How to Conduct RERA Due Diligence Before Buying a Property?

Introduction

An appropriate legal verification before making any payment while buying a property is very essential process because it involves a major financial decision. There are several major issue exists related to property like construction, approvals, possession or encumbrances, so accordingly buyer should not only solely rely on location, price and builders promise.

With the help of RERA due diligence buyers can perform verification of important project details and evaluate legal risk involve. The projects under Real Estate (Regulation and Development) Act, 2016, requires RERA registration before being advertised or sold. Moreover, the only registration of RERA is not enough, buyer must verify the property title, approvals, and other legal documents.

What is RERA Due Diligence?

RERA due diligence means conducting a legal and factual verification of a real estate project before purchasing a property in it.

The purpose is to determine whether the project and the property being offered to you are consistent with:

• RERA records;

• Approved plans;

• Project approvals;

• Land title documents;

• Builder disclosures;

• Agreement for Sale;

• Possession commitments;

• Financial and construction information.

The RERA framework requires promoters to disclose important project information through the regulatory system. Section 11, for example, requires promoters to maintain project information on the Authority's website, including registration details, booked units, approvals, and project status.

Therefore, the RERA portal can be an important starting point for a buyer's due diligence.

Why should buyers conduct RERA Due Diligence?

A buyer should not rely only on the builder's sales team or brochure. Marketing material may highlight the positive aspects of a project, but legal due diligence is intended to identify potential risks. RERA due diligence can help a buyer understand whether:

• The project is registered;

• The registration is valid;

• The promoter's details are correct;

• The land documents have been disclosed;

• Required approvals have been obtained;

• The project matches the sanctioned plans;

• Construction is progressing as stated;

• The promised possession date is realistic;

• Any complaints or regulatory issues exist;

• The proposed transaction documents are consistent with RERA disclosures.

The objective is not simply to find problems. It is to make an informed purchasing decision before money is committed.

Key RERA Checks Before Buying a Property

Check the RERA Registration

The first step should be checking whether the project is registered with the appropriate RERA Authority. Under Section 3 of the RERA Act, a promoter generally cannot advertise, market, book, sell, or offer for sale a real estate project that is required to be registered without obtaining registration.

The buyer should verify the project's:

• RERA registration number;

• Project name;

• Promoter name;

• Project location;

• Registration status;

• Proposed completion date;

• Registered project details.

Do not rely only on a registration number printed in a brochure. Search the number on the official State RERA portal and compare the information with what the builder is offering.

The Ministry of Housing and Urban Affairs provides a list of RERA Authorities for different States and Union Territories, including Uttar Pradesh, Haryana, Maharashtra, Karnataka, Delhi, Rajasthan, and others.

Check Whether the Project Details Match

After finding the project on the RERA portal, compare the portal information with the builder's offer. For example, check whether the:

• Project name is the same;

• Promoter name is the same;

• Location is the same;

• Number of towers is consistent;

• Number of units is consistent;

• Project area is consistent;

• Completion date is consistent;

• Amenities are consistent.

Any major difference should be investigated before proceeding.

Verify the Promoter's Details

The identity and background of the promoter are important parts of due diligence. The buyer should examine the promoter's name, corporate or business details, previous projects, and available regulatory information.

If the project is being developed by a company or group of companies, the buyer should understand which legal entity is actually responsible for the project. This is important because the name used by a sales team or brand may not always be the same as the legal entity mentioned in the agreements.

The buyer should ensure that the entity signing the Agreement for Sale has the proper authority and connection with the project.

Check the Land Title

RERA registration does not replace independent title verification. The buyer should separately examine the legal title of the land on which the project is being developed. A title review may involve checking:

• Previous title documents;

• Sale deeds;

• Conveyance documents;

• Mutation records;

• Revenue records;

• Development agreements;

• Joint development agreements;

• Power of Attorney documents;

• Inheritance documents, where applicable.

The objective is to determine whether the promoter has a legally sufficient interest or authority to develop and sell the property.

A property lawyer should ideally conduct this verification because title issues can be complex and may require examination of historical documents.

