Luxury Developers Under RERA: The Cost of Phased Ambiguity

The Real Estate (Regulation and Development) Act, 2016 (RERA), was established with the aim of making the home buying process more transparent and to give home buyers a timely delivery with transparent paperwork. However, this framework becomes a paradox when it comes to with large-scale, multi-tower, luxury projects, commonly referred to as townships or integrated developments. A clever business tactic is to divide these projects into stages or phases that will help the developers to better manage the cash flow and approvals. Alas, RERA often treats the entire advertised scheme as a unified entity, which poses a challenge to those developers who bifurcate large scale projects into phases. This difficulty arises when a business's step-by-step, incremental implementation of a project (phased execution) conflicts with the obligation to meet all the legal requirements of the project as a whole, from the very beginning.

The snag lies in the fact that the phased registration, which RERA permits, does not match with the ground reality that you cannot really separate each phase into an independent entity, as all of these stages ultimately rely upon the same underlying infrastructure (like main access roads, water supply, and sewage systems), which is an indivisible reality.

Phased Development: The Criticality of RERA Registration and Disclosure

RERA requires developers to register a project in stages and fill an affidavit indicating the duration they would take to complete the concerned phase. This segment makes the difference in terms of logistics and money planning. However, regulators often bypass this phased distinction when the subsequent or later phases are highly reliant on common core infrastructure such as the main clubhouse, key access roads, or the common utilities that were previously sold and guaranteed to the initial allottees/buyers. 

In case the identity of the entire project relies upon these very core infrastructures, the authorities may force the incorporation of the entire project into a single one. This route further leads to massive delays in the completion of core infrastructure that was promised to initial allottees.

The Bottleneck: Section 14(2) 

Section 14(2) of the RERA Act is one of the largest legal nuisances of the multi-phase works in which the developer is expected to obtain the written consent of at least two-third (67%) of all the buyers before the developer can make any major alteration or addition to the sanctioned plans, layout, or specifications of the building or the common areas. This often results in a dead end in a multi-stage township.

For example: take a case in which the developer has already used the original three towers (Blocks A, B, and C) but he is now interested in adding another floor or altering the plan of subsequent ones (D and E), and this modification is visible in shared spaces such as parking lots or the central clubhouse. Hence, now the developer legally requires consent from the existing allottees in Blocks A, B, and C. Receiving such high number of signatures of occupied units may turn into a nightmare, particularly when there is a perception that this change is going to hurt density or quality of living. Therefore, what should seem as a smooth transition turns into a massive risk as you are forced to seek consent with all the previous customers, who are now the victims of this transition. Beyond mere visible delays, regulators can also impose hefty fines for breaches of disclosure integrity, as the statutory obligation requires developers to strictly adhere to the sanctioned plans. The Mahagun Group has been fined by the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) after an inquiry revealed that the company had uploaded electrical drawings onto the RERA portal and attempted to pass them off as official electrical No-Objection Certificates.

The Statutory Deadline: Section 17

Section 17 of the RERA Act places a non-negotiable obligation on the developer to make a registered conveyance deed transferring title of the land and building to the allottee or the Association of Allottees (AOA). The transfer should also cover the undivided proportionate title in the common areas, and this action should be accomplished within 3 months of receiving the Occupancy Certificate (OC) or when 51% of all the buyers in a building or wing have paid full consideration, whichever occurs first. The developer is also required to assist in the establishment of the AOA and handover all the required documentation plans, title deeds, maintenance records, corpus funds etc. 

This rule poses a conflict in the multi-phase projects. After the buildings in Phase 1 obtains its OC, it is obligatory that the shared areas of that phase be transferred by the developer. However, Phase 1 items such as a huge clubhouse, shopping complex or a sports complex that were included in the Phase 1 pitch may technically be located on the land that will be built upon in Phase 3. In case the developer merely transfers the Phase 1 common spaces, the buyers may sue the developer due to the non-delivery of the agreed facilities. When the developer is in a hurry to deliver the costly central facilities, he/she will plunge money into a hurriedly-completed project that spoils the long-term capital plan. Concisely, the provisions of Section 17 compel developers to make commitments, yet stipulate a specific date of handover of all the internal and shared spaces used in the phase registration process, since by the time the AOA is established, it is allowed by law to use and regulate those shared spaces.

In proceedings related to Supertech Ltd. (Supernova project), the NCLAT established the principle that once the Association of Allottees is registered, it possesses a statutory right to manage the property regardless of the stage of construction or project completion. This applies even when the developer has not completed the 33% of tasks typically required before handing over maintenance and management of common areas.

Conclusion 

RERA’s effectiveness is underpinned by its enforcement mechanisms. When a developer fails to comply with orders for refund, interest, or penalty, RERA issues a Recovery Certificate (RC) under Section 40, enabling the recovery of the payable amount as arrears of land revenue through the District Collector.

While administrative backlogs often challenges the timely execution of RERA orders, recent judicial directives are accelerating the process. For example, a 2024 ruling by the Bombay High Court directed revenue officers to complete property attachment and auction procedures within 15 days if a builder fails to settle dues after a recovery warrant is issued. This limits the urge of a developer to surf on huge financial commitments on procedural hold-ups. Cash is not the only risk in a situation where the developers are notorious. Any non-compliance with this could have a devastating effect on the image of developers and any potential client would not risk investing money in a project that the regulators found out. Additionally, RERA possesses the power to restrict future sales or approvals, creating operational setbacks. For established luxury brands, maintaining brand equity and market trust is paramount, making compliance and timely project delivery an essential, legally enforced standard of corporate operation.