Limited Reach of RERA: Why Rural India Remains Unaffected

Abstract

The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to bring transparency, accountability, and efficiency to India’s real estate sector. While the Act has significantly improved the regulation of urban real estate markets, its impact on rural areas remains minimal. This paper examines the limitations of RERA in addressing rural real estate concerns and explores the reasons behind its ineffectiveness in these regions. The study also suggests potential reforms to ensure broader applicability and inclusivity in the real estate regulatory framework.

Introduction

The real estate sector in India has long been marred by various structural and operational challenges, including prolonged project delays, fraudulent transactions, lack of transparency, and inadequate accountability mechanisms. These issues have resulted in significant financial and emotional distress for homebuyers, who often find themselves entangled in legal disputes or forced to accept substandard construction. Recognizing the urgent need for regulatory intervention, the Indian government introduced the Real Estate (Regulation and Development) Act, 2016 (RERA) to bring discipline to the sector, enhance consumer protection, and ensure the timely completion of real estate projects. RERA mandates strict compliance with project registration, financial disclosures, and grievance redressal mechanisms, thereby fostering greater accountability among developers and builders.

Despite its intended objective of revolutionizing the real estate sector, RERA’s implementation has been predominantly urban-focused, with limited penetration into rural areas. The regulatory framework largely caters to metropolitan cities and urban homebuyers, leaving rural real estate markets outside its ambit. This exclusion has created a significant regulatory vacuum, where rural homebuyers continue to face issues such as unregulated transactions, lack of standardization, and weak enforcement of contractual obligations. The absence of RERA in rural regions not only affects the confidence of potential homebuyers but also hampers the overall growth and formalization of the real estate sector in these areas.

This paper critically examines the underlying reasons for RERA’s restricted applicability in rural India, exploring factors such as administrative challenges, lower volume of large-scale real estate projects, and lack of awareness among rural stakeholders. Additionally, it delves into the broader implications of this regulatory gap, assessing its impact on rural development, property rights, and financial security of homebuyers. Through this analysis, the paper aims to highlight the necessity of extending RERA’s protections to rural real estate markets and proposes potential reforms to make the law more inclusive and effective.

Legal Framework of RERA

The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to introduce much-needed regulation and accountability in the real estate sector, addressing issues such as project delays, financial mismanagement, and consumer exploitation. The Act establishes a robust framework through several key measures. One of its fundamental provisions is the mandatory registration of real estate projects with the respective state Real Estate Regulatory Authorities (RERAs), ensuring that only approved and legally compliant projects are marketed and sold. Additionally, the Act mandates the use of escrow accounts, requiring developers to deposit at least 70% of the project funds collected from homebuyers into a dedicated account. This provision aims to prevent fund diversion and ensures that the money is used exclusively for construction and project-related expenses, thereby reducing the risk of delays and financial mismanagement. Furthermore, RERA introduces an efficient dispute resolution mechanism by establishing Real Estate Appellate Tribunals, where aggrieved homebuyers can seek redressal against unfair trade practices, contractual breaches, or non-compliance by developers.

Despite these regulatory safeguards, RERA contains certain exemptions that limit its applicability, particularly in rural areas. One such exemption is found in Section 3(2)(a) of the Act, which states that projects where the land area is below 500 square meters or comprise fewer than eight apartments do not require registration under RERA. This exemption is significant because rural real estate developments are typically small-scale and often fall below these thresholds, effectively placing them outside the regulatory framework. As a result, many homebuyers in rural areas remain unprotected from project delays, fraudulent dealings, and lack of accountability.

Moreover, RERA primarily focuses on formalized real estate transactions, which involve registered sales agreements, structured payment mechanisms, and legally documented projects undertaken by established developers. However, rural property dealings are often conducted through informal agreements, verbal commitments, and unregistered sales, which do not come under the purview of RERA. The reliance on traditional and unstructured methods of property transactions in rural areas further diminishes the impact of RERA’s regulatory provisions, leaving rural homebuyers with limited legal recourse in case of disputes or fraudulent practices. This structural limitation underscores the need for policy reforms to extend RERA’s protections to the rural real estate sector, ensuring that homebuyers in these regions receive the same level of legal safeguards as their urban counterparts.