Check for Encumbrances

An encumbrance may affect the buyer's rights over the property. The buyer should investigate whether the land or project is subject to:

• Mortgage;

• Charge;

• Loan;

• Litigation;

• Attachment;

• Other third-party rights.

The relevant documents and records should be examined to determine whether any financial or legal burden exists.

If the property is mortgaged, the buyer should understand how the lender's interest will be released in relation to the specific unit being purchased. A buyer should never assume that a builder's verbal assurance is sufficient to remove an encumbrance-related concern.

Verify Approvals and Permissions

A real estate project may require several approvals and permissions from relevant authorities. Depending on the project and location, these may relate to:

• Land use;

• Building plan;

• Layout approval;

• Environmental permissions;

• Fire safety;

• Water and sewerage;

• Electricity;

• Commencement;

• Other local approvals.

RERA disclosures can help a buyer understand which approvals have been obtained and which may still be pending.

Section 11 requires project information relating to approvals and their status to be disclosed on the Authority's website.  The buyer should therefore compare the builder's statements with the regulatory records.

Verify the Sanctioned Plan

One of the most important aspects of property due diligence is checking whether the property being sold corresponds with the approved plan. The buyer should compare the proposed unit and project layout with the sanctioned documents.

Pay attention to:

• Building configuration;

• Floor;

• Unit location;

• Carpet area;

• Common areas;

• Parking;

• Amenities;

• Open spaces;

• Other promised facilities.

This is important because buyers should not rely solely on a sales brochure or sample apartment. The legal documents and approved plans should support what has been promised.

Check the Carpet Area

RERA places importance on the disclosure of carpet area for property transactions. The Ministry of Housing and Urban Affairs identifies carpet-area disclosure as an important consumer protection feature of RERA. 

A buyer should carefully understand the difference between: Carpet Area, Built-up Area, and Super Built-up Area.

The price should be understood in relation to the legally relevant area stated in the transaction documents. The buyer should also verify whether balconies, terraces, exclusive areas, parking spaces, and common areas are being separately described.

Check the Construction Status

For an under-construction property, the buyer should not rely only on the builder's verbal statement that construction is progressing as planned.

The RERA portal may provide information about the project's status and updates. Section 11 requires the promoter to maintain periodic information regarding the status of the project.

The buyer should compare: RERA status + physical site condition + promised completion date. If there is a significant difference between these three, further investigation is advisable.

Verify the Possession Date

Possession date is one of the most important terms in a property transaction. The buyer should compare the possession date mentioned in:

• RERA records;

• Builder's offer;

• Agreement for Sale;

• Project approvals;

• Other written communications.

Do not rely solely on statements such as "possession soon" or "possession within a few months." The actual contractual date should be clearly identified.

If possession is delayed, the buyer's rights may depend upon the agreement, RERA provisions, and applicable law.

Check the Promoter's Financial Structure

RERA also seeks to reduce diversion of project funds.

The Ministry of Housing and Urban Affairs explains that 70% of amounts realised from buyers for a project are required to be deposited in a separate bank account for that project, with withdrawals subject to the prescribed certification requirements.

This provision is intended to promote financial discipline in project development.

While a buyer does not normally conduct the promoter's complete financial audit, the buyer should still examine available RERA disclosures and understand whether there are warning signs concerning project progress or financial difficulties.

Check RERA Complaints and Orders

Before purchasing, buyers should also check whether the promoter or project has been involved in RERA proceedings. The relevant RERA portal may provide information about:

• Complaints;

• Orders;

• Penalties;

• Project-related proceedings;

• Regulatory actions.

This can provide useful information about disputes involving the project.
A history of complaints does not automatically mean that a property should never be purchased. However, the nature, frequency, and seriousness of the complaints should be considered before making a decision.

Verify the Real Estate Agent

If a broker or real estate agent is involved, the buyer should also verify whether the agent is registered with the relevant RERA Authority where registration is required.

RERA separately provides for registration of real estate agents dealing with covered projects.

The buyer should be cautious where an agent refuses to provide basic project information or pressures the buyer to make an immediate payment.

