RERA vs SARFAESI: Navigating the Legal Crossroads of Homebuyer Protection and Bank Recovery Rights in Indian Real Estate

Introduction: A Collision Rooted in Real Estate Financing

India's real estate sector frequently witnesses a triangular conflict that places homebuyers in an extremely precarious position. The sequence is almost formulaic: a developer secures project financing from a bank by mortgaging the underlying land, proceeds to sell individual residential units to allottees through registered sale deeds, and subsequently defaults on the loan repayment. Once the loan slips into non-performing asset territory, the bank exercises its statutory enforcement rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), seeking physical possession of the mortgaged property. The allottees — often holding valid registered sale deeds and completely unaware of any existing default — instinctively seek refuge under the Real Estate (Regulation and Development) Act, 2016 (RERA).

A cluster of connected appeals recently placed before a State Real Estate Appellate Tribunal, originating from a common order issued by the Real Estate Regulatory Authority in connection with a residential township project, brings this tension into sharp focus. Three fundamental legal questions emerge from such disputes, each with significant practical consequences:

  1. Is the RERA-SARFAESI conflict genuinely a constitutional or legislative competence issue?
  2. What does the governing Supreme Court precedent actually establish — as opposed to what is selectively cited?
  3. What happens to an appeal of this nature when the underlying bank-versus-promoter recovery dispute is independently resolved?

This analysis addresses each of these questions in depth.

I. Factual Background: The Anatomy of the Dispute

The promoter of a residential township project had availed project loans from a nationalised bank, offering open land forming part of the project as mortgage security. Registered sale deeds were subsequently executed in favour of individual allottees — in a majority of cases after the mortgage had already been registered, in a few instances before it, and in an even smaller subset, before the mortgage was even sanctioned.

Once the loan became a non-performing asset, the bank issued notices under Section 13(2) and Section 13(4) of the SARFAESI Act and successfully obtained an order under Section 14 directing physical possession through a court-appointed commissioner. Numerous allottees approached the State RERA Authority, which granted possession-protection injunctions in favour of those presenting credible documentation while declining relief for units where the supporting paperwork did not withstand scrutiny.

The bank appealed to the State Real Estate Appellate Tribunal. After the appeal was filed, the bank's recovery proceedings against the promoter before the Debts Recovery Tribunal were disposed of as settled at a Lok Adalat — on reduced terms, with execution held in abeyance pending actual payment. Despite this development, the Appellate Tribunal indicated its intention to decide the appeal on merits.

II. Setting the Record Straight: This Is Not a Union List vs. State List Dispute

A widespread misconception frames the RERA-SARFAESI conflict as a question of legislative competence — specifically, a clash between a Union List subject and a State List subject. This reading does not withstand close examination.

The SARFAESI Act indeed traces its legislative competence to Entry 45 of List I (the Union List) of the Seventh Schedule to the Constitution of India, which covers banking. However, RERA is not state legislation at all. The Real Estate (Regulation and Development) Act, 2016 is itself a Parliamentary enactment, drawing competence from Entries 6 and 7 of List III (the Concurrent List), which govern transfer of property and contracts respectively. A State Real Estate Regulatory Authority is not an institution created by any State legislature — it is the implementing body constituted under Section 20 of the same Central Act.

Consequently, Article 254 of the Constitution of India has no application here. That provision addresses repugnancy between State legislation and Union legislation on Concurrent List subjects. Since no State legislature has enacted any law that conflicts with either SARFAESI or RERA, the constitutional repugnancy framework simply does not arise.

What actually stands before tribunals is a horizontal conflict between two Central statutes — each equipped with its own non-obstante clause:

  • Section 35 of the SARFAESI Act
  • Section 89 of RERA

The resolution of this conflict calls for the application of ordinary principles of statutory interpretation, particularly the well-established rule that a later, special enactment prevails over an earlier, general one within its own field. This is a question of statutory construction — not constitutional federalism.