22. Penalties for Non-Compliance with RERA
Introduction
RERA is not merely a disclosure law; it is an enforcement-oriented legislation backed by significant penalties for non-compliance. The penalty framework under RERA is designed to ensure that promoters, real estate agents, and other stakeholders comply with statutory obligations.
Penalties under RERA may arise for failure to register a project, false disclosures, non-compliance with orders, violation of advertisement restrictions, failure to update information, or breach of promoter obligations.
The existence of strong penalty provisions reflects the legislative intent to create discipline and accountability in the real estate sector.
Legal Framework
RERA contains various penalty provisions depending on the nature of default and the person committing the default. Promoters, agents, and allottees may all be subject to penalties in specific circumstances.
For promoters, penalties are generally more significant because they carry primary responsibility for project registration, disclosures, execution, and compliance.
The penalty may be calculated as a percentage of the estimated project cost, daily penalty, or fixed amount depending on the violation.
Penalties Applicable to Promoters
Promoters may face penalties for several types of violations. One of the most serious defaults is failure to register a project where registration is mandatory. In such cases, penalty may extend up to a prescribed percentage of the estimated project cost.
Promoters may also be penalized for providing false information, violating terms of registration, failing to comply with orders of the authority, or continuing violations after directions are issued.
The penalty framework is intended to ensure that promoters do not treat compliance as optional.
Penalties Applicable to Real Estate Agents
Real estate agents are also regulated under RERA. Agents who facilitate transactions in registered projects without obtaining registration may be subject to daily penalties.
They may also face consequences for misrepresentation, failure to maintain records, or violation of obligations under the Act.
This ensures that intermediaries in real estate transactions also operate within a transparent framework.
Penalties Applicable to Allottees
Although RERA is primarily buyer-protection legislation, allottees also have obligations. For example, buyers are required to make payments as per the agreement and comply with lawful obligations.
Failure by allottees to comply with orders or obligations may also attract consequences, though in practice enforcement is more commonly seen against promoters and agents.
Factors Considered in Penalty Proceedings
Authorities may consider several factors while imposing penalties, including:
- Nature and seriousness of default
- Whether default is continuing
- Impact on buyers
- Conduct of the promoter or agent
- Whether violation was intentional or due to procedural lapse
Voluntary correction of non-compliance before proceedings escalate may reduce regulatory exposure, though it may not completely eliminate liability.
Consequences beyond Monetary Penalty
Penalty exposure under RERA is not limited to financial cost. Non-compliance can also lead to broader consequences such as:
- Revocation of registration
- Restriction on project marketing
- Increased scrutiny of future projects
- Buyer litigation
- Reputational damage
In severe cases, continued non-compliance may also result in prosecution or imprisonment depending on the nature of violation.
Litigation and Enforcement Trends
Penalty proceedings often arise from buyer complaints, regulatory inspections, or failure to comply with authority orders. Increasingly, authorities are taking a stricter view of repeated or deliberate non-compliance.
Common penalty triggers include:
- Marketing without registration
- Delay in project completion
- Non-updating of portal information
- False or misleading disclosures
- Non-compliance with refund or interest orders
CABTA Insights
- Penalty risk should be managed proactively, not reactivelyOnce proceedings begin, reputational and financial exposure increases.
- Documentation helps demonstrate bona fide conductProper records can help distinguish genuine difficulty from deliberate default.
- Repeated defaults invite stricter scrutinyAuthorities are less lenient where non-compliance is habitual.
- Compliance failures often trigger multiple consequencesA single violation may lead to penalty, litigation, and reputational loss.
- Internal compliance review reduces penalty exposurePeriodic review of registration, disclosures, reporting, and financial compliance is essential.