Do Not Pay a Large Advance Without Proper Documentation

A buyer should be careful before making substantial payments.
Section 13 of the RERA Act addresses advance or deposit amounts and provides that a promoter cannot accept more than the prescribed threshold before entering into an Agreement for Sale.

Therefore, buyers should understand the legal and contractual basis of any payment requested by the promoter. Never make a substantial payment merely because a sales representative says that the offer will expire soon.

Review the Agreement for Sale

The Agreement for Sale is one of the most important documents in a property transaction. The buyer should carefully verify the property description, carpet area, total consideration, payment schedule, possession date, parking terms, maintenance obligations and applicable taxes and charges.

The agreement should also clearly specify the consequences of delay, cancellation provisions, default conditions and dispute-resolution mechanism. Any unclear or inconsistent term should be clarified and corrected before signing the agreement. The agreement should be compared with the information available on the RERA portal.

If the agreement contains terms significantly different from the project disclosures or promises made during booking, the buyer should seek legal clarification before signing.

Check Cancellation and Refund Terms

The buyer should also understand the consequences of cancelling the booking.
The agreement should explain:

• When cancellation is permitted;

• Applicable deductions;

• Refund procedure;

• Time for refund;

• Consequences of buyer default;

• Consequences of promoter default.

The buyer should not assume that the booking amount will automatically be refundable in every situation.

Keep Copies of All Documents

The buyer should maintain a complete record of the transaction. Important documents may include:

• RERA registration details;

• Builder's offer;

• Brochure;

• Application form;

• Allotment letter;

• Agreement for Sale;

• Payment receipts;

• Approved plans;

• Relevant title documents;

• Correspondence with the promoter;

• Possession documents.

Emails, letters, and written communications should also be preserved. Proper documentation can become extremely valuable if a dispute arises later.

Why independent legal due diligence is important?

RERA provides important protections, but RERA registration does not mean that every aspect of the property is automatically risk-free.

A buyer should understand that RERA due diligence and title due diligence are related but different exercises.

RERA verification primarily examines the project's regulatory disclosures and compliance. Title due diligence examines the legal ownership and history of the property.

Both are important before making a significant investment.

A property lawyer can review the documents together and identify inconsistencies that an ordinary buyer may overlook.

What if the project is not registered under RERA?

If a project is required to be registered but has not been registered, the buyer should exercise considerable caution.

The first question should be whether the project actually falls within a category requiring registration. Certain projects may be exempt under the RERA framework depending on factors such as project size or other statutory conditions.

Therefore, the buyer should not simply assume that every unregistered project is illegal.

The specific facts and applicable RERA rules should be examined before making any payment.

Difference between RERA Due Diligence and Property Due Diligence

Although they overlap, the two are not exactly the same.

RERA due diligence focuses mainly on the project's regulatory registration, disclosures, promoter information, construction status, approvals, and other information available under the RERA framework.

Property due diligence is broader. It may include detailed verification of title, ownership history, encumbrances, litigation, land use, approvals, development rights, and transaction documents.

For a safer property purchase, both forms of verification should be considered.

How Lead India can help you?

1. RERA Verification: Check the project's registration and available RERA details.

2. Title Verification: Review ownership and land title documents.

3. Encumbrance Check: Identify mortgages, charges, or other recorded interests.

4. Approval Verification: Review relevant project approvals and permissions.

5. Builder Verification: Examine promoter and project-related information.

6. Agreement Review: Check the Agreement for Sale before signing.

7. Document Verification: Review important property and project documents.

8. Risk Identification: Identify potential legal and documentation risks.

9. Legal Guidance: Explain your rights and obligations before purchase.

10. Dispute Prevention: Help identify issues early and reduce future legal risks.

Conclusion

RERA due diligence is an important part of making an informed property purchase. Checking the RERA registration, promoter details, project status, approvals, land information, possession date, and project disclosures can help identify potential risks.

However, RERA registration alone does not guarantee that every legal aspect of a property is risk-free. Buyers should also independently verify title, encumbrances, litigation, approvals, development rights, and the Agreement for Sale.

A careful review before purchase can help buyers identify problems early, negotiate with better information, and avoid costly disputes later. For a high-value property transaction, professional legal due diligence can provide an additional layer of protection.