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New Real Estate Bill Set to Boost Transparency and Protect Investors

India’s looming Real Estate (Regulation and Development) Bill is expected to offer greater protection to buyers and investors. The key element of the legislation is the establishment of a state-level Real Estate Regulatory Authority (RERA).  All real estate projects and agents will then be obliged to register with this new body.

Under the terms of the bill, 70% of the amount collected from buyers for any given project must be deposited into an escrow account by the developers. These funds can then only be used for the construction of that named project. The legislation will also introduce a fast-track dispute resolution mechanism.

The bill was approved by the Indian Parliament on March 15 this year. It is expected to be enacted once it has been formally endorsed by the Indian President. The move to introduce the legislation follows a slowdown in the Indian real estate sector and is aimed at increasing the confidence of both domestic and overseas investors. The bill is one of a few key pieces of legislation that currently enjoy cross-party support.

Additional Elements of the Bill

  • Builders obliged to disclose complete details regarding their registered projects, including information on the promoter, design plan, land status, approvals, agreements, real estate agents, contractors, architects, structural engineers, etc.
  • Grievance redressal with regards to real estate matters will be addressed only by the consumer courts (there are 644 in total), and not the civil courts.[1] This provision has apparently been introduced to reduce litigation costs for buyers. The bill also ensures that no changes to the original lay-out and design plans can be made without first seeking the consent of investors/buyers.
  • Penalties will be imposed on all those violating the law’s provisions. A promoter, for example, will have to pay up to 10% of the project cost if the property is not registered and can be imprisoned for up to three years if an order by the RERA is not followed. Similarly, real estate agents will be fined US$148.8 (Rs 10,000) per day of the period of their violation, while builders could have to pay up to 5% of the estimated project cost  should any violations be proven.

Timely Boost for the Indian Realty Sector

The bill is designed to infuse greater transparency into India’s real estate industry and will boost investor confidence, leading to a potential increase in foreign direct investment in the sector. Undoubtedly, a booming real estate market is vital for India’s national economy as it boosts job creation, business activity, as well as the manufacturing industries. Finally, it has important carry over implications for vendors – both domestic and foreign – affiliated with the construction industry and related sectors, such as banking and insurance, asset management, marketing and advertisement, appraisers, attorneys, household goods and appliances, furniture and the furnishings, and logistics, among others.


[1] Firstpost, 8 March 2016

Content provided by Picture: HKTDC Research
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