The Real estate sector is one of the significant sectors which is globally recognised. Over the past few decades this sector has grown significantly in India and there has never been a drop in demand for real estate in India. The post pandemic era became boom for this sector as there was no reduction in demand of this sector and market shown a positive sign of growth and development. After agriculture, it is India’s second most populous industry.
In the words of
Franklin D. Roosevelt, “Real Estate cannot be lost or stolen, nor can it be carried away, purchased with common sense, paid in full & managed with reasonable care, it is the safest investment in the world.”
Real estate sector is a catalyst in fulfilling the need and demand for housing and infrastructure in the country. It is one of the most significant financial decisions a person makes in their lifetime as this sector involves huge investment. However, this journey can be filled with many challenges, especially when dealing with delays in possession, faulty construction, or unmet promises by builders. Previously, transactions in the real estate sector were one sided mostly favouring the developers and there was no checks and balances in the sector, which leads to the malpractices and fraudulent activities held with buyers.
To protect homebuyers and regulate real estate transactions, India has established two primary platforms: RERA (Real Estate Regulatory Authority) and Consumer Courts. While both offer legal recourse, they differ in their approaches, functions, and benefits. Additionally, both RERA and Consumer Courts provide the possibility of Compensation from property developers, though the type and process of compensation vary.
This article compares RERA and Consumer Courts, helping homebuyers decide which platform to approach based on their grievances and the possibility of claiming compensation from developers.
What is RERA?
RERA stands for Real Estate Regulatory Authority which came into existence as per Real Estate (Regulation and Development) Act, passed in 2016, which aims to bring transparency to the real estate industry. RERA establishes a regulatory framework to address disputes between homebuyers and developers, ensuring that property transactions are fair and transparent.
The main purpose of RERA is to provide relief to homebuyers from the unfair malpractices done by builders, to bring more accountability and transparency in real estate transactions. RERA specifies the creation of a Real Estate Authority and Appellate Tribunal for each state for the speedy redressal of any grievance of allottees
The Features of RERA are
- Mandatory Registration: the RERA has mandates that every real estate project must be registered with the Real Estate Regulatory Authority without registration the developers are not allowed to advertise, book, sell or invite any person to purchase the projects.
- Transparency in Project Details: Developers must provide complete details of the project information, including their layout plans, timeline about the completion of the projects and approvals of the projects.
- Protection for Buyers: Homebuyers can claim compensation for project delays, incorrect project details, or other discrepancies.
- Fast-Track Dispute Resolution: the main objective for the establishment of RERA Authorities is to resolve the disputes in a shot span of time (specifically 60 days)
- Escrow Account Requirement: Developers must deposit 70% of project funds in an escrow account, ensuring that money is only used for construction. This makes it impossible to engage in any fraudulent transaction or money laundering.
- Monetary Compensation for Delays: RERA provides homebuyers with the right to claim interest or compensation for delays in project completion, calculated from the promised date of possession.
The key benefits of RERA
- It reduces the project delays and property fraud.
- The RERA rules apply to both commercial and residential properties.
- RERA act has brought more accountability and transparency in the real estate industry.
Drawback of RERA.
On of the drawbacks of RERA act is that it does not have retrospective effect. Thus, the projects before, 2016 does not come under the purview of RERA act, 2016.
What are Consumer Courts?
Consumer Courts, under the Consumer Protection Act, 2019, was introduced with the aim of safeguarding consumers rights against the malpractices done by the developers/ sellers. It offers a platform for consumers to file complaints regarding defective goods or services. For real estate buyers, Consumer Courts are available to address grievances like unfair trade practices, misleading advertisements, or poor construction quality by builders.
CPA, 2019 has three distinct forums to file their complaints depending upon the pecuniary limitation. These forums are
- District Consumer Disputes Redressal Forum in the District with the pecuniary limitation of (Rs.20,00, 000 to Rs.100,00,000) as per Section 34, Consumer Protection Act, 2019.
- State Consumer Disputes Redressal Commission at the state level the pecuniary limitation of (Rs.100,00,000 to Rs.10,00,00,000) as per Section 47, Consumer Protection Act, 2019.
- the National Consumer Disputes Redressal Commission at the national level. the pecuniary limitation of (above Rs.10,00,00,000 to above Rs.10,00,00,000) as per Section 58, Consumer Protection Act, 2019.
Key features of Consumer Courts:
- Wider Scope: They handle cases across all consumer goods and services, not just real estate.
- Compensation for Deficiency in Services: Homebuyers can seek compensation for delays, defects, or other deficiencies in the builder’s services.
- Three-Tier System: Consumer Courts operate at district, state, and national levels, depending on the monetary value of the complaint.
- Focus on Consumer Rights: The courts aim to protect consumers from exploitation or fraud across all sectors.
- Compensation for Agony and Negligence: In addition to delays, homebuyers can seek compensation for mental agony, harassment, or negligence in providing services or amenities.