Factors Contributing to RERA’s Limited Reach in Rural India

The effectiveness of the Real Estate (Regulation and Development) Act, 2016 (RERA) in safeguarding homebuyers’ interests and ensuring accountability in the real estate sector has been largely confined to urban areas. Several factors contribute to the law’s limited reach in rural India, where property dealings remain largely informal and unregulated. These factors include legislative exemptions, structural issues in rural real estate markets, lack of awareness, variations in state-level implementation, and infrastructural challenges.

1. Exemption of Small-Scale Projects

One of the primary reasons for RERA’s limited applicability in rural areas is the exemption granted to small-scale real estate projects under Section 3(2)(a) of the Act. According to this provision, any project that covers an area of less than 500 square meters or consists of fewer than eight apartments is not required to be registered under RERA. Since most rural housing developments and land transactions involve small plots or individual home constructions rather than large-scale residential complexes, they fall outside the regulatory framework. As a result, rural homebuyers do not benefit from RERA’s protections, such as mandated disclosures by developers, project completion timelines, and access to dispute resolution mechanisms. This exemption creates a significant regulatory vacuum, allowing many small-scale developers and builders in rural areas to operate without oversight, leading to potential risks of fraud, misinformation, and lack of consumer protection.

2. Lack of Formalized Real Estate Markets

Unlike urban areas, where real estate transactions are typically formalized through registered agreements and legal documentation, rural property dealings often take place informally. Many transactions are based on verbal agreements, unregistered sales, and customary land ownership practices, which do not fall within the purview of RERA. The absence of formal contracts and legal documentation makes it challenging to enforce regulatory provisions and provide legal recourse to rural homebuyers in cases of disputes or malpractice. Additionally, rural real estate dealings frequently involve ancestral property transfers, agricultural land sales, and informal land partition arrangements, which are rarely registered with real estate regulatory authorities. This informal nature of rural property transactions limits RERA’s effectiveness, as it primarily governs formalized, large-scale real estate projects that require legal registration and structured financial dealings.

3. Limited Awareness and Accessibility

Another critical challenge to RERA’s implementation in rural India is the lack of awareness among homebuyers, landowners, and small-scale developers regarding their rights and obligations under the Act. In many rural areas, people are unfamiliar with legal frameworks governing real estate, and RERA-related information is not readily available or disseminated effectively. Unlike urban homebuyers, who often rely on legal professionals, online resources, and consumer forums to understand real estate regulations, rural buyers may not have adequate access to legal guidance or state RERA authorities to seek clarifications or file complaints.

Additionally, many rural residents do not have internet access or face language barriers, which makes it difficult to navigate state RERA websites, file grievances online, or track project approvals. The absence of local RERA offices in smaller towns and villages further reduces accessibility, discouraging rural homebuyers from seeking regulatory protection or legal recourse against fraudulent practices.

4. State-Level Variations in Implementation

RERA is a central law, but its implementation is handled by state regulatory authorities, leading to significant variations in enforcement across different states. Some states have actively enforced RERA, ensuring strict compliance among developers, while others have been slower in establishing regulatory authorities or enforcing the law effectively. This disparity is more pronounced between urban and rural areas, where enforcement mechanisms are often weaker due to limited administrative presence and regulatory oversight.

For instance, in states with strong urban real estate markets, RERA enforcement is more stringent, with regular project inspections, online complaint mechanisms, and proactive consumer awareness campaigns. However, in rural areas, the absence of dedicated enforcement teams, weak monitoring mechanisms, and lower consumer engagement result in poor implementation. This uneven enforcement contributes to continued real estate malpractices in rural markets, as developers and brokers operating in these areas are less likely to face regulatory scrutiny compared to their urban counterparts.

5. Infrastructure and Connectivity Challenges

The effective functioning of RERA relies heavily on digital infrastructure, streamlined legal systems, and real-time project monitoring, all of which are lacking in many rural regions. Unlike urban centres, which have well-established real estate offices, legal aid services, and online regulatory platforms, rural areas often lack the necessary institutional support for RERA’s implementation. Some key challenges include:

• Limited digital access: Many rural homebuyers and landowners do not have reliable internet connectivity, making it difficult to access state RERA websites, register complaints, or track project approvals online.
• Scarcity of legal professionals: Unlike cities, where legal experts specializing in real estate law are easily available, rural areas have fewer legal practitioners who can assist buyers in understanding and enforcing their rights under RERA.
• Delayed dispute resolution: The absence of dedicated real estate appellate tribunals in rural districts results in delayed hearings and limited redressal options, discouraging homebuyers from filing complaints.

