Despite RERA rules, marketing of unregistered projects continues unabated, branded as 'expression of interest' period

While details about pre-launch and EOI periods are murky, RERA regulations do not permit advertisements without registration

One of the key provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), is that real estate projects cannot be advertised unless they are registered with the competent authority. However, observers say, sales channel partners and in some instances developers themselves are skirting this ban under the garb of an "expression of interest" (EOI) period are openly advertising projects that have not been registered despite the rules prohibiting this. Potential homebuyers have reported seeing such "advertisements" on social media platforms, as well as on outdoor displays.

While EOI-related communication online is often floated by channel partners using euphemisms or project code names to hint at a project yet to be registered or launched, homebuyers said that for outdoor displays, including the digital variants, developers are often using their own names, calling for enquiries in the "expression of interest" or "pre-launch" period. These communications generally do not mention a RERA registration number, according to observers.

According to RERA statutes, no residential or commercial development can be advertised without being registered with the respective state-level real estate regulatory authority. The advertisements, irrespective of the medium, are required to have details such as the registration number, a QR code that leads to more details about the project, and the site address. The Maharashtra Real Estate Regulatory Authority (MahaRERA), for instance, has fined hundreds of developers and projects since its inception due to advertisement-related violations, including through suo motu actions.

Last year, MahaRERA fined developers of more than 600 projects for advertisement-related violations, including the non-display of RERA registration numbers and QR codes. The authority also sought assistance from the Advertising Standards Council of India (ASCI). MahaRERA officials did not respond to requests for comment on the EOI advertisements matter.

For the upcoming Property Expo in Mumbai, organised by the developers' advocacy group CREDAI-MCHI, which starts on January 17, organisers confirmed that developers will be allowed to "mention" their upcoming, unregistered projects to homebuyers, alongside projects that have been registered and are up for sale. However, they will not be allowed to accept any bookings for the unregistered projects, CREDAI-MCHI office bearers added.

"Projects not registered under RERA are not allowed to sell their inventory in any way. With expression of interest advertisements, developers gauge the market regarding demand and sales velocity in a city or micro market. Channel partners also do the same, once they are briefed by the developers of the planned project. As long as they do not accept any money against the expressions of interest, there should not be any problem with such advertisements," said a developer based in Mumbai.

The developer added that the EOI period often helps in determining the actual size of the projects, the number of units to be launched in every phase, and the pricing as well. Legal experts concede that what exactly is a "EOI" or "pre-launch" period is up in the air, and developers may be taking advantage of the same.

"In order for such marketing activities to be considered as advertisement, we have to look into the objective that the developer is trying to achieve, whether directly or indirectly. If the EOI process is used to inform the public about a project, generate interest or promote the project's features, it would constitute an advertisement. However, merely conducting EOI studies without any promotion, marketing or public outreach or conducting feasibility studies or market research without advertising or promoting the project may not qualify as advertisement but could still be scrutinised under RERA for compliance," said Aaron Solomon, managing partner at law firm Solomon & Co.

Others said that it is imperative for state-level real estate regulatory bodies to clarify the advertisement statutes and increase monitoring in order to better implement the spirit of the law.

"The real estate act was passed to help protect retail investors better. The act does not expressly define what an expression-of-interest period is, and developers tend to use these loopholes and grey areas. While it is a settled principle of law that what cannot be carried out directly cannot be sought to be achieved indirectly, the responsibility would be on the state-level RERAs to clarify the law in this matter, and clearly lay out which activities are permitted, and which are not," said Ketan Mukhija, senior partner at Burgeon Law.