How does Indian Real Estate Rank Compared to Rest of World ?

Given that the Real Estate sector now accounts for ~10% of India’s GDP, demand for regulating the sector has increased significantly. The Cabinet has already cleared a draft real estate regulatory bill which is likely to be presented in the Parliament in the Budget session.

Indian real estate sector is considered to be semi-transparent when compared to the Rest of the World

We believe this draft has some excellent provisions including a time-bound mechanism for grievance redressal, dispute resolution (between customers/ authorities) and appeal – similar to the telecom sector. The registration of a detailed plan of the project with timely updates on execution and sales booking will also increase transparency and accountability, in our view.

Developers have already raised objections to the bill citing their disagreement over several provisions. It’s understandable, given that it shakes their status quo and introduces pro-customer provisions.

Developers to be pained in the near term? Two aspects of this bill will have the greatest impact for developers.

• All approvals have to be in place before the launch of construction and sales; and 
• 70% of customer advances have to be placed in an escrow dedicated for use in the project. This would help potentially slow or stop diversion of early stage customer advances for land purchases, debt repayment and other projects