DEST Practice 19

The real estate sector is one of the largest segments of the Indian economy, contributing significantly to employment, construction activity, demand for building materials, and the household wealth of the country's growing middle class and aspirational working population that has over decades considered the acquisition of a residential property as the primary investment and symbol of financial security and social status. The sector has historically been characterised by opacity in transactions, delay in project completion, frequent diversion of homebuyer funds from the projects for which they were collected, contractual asymmetry between powerful developers and individual homebuyers, and inadequate dispute resolution mechanisms that left aggrieved buyers with little effective recourse other than prolonged and expensive litigation. The Real Estate (Regulation and Development) Act of 2016, commonly known as RERA, represents the most significant regulatory reform in the history of the Indian real estate sector, establishing for the first time a transparent, accountable, and consumer-protective framework for transactions in residential real estate. The Act requires all developers to register their projects with the State Real Estate Regulatory Authority before launching or advertising, disclosing complete information about the project including land title, approvals, specifications, layout plans, delivery timelines, and the financial history of the promoter, and undertaking to complete the project on time or compensate buyers for delay at the same interest rate that they are charged for delayed payments. Seventy percent of the funds collected from buyers must be held in a dedicated escrow account and used only for construction and land cost of the project, preventing the diversion of buyer money to other projects or uses that had previously been a common cause of project delays and failures. The Real Estate Regulatory Authority in each state adjudicates complaints from buyers against developers and from developers against buyers in a time-bound manner, imposing penalties on defaulting parties and awarding compensation, and maintaining a publicly accessible register of registered projects and their status that allows prospective buyers to check the compliance record of developers before investing. The Housing For All mission, implemented through the Pradhan Mantri Awas Yojana, addresses the housing shortage for economically weaker sections and low-income groups by providing interest subsidies on home loans, capital subsidies for in-situ slum rehabilitation, and direct financial assistance for affordable housing projects, with a focus on expanding the supply of formal, pucca housing for those who cannot access it at market rates. The Credit Risk Guarantee Fund Trust for Low Income Housing provides loan guarantees for housing finance to low-income borrowers who lack adequate collateral, enabling housing finance companies and banks to extend credit to this underserved market segment. The National Urban Rental Housing Policy recognises that affordable rental housing is an essential component of the urban housing market, particularly for migrant workers, young professionals, and households that cannot afford to purchase a home, and aims to promote the development of purpose-built rental housing through institutional investors and affordable rental housing complexes on government land.