Need For a Real Estate Regulatory Authority in India

following guest post is contributed by Ranjit Mahishi, who is an Associate at Kochhar
& Co., Bangalore. He can be reached at [email protected]]

Real estate in India has experienced a tremendous
growth in the recent years. The demand for commercial and residential spaces in
major cities has seen a steady rise. Generally, a real estate transaction
involves complex issues such as financing, transfer of ownership or right and
interest, applicability of various property laws and tax laws etc., which are
beyond the understanding of a common man. For the general public, buying
residential property would be one of the most important decisions of their
lives. Even buying or leasing commercial space to a great extent involves
complex transactions and third party agents who facilitate the transactions. This
enormous sector has for the most part been unregulated and disorderly with consumers
being subject to harassment and unsympathetic practices of the builders.        

The Real Estate (Regulation and Development) Bill
(“Bill”), which is currently pending before the Rajya Sabha (Upper House of the
Parliament of India), seeks to regulate the real estate sector in India in the
coming years. Due to a lack of standardization and professionalism in the real
estate sector in India, a regulator is necessary to promote and implement consistency,
fairness and competence along with protecting the people’s investments and
thwarting dishonest and abusive practices with a firm hand. The preamble of the
said Bill clearly enlists that the establishment of a regulatory authority is
to ensure efficiency, transparency, fairness and to protect the consumers.

The regulations under the Bill apply to all builders
(promoters) and real estate agents, regardless of their size and influence, and
also apply to consumers. The goal of the Bill is to protect the public and
promote healthy competition.  

registration of the project and real estate agents

One of the most important components of the Bill is
the establishment of competency of promoters and uniform standards within the
industry. The Bill makes it compulsory for a promoter to register the real
estate project with the regulatory authority. Only upon its registration can
the promoter advertise on the regulatory authority’s website and invite persons
to purchase the property. The registration granted is for the period declared
by the promoter for completion of project. If the promoter fails to complete
the project as per schedule, the regulatory authority can revoke the

Real estate agents are also required to be registered
with the regulatory authority. A real estate agent who is not registered will
not be able to facilitate the sale or purchase of a property in a project. The
registration provided by the regulatory authority would be valid for a
prescribed period and is renewable by the authority from time to time. The
regulatory authority has the power to revoke or suspend the registration of a
real estate agent, thereby deterring the real estate agent from misrepresenting
to or causing fraud on the general public.

The regulatory authority creates a means by which
incompetent promoters do not have the opportunity to profit from the faith invested
in them by the unwary public. As the regulatory authority’s power of scrutiny
is ongoing throughout the construction process, it ensures constant proficiency
of the promoters to complete the project within stipulated timelines and in
accordance with the approvals granted by the competent government

However, the Bill falls short on requiring the
promoters to be registered with the regulatory authority. If the regulatory
authority was to be empowered to license the promoters, it would have opened
the doors to insist on minimum standards with respect to basic skills and
competencies that one would expect from a developer. Further, it could have
warranted the need for continuing education to ensure that the promoter is
aware of the recent changes in the real estate laws, techniques etc., especially
when the promoter would have to get its license renewed periodically. 


The Bill defines the responsibilities of the
promoters, real estate agents and consumers. 
There will be a clear understanding of duties and responsibilities of
what a promoter and real estate agent is expected to perform. The standards set
by the regulatory authority will be uniformly applicable to all registrations. This
will ensure provision of protection through ongoing enforcement, which is the
principle goal of the Bill. The regulatory authority has been empowered to
register, revoke registrations for violations and even terminate them in
certain cases. 

It will compel the promoter, upon entering into an
agreement of sale, to obtain and provide to the consumer/allottee essential
documents such as the completion certificate and also perform essential duties
such formation of the owner’s association or society. More importantly, a
promoter can receive any payment including advance from the consumer only after
executing the agreement of sale and is entitled to cancel allotment only in
terms of the agreement to sell, which would curtail the existing practice where
a promoter demands advance payment before executing the agreement of sale and,
thereafter, cancels allotment if there is an expansion in the project that leads
to consequent increase in sale consideration or simply because the another person
is willing to pay more. 

The Bill also puts onus on the promoter to rectify
structural defects in the project upon receiving a complaint by the consumer
and transfer the title of the property only by executing a registered
conveyance deed. This will put an end to the prevalent malicious practice of
fraudulently transferring property to unsuspecting consumers through a power of
attorney or by any other means to avoid payment of stamp duty and registration

The promoter must on a quarterly basis update the
list of number and types of property that are booked and the status of the
project in the regulatory authority’s website. Further, all advertisements and
prospectus of the promoter must mention the website of the regulatory authority
and the fact that all details of the project are available therein. This will
prevent the promoters from falsely advertising in order to deceptively induce
the public.   

The Bill will provide the regulatory authority with
disciplinary powers to investigate, provide a fair hearing and impose
punishment. A promoter could be debarred from accessing the regulatory
authority’s website with respect to the project if found to be in violation of
the law or contractual terms, have its registration cancelled and be listed in
the ‘list of defaulters’, which would be accessible by all and the list would
be shared with all the real estate regulatory authorities in other states
thereby acting as an effective deterrent to the promoter. The regulatory
authority is also empowered to impose penalty or interest on the promoter or
real estate agent if found guilty. Further, the regulatory authority can make
suo moto reference to the Competition Commission of India if a promoter is
found to be preventing, restricting or distorting competition or affecting the
interest of consumers/allotees by abusing market dominance.

