Structural Defects, Project Delays, and Liability under the Real Estate (Regulation and Development) Act, 2016

This note explains how liability for structural defects and project delays arises under the Real Estate (Regulation and Development) Act, 2016 (“RERA”), who the law applies to, what obligations are mandatory, how compliance is assessed by authorities, and the legal and financial consequences of default. It is intended for promoters, developers, landowners acting as promoters, and senior management responsible for real estate projects in India.

The Real Estate (Regulation and Development) Act, 2016 was enacted on 25 March 2016 and brought into force on 1 May 2016. The Act applies to real estate projects where the area of land proposed to be developed exceeds 500 square metres or the number of apartments exceeds eight, inclusive of all phases. States have adopted the Act with local rules notified between 2016 and 2017.

RERA establishes a statutory, consumer-centric framework governing project registration, disclosures, construction obligations, timelines, and post-handover liability. Unlike pre-RERA law, liability under RERA is largely strict and timeline-driven, with limited scope for equitable defences.

Under Section 2(zk), a “promoter” includes not only the developer but also landowners, development authorities, or any person who constructs or causes construction for sale. Joint development arrangements and landowner-developer models therefore attract joint exposure unless contractually structured otherwise.

Project delays are governed primarily by Sections 18 and 19 of the Act. A promoter is statutorily bound to complete the project and hand over possession in accordance with the timeline declared at the time of registration. The declared timeline is not indicative; it is binding. Any deviation, unless falling within narrowly interpreted force majeure, triggers liability.

If the promoter fails to complete or is unable to give possession in accordance with the agreement for sale, the allottee has two statutory options. First, the allottee may withdraw from the project and seek refund of the entire amount paid along with interest and compensation. Second, the allottee may choose to continue with the project and claim interest for every month of delay until possession is handed over.

Interest rates are prescribed under State RERA Rules and are typically linked to the State Bank of India’s highest marginal cost of lending rate plus a specified margin. These rates are applied mechanically by authorities and leave little discretion once delay is established.

The defence of force majeure under RERA is narrowly construed. Section 6 permits extension of project registration only in cases of war, flood, drought, fire, cyclone, earthquake, or other natural calamities affecting regular development. Financial difficulty, market slowdown, contractor default, or internal disputes do not qualify. Extensions granted by authorities are limited and closely scrutinised.

Structural defect liability is governed by Section 14(3) of the Act. This provision imposes a statutory warranty on the promoter for a period of five years from the date of handing over possession. During this period, the promoter is liable for any structural defect or defect in workmanship, quality, or provision of services.

Upon notice by the allottee, the promoter is required to rectify such defects within thirty days without further charge. If the promoter fails to do so, the allottee is entitled to compensation as determined by the Authority. This obligation exists irrespective of contractual terms to the contrary and cannot be waived by agreement.

The term “structural defect” is not exhaustively defined in the Act. Authorities have generally interpreted it to include defects affecting the stability, safety, or essential integrity of the building, including defects in foundation, columns, load-bearing structures, and major service infrastructure. Cosmetic issues are usually excluded, but interpretation varies by authority and facts.

Importantly, Section 14(3) creates post-handover liability that survives completion certificates and occupancy. Completion of construction does not extinguish liability. This marks a significant departure from pre-RERA practice.

Compliance obligations under RERA are disclosure-driven. Promoters must register projects with the State RERA Authority, disclose sanctioned plans, layout, timelines, approvals, and quarterly updates on construction progress. These disclosures form the basis against which delay and defect claims are adjudicated. Inconsistencies between actual construction and registered disclosures significantly weaken the promoter’s position.

Penalties under RERA are substantial and cumulative. Under Section 59, failure to register a project can attract penalties up to ten percent of the estimated project cost and, in cases of continued default, imprisonment of up to three years. Under Section 61, contravention of other provisions, including disclosure and compliance obligations, can attract penalties up to five percent of the estimated project cost.

Orders of the RERA Authority are enforceable as decrees of a civil court. Non-compliance with orders may result in additional penalties and recovery proceedings. Appeals lie before the Real Estate Appellate Tribunal, subject to mandatory pre-deposit requirements, typically thirty percent of the penalty or the full amount payable to the allottee.

Director and officer liability under RERA is indirect but real. While the Act primarily targets the promoter entity, enforcement authorities have, in practice, required personal affidavits, undertakings, and compliance commitments from directors and authorised signatories. Persistent non-compliance may also trigger parallel action under company law.

RERA remedies are in addition to, not in derogation of, remedies available under other laws. Allottees may still approach consumer commissions or civil courts in appropriate cases, subject to judicial developments on jurisdictional overlap. Arbitration clauses in agreements for sale do not oust RERA jurisdiction.

In practical terms, RERA has transformed construction risk allocation. Timelines declared at registration are legally binding, structural quality is statutorily guaranteed for five years, and financial exposure is predictable but significant. Documentation, accurate disclosures, and realistic project planning are critical. Once a delay or defect is established, discretion with authorities is limited.

For promoters and developers, RERA compliance is not a procedural exercise. It is a continuous legal obligation with long-tail liability extending years beyond possession.