What Happened
- On February 12, 2026, a bench of Chief Justice Surya Kant and Justice Joymalya Bagchi made sharp observations about the functioning of Real Estate Regulatory Authorities (RERA) across states.
- The Court said homebuyers feel "depressed, disgusted and disappointed" because RERA is not providing effective relief, and in some states the authority appears to be "facilitating defaulting builders" rather than protecting buyers.
- The bench went as far as suggesting that it may be "better to abolish" the institution if it continues to serve builders' interests over homebuyers.
- The Court urged all states to rethink the constitution of their RERA bodies, questioning the practice of appointing retired bureaucrats without domain expertise.
- The observations came in a case where homebuyers sought relief from delayed projects, highlighting systemic failures in RERA's enforcement mechanism across multiple states.
Static Topic Bridges
Real Estate (Regulation and Development) Act, 2016
- Mandatory Registration: All real estate projects with land area exceeding 500 sq. metres or more than 8 apartments must be registered with the state RERA before advertising, marketing, or selling.
- Escrow Account Requirement: Developers must deposit at least 70% of funds collected from buyers into a separate escrow account, usable only for construction and land costs of that specific project, preventing fund diversion.
- Carpet Area Standardization: The Act mandated sale based on carpet area (usable floor area), not super built-up area, eliminating a major source of buyer deception.
- Penalty for Delay: Developers who fail to hand over possession by the agreed date must pay interest to the buyer at a prescribed rate, or the buyer can withdraw with full refund and interest.
- Appellate Tribunal: Each state must constitute a Real Estate Appellate Tribunal for appeals against RERA orders, with further appeal lying to the High Court.
- State-Level Implementation: While all states and UTs have notified RERA rules, the quality of implementation varies widely -- some states have diluted key provisions or appointed authorities with limited independence.
Connection to this news: The Supreme Court's criticism directly targets the gap between RERA's legislative intent and its on-ground implementation. Despite the Act's robust provisions, the regulatory bodies in many states have been ineffective in enforcement, leading to continued builder defaults and homebuyer distress.
Regulatory Capture and Institutional Independence
- The appointment mechanism is a critical determinant of regulatory independence. When regulators are staffed primarily with retired bureaucrats who may have industry ties, the risk of regulatory capture increases.
- The Competition Commission of India (CCI), TRAI, and SEBI provide contrasting models of regulatory design -- with varying degrees of independence, technical expertise, and enforcement capacity.
- The Supreme Court in SEBI v. Sahara (2012) emphasized the importance of regulatory bodies having "real teeth" to enforce compliance.
- International best practices suggest that regulatory appointments should include domain experts, fixed tenures with security of service, and insulation from executive interference.
- The Second Administrative Reforms Commission recommended that regulatory bodies should have multi-disciplinary membership with a clear conflict-of-interest framework.
Connection to this news: The Supreme Court's observation about retired bureaucrats heading RERA bodies echoes the broader concern about regulatory capture. When RERA authorities lack real estate expertise or enforcement willingness, they become instruments that inadvertently protect the regulated (builders) rather than the intended beneficiaries (homebuyers).
Consumer Protection in Real Estate: Constitutional and Statutory Framework
- Article 21 jurisprudence: In Chameli Singh v. State of UP (1996) and Shantistar Builders v. Narayan Totame (1990), the Supreme Court held that the right to shelter is a fundamental right under Article 21.
- The Consumer Protection Act, 2019 provides a parallel forum for real estate complaints, with the National Consumer Disputes Redressal Commission (NCDRC) handling cases above Rs 10 crore.
- The Insolvency and Bankruptcy Code (IBC), 2016 was amended in 2018 to recognize homebuyers as financial creditors (equal in status to banks), giving them a seat on the Committee of Creditors.
- RERA, Consumer Protection Act, and IBC create overlapping jurisdictions -- homebuyers must strategically choose the forum that offers the best remedy in their specific situation.
- The Supreme Court in Pioneer Urban Land v. Union of India (2019) upheld the IBC amendment treating homebuyers as financial creditors.
Connection to this news: The Court's frustration reflects a situation where despite multiple legislative protections, homebuyers continue to face delays and defaults. The suggestion to abolish RERA is not a call to remove regulation but a provocation for states to reconstitute these bodies with genuine enforcement capacity and expertise.
Key Facts & Data
- RERA came into force on May 1, 2017 (full effect from May 1, 2017)
- Escrow account requirement: 70% of buyer funds must be kept in a dedicated account per project
- Registration threshold: Projects with land area above 500 sq. metres or more than 8 apartments
- All 36 states and UTs have notified RERA rules; however, implementation quality varies significantly
- IBC Amendment 2018: Homebuyers recognized as financial creditors -- a landmark shift in buyer protection
- RERA orders are appealable to the Appellate Tribunal, then to the High Court
- Supreme Court bench: Chief Justice Surya Kant and Justice Joymalya Bagchi (February 12, 2026)