When Does A Landowner Become A “Promoter”? Re-Examining The Debate After Supreme Court's Unishire Homes LLP Decision

Real estate development in India involves projects which are typically structured through joint development agreements (“JDAs”), under which landowners contribute land while developers/promoters undertake construction, regulatory approvals, financing, and sale of units. In return, landowners may receive a portion of the developed area, a share of project revenues, or a combination of both. While commercially efficient, such structures frequently generate legal complexity when projects are delayed or disputes arise. Homebuyers seeking remedies often attempt to hold both developers and landowners responsible, especially in scenarios where developers have not been able to deliver projects on time, have gone bankrupt or are in some cases, missing. More often than not, the landowners, in such a scenario, contend that they merely contributed land and should not be exposed to statutory liabilities intended for the developers/promoters.

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) has intensified this debate. By imposing extensive obligations on the “promoter” of a real estate project, including registration requirements, escrow obligations, and liability to refund amounts with interest for delayed possession; RERA has made the classification of a party as a promoter a matter of significant legal consequence. Against this backdrop, the SC's ruling in Unishire provides a timely opportunity to revisit the evolving jurisprudence on the issue. The decision adopts a relatively narrow approach, emphasising contractual allocation of responsibilities in determining liability. However, when read alongside the views expressed by various High Courts and the regulatory guidance issued by several RERA authorities across India, it becomes apparent that the law on landowner liability remains far from settled.

The Supreme Court's Approach in Unishire

The dispute in Unishire arose from a project developed pursuant to a joint development agreement between landowners and a developer. The landowners had executed a development agreement and granted a general power of attorney to the developer, enabling it to obtain approvals, undertake construction, and enter into agreements with flat purchasers.

Under the agreements with buyers, the developer undertook to deliver possession within a stipulated period. However, construction was significantly delayed. The moot issue before the SC was whether the landowners could be held jointly and severally liable along with the developer for deficiency in service and accordingly also liable to pay compensation for the delay. It was the contended that landowners (principal) had executed power of attorney in favour of the developer (agent) thereby creating a principal and agent relationship, and the principal is liable for deficient acts of the agent.

After examining the terms of the joint development agreement and the power of attorney, SC concluded that the responsibility for construction and delivery of the flats rested exclusively with the developer and further that the delay related to apartments formed part of the developer's allocation under the development arrangement. It further held that, the landowners who were not responsible for construction and had not undertaken obligations relating to project completion could not be held liable for delay compensation payable to homebuyers.

Having said that, the SC observed that the landowners could not be entirely excluded from the transaction, because the landowners continued to hold title to the underlying land, they remained obligated to cooperate in transferring title to purchasers and executing the conveyance deeds.

The judgment therefore draws a careful distinction between two types of obligations: construction-related obligations resting with the developer and title-related obligations that may still require participation from the landowner. Although the decision provides clarity in the factual context before it, the Court also observed that the issue of joint liability must ultimately be determined on the facts of each case. Consequently, the broader question of when landowners may be classified as promoters remains open to interpretation.

Although the decision in Unishire was rendered in the context of the Consumer Protection Act, 2019, the underlying principle discussed by SC continues to hold conceptual relevance within the framework of the RERA regime. The decision reflects a broader judicial approach toward protecting homebuyers and ensuring accountability of parties involved in real estate transactions. While RERA operates as a specialised regulatory framework governing real estate development, the reasoning in Unishire, particularly regarding the responsibilities of entities involved in housing projects, aligns with the consumer-centric objectives that RERA seeks to achieve.

The Definition of “Promoter” Under RERA

The continuing debate stems largely from the expansive definition of “promoter” contained in Section 2(zk) of RERA. The provision defines a promoter to include any person who constructs or causes to be constructed a building consisting of apartments for the purpose of sale, or who develops land into a project for sale. It also includes persons acting as builders, colonisers, developers or contractors, as well as persons acting under a power of attorney from the landowner for purposes of development. Significantly, the explanation appended to the provision states that where the person constructing the project and the person selling apartments are different, both shall be deemed to be promoters and jointly liable for the functions and responsibilities specified under RERA.

This language has created interpretational challenges in the context of joint development projects. In a typical JDA structure, the developer undertakes construction and marketing activities, while the landowner merely contributes land. The question therefore arises whether a landowner who enables development through such arrangements can be said to have “caused the construction” within the meaning of the statute. The answer to this question has varied across judicial and regulatory forums.

Judicial Perspectives on Landowner Liability

High Courts and consumer fora have on several occasions been required to examine the liability of landowners in development projects.

The Kerala High Court in Pooja Constructions v. The Secretary, Kerala Uranma Devaswom Board and Anr. [2024 SCC OnLine Ker 4894] considered whether a landowner could be treated as a promoter under RERA merely because development rights had been granted to a developer. The Court observed that where a landowner does not participate in development activities or marketing of units, the classification of such landowner as a promoter may not be justified.

In contrast, the Bombay High Court in Wadhwa Group Holding Pvt. Ltd. v. Vijay Choksi [2024 SCC OnLine Bom 660

] adopted a more expansive view of promoter liability while examining the scope of Section 18 of RERA. The Court noted that statutory obligations under the Act may extend to co-promoters, particularly where the project structure reflects joint participation in development. The MahaRera Circular (defined hereinbelow) was interpreted as reinforcing joint liability of all promoters, including land owners and investors, to ensure transparency and consumer protection.

