Quick Answer
RERA compliance for developers in India requires project registration before any marketing, maintaining a 70% escrow account (three-account model under RERA 2.0), issuing a RERA-compliant Agreement for Sale, obtaining an Occupancy Certificate before possession, and honoring a 5-year defect liability period. Penalties for non-compliance reach up to 10% of the estimated project cost.
Developer compliance under the Real Estate (Regulation and Development) Act, 2016 (RERA) has grown significantly more demanding since the 2025 amendments took effect. RERA 2.0 introduced mandatory escrow audits, suo motu enforcement powers, and an expanded definition of ongoing projects, raising the compliance bar for every builder and developer operating in India.
This guide covers every core obligation a developer must meet, from project registration and escrow structuring to Occupancy Certificate requirements and post-possession defect liability. It is designed specifically for developer compliance teams and legal heads who need a precise, step-by-step reference for 2026 operations. For a broader view of how the real estate legal landscape applies to your business, see our Real Estate Industry Overview.
Project Registration: Before Any Marketing or Sale
What Must Be Registered?
RERA registration is compulsory for any project where the land area exceeds 500 square meters or the number of apartments exceeds eight. This applies equally to residential, commercial, and mixed-use developments.
Registration must be completed with the relevant State RERA authority before any of the following activities begin:
- Advertisement or marketing of the project
- Booking or collection of any advance from buyers
- Sale or offer to sell any unit
Failure to register before initiating any of these activities exposes the developer to penalties of up to 10% of the estimated project cost under Section 59 of the Real Estate (Regulation and Development) Act, 2016.
What Must Be Disclosed at Registration?
At the time of RERA registration, the developer must submit the following documents and disclosures to the State RERA authority:
Disclosure Category | Specific Requirements |
Project details | Sanctioned plan, layout plan, specifications of proposed development |
Land title | Encumbrance certificate, title documents, ownership details |
Financial details | Project cost estimates, funding sources, proposed escrow bank |
Approvals | All commencement certificates and approvals received |
Promoter track record | Details of past projects including any pending litigation or delays |
Timeline | Proposed schedule of completion with phase-wise milestones |
Agent details | Names and registration numbers of all RERA-registered agents appointed |
Incomplete or inaccurate disclosures are treated as non-compliance and can attract independent penalties.
Ongoing Portal Updates: Quarterly (RERA 2.0 Enhanced)
Every registered project must be updated on the State RERA portal at regular intervals. Under RERA 2.0, the quarterly update obligation has been tightened.
Developers must upload the following information every quarter, no later than the last day of the quarter:
- Percentage of construction completed (floor-wise or phase-wise as applicable)
- Photographs of the construction site
- Number of units booked and sold
- Updated financial statements for the escrow account
- Any changes to the project timeline with supporting reasons
The deadline for each quarterly update is the last working day of the quarter (March 31, June 30, September 30, and December 31). Missing a quarterly update constitutes a RERA violation and is subject to suo motu action under RERA 2.0.
Escrow Account Compliance: 70% Rule and RERA 2.0 Audits
The 70% Escrow Rule
Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016 requires that 70% of all amounts realized from buyers for a project be deposited into a separate escrow account maintained with a scheduled bank.
The 70% escrow funds can only be used for the following purposes:
- Land cost
- Construction cost
- Infrastructure development directly related to the project
These funds cannot be used for marketing expenses, developer overhead, or any purpose unrelated to the specific registered project. Withdrawals must be in proportion to the percentage of completion, certified jointly by an engineer, an architect, and a chartered accountant.
RERA 2.0 Three-Account Model (GujRERA January 2025 as Model)
The GujRERA three-account model, formalized in January 2025, has become the national benchmark for escrow structuring under RERA 2.0. The structure operates as follows:
Account | Purpose | Access |
Account 1 (Collection Account) | All buyer payments received into this account first | Developer, with transfer obligations |
Account 2 (Project Escrow Account) | 70% of collections transferred here for land and construction costs | Requires certification from engineer, architect, and CA |
Account 3 (Developer Operations Account) | Remaining 30% available for non-project developer use | Developer discretion |
Developers maintaining a single collection account without the mandated three-account structure are directly exposed to RERA authority action. State RERA authorities now hold powers to audit escrow accounts independently.
