“The Supreme Court has issued a strong criticism of RERA, stating it is “doing nothing more than facilitating defaulted builders.” This rebuke highlights concerns about RERA’s efficacy in protecting homebuyers and ensuring developer accountability in India’s real estate sector.”
In This Article
The Premise of RERA
SC Observations
RERA Loopholes
The IBC Trick
Right to appeal
The Enforcement Gap
Why RERA is Failing?
Mansi Brar Fernandes (2025)
RERA Reforms
One Nation, One RERA
The “Glass House” Approach
The Promise and Premise of RERA
Enacted in 2016, RERA aimed to bring transparency, accountability, and efficiency to the unregulated real estate market.
Its core objectives included protecting homebuyers, ensuring timely project completion, and fostering transparency. Key provisions included:
- Mandatory project registration
- Strict delivery timelines
- Escrow accounts for 70% of payments
- State-level Regulatory Authorities
The Supreme Court’s Scathing Observations
“The Court’s criticism stems from a pattern where RERA orders, particularly for refunds or possession, often remain unimplemented.”
It is a frustrating reality for many homebuyers when you win your case in a specialised “fast-track” court (RERA), but you still don’t have your keys or your refund.
The Supreme Court is essentially pointing out that while RERA was built to be a “finish line,” builders are treating it like a “pit stop” on the way to more complicated legal battles.
1. The “Insolvency” Shield (The IBC Trick)
The Insolvency and Bankruptcy Code (IBC) is a law designed to help failing companies settle their debts. However, builders often use it as a “get out of jail free” card to pause RERA orders.
- How it works: When a builder is ordered by RERA to pay a heavy penalty or refund, they (or a friendly creditor) might file for insolvency.
- The “Moratorium”: Once an insolvency process starts, a “moratorium” is declared. This is a legal freeze that stops all other court cases and debt collections against the builder, including your RERA order.
- The Result: Your RERA win is put on ice for months or years while the insolvency court decides what to do with the company.
2. The Procedural Merry-Go-Round
Builders often exploit the “right to appeal” to ensure a case never actually ends.
- Endless Appeals: A builder might lose at RERA, then appeal to the RERA Appellate Tribunal, then the High Court, and finally the Supreme Court. Even if they know they will lose, the goal is attrition, hoping the homebuyer runs out of money or patience.
- Jurisdictional Squabbles: Builders often argue that RERA doesn’t have the authority to hear a specific case because it should be in a consumer court or a civil court, dragging out simple disputes over “where” the case should be heard rather than “what” the builder did wrong.
3. The Enforcement Gap
Winning a case is one thing; getting the money is another.
- RERA itself doesn’t have a police force. To recover money, RERA issues a “recovery certificate” to the local District Magistrate (DM) or Collector.
- Builders exploit this by hiding assets, transferring funds to subsidiary companies, or simply relying on the fact that local administrative offices are too busy to hunt down the builder’s bank accounts.
The Supreme Court is concerned that RERA is losing its “teeth.” Instead of being a swift enforcer, it is becoming just another piece of paper that builders ignore while they run to other courts to hide behind complex financial laws.
The builder is using the complexity of the legal system to tire you out, turning a “fast-track” consumer protection law into a decade-long marathon.
Why RERA is Failing?
1. The “Staffing & Expertise” Crisis
Think of RERA as a new, high-tech hospital that has no doctors. Many state RERAs are severely understaffed or lack technical expertise.
Instead of “fast-track” justice, cases get stuck for years. Without dedicated Appellate Tribunals and forensic auditors, RERA can’t catch “fund diversion” (builders moving your money to other projects).
2. Jurisdiction Hopping
Developers often practice Regulatory Arbitrage. If State A is very strict, a developer might launch their next big project in State B, where the rules are “diluted”, or the online portal barely works. This creates a “race to the bottom” where the weakest laws win.
3. The IBC “Shield” vs. RERA “Sword”
The biggest loophole is the conflict between RERA vs. IBC.
- When a builder loses a case in RERA and is ordered to pay a refund, they often declare insolvency.
- Under the Insolvency and Bankruptcy Code (IBC), a “Moratorium” is triggered. This legally pauses all RERA orders. Your refund is essentially locked in a vault while the builder claims they are “broke.”
In recent landmark rulings like Mansi Brar Fernandes (2025), the Supreme Court has tried to fix this. They ruled that RERA is the primary forum for homebuyer grievances. The IBC should not be used as a “recovery tool” by speculative investors to bypass RERA. They are essentially telling builders: “You cannot use insolvency to run away from your RERA liabilities.”
So, if your builder is ignoring a RERA order, check if they have filed for insolvency. If they haven’t, your best path is a Recovery Certificate (RC) issued to the District Collector.
New Homebuyers face immense frustration and financial distress due to dual burdens of EMIs and rent, prolonged uncertainty, and a complex multi-forum legal labyrinth.
Reforming RERA
To fix the “loophole game” and the “staffing crisis,” legal experts and the government are pushing for a major upgrade, often called RERA 2.0. These reforms are designed to turn RERA from a “paper tiger” into a “powerhouse.”
1. The Power to Punish
Currently, RERA often has to ask the local District Magistrate to collect money—a process that can take years.
- Property Attachment: Under RERA 2.0, authorities would be empowered to directly seize and auction a builder’s personal or company assets to pay back homebuyers. This cuts out the middleman and the wait time.
- Punitive Penalties: Instead of just simple interest, authorities could impose heavy daily fines that increase the longer a builder ignores a court order.
2. One Nation, One RERA
Currently, a “carpet area” might mean something slightly different in Karnataka than it does in Haryana. This allows builders to exploit weaker state rules.
- Central Oversight: The goal is to harmonise rules so that a builder in Noida and a builder in Bangalore follow the exact same contract templates and penalty structures.
- The “RERA Portal” Integration: In late 2025, the government launched a unified national portal to prevent builders from hiding their bad track records in one state while launching “clean” projects in another.
3. Digital Integration: The “Glass House” Approach
RERA 2.0 aims to make project status as easy to track as a pizza delivery.
- Real-Time Dashboards: Developers would be mandated to use Digital Project Management tools linked directly to the RERA website. If a builder hasn’t poured the concrete for the 4th floor by the promised date, the RERA system flags it automatically.
- Public Records: Complete histories of a developer, including every past delay, court case, and financial audit, would be a click away for any prospective buyer.
The Supreme Court’s criticism of RERA highlights its shortcomings in protecting homebuyers and ensuring developer accountability. This necessitates systemic reforms to strengthen enforcement, standardise implementation, and close loopholes.
For homebuyers, RERA provides a framework, but its journey to becoming a robust guardian is ongoing, requiring commitment from policymakers and regulators to uphold transparency, fairness, and accountability in practice.