The Consumer fora have also dealt with similar issues, which were later discussed and have now attained finality in the SC. In several such matters, the allocation of responsibilities under the development agreement has played a decisive role in determining whether landowners can be held liable. In Faqir Chand Gulati v. Uppal Agencies (P) Ltd., (2008) 10 SCC 345, the SC particularly held, where the contract is a true joint venture between the landowner and a recognised builder/developer or fund provider, the landowner is a true partner or co-adventurer in the venture where the landowner has a say or control in the construction and participates in the business and management of the joint venture, and has a share in the profit/loss of the venture. In such a case, the landowner is not a consumer nor is the other co-adventurer in the joint venture, a service provider. The landowner himself is responsible for the construction as a co-adventurer in the venture. Thus, in such a scenario, the landowner would also be liable for any deficiency in service which is otherwise cast upon a promoter/developer.

While judicial decisions have approached the issue primarily through the lens of contractual allocation of responsibilities, RERA authorities across several states have addressed the same question from a regulatory perspective. Through circulars and administrative guidance, these authorities have attempted to clarify the circumstances in which landowners participating in joint development arrangements may be classified as promoters under RERA.

Regulatory Guidance from RERA Authorities

In addition to judicial pronouncements, several RERA authorities across India have issued circulars and orders clarifying the circumstances in which landowners may be treated as promoters.

One of the earliest regulatory interventions came from Maharashtra RERA, which issued a circular in 2017 (“MahaRera Circular”) addressing joint development arrangements. The circular clarified that where landowners receive a share of project revenue, they may be treated as promoters under RERA. It further required such landowner promoters to comply with the statutory requirement of depositing seventy percent of sale proceeds into the designated project escrow account.

A similar position was adopted by Goa RERA, which issued a circular in 2018 clarifying that landowners or investors who receive a share of revenue from the project or a portion of the developed area intended for sale would fall within the scope of the term “promoter”. The circular further stated that such landowners would be jointly liable for statutory obligations under RERA.

Karnataka RERA subsequently issued a circular along similar lines in 2019. The regulatory framework in Karnataka requires landowners and developers involved in joint development projects to submit joint affidavits confirming compliance with RERA obligations and ensuring that development agreements expressly reflect such obligations.

Rajasthan RERA adopted a more measured stance in its circular in 2020. The authority clarified that a landowner cannot be automatically classified as a promoter merely because they receive a share of the project's revenue. Instead, the classification should be determined by examining the specific terms of the development agreement and assessing the degree to which the landowner is involved in the project's development activities. Several situations were carved out in which a landowner may be treated as a promoter including where the landowner participates in construction activities, retains marketing rights over units, shares profits or losses of the project, or is expressly designated as a promoter under the development agreement.

Decoding the Emerging Framework

When the various judicial decisions and regulatory circulars are examined together, the jurisprudence appears to be evolving around three distinct analytical approaches to landowner liability.

The first may be described as the contractual responsibility model, reflected in decisions such as Unishire and certain High Court judgments. Under this approach, liability is determined primarily by the allocation of responsibilities in the development agreement.

The second may be described as the statutory promoter model, reflected in the RERA and the circulars issued by several RERA authorities. Under this approach, landowners who participate in the economic structure of the project, through revenue sharing or sale of units, may be treated as promoters regardless of contractual allocations.

The third may be described as a joint commercial venture model, where courts examine whether the landowner's participation in the project effectively amounts to a joint venture enterprise.

Structuring Development Agreements in Light of Emerging Jurisprudence

Given the evolving legal landscape, practitioners advising developers and landowners must approach joint development agreements with particular care.

First, the JDAs should clearly allocate responsibilities relating to construction, regulatory approvals, marketing, and delivery timelines. Courts frequently rely on the contractual framework when determining liability.

Second, the role of the landowner should be clearly defined. Where the intention is that the landowner should remain a passive participant, the agreement should avoid provisions suggesting involvement in construction or sales.

Third, powers of attorney granted to developers must be drafted carefully. While developers require sufficient authority to execute sale agreements and conveyances, the document should avoid creating the impression that the developer acts merely as an agent of the landowner for all aspects of the project.

Fourth, indemnity provisions should be incorporated to allocate risk between the developer and the landowner in the event of claims by homebuyers or regulatory authorities.

Finally, practitioners must ensure compliance with state-specific RERA circulars and regulatory requirements, particularly in jurisdictions where landowners may be required to be disclosed as promoters.

The Supreme Court's decision in Unishire reinforces that the liability for construction delays should ordinarily rest with the party responsible for construction. Where a landowner merely contributes land and does not participate in development activities, it would be difficult to justify imposing liability for delays attributable to the developer.

However, the broader regulatory landscape under RERA reveals a more complex picture. Circulars issued by several RERA authorities, demonstrate that regulators increasingly view landowners who participate in the economic structure of a project as potential promoters. Where landowners share project revenues, retain rights to sell units, or participate in project decisions, they may well be treated as co-promoters with corresponding statutory obligations.

The result is a legal framework in which the classification of a landowner as a promoter remains fact-specific, jurisdiction-dependent, and heavily influenced by the structure of the development agreement itself. Until further guidance emerges from the SC, the question of when a landowner becomes a promoter will likely continue to arise in litigation across the country.

Gaurav Dasgupta is Partner with Khaitan & Co.

Richaa Mukhopadhyay is Associate with Khaitan & Co.

Views expressed are personal.