INTRODUCTION:
The real estate sector has increasingly incorporated arbitration in the standard builder-buyer agreements and contracts, which is generally seen as an efficacious method of dispute resolution. Simultaneously, persistent delays, imbalance in information, and existing builder vulnerabilities led to the legislative intervention of the Real Estate (Regulation and Development) Act, 2016 (RERA)[1] and the Consumer Protection Act, 2019 (CPA, 2019)[2]. This legislation has sought to resolve the defaults faced by the homebuyers by establishing statutory forum-based remedies. However, the coexistence of statutory dispute resolution mechanisms and arbitration has raised a major legal question: can arbitration supersede these mechanisms?[3]
Unlike any other sector, where the bargaining power of buyers and sellers is at an equal footing, real estate transactions place buyers at a disadvantage, and the agreements are tilted in favor of the builders, as was given in the case of Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725[4], leaving the homebuyers with minimal scope for negotiation. Arbitration clauses generally lead to private, mutual disagreements. Against this backdrop, statutory frameworks like RERA and the CPA, 2019, act with a remedial intent to treat such critical questions as subjects of consumer welfare and public interest.
This article argues that all the disputes governed by statutory legal bodies and frameworks like RERA and CPA, 2019, cannot be displaced by private arbitration. Drawing upon the case of Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1[5], a significant judgment in the sector of arbitration laws, the article aims to present that statutory consumer protection and remedies under RERA cannot be contracted out through arbitration clauses.
STRUCTURAL IMBALANCE IN REAL ESTATE CONTRACTS:
Legislative Recognition of Power Asymmetry in Real Estate:
The enactment of the Real Estate (Regulation and Development) Act, 2016[6], came as a deliberate shift with an intent to eradicate the asymmetrical power of the system. The framework is primarily based on shifting the angle of real estate transactions away from private contractual agreements. RERA has sought to establish and regularize mandatory disclosure norms, regulatory oversight, and specialized adjudicatory norms, rather than the laissez-faire autonomy of contracts.
The most crucial part of the RERA framework is the structural intervention. Buyers are also vulnerable to the systemic asymmetries and inherent problems that arise from contractual disputes in the real estate sector. This statute is proposed to regulate and balance the lack of negotiating power of the buyers in such vertical standard form builder-buyer contracts.
RERA as a Sector-Specific Regulatory Intervention:
RERA departs from typical contract-centric regulations by mandating certain statutory obligations for both builders and buyers. These legislative standards include registering conveyance deeds, forming associations, maintaining timely possession of the property, adhering to stipulated timelines, and restrictions on diverting funds[7]. Such regulations, falling under Sections 11 and 17 of the RERA Act, 2016[8], indicate that the RERA framework is not only concerned with the resolution of disputes but also with regulating overall conduct to prevent exploitative practices.
The emphasis of the statute is more on disclosure and transparency. RERA provides information on the project and promoter credentials to the public, and hence balances the asymmetries in the systemic regulation[9]. Since this obligation is independent of any contractual limits, private agreements cannot dictate the rights and duties of the parties.
In addition to this, RERA seeks to set up adjudicatory forums not only for the resolution of disputes but also to institutionalize a sector-specific and buyer-centric statutory forum[10] that collectively addresses the prevalent grievances by ensuring regulatory compliance and systemic accountability.
Consumer Protection Act and Statutory Position of Homebuyers:
The Consumer Protection Act, 2019[11] reinforces the statutory framework for contractual real estate transactions while recognizing the disadvantages for homebuyers. In the case of Lucknow Development Authority v MK Gupta (1994) 1 SCC 243, it has been held that homebuyers are consumers and builders as service providers[12]. This classification facilitates the prioritization of homebuyers’ rights and strengthens consumer formalism. Similar to other disputes arising under the CPA, 2019, real estate disputes are also addressed, and the statute affirms that grievances arising from a deficiency in service or an exploitative term of contract are matters of consumer disputes rather than mere contractual imbalances.
Section 100 of the CPA, 2019[13], contains an overriding clause which states that the Act shall prevail over the regime of any other statute or anything inconsistent with any other law. It therefore curtails the possibility of consumer rights being diluted by any other competent legislation or private arrangement. This provision, as in the case of Emaar MGF Land Ltd v Aftab Singh (2019) 12 SCC 751[14], in the context of builder-buyer agreements, assumes that arbitration clauses are inserted in the agreements without proper, meaningful negotiation.
ARBITRATION, PARTY AUTONOMY, AND THEIR STATUTORY LIMITS:
Section 19 of the Arbitration and Conciliation Act, 1996,[15] confirms that arbitration is a traditional process or mechanism for party autonomy. In such cases, the parties presuppose that there is an equal bargaining and negotiating power between both. However, this is completely absent in the case of builder-buyer contracts, wherein the arbitration clauses are inserted without any informed consent by the promoters, leaving the homebuyers with no scope for negotiation[16].