Additionally, rural areas often face logistical constraints, such as poor road connectivity and inadequate communication networks, making it difficult for regulatory authorities to conduct site inspections, enforce compliance, or penalize defaulting developers. Without a strong institutional framework, RERA’s implementation in rural regions remains ineffective, leaving homebuyers vulnerable to unregulated and exploitative real estate practices.

Implications of RERA’s Limited Reach

Impact of the Absence of a Regulatory Framework in Rural Real Estate

The lack of a comprehensive regulatory framework governing real estate transactions in rural areas has significant consequences for homebuyers, developers, and the overall development of the real estate sector. In the absence of legal oversight, standardized processes, and consumer protection mechanisms, rural real estate markets remain highly unstructured and prone to malpractices, leading to a range of issues such as fraudulent transactions, lack of accountability, limited legal recourse, and stunted economic growth.

1. Continued Exploitation of Homebuyers

Rural homebuyers often lack legal protection against misrepresentation, unfair trade practices, and contractual breaches due to the absence of regulatory oversight. Some common forms of exploitation include:

• Misleading property descriptions: Buyers are frequently sold properties without clear title verification, leading to ownership disputes or land encroachment issues after purchase.
• Substandard construction: Developers and builders often cut corners in construction quality, using inferior materials or failing to complete projects as promised. In urban areas, RERA mandates strict quality checks and disclosures, but rural homebuyers lack similar protections.
• Hidden costs and price manipulation: Since rural property transactions are not strictly regulated, developers and brokers often impose undisclosed charges, inflate property prices, or manipulate agreements to the disadvantage of buyers.
• Unfulfilled project commitments: Without RERA’s mandatory project completion timelines, developers can delay construction indefinitely, leaving buyers in financial distress with no legal means to enforce deadlines.

As a result, rural homebuyers remain vulnerable to financial losses, delayed possessions, and property disputes, with no structured mechanism for grievance redressal.

2. Fraudulent Land Dealings and Unregulated Transactions

• Fraudulent real estate transactions are rampant in rural areas due to weak legal enforcement and lack of standardized documentation. Some common fraudulent practices include:
• Sale of disputed or encumbered land: Buyers may unknowingly purchase land that is subject to legal disputes, government acquisitions, or multiple ownership claims, leading to prolonged legal battles.
• Forgery and identity fraud: Unscrupulous sellers sometimes forge land records, manipulate property deeds, or impersonate rightful owners to sell land illegally.
• Unregistered sales and verbal agreements: Unlike in urban areas where property sales are registered and recorded under government databases, many rural land transactions take place through verbal agreements or informal contracts, leaving buyers with no legal proof of ownership in case of disputes.
• Land grabbing by developers and intermediaries: Without strict oversight, powerful developers or middlemen often exploit small landowners, coercing them into unfair deals or grabbing land without appropriate compensation.

The absence of a regulatory authority like RERA allows such fraudulent activities to continue unchecked, leading to loss of property rights, financial instability, and long-term legal conflicts for buyers.

3. Lack of Dispute Resolution Mechanisms

In urban areas, RERA provides a structured grievance redressal system through state regulatory authorities and real estate appellate tribunals. However, rural homebuyers have no such dedicated mechanism to address real estate disputes, forcing them to rely on costly and time-consuming civil litigation. The challenges of dispute resolution in rural real estate include:

• Delays in legal proceedings: Due to overburdened courts and lack of specialized real estate tribunals, cases related to fraudulent land sales, delayed possession, and property disputes can take years to resolve.
• Lack of awareness about legal rights: Many rural buyers do not have legal knowledge or access to lawyers, making it difficult for them to seek justice in case of fraud.
• Intimidation by influential parties: In many rural areas, developers, brokers, or politically connected individuals use coercion or threats to prevent homebuyers from challenging fraudulent transactions.

The lack of an accessible, fast-track dispute resolution mechanism leaves rural homebuyers without legal recourse, discouraging them from seeking justice against fraudulent practices.

