The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to bring transparency, accountability, and fairness to India’s real estate sector. Before RERA, homebuyers frequently faced delays, misleading promises, financial losses, and unclear legal remedies. With RERA in force, real estate projects and builders must now comply with strict regulatory standards. When builders violate RERA regulations—whether by delaying projects, making false representations, or failing to register projects—they face serious legal consequences.

Understanding these consequences helps homebuyers know their rights and protections under Indian law. This article provides a clear, structured, and legally accurate explanation of what happens to Builders Who Violate RERA, the penalties imposed, and how RERA authorities enforce compliance.

Understanding RERA and Its Purpose

RERA applies across most Indian states and union territories, with each state establishing its own Real Estate Regulatory Authority. The primary objective of RERA is to regulate the real estate sector by ensuring:

  • Mandatory registration of real estate projects

  • Transparency in project details, timelines, and financials

  • Builder accountability

  • Protection of homebuyers’ rights

  • Speedy resolution of disputes through RERA authorities and adjudicating officers

Builders must comply with the obligations listed in the Act. Any breach results in significant legal, financial, and reputational consequences.

Common Violations Committed by Builders Under RERA

Builders Who Violate RERA usually fall into one or more of the following categories:

1. Failure to Register a Project with RERA

Under Section 3 of the Act, all real estate projects exceeding prescribed thresholds must be registered. Selling or advertising an unregistered project is illegal.

2. Providing False Information

Giving incorrect details during registration, misrepresenting project timelines, or withholding facts violates Sections 4 and 12.

3. Delay in Possession

Failure to complete or hand over the project within the committed timeline violates Section 11 and is one of the most common complaints under RERA.

4. Misuse of Funds

Under Section 4(2)(l)(D), 70% of the project funds must be deposited in a designated account and used only for construction and land costs. Misappropriation is a grave violation.

5. Unauthorized Changes in Project Plans

Builders cannot change project layouts, specifications, or amenities without the consent of at least two-thirds of homebuyers as per Section 14.

6. Failure to Obtain Mandatory Clearances

Builders must secure approvals from competent authorities before advertising or selling units.

7. Charging Beyond the Approved Rate

Any price increase beyond what is declared in the RERA records is a violation.

8. Not Providing Essential Documents at Possession

Withholding occupancy certificates, completion certificates, or registry documents is a breach of statutory duties.

Legal Consequences for Builders Who Violate RERA Regulations

The consequences depend on the nature and severity of the violation. RERA authorities have wide-ranging powers to impose penalties, interest, compensation, and even initiate criminal proceedings.

1. Financial Penalties Under RERA

A. Penalty for Non-Registration (Section 59)

If a builder fails to register a project, the penalty may extend up to 10% of the estimated project cost.
If the builder continues to violate, an additional penalty which may include imprisonment up to 3 years or further fines may be imposed.

B. Penalty for Providing False Information (Section 60)

If a promoter submits misleading or incorrect details, they may be penalized up to 5% of the project cost.

C. Penalty for Violating Project Plans or Commitments (Section 61)

General non-compliance with RERA orders results in a penalty up to 5% of the project cost.

2. Interest and Refund Obligations

A. Delay in Possession

Builders must pay interest to homebuyers for every month of delay. The rate is determined by state rules, generally linked to a benchmark such as SBI’s highest MCLR + additional spread.

B. Refund with Interest (Section 18)

If the buyer chooses to withdraw due to delay or violation, the builder must refund the entire amount along with interest and compensation.

C. Structural Defect Liability (Section 14(3))

Builders must fix any structural defects or quality issues reported within 5 years of possession at no additional cost. Failure triggers financial compensation.

3. Imprisonment in Severe Cases

Certain violations can lead to criminal consequences.
For example:

  • Up to 3 years imprisonment for non-registration even after penalty orders

  • Up to 3 years imprisonment for continued non-compliance with RERA Appellate Tribunal orders

These criminal consequences reinforce the seriousness of RERA compliance.

4. Suspension or Revocation of Project Registration

Under Section 7, RERA may revoke a project’s registration if the builder:

  • Violates terms of approval

  • Engages in unfair practices

  • Misappropriates project funds

  • Fails to follow statutory obligations

Upon revocation:

  • Bank accounts may be frozen

  • Development may be taken over by the association of allottees

  • Builders lose all rights to advertise, sell, or proceed with the project

5. Compensation Orders by the Adjudicating Officer

Homebuyers often file cases seeking compensation for:

  • Mental harassment

  • Financial loss

  • Alternate accommodation rent

  • Increased cost due to delay

  • Loss of opportunity

Builders must comply with these orders, and failure can lead to recovery proceedings similar to land revenue recovery.

6. Liability for Misuse of Project Funds

Misuse of escrow funds is one of the harshest violations. Authorities may:

  • Impose heavy penalties

  • Start criminal proceedings

  • Freeze accounts

  • Initiate audits under Section 35

Persistent non-compliance may also lead to prosecution.

