Real estate disputes in India often arise when expectations do not match delivery. Delayed possession, changes in layout, refund claims, or disputes over payment schedules are common issues faced by homebuyers and developers alike. With the introduction of the Real Estate (Regulation and Development) Act, 2016, commonly known as RERA, a specialised dispute resolution framework was created.
At the same time, many builder buyer agreements still contain arbitration clauses that refer disputes to private arbitration. This creates an important legal question for anyone dealing with real estate contracts today. If RERA provides a statutory forum, can parties still rely on arbitration? As a law student, lawyer, or real estate professional, you need clarity on how courts have balanced RERA and arbitration.
What Is the Purpose of RERA in Resolving Real Estate Disputes?
RERA was enacted to protect homebuyers and bring transparency and accountability into the real estate sector. Before RERA, buyers often had to approach civil courts or consumer forums, which involved long delays.
RERA introduced a specialised mechanism by creating Real Estate Regulatory Authorities and Adjudicating Officers in each state. These authorities are empowered to handle complaints related to registered real estate projects.
Under RERA, you can approach the authority for issues such as delay in possession, refund of amount paid, interest on delayed possession, compensation for defects, and violation of statutory obligations by promoters. The idea is to provide a faster and sector specific remedy instead of pushing buyers into lengthy litigation.
What Is Arbitration and Why Is It Common in Builder Buyer Agreements?
Arbitration is a form of private dispute resolution where parties agree to resolve disputes outside courts through an arbitrator. In real estate contracts, developers often include arbitration clauses stating that disputes shall be resolved by arbitration under the Arbitration and Conciliation Act, 1996.
From a developer’s perspective, arbitration is preferred because it is confidential, flexible, and avoids public litigation. For buyers, arbitration clauses are often non negotiable and included as standard terms in agreements.
This overlap between RERA and arbitration has led to confusion. If you have signed an agreement with an arbitration clause, are you barred from approaching RERA?
Does RERA Override Arbitration Clauses in Real Estate Contracts?
This is the most important question, and the short answer is yes, RERA overrides private arbitration when it comes to disputes covered under the Act.
Section 79 of RERA expressly bars civil courts from entertaining matters that fall within the jurisdiction of the RERA authority or adjudicating officer. Additionally, Section 88 states that RERA is in addition to and not in derogation of other laws, while Section 89 gives RERA an overriding effect in case of inconsistency with other laws.
Courts have interpreted these provisions to mean that statutory remedies under RERA cannot be contracted out through private agreements. Even if your agreement contains an arbitration clause, it cannot take away your right to approach the RERA authority for matters covered under the Act.
What Have Courts Said About RERA Versus Arbitration?
Indian courts have consistently upheld the supremacy of RERA over arbitration clauses.
What Was Held in Pioneer Urban Land and Infrastructure Ltd v Union of India?
In this landmark case, the Supreme Court observed that RERA is a welfare legislation enacted to protect homebuyers. The Court noted that allowing arbitration clauses to override RERA would defeat the purpose of the Act.
The Court made it clear that statutory remedies provided under RERA cannot be waived by contractual clauses. This judgment laid the foundation for later decisions on the RERA and arbitration conflict.
How Did the Supreme Court Clarify the Position in Vidya Drolia and Related Cases?
While Vidya Drolia primarily dealt with arbitrability of disputes, it reinforced an important principle. Disputes that involve rights in rem or are governed by special statutes with exclusive forums are generally not arbitrable.
RERA disputes were later understood within this framework. Since RERA creates special rights and obligations and establishes a dedicated forum, disputes falling under its scope are not suitable for private arbitration.
Can You Still Choose Arbitration for Any Real Estate Disputes After RERA?
This is where nuance is important. Not all disputes connected to real estate projects are barred from arbitration.
Which Disputes Are Clearly Covered by RERA?
Disputes related to delay in possession, refund, interest, compensation, defective construction, misleading advertisements, and non compliance with statutory obligations are squarely within the jurisdiction of RERA.
For these issues, you cannot be compelled to go for arbitration. Even if arbitration proceedings are initiated, courts have held that RERA proceedings can continue independently.
Are There Any Disputes Where Arbitration May Still Be Possible?
Yes, arbitration may still be possible for disputes that are purely contractual and do not fall within RERA’s regulatory framework. For example:
- Disputes between co developers or joint venture partners
- Inter se disputes between investors that do not involve homebuyers
- Commercial disputes unrelated to statutory obligations under RERA
However, even in such cases, you need to carefully examine whether the dispute indirectly affects the rights of allottees or the regulatory framework. If it does, RERA is likely to prevail.
What Happens If a Developer Invokes Arbitration Despite RERA?
If a developer invokes arbitration and you approach RERA simultaneously, courts have generally supported the continuation of RERA proceedings.
High Courts have repeatedly held that the existence of an arbitration clause does not bar the jurisdiction of RERA authorities. Applications under Section 8 of the Arbitration and Conciliation Act seeking reference to arbitration have been dismissed when the dispute falls under RERA.
This means that as a buyer, you do not lose your statutory remedy simply because you signed an agreement with an arbitration clause.
Can Parties Mutually Agree to Arbitration Instead of RERA?
Another common question is whether parties can voluntarily choose arbitration after a dispute arises.
The legal position suggests that statutory rights under RERA are not merely personal rights but part of a regulatory framework meant to protect a class of persons. Because of this, even mutual consent may not always be sufficient to bypass RERA for covered disputes.
That said, once RERA proceedings are concluded or if the dispute is outside RERA’s scope, parties may still explore arbitration or settlement. The key factor is whether the subject matter falls within the exclusive jurisdiction created by the statute.
How Should You Advise Clients or Draft Agreements After RERA?
From a practical standpoint, you should approach drafting and advisory work with clarity on this legal position.
While Drafting Agreements
Developers should avoid relying solely on arbitration clauses as the primary dispute resolution mechanism for buyer disputes. Buyers should be made aware that arbitration clauses do not take away their right to approach RERA.
While Advising Clients
If you are advising a homebuyer, you should confidently guide them towards RERA for statutory disputes. If you are advising a developer, you should explain that arbitration clauses cannot shield them from RERA proceedings.
Understanding this balance helps manage client expectations and reduces unnecessary litigation over jurisdictional issues.
What Is the Broader Impact of RERA on Private Dispute Resolution?
RERA reflects a broader legal trend in India where welfare legislation creates specialised forums that override private dispute resolution mechanisms. Similar patterns can be seen in consumer law and insolvency law.
This does not mean arbitration is losing relevance. Instead, it highlights that arbitration cannot be used to dilute statutory protections. As a legal professional, you must learn to identify when arbitration is appropriate and when statutory forums are mandatory.
Final Thoughts: What Should You Take Away from the RERA and Arbitration Debate?
RERA has fundamentally changed how real estate disputes are resolved in India. While arbitration continues to be an important tool in commercial contracts, it cannot override statutory remedies provided under RERA.
If you are dealing with buyer related disputes covered by RERA, arbitration clauses will not prevent you from approaching the RERA authority. Courts have consistently prioritised the legislative intent behind RERA over private contractual arrangements.
As you grow in your legal career, understanding this interplay between statutory law and arbitration will help you draft better contracts, advise clients accurately, and avoid jurisdictional pitfalls.
If you want to learn how such statutory frameworks interact with arbitration in practice, including case law analysis and drafting insights, exploring specialised courses on real estate law and dispute resolution can give you a strong practical edge.
