The RERA-Arbitration Crossroads: How Legal Ambiguity is Delaying Justice for India’s Homebuyers

The RERA-Arbitration Crossroads: How Legal Ambiguity is Delaying Justice for India’s Homebuyers

For lakhs of homebuyers across India, the dream of a new home is increasingly overshadowed by a looming legal question: when a builder defaults, do you knock on the door of the real estate regulator, or are you forced into a private arbitration room? This isn’t just procedural nuance; it’s a fundamental conflict that is stretching disputes, escalating costs, and leaving citizens in a limbo where the path to justice itself becomes a battleground. 

At the heart of this dilemma lies the uneasy coexistence of two powerful systems: the Real Estate (Regulation and Development) Act, 2016 (RERA), a statutory watchdog created for transparency and consumer protection, and arbitration, a contractual mechanism promising private, binding resolution. Individually, they are pillars of modern dispute resolution. Together, they are often on a collision course. 

The Heart of the Conflict: Two Promises, One Dispute 

Imagine a homebuyer, files in hand, approaching a RERA authority. Their grievance is clear: delayed possession, changed layouts, or amenities that exist only in glossy brochures. They seek the swift, powerful remedies RERA promises—compensation, interest, or even a full refund, enforced through the state’s machinery. 

The builder’s response, however, often hinges on a single clause buried in the sale agreement: “All disputes shall be referred to arbitration.” This invocation of “party autonomy” triggers a complex legal debate. Is a homebuyer’s right, grounded in a public statute designed to correct power imbalances, something that can be sidestepped by a pre-written clause in an adhesive contract? Or does the sanctity of contract prevail? 

The Supreme Court’s evolving jurisprudence has yet to deliver a definitive answer. While judgments like Vidya Drolia (2021) have outlined tests for “arbitrability,” specifically excluding disputes involving “rights erga omnes” (rights against the whole world) or those entrusted to specialised tribunals, the application to RERA remains frustratingly grey. Is a claim for delay under Section 18 a mere breach of contract (arbitrable) or an enforcement of a statutory duty created by RERA (non-arbitrable)? The silence is deafening, and lower courts are filling it with contradictory voices. 

The Great Jurisdictional Divide: A Tale of Two States 

This lack of clarity has birthed a palpable “postcode justice.” 

• The “Concurrent Remedy” Camp (Delhi, Punjab, Patna, Gauhati): Courts here lean on the doctrine of election. If the buyer approaches RERA first, that forum proceeds. If the buyer or builder invokes arbitration first, the dispute may be referred there. This view treats RERA as an additional, not exclusive, remedy. The Gauhati High Court’s 2024 logic was technical: since Section 79 of RERA bars only “civil courts,” and an arbitral tribunal is not a civil court, the bar doesn’t apply. 

• The “Non-Arbitrable” Camp (Maharashtra): Taking a more substantive view, the Bombay High Court in Rashmi Realty (2024) held that core disputes between allottees and promoters, especially under Sections 12 (obligation to render true facts) and 18 (defects and delays), are inherently non-arbitrable. The reasoning is rooted in RERA’s soul: it is a public welfare legislation establishing a regulatory framework with adjudicatory powers. To allow private arbitration would be to dilute this statutory oversight and the unequal bargaining power it seeks to redress. 

This split has real-world consequences. A buyer in Mumbai can proceed directly before RERA, while one with an identical contract in Delhi might find themselves entangled in months of preliminary hearings just to decide where their case will be heard. This inconsistency is the antithesis of a stable legal system. 

The Ripple Effects: Delay, Cost, and Strategic Gaming 

The uncertainty doesn’t just confuse—it actively harms the dispute resolution process. 

1. The Procedural Quagmire: What should be a single dispute fractures into two. The main complaint is paused while a separate legal battle (under Section 8 of the Arbitration Act) is fought over the forum itself. Months, sometimes years, are added before the merits are even touched. 

1. Divergent Outcomes & Enforcement: A RERA order for compensation is executable like a court decree through the collector. An arbitral award, while final, must survive challenges under Section 34 of the Arbitration Act on limited grounds. The nature of relief can also differ—RERA can impose penalties for statutory non-compliance, whereas arbitration typically awards contractual damages. 

1. The Rise of Forum-Shopping: This ambiguity encourages tactical litigation. Builders may routinely insert arbitration clauses and file Section 8 applications as a standard delay tactic. Buyers’ lawyers must now devise forum-selection strategies before a complaint is even drafted, weighing the speed of RERA against the perceived neutrality of arbitration. The law becomes a game of chess, not a pursuit of justice. 

The Path Forward: Clarity, Coexistence, and Craftsmanship 

Waiting for a definitive Supreme Court ruling is the immediate hope, but it is a passive strategy. Proactive steps are needed from legislators, drafters, and institutions. 

• Legislative Clarification: Parliament can amend Section 79 of RERA to explicitly state whether arbitral tribunals are included in the jurisdictional bar. A clearer legislative intent could end the debate overnight. Alternatively, a structured division could be legislated: RERA for regulatory breaches (false advertising, registration violations) and arbitration for pure contractual quantification disputes post-possession. 

• Contractual Drafting Evolution: Builders and their lawyers must move beyond using boilerplate arbitration clauses as a blanket shield. Sophisticated drafting can carve out specific RERA-based statutory remedies, limiting arbitration to genuinely negotiable commercial terms. This honesty in drafting would reduce futile litigation over arbitrability. 

• Institutional Synergy: Why must it be adversarial? A protocol for referral or concurrent jurisdiction could be envisioned. For instance, a RERA authority could rule on whether a statutory violation occurred, and if the only remaining issue is the quantum of compensation, it could refer that narrow question to a fast-track arbitration. This would marry regulatory oversight with arbitral efficiency. 

• Capacity Building: Adjudicating officers in RERA and arbitrators in commercial real estate panels often operate in silos. Cross-training on the boundaries of each other’s domains would foster mutual understanding and reduce conflicting decisions. 

Conclusion: Aligning the Foundations 

The metaphor is apt: law, like architecture, requires aligned foundations. RERA was built on the foundation of consumer protection and market integrity. Arbitration rests on the foundation of contractual freedom and efficient dispute resolution. Currently, their walls are misaligned, creating cracks through which justice slips. 

The goal is not for one system to demolish the other, but for them to be reconciled with clarity. RERA must remain the uncompromising guardian of transparency and a check against malpractice. Arbitration should rightfully govern disputes where parties negotiate on a level playing field. 

Until this clarity arrives, the homebuyer remains caught between two promises: one of a public statute that is swift in intent but often slowed by jurisdictional winds, and another of a private process that promises autonomy but often awaits judicial permission to even begin. The journey to their home is, unfortunately, paused at a legal crossroads. Resolving this isn’t just about legal doctrine; it’s about delivering on the basic promise of fairness that both RERA and arbitration were ultimately designed to uphold.