7. Denylisting and Reputational Impact

State RERA authorities maintain public records of registered projects and promoters. Builders who repeatedly violate RERA regulations may be denylisted or flagged by authorities. This means:

  • Their non-compliance history becomes visible to the public

  • Future approvals may become difficult

  • Buyers may avoid their projects due to negative compliance records

  • Lenders and financial institutions may consider them high-risk

Denylisting or compliance flagging can significantly affect a builder’s credibility and long-term business prospects.

How RERA Authorities Enforce Compliance

State RERA authorities have broad enforcement powers under the Act.

Monitoring and Investigations

Authorities can conduct:

  • Audits

  • Inspections

  • Inquiries

  • Verification of financial records

Issuing Notices

If a violation is detected, the builder receives a notice asking for explanation.

Hearings and Orders

RERA conducts quasi-judicial proceedings. The builder must appear or be represented, failing which orders may be passed ex-parte.

Recovery of Penalties

Penalties are recovered as arrears of land revenue, giving them strong enforceability.

Appeal Mechanism

Builders may appeal to:

  1. RERA Appellate Tribunal

  2. High Court (only on substantial questions of law)

Pending appeal, penalties may still have to be deposited fully or in part.

Impact of RERA Violations on Homebuyers

Buyers benefit significantly from strict enforcement. Violations lead to:

  • Better transparency of project details

  • Monetary compensation

  • Timely possession through monitored timelines

  • Ability to withdraw funds with interest

  • Legal clarity through documented RERA orders

Buyers also gain confidence knowing that Builders Who Violate RERA face quantifiable legal consequences.

Responsibilities of Builders Under RERA

A clear understanding of mandatory obligations helps assess violations. Builders must:

  • Register the project

  • Provide accurate project information

  • Update construction progress regularly

  • Maintain separate bank accounts for project funds

  • Adhere to approved layouts

  • Obtain completion and occupancy certificates

  • Hand over possession on time

  • Transfer common areas to associations

  • Fix structural defects for 5 years

Failure to meet these responsibilities forms the basis of RERA complaints.

Practical Steps for Homebuyers When a Builder Violates RERA

Although this article is purely informational, understanding the general process helps readers know what typically happens when builders breach compliance.

1. Check RERA Registration Status

Every state RERA portal provides project details, approvals, timelines, and complaints history.

2. Collect Evidence

Important documents include:

  • Agreement for sale

  • Payment receipts

  • Communication records

  • Brochures or advertisements

  • Approved layouts

  • Any written promises

3. File a Complaint Under Section 31

Buyers may file complaints before:

  • RERA Authority (for violation of rights)

  • Adjudicating Officer (for compensation claims)

4. Attend Hearings

Authority reviews evidence, hears both sides, and passes orders.

5. Execution of Order

If the builder does not comply, RERA may initiate recovery of penalties or take enforcement steps.

Relevant Legal Provisions in RERA

Key sections involved in violations include:

  • Section 3 – Mandatory registration of projects

  • Section 4 – Application for registration

  • Section 7 – Revocation of registration

  • Section 11 – Duties of promoters

  • Section 12 – Liability for false advertisements

  • Section 14 – Adherence to sanctioned plans

  • Section 18 – Compensation for delay or defect

  • Section 59–64 – Penalties, fines, imprisonment

  • Section 71–72 – Compensation and adjudicating officer’s powers

These statutory provisions form the legal backbone for handling cases against Builders Who Violate RERA.

Frequently Asked Questions

1. What happens if a builder does not register a project under RERA?

They may be penalized up to 10% of the project cost and face possible imprisonment of up to 3 years for continued violation.

2. Can a builder change the layout or project specifications after RERA registration?

No major changes are allowed without the written consent of at least two-thirds of allottees.

3. How does RERA handle project delays?

Builders must either pay interest for every month of delay or refund the buyer’s money with interest if the buyer chooses to withdraw.

4. Does RERA allow criminal action against builders?

Yes. Serious violations, such as non-registration or non-compliance with tribunal orders, may lead to imprisonment.

5. Are RERA orders binding?

Yes. Builders must comply, and non-compliance can lead to recovery proceedings similar to land revenue recovery.

6. Can builders appeal against RERA orders?

They may appeal to the Appellate Tribunal, and further to the High Court on questions of law.

RERA has significantly transformed India’s real estate sector by promoting transparency, accountability, and fairness. Builders Who Violate RERA face substantial penalties, including heavy fines, interest obligations, compensation awards, registration revocation, and even imprisonment. These consequences ensure strict compliance and empower homebuyers with reliable protections.

For a general audience, it is important to understand that RERA serves as a strong regulatory mechanism. While it does not eliminate disputes entirely, it ensures that violations are dealt with through a clear, structured, and legally enforceable process. By knowing the legal consequences and the protections available, homebuyers can make more informed decisions and assert their rights effectively within the framework of Indian law.