Is RERA Applicable to Old Projects?

The Real Estate (Regulation and Development) Act, 2016 (RERA) is one of the most significant reforms in Indian real estate law. Brought into effect to enhance transparency, accountability and efficiency in the sector, RERA was welcomed by home buyers and investors alike. 

However, ever since its notification in May 2016, a crucial legal question has repeatedly surfaced: Is RERA applicable to old projects? In other words, can RERA regulate and enforce its provisions on projects that were already underway or launched before the Act came into force?

This article aims to demystify this subject, exploring what the law and courts have said, and what it means in practice for buyers, promoters, and other stakeholders.

The Objective and Structure of RERA

Before addressing its applicability to old projects, it is important to understand why RERA was introduced and what it seeks to achieve.

• Purpose: RERA was enacted to regulate and promote the real estate sector, protect the interests of consumers, ensure transparency in project execution, and establish a regulatory framework.
• Scope: RERA applies to the sale of plots, apartments, buildings, and real estate projects.
• Key Features:
  • Establishment of Real Estate Regulatory Authority (RERA) in every state and union territory.
  • Mandatory registration of projects and real estate agents.
  • Standardisation of project disclosures, escrow accounts, and timelines.
  • Swift dispute resolution through adjudication and appellate tribunals.

Understanding ‘Old Projects’ Under RERA

When people refer to “old projects,” they generally mean projects that were:

• Launched before RERA came into force (i.e., before 1 May 2016), and
• Not yet completed as on the date RERA was notified in the respective state.

Such projects are often termed as “ongoing projects.” The question is whether RERA’s regulations apply to these ongoing projects, or are they exempt from its requirements?

The Legal Concepts: Retrospective vs Retroactive

To answer the above, it is necessary to understand two fundamental legal concepts:

• Retrospective law: A retrospective statute applies to acts, transactions, or events that took place before the statute was enacted. It seeks to change the legal consequences of events that have already occurred and been concluded.
• Retroactive law: A retroactive (or quasi-retroactive) statute applies to acts, events, or transactions that started before the law was enacted but are still ongoing or not yet completed. It does not disturb fully completed events, but imposes new obligations or rights on continuing situations.

This distinction is crucial in the context of RERA. Is RERA retrospective (and applies to completed projects), or is it retroactive (and applies to ongoing projects)?

RERA’s Express Provisions Regarding Old Projects

Section 3 of the RERA Act provides vital clues.

• Section 3(1): Prohibits promoters from advertising, marketing, or selling any real estate project without registering it with RERA.
• Section 3(2): Makes an exception for projects where completion certificate was received before the commencement of RERA.

The central point is the “completion certificate.”

• If a project received its completion certificate before RERA came into force: The project is considered complete and does not need RERA registration.
• If a project was ongoing and did not have a completion certificate: The promoter was required to register the project with RERA within a specified period after the Act commenced.

Therefore, RERA is not retrospective (does not affect completed projects), but it is retroactive (applies to ongoing old projects).

Judicial Interpretation: High Courts and Supreme Court

This distinction has been clarified and reinforced by various courts in India.

Bombay High Court: Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India (2017)

• The Bombay High Court was among the first to analyse whether RERA is retrospective or retroactive.
• Findings:
  • RERA is not retrospective as it does not affect concluded transactions or projects with completion certificates before the Act.
  • RERA is retroactive because it applies to ongoing projects that had not received a completion certificate as of 1 May 2016.
  • The court upheld Parliament’s power to legislate retroactively in public interest and found no constitutional infirmity in applying RERA to ongoing projects.

Supreme Court: Newtech Promoters and Developers Ltd. v. State of UP (2021)

The Supreme Court considered whether RERA can regulate projects that commenced before the Act.

• Key Observations:
  • Section 3 of RERA is intended to cover all ongoing projects lacking a completion certificate, irrespective of their launch date.
  • The Act seeks to protect stakeholders’ interests and regulate the sector holistically.
  • Completed projects (with valid completion certificates prior to the Act) remain outside RERA’s scope.
  • Parliament is competent to make laws with retroactive effect, provided they serve public interest and do not breach constitutional rights.

Practical Implications: Who Needs to Register Under RERA?

Completed Projects (before 1 May 2016)

• Projects with completion certificates issued before RERA’s commencement are not covered.
• No requirement for registration, disclosures, or compliance with RERA for these projects.

Ongoing Projects (without completion certificate as on 1 May 2016)

• Must register with RERA within the time prescribed.
• Promoters are required to make statutory disclosures, follow timelines, maintain escrow accounts, and comply with all RERA obligations.
• Allottees/buyers enjoy the full protection and remedies provided under RERA.

New Projects (launched after 1 May 2016)

RERA registration and compliance is mandatory from the outset.

Why Did Parliament Choose a Retroactive Approach?

The rationale for including ongoing projects is clear:

• Consumer Protection: Many buyers suffered due to delays, false promises, and diversion of funds in projects launched before RERA. Excluding ongoing projects would defeat the very purpose of the Act.
• Level Playing Field: Both new and existing promoters must follow the same transparent rules, ensuring fairness.
• Accountability: The regulatory authority can intervene in stalled or delayed projects, enforce timelines, and protect buyer interests.

What if a Promoter Fails to Register an Old Ongoing Project?

RERA imposes strict penalties for non-registration:

• Promoters can be fined up to 10% of the estimated project cost.
• Authorities may stop further marketing, booking, or sale of units.
• Allotment or sale agreements made in violation of RERA may be rendered voidable at the option of the buyer.
• Buyers can seek redressal, refund, compensation, and interest.

Key Rights and Remedies for Buyers in Old Projects

Buyers in ongoing old projects registered under RERA enjoy important rights:

• Right to Information: Regular updates on project status, approvals, and financial details.
• Right to Timely Delivery: Compensation for delays in completion.
• Right to Refund: Option to withdraw and seek refund with interest if project is delayed or defective.
• Grievance Redressal: Quick and effective dispute resolution through the regulatory authority and Appellate Tribunal.

Conclusion

Is RERA applicable to old projects? The answer is clear:

• RERA is not retrospective and does not apply to fully completed projects with valid completion certificates before 1 May 2016.
• RERA is retroactive and applies in full force to ongoing projects that had not received completion certificates when the Act was notified.
• The intention is to protect home buyers, promote fair play, and bring about transparency in a sector that was long in need of reform.

In summary, if you are a buyer, promoter, or agent associated with an old project, it is crucial to check the status of the completion certificate as on the date of RERA’s commencement. For ongoing projects, RERA offers a much-needed safety net and legal recourse, making Indian real estate a safer space for all stakeholders.