RERA vs Consumer Courts: Key Differences
| Nature | RERA | Consumer Courts |
|---|---|---|
| 1. Scope | This regulatory authority deals exclusively with real estate issues. | They handle complaints across all consumer sectors, including real estate. |
| 2. Jurisdiction | It only registers real estate projects that fall under RERA. | Covers all sectors, regardless of RERA registration. |
| 3. Grievances Addressed | The main focuses are on delays, false advertising, and project violations. | Deals with broader issues relating to goods and services and any kind of deficiencies and unfair practices is being conducted with it. |
| 4. Resolution Time | This authority is faster compared to consumer courts, as disputes are expected to be resolved within 60 days. | It is typically slower and time-consuming. |
| 5. Relief Offered | Focus on possession delays, refunds, or interest. | Can offer compensation for deficiency in service, negligence, and mental agony. |
| 6. Appeal Process | Decisions can be appealed in RERA’s Appellate Tribunal. | Appeals can be taken to higher Consumer Courts (state or national). |
| 7. Compensation | Offers interest for delays and refunds, plus penalties on developers. | Can award broader compensation, including damages for emotional distress. |
Compensation from Property Developers under RERA:
Under RERA, compensation typically focuses on the following:
- Delay in Possession:
One of the most common reasons the buyers approach RERA is the delay in the handover of possession. RERA mandates developers to pay interest for every month of delay, starting from the promised date of possession until the actual handover. The rate of interest is typically equal to the SBI’s highest marginal cost of lending rate plus 2%, though this can vary depending on state RERA rules.
- Refund of Amount Paid:
If the buyer opts not to wait for possession due to excessive delay or other reasons, RERA allows the buyer to claim a full refund of the amount paid, along with interest. Developers are also penalized for not adhering to the terms of the agreement.
- Compensation for False Representation:
If the builder misrepresented key facts (such as layout plans, location of the property, or amenities), the buyer can claim compensation under RERA for such false promises.
- Defects Liability:
RERA also holds developers liable for structural defects, poor construction quality, and services that do not meet the promised standards. If defects are discovered within 5 years of possession, the builder is required to rectify them or compensate the buyer.
In Consumer Courts, the scope for compensation is broader as compared to RERA
- Compensation for Delay and Deficiency in Service:
Just like RERA, buyers can claim compensation for delayed possession. However, Consumer Courts allow buyers to seek additional compensation for the inconvenience, harassment, and mental agony caused by the delay.
- Poor Construction Quality or Amenities:
In cases where the quality of construction is substandard, or the builder fails to provide promised amenities, buyers can claim compensation for the cost of repairs or unmet expectations.
- Compensation for Emotional Distress:
Unlike RERA, Consumer Courts provide for compensation for mental distress, harassment, and negligence. This compensation is especially useful if the buyer has been subjected to extended delays or poor customer service by the developer.
- Misleading Advertising:
If the buyer has been lured into buying property based on false promises in advertisements, Consumer Courts allow for claiming compensation for misrepresentation and fraudulent practices.
Which One to Choose: RERA or Consumer Courts for Compensation?
The platform you choose depends on the nature of your complaint and the type of compensation you are seeking:
If a person is seeking for a quick relief where there is delay in the possession, it is better to opt for the RERA option as it is specialized in providing the quick reliefs and provides interest-based compensation for delays. If a person is seeking for broader compensation which includes emotional distress, poor construction or misleading advertisements, the consumer courts offer more comprehensive remedies.
Landmark Judgements:
- Emaar MGF Land Ltd CO V Aftab Singh
This was a case of delayed possession, where the respondent was unable to get the possession even after paying all the dues on time. The respondent had filed a complaint as per the provisions of the Consumer Protection Act. However, the builder claimed that due to an arbitration clause mentioned in the agreement signed between the two parties, it was arbitrary of the buyer to file a consumer complaint. However, the Hon’ble Apex court had decided that the buyer has the right to seek redressal as per the Consumer Protection Act.
- Newtech Promoters and Developers Pvt Ltd V State of UP & Ors (2021)
The Hon’ble court had decided that the buyer has the absolute right whether he wants a refund or the possession of the property, in cases of delayed possession of the property. The buyer is entitled for a refund in cases of delayed possession; however, the buyer would still have the option to opt for the possession of the property, which the builder is bound to construct in, during the grave period.
- Experion Developers Pvt. Ltd. V. Sushma Ashok Shiroor (2022)
The Hon’ble Supreme Court held that the delay in possession and unfair clauses in builder-buyer agreements could be challenged under RERA. This judgement emphasized that the buyers are entitled to a refund, including interest, if the developers delay possession.
Conclusion:
Both RERA and Consumer Courts serve as powerful tools to protect buyers’ rights and offer compensation from property developers. While RERA is quicker and more specialized. Consumer Courts provide a broader scope for claims and higher potential compensation for emotional distress and service deficiencies. The key to seeking appropriate relief lies in understanding the nature of your grievance and choosing the forum that offers the best chance for a favourable outcome.
For buyers facing delays or deficiencies from developers, compensation from property developers is a right, not a favor. Choosing between RERA and Consumer Courts can make all the difference in how swiftly and fully this compensation is realized.
FAQs
Ques 1) Does RERA reduce the scope of Consumer Courts?
Ans) Yes, with the introduction of the RERA Act, 2016 the scope of consumer Courts in real estate matters has been reduced to some extent, but it has not eliminated entirely. Buyers cab still approach the Consumer Courts, if they choose not to go to RERA.
Ques 2) Whether the RERA has a retrospective effect?
Ans) No, RERA act, 2016 does not have retrospective effect. It is prospectively applicable to the projects which are initiated after 2016.
Ques 3) Can Buyer file complaint in both forums simultaneously?
Ans) No, the buyers cannot file cases on the same issues in both the forums simultaneously.
Ques 4) Who can file a complaint with RERA?
Ans) Any buyer, promoter, or agent can file a complaint with RERA if they are aggrieved in delays in possession, non-compliance of project promises, or defects in the construction.
Ques 5) What type of projects fall under RERA?
Ans) RERA applies to residential and commercial real estate projects.
Ques 6) Is there a time limit for filing a complaint in the Consumer Court?
Ans) Yes, the complaint must be filed within two years from the date the cause of action arises.