Consequences of Escrow Non-Compliance
Non-compliance with the escrow account structure attracts the following consequences under RERA and RERA 2.0:
- Mandatory rectification orders directing the developer to restructure accounts within a specified period
- Financial penalties at the discretion of the State RERA authority
- Cancellation of project registration in severe or repeated cases
- Suo motu proceedings initiated by the RERA authority without any buyer complaint
These consequences apply regardless of whether the project is progressing on schedule. Escrow non-compliance is treated as an independent violation.
Agreement for Sale (AFS): Mandatory Format and Provisions
No developer may accept a payment exceeding 10% of the apartment’s total cost from a buyer without first executing a registered Agreement for Sale (AFS). This obligation applies to both residential and commercial units.
The AFS must follow the model format prescribed by the relevant State RA authority and must include all of the following provisions:
- Full description of the unit, including carpet area as defined under RERA
- Agreed total consideration and payment schedule
- Date of possession and consequences of delay
- Specifications of construction materials and fittings
- Rights and obligations of both parties
- Compensation payable at SBI MCLR plus 2% per annum on amounts paid, in the event of possession delay (standardized under RERA 2.0)
- Refund provisions in case of project cancellation
Any agreement that deviates from the prescribed format or limits the developer’s liability for delay below the RERA-mandated rate is unenforceable to that extent. Executing a non-RERA-compliant AFS is itself a violation.
Occupancy Certificate (OC): Mandatory Before Possession
A developer cannot hand over possession of any unit to a buyer until the relevant local authority has issued a valid Occupancy Certificate (OC) for the building.
The OC confirms that the construction has been completed in accordance with the sanctioned building plan and that the structure is fit for occupation. Handing over possession without an OC constitutes a violation of RERA and exposes the developer to buyer complaints, RERA penalties, and potential suo motu action.
Before applying for an OC, developers must ensure the following have been obtained:
- Fire NOC from the relevant fire authority
- Water and sewage connection approvals
- Electricity supply agreement and connection
- Completion certificate from the local body confirming construction matches the approved plan
Buyers retain the right to refuse possession until the OC is produced. Forcing or inducing a buyer to accept possession without an OC creates additional legal exposure for the developer.
Defect Liability: 5-Year Post-Possession Obligation
Under Section 14(3) of the Real Estate (Regulation and Development) Act, 2016, a developer is obligated to repair any structural defect or defect in workmanship, quality, or provision of services that is brought to the developer’s notice within five years of the date of possession.
This obligation applies to:
- Structural defects in the building
- Defects in workmanship or quality of materials
- Deficiencies in services provided (water supply, electrical systems, common areas)
The developer must rectify any such defect within 30 days of receiving written notice from the buyer. Failure to rectify within 30 days entitles the buyer to compensation at the applicable rate.
Developers cannot contractually limit or waive this 5-year defect liability. Any clause in the AFS or sale deed purporting to reduce or eliminate this obligation is void under RERA.
Real Estate Agent Registration Under RERA
Every real estate agent facilitating the sale or purchase of units in a RERA-registered project must be individually registered with the relevant State RERA authority under Section 9 of the Real Estate (Regulation and Development) Act, 2016.
Developers bear a direct compliance obligation here. A developer cannot appoint or engage an unregistered agent for any transaction involving their RERA-registered project. Doing so constitutes a violation by the developer, not just the agent.
Agent registration requirements include:
- Application to the State RERA authority with prescribed documents
- Payment of registration fee as specified by the State RERA
- Disclosure of all projects in which the agent is involved
- Renewal of registration upon expiry (typically every five years, subject to state rules)
Developers must maintain a record of all agent registration numbers and verify registration validity before executing any agency appointment.
RERA Penalties for Developers
The Real Estate (Regulation and Development) Act, 2016 prescribes specific penalties for each category of violation. The following table summarizes the key penalty provisions applicable to developers:
Violation | Applicable Section | Penalty |
Non-registration of project before marketing or sale | Section 59 | Up to 10% of estimated project cost; continued non-compliance can attract imprisonment up to 3 years, or additional fine, or both |
Non-compliance with RERA orders or directions | Section 63 | Up to 5% of estimated project cost |
Failure to maintain escrow account correctly | Section 60 | Up to 5% of estimated project cost |
Providing false information at registration | Section 60 | Up to 5% of estimated project cost |
Non-compliance with RERA Appellate Tribunal orders | Section 64 | Imprisonment up to 3 years, or fine up to 10% of estimated project cost, or both |
Appointing unregistered real estate agents | Section 62 | Up to 5% of estimated project cost |
State RERA authorities have discretion in determining the final penalty amount within these limits, based on the nature and duration of the violation.