The Bill also imposes duties on the
consumers/allotees. The allottee is expected to make payments on time for the
property and utilities in accordance with the terms of the agreement of sale
and that the allottees must equally participate in the formation of association
or society. 

The disciplinary powers of the regulatory authority
cover recovery of penalty, interest and/or compensation from the promoter, real
estate agent or consumers/allotees. All the parties associated with the works
under the Bill are equally expected to perform their respective duties and
would be adjudged without prejudice.  

transparency and fairness

Private promoters’ associations such as
Confederation of Real Estate Developers’ Association of India (CREDAI)
establish their own standards, ethical practices, self governance etc., which
need not necessarily assist the general public or bind the promoter especially
since they are voluntarily adopted. A government authorized real estate
regulatory authority guarantees, at least to a greater extent, fair and open
administration. There will be an assumption that when the regulatory authority
acts, everyone is treated equally and impartially and, more importantly, the
public interest is protected.

The Bill provides that the regulatory authority must
be guided by the principles of natural justice. 
The punitive clauses of the Bill clearly emphasize that no person must
be punished without having been provided with an opportunity of being heard and
to show cause. Thus, any promoter or real estate agent or consumer/allottee
accused of violation is entitled to right of fair trial, procedural protection
and right of legal representation. The regulatory authority is vested with the
same powers as that of a civil court under the Civil Procedure Code. Thus, a
regulatory authority has the power of discovery and production of documents,
summoning and enforcing attendance of persons including witnesses and examining

The manner in which the regulatory authority
administers and adjudicates the matters before it is subject to review by higher
authorities. The Bill provides for establishing a ‘Real Estate Appellate
Tribunal’. Any person that is aggrieved by the decision of the regulatory
authority may prefer an appeal before the appellate tribunal within 60 days
from the date of receipt of the copy of the order. The said appellate tribunal
is also vested with the powers of a civil court. The order of an appellate
tribunal is executable as a decree of the civil court. A further appeal
mechanism is provided to the high court against the order of the appellate
tribunal within 90 days from the date of communication of the decision.      

The Bill also provides for a greater degree of
transparency. The fact that the regulatory authority and the appellate
authority consists of public servants provides an assurance to the general
public that their interest would not be compromised. Further, the appellate
tribunal consists of a chairperson and two members, one among whom must be a
judicial member and another, a technical member or administrative member. The
Bill, in constituting the regulatory authority and appellate tribunal, tries to
balance efficacy and practicability by providing representation from all
possible areas affecting the interests of persons involved. The chairperson and
the members are prohibited from associating with any person or organization that
has been associated with any work under the Bill after ceasing to hold office
or share information that they were privy to while in the capacity of a
chairperson or member. The conduct of the chairperson and members, subsequent
to them ceasing to hold office, is subject to the scrutiny and review of the
appropriate government, the judiciary and even the public at large.   

All the records deposited with the regulatory
authority are open to the public. One can simply access the website of the
regulatory authority before deciding to purchase a property, inspect the
records online and then make an informed decision.


The Bill will introduce a much needed concept in
India through which the real estate sector can possibly be streamlined,
standardized and regulated. The Bill subtly tries to bring in efficiency,
fairness and transparency in real estate transactions in India. This could be a
huge leap forward not only in promoting a healthy real estate market, but to
also to reduce tax evasion and free flow of black money in the market. The Bill
has many grey areas and has been subject to criticism.  However, in its present form, it appears to
promote the real estate industry at large with a greater emphasis on protection
of the public. With the Central Government having ambitious plans of unveiling
‘Smart City Project’, ‘Atal Mission’ and ‘Housing for all by 2020’, the real
estate sector is going to experience a lot of activity in the near future and
the need for a real estate regulatory authority is indeed very timely.        

– Ranjit Mahishi

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.


  • "….and the need for a real estate regulatory authority is indeed very timely."

    Undoubtedly , of course, the need for an authority, with adequate, effective and substantial powers to regulate, so also the often-wanting 'will' to implement and bring about the decades -long- pending orderliness in the thus-far- remaining most neglected realty sector cannot be impudently over-sighted or under-emphasized /- meekly- played any longer. Nonetheless, the most common concern still prevailing, but left wide open, – which is centered on the very crucial and fundamental point, -as to how far and to what extent the bill as presently framed and structured could be expected to fulfill the objective behind, especially from the customers'/ consumers' viewpoint, – has been disappointingly omitted to be touched upon, unwittingly or otherwise.

    For knowing why to say so emphatically, anyone may care and go through the plethora of attempted analytical study, shared in public domain; and consider independently, in-depth, the not-so-apparent or -consciously noted deficiencies in the legislation in offing, after equipping self the intricacies of the issues/problems involved.

    To make a good start and fast-track, the host of material /thoughts shared in inter alia the personal blog , – swamilook 2005, aimed at serving the ‘public good’, should help the purpose of /make for a ready reckoner.


    (< May have more to share/highlight).

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