4. Lack of Developer Accountability

In the absence of mandatory project registration and financial disclosures, developers operating in rural areas remain largely unregulated and unaccountable. Unlike urban developers, who must comply with strict RERA provisions such as:

• Project registration and progress updates
• Escrow accounts to prevent fund mismanagement
• Mandatory completion timelines
• Transparency in agreements and pricing

Rural developers face no such obligations and can operate without disclosing project details, financial records, or buyer protections. This results in unchecked malpractices, such as:

• Incomplete projects or abandoned developments
• Non-compliance with safety and building regulations
• Unauthorized land use and environmental violations
• Lack of compensation or refunds for buyers

Since rural real estate transactions often involve small-scale developers and local builders, there is no centralized authority to monitor their activities, making homebuyers more susceptible to exploitation and financial losses.

5. Discourages Investment and Structured Development

• The lack of a regulatory framework in rural real estate markets deters institutional investment and hinders structured development. Without legal safeguards, banks, financial institutions, and large-scale developers are hesitant to invest in rural housing projects, infrastructure development, or commercial real estate. Key deterrents include:
• Uncertainty in land titles: Ambiguous land ownership records and frequent legal disputes make it risky for investors to engage in large-scale projects.
• Lack of clear zoning and development policies: Unlike cities, where land use is planned and regulated, rural areas often lack zoning laws, leading to haphazard construction and lack of proper infrastructure.
• Insecure financing and loan risks: Financial institutions hesitate to provide home loans or project financing in rural areas due to high risks of fraud, non-compliance, and legal uncertainties.
• Absence of formal property valuation mechanisms: The informal nature of rural real estate makes it difficult to establish standardized property values, discouraging structured investments.
• As a result, rural areas miss out on organized real estate growth, leaving homebuyers dependent on unreliable developers, fragmented property markets, and weak legal protections.

Possible Reforms and Recommendations for Strengthening RERA in Rural India

To address the regulatory vacuum in rural real estate markets and extend RERA’s consumer protection benefits beyond urban areas, several policy reforms and structural improvements are necessary. The following recommendations focus on expanding RERA’s jurisdiction, improving enforcement mechanisms, increasing awareness, and leveraging local governance structures to make the regulatory framework more inclusive and effective.

1. Expanding RERA’s Scope

One of the key limitations of RERA in rural areas is its exemption for small-scale projects, as outlined in Section 3(2)(a) of the Act, which excludes projects that:

• Cover less than 500 square meters of land, or
• Have fewer than eight apartments

Since most rural developments fall below these thresholds, they remain outside RERA’s regulatory ambit, allowing small-scale builders and developers to operate without oversight. To increase regulatory coverage, the following reforms could be considered:

• Lowering the threshold: Reducing the land area and apartment count criteria would bring more rural housing projects under RERA’s jurisdiction.
• Introducing a tiered regulatory framework: Instead of a blanket exemption, a simplified version of RERA could be applied to smaller projects, ensuring at least basic compliance with disclosure, dispute resolution, and consumer protection norms.
• Extending RERA provisions to individual home construction projects: In rural areas, home construction is often undertaken by individual landowners or local builders rather than large developers. A modified RERA framework could require such projects to adhere to minimum construction quality standards and legal documentation norms.

By expanding RERA’s coverage, more rural homebuyers can be protected from fraudulent transactions, substandard construction, and delayed project completions.

2. Strengthening Rural Land Record Digitization

A major challenge in enforcing real estate regulations in rural areas is the lack of clear and updated land records. Many rural property transactions are affected by:

• Ambiguous land titles
• Multiple ownership claims
• Undocumented property sales

To enhance transparency and legal enforcement, the government should focus on integrating RERA with digital land records and property registration systems. Key steps include:

• Linking real estate transactions with government land record databases to ensure that only legally verified properties are sold.
• Expanding initiatives like the Digital India Land Records Modernization Programme (DILRMP) to accelerate computerization of land records in rural areas.
• Creating a centralized online portal where homebuyers can verify project approvals, developer credentials, and property ownership details before making transactions.

By digitizing land records and integrating them with RERA’s monitoring mechanisms, enforcement agencies can identify fraudulent transactions more efficiently, and homebuyers can make informed decisions before purchasing property.

