Real estate sector is one of the core sectors in the economy in terms of its contribution to GDP, employment of labor force and the multiplier effects it has on other vitals of the economy. However, despite its fundamental importance to the economy, this sector has been plagued by delays, fraud, cheating, and imbalance of power between developers and consumers.
The Real Estate (Regulation & Development) Act, 2016 (hereinafter referred to as the ‘RERA Act’) was enacted with much fanfare in the year 2016 to establish a regulator for the real estate sector. Prior to the promulgation of the Act, there were widespread malpractices prevalent including large scale diversion of funds from real estate projects. The builders would often enter into unconscionable Builder Buyer Agreements (hereinafter referred to as “BBA”) with the buyers that would excessively penalise the latter in case of any default on their end and which provided for nominal interest rates if the builder failed to give possession on time. The difference in bargaining power between the builder and buyer led to other instances of cheating wherein builders took huge advances from the buyer without commensurate construction in the project or without executing binding contracts with the buyers; show of high handedness by the builder by unilateral change in sanctioned plans, costs escalation in the project to be recovered from the buyers etc. In the absence of an effective regulator, the buyers were left in a lurch and would find themselves running from pillar to post for redressal of their grievances.
Source : livelaw