Dividend from REIT
Dividends distributed by a REIT to its unit holders are taxable in the hands of the unit holder at their applicable income tax slab rate. No withholding tax applies at the REIT level on dividend distributions to resident unit holders. For non-resident unit holders, withholding tax applies at applicable treaty or statutory rates.
RERA Suo Motu Enforcement: RERA 2.0 Key Change
One of the most significant changes introduced by RERA 2.0 is the grant of suo motu enforcement powers to State RERA authorities. Prior to this amendment, RERA proceedings were primarily complaint-driven, requiring a buyer to file a formal complaint before the authority could act.
Under RERA 2.0, State RERA authorities can now:
- Initiate proceedings against a developer without any buyer complaint
- Conduct inspections of project sites and financial records without prior notice
- Audit escrow accounts independently of any buyer dispute
- Issue show-cause notices and impose penalties on the basis of their own review of portal data
This change means that quarterly update discrepancies, escrow account irregularities, and non-compliant project advertisements are all directly visible and directly enforceable by the regulator.
The Supreme Court, in its March 2025 ruling, described RERA implementation across states as “disappointing” and directed stricter enforcement going forward. Developers cannot rely on the absence of buyer complaints as protection against RERA liability.
Altacit Global recommends that developer compliance teams conduct an internal RERA audit at least once per quarter, independent of the formal portal update cycle, to identify and remediate exposure before the RERA authority does. For a full view of the developer compliance lifecycle beyond RERA, refer to our Legal Guide for Real Estate Developers and Builders in India (2026).
Take the Next Step with Altacit Global
RERA compliance for developers in India in 2026 is not a one-time registration exercise. It is a continuous operational obligation that runs from the first booking through to five years after possession. The introduction of RERA 2.0 has made this framework more demanding, more auditable, and more directly enforceable.
Altacit Global advises developer compliance teams and legal heads on the full lifecycle of RERA obligations, from registration and escrow structuring to AFS drafting, OC coordination, and defect liability management. Our teams in Chennai, Bangalore, Hyderabad, Kochi, and Coimbatore provide jurisdiction-specific guidance tailored to the state RERA rules applicable to your projects.
To discuss your project’s RERA compliance requirements, contact us at info@altacit.com
Frequently Asked Questions: RERA Compliance Developers India
Q1: Can a developer delay the Occupancy Certificate and still hand over possession?
No. Under RERA, possession cannot be handed over to any buyer without a valid Occupancy Certificate issued by the competent local authority. Handing over possession before the OC is obtained is a direct RERA violation. The buyer has the legal right to refuse possession until the OC is produced, and the developer remains liable to pay compensation at SBI MCLR plus 2% per annum for every day of delay beyond the agreed possession date.
Q2: What is the quarterly update deadline under RERA?
The quarterly update must be uploaded to the State RERA portal by the last working day of each quarter. The four deadlines in a calendar year are March 31, June 30, September 30, and December 31. The update must include construction progress photographs, the percentage of completion, units booked, and the current status of the escrow account. Missing a quarterly update is an independent violation and is subject to suo motu enforcement action under RERA 2.0.
Q3: Can the developer use escrow funds for marketing expenses?
No. The 70% escrow funds deposited under Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016, are restricted exclusively to land cost, construction cost, and project infrastructure. Marketing expenses, sales commissions, developer overhead, and financing costs must be funded from the 30% non-escrow portion. Using escrow funds for any non-permitted purpose is a direct escrow violation and can attract penalties, rectification orders, and project registration cancellation.
Q4: If a buyer cancels, must the developer refund from the escrow account?
Yes. If a buyer who has paid into the project is entitled to a refund, whether due to project delay, developer default, or mutual cancellation, the refund obligation is not reduced by the escrow structure. The developer must return the full amount paid by the buyer along with interest at SBI MCLR plus 2% per annum from the date of payment. Where funds are held in the escrow account, the developer must ensure sufficient liquidity is available. Structuring the project accounts to prevent refund payments is itself a RERA violation.