3. Awareness Campaigns for Rural Homebuyers

• One of the biggest obstacles to effective real estate regulation in rural areas is the lack of awareness among homebuyers about:
• Their legal rights under RERA
• Mandatory project registration requirements
• Available grievance redressal mechanisms

To bridge this knowledge gap, the government should implement targeted awareness campaigns, including:

• Community outreach programs in villages to educate buyers about how to identify legal property transactions and avoid real estate fraud.
• Mobile legal aid clinics to provide on-the-spot assistance to rural homebuyers regarding property transactions.
• Public information drives using radio, television, and social media in regional languages to simplify legal provisions and explain how buyers can file complaints under RERA.
• Collaboration with local NGOs and consumer rights groups to conduct legal literacy workshops in rural districts.

By increasing awareness and accessibility, rural homebuyers will be better equipped to identify fraudulent deals and seek legal recourse when necessary.

4. Mobile and Local RERA Offices for Rural Areas

Currently, RERA offices and tribunals are concentrated in urban centers, making it difficult for rural homebuyers to access regulatory authorities or file complaints. To ensure effective enforcement in rural areas, the government could introduce:

• Mobile RERA units: Setting up mobile RERA complaint desks that periodically visit rural districts to collect grievances, provide legal guidance, and inspect real estate projects.
• Decentralized RERA offices: Establishing smaller, district-level RERA branches in rural areas to ensure that homebuyers do not need to travel to state capitals or major cities to seek legal assistance.
• Helpline and online portals: Creating a toll-free helpline and multilingual online portals where rural buyers can report violations, check property registration status, and track complaint progress.

By bringing regulatory authorities closer to rural communities, more homebuyers will have access to timely legal intervention and dispute resolution mechanisms.

5. Integration with Panchayati Raj Institutions

Local governance bodies, such as Gram Panchayats and Block Development Committees, play a crucial role in rural administration and land management. Since these institutions are already involved in land-related matters, they could be leveraged to monitor compliance with real estate regulations and assist in RERA’s enforcement. Key steps include:

• Training Panchayat members on real estate laws so they can help local homebuyers identify legal vs. fraudulent property transactions.
• Mandating Panchayats to verify project approvals before developers are allowed to undertake construction in rural areas.
• Creating local real estate grievance committees under Panchayati Raj institutions to assist homebuyers in filing complaints and seeking resolution.
• Ensuring Panchayats coordinate with district-level RERA authorities to report real estate violations and fraudulent activities.
• By integrating local governance bodies into the regulatory framework, RERA enforcement in rural areas can be strengthened without requiring extensive bureaucratic expansion.

Conclusion

While RERA has transformed the urban real estate landscape, its effectiveness in rural India remains limited due to exemptions, lack of formalization, and inadequate enforcement mechanisms. Expanding its applicability, improving awareness, and integrating digital tools could help bridge this gap. A more inclusive approach to real estate regulation is necessary to ensure that rural homebuyers receive the same level of protection as their urban counterparts.

Reference

India Code, (May 16, 2024), https://www.indiacode.nic.in/bitstream/123456789/2158/3/A2016-16.pdf

Challenges Facing Rural Development in India: Overcoming the Obstacles, Social For Action (Jan. 20, 2025), https://www.socialforaction.com/blog/what-are-the-challenges-facing-rural-development/

Suhani Kedia, Economic Development in Rural India: Challenges and Opportunities, (Nov. 28, 2023), https://www.i jsr.net/archive/ v12i11/ SR23112 4185555.pdf

https://r.search.yahoo.com/_ylt=AwrKA27cz.NnwwIAV3G7HAx.;_ylu=Y29sbwNzZzMEcG9zAzEEdnRpZAMEc2VjA3Ny/RV=2/RE=1744192733/RO=10/RU=https%3a%2f%2fnano-ntp.com%2findex.php%2fnano%2farticle%2fdownload%2f3939%2f2985%2f7460/RK=2/RS=0TnPZpQjNvWbXF.2bTe0W77VU8A-.

(Oct. 12, 2021), https://www.jetir.org/papers/JETIR2110162.pdf.

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Chahak Agarwal
College: Lloyd School of Law, Greater Noida