India real estate regulations take step forward

Despite the fact that the Real Estate (Regulation and Development) Bill 2016 was passed in March this year progress has been relatively slow in rolling out all of the new regulations. However, we should see some forward movement over the next few weeks with the Indian government set to notify various regional authorities about the new rules associated with the bill. There is a 31st October deadline to notify regional authorities about the details of the bill although the situation should be resolved well before this deadline.

Enacting the bill

So far 69 of the 82 different sections of the Real Estate Bill have been active, since 1 May 2016, and they are starting to make a difference in the way investors perceive the Indian real estate market. The final throes of the act will come into play by the end of April 2017, after the creation of a tribunal, with the entire act expected to be in place by 1 May 2017 at the latest. It is surprising to learn how slowly this very important act has been introduced to the various local authorities around India but many investors are thankful it is moving forward.

Greater transparency

As we have mentioned in previous articles, the real estate act is a major step forward for the Indian authorities and will assist not only investors but also developers. All future projects will need to be registered with the Real Estate Regulatory Authorities offering priceless transparency for both buyers and developers. This is something which has been missing for many years in the Indian real estate market, opening up some investors to fraudulent activity and scams.

The introduction of regulations which require builders/developers to put 70% of investor deposits into stand-alone bank accounts has also been welcomed. This effectively stops developers from using deposits from one project to help finance their next project and obviously protects investor funds. If in the future there were problems with a particular project then in theory the vast majority of the funds paid upfront would be available for reimbursement to investors.

Threat of prison

While the new regulations contain provisions to jail real estate agents and buyers who violate the terms of the act, is this really feasible? In theory the greatest benefit of this particular provision is the threat of a three-year prison sentence which should hopefully be enough to make those thinking of bending the rules think again. It does however suggest that the Indian authorities are determined the clean-up the real estate market and make it more transparent. Will they be good to their word and follow through with their various threats?


The introduction of new real estate regulations across India appears to be painstakingly slow although behind-the-scenes there is much activity. While greater transparency is perhaps the main benefit of the changes the new protections afforded to investors and developers should not be underestimated. When you bear in mind the size of the Indian real estate market, and the vast population of the country, it does beggar belief as to why it has taken so long to introduce these safeguards.

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