This imbalance acts as a fundamental challenge to the mechanism of arbitration in real estate disputes. Arbitration functions as a means of private and alternative dispute resolution mechanism to provide speedy justice, prioritizing efficiency and confidentiality. On the contrary, statutory frameworks such as RERA and CPA, 2019[17], are established to maintain a balanced system, promote a fair institution, resolve market failures, regulate conduct, and correct the vulnerabilities of the consumers. Allowing arbitration to override these statutory mechanisms of dispute resolution would undermine the legality of these legislative protections.
While party autonomy is a crucial aspect of arbitration law, it cannot contract out statutory mechanisms for dispute redressal, especially for sectors that are operated under welfare legislation. In such cases, arbitration, rather than overriding the given statutory framework, should function according to the statutory limits rather than running parallel to such legislation.
THE VIDYA DROLIA DOCTRINE:
The case of Vidya Drolia v. Durga Trading Corporation led to the establishment of a doctrine of non-arbitrability of real estate disputes.
For the purpose of streamlining the process of arbitration in India, the SC, in this case, laid down a four-fold test of non-arbitrability[18].
(i) when the cause of action and subject matter of the dispute relate to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem;
(ii) when the cause of action and subject matter of the dispute affects third-party rights; have an erga omnes effect; require centralized adjudication;
(iii) when the cause of action and subject matter of the dispute relate to inalienable sovereign and public interest functions of the State; and
(iv) when the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).
The SCI, by expressly acknowledging that subordinate rights in personam arising from actions in rem are arbitrable, paved the way for private adjudication of statutory claims in India. Applying this test, the SCI overruled Himangi Enterprises v. Kamaljeet Singh Ahluvalia (2017) 10 SCC 706[19], and held that landlord-tenant disputes, governed by the Transfer of Property Act, 1886[20], are arbitrable in India.
Permitting arbitration in this case would allow contractual clauses to easily bypass the welfare-oriented statutory mechanisms, which would defeat the purpose of the legislation.
IMPLICATIONS FOR REAL ESTATE DISPUTE RESOLUTION
The process of arbitration is oftentimes most financially taxing for the homebuyers, and they also face the procedural burdens of the system. This aggravates especially when the dispute arises out of issues such as delayed possession, stalled projects, or financial distress. Statutory forums, on the other hand, are institutionalized for streamlined remedies and consumer-centric adjudication.
However, this does not imply the complete cancellation of arbitration or other forms of alternative dispute resolution systems in the real estate sector. It only aims to establish the idea that arbitration and conciliation can complement each other without overriding the existing statutory obligations and regulations.
CONCLUSION:
The regulatory frameworks established under RERA and the Consumer Protection Act, 2019, reflect a clear legislative intent to move real estate disputes beyond the realm of private contractual enforcement. These statutes recognize the structural vulnerability of homebuyers and seek to address systemic imbalances through mandatory obligations, specialized forums, and non-waivable remedies. In this context, the enforcement of arbitration clauses in builder–buyer agreements risks diluting statutory protection and undermining consumer welfare.
The doctrine of non-arbitrability, as articulated in Vidya Drolia[21], provides the necessary jurisprudential basis to prevent such outcomes. A coherent approach to real estate dispute resolution must therefore prioritize statutory consumer remedies over private arbitration, ensuring that efficiency does not come at the cost of access to justice and legislative intent.
Author(s) Name: Asmii Patange (University of Mumbai Law Academy (UMLA))
References:
[1] Real Estate (Regulation and Development) Act, 2016
[2] Consumer Protection Act, 2019
[3] Arbitration and Conciliation Act, 1996, s. 8
[4] Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725
[5] Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1
[6] Supra
[7] ‘Real Estate (Regulation and Development) Act 2016 – Builder Obligations’ https://lawcrust.in/rera-act-2016/ accessed 5th January, 2026
[8] Real Estate (Regulation and Development) Act 2016, ss. 11 & 17
[9] Ministry of Housing and Urban Affairs, ‘FAQs on the Real Estate (Regulation and Development) Act 2016’ https://rera.mohua.gov.in/new-img-rera/FAQs-on-RERA.pdf accessed 7th January, 2026
[10] ‘Promoters’ Functions and Duties under the RERA Act 2016’ (TaxGuru) https://taxguru.in/corporate-law/promoters-functions-duties-rera-act-2016.html accessed 7th January, 2026
[11] Supra
[12] Lucknow Development Authority v MK Gupta (1994) 1 SCC 243
[13] Consumer Protection Act 2019, s 100
[14] Emaar MGF Land Ltd v Aftab Singh (2019) 12 SCC 751
[15] Arbitration and Conciliation Act, 1996, s. 19
[16] Pioneer Urban Land and Infrastructure Ltd v Govindan Raghavan (2019) 5 SCC 725
[17] Supra
[18] Kluwer Arbitration Blog, ‘Applying Vidya Drolia’s Four-Fold Arbitrability Test to Antitrust Disputes in India’ https://legalblogs.wolterskluwer.com/arbitration-blog/applying-vidya-drolias-four-fold-arbitrability-test-to-antitrust-disputes-in-india/ accessed 9th January, 2026
[19] Himangi Enterprises v. Kamaljeet Singh Ahluvalia (2017) 10 SCC 706
[20] Transfer of Property Act, 1886
[21] Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1
