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The real estate sector in India has long been a cornerstone of the country’s economic growth, contributing significantly to GDP and employment.However, for decades, the sector was plagued by inefficiencies, lack of transparency, and regulatory gaps, leading to disputes, delays, and distrust among stakeholders. In recent years, the Indian government has undertaken significant reforms to overhaul the legal and regulatory framework governing real estate leading to a new era of accountability, transparency, and consumer protection. This article explores the changing paradigm of real estate laws in India, focusing on key legislative reforms and their implications for the industry.
Before the introduction of transformative laws, the Indian real estate sector operated in a largely unregulated environment. Key challenges included lack of title transparency to the buyers coupled with issues such as delayed possession, diversion of funds, and discrepancies in project approvals. The homebuyers had limited legal recourse in case of disputes with developers and the laws varied across states, leading to inconsistencies and confusion for the homebuyers who are fighting against the tall and mighty. Aside from this, there was a huge influx of black money leading to the entire sector being regarded as dubious for unaccounted transactions and corruption, undermining investor confidence.
These issues not only affected homebuyers but also deterred foreign and domestic investments, hampering the sector’s growth potential. However, recognizing the need for systemic change, the Indian government introduced several landmark reforms to address these challenges. The most significant among these are:
The advent of Real Estate (Regulation and Development) Act, 2016 which is one of the most transformative legislation in the history of Indian real estate has been enacted to regulate the sector and protect homebuyers, RERA introduced several provisions such as establishment of Regulatory Authority in each state and union territory to oversee the sector and adjudicate its disputes. Aside this, the Act mandated the registration of Projects with the regulatory authority before advertising or selling them.
The Act also brought transparency in transactions and mandated the Developer to disclose project details, including approvals, timelines, and layout plans, on the RERA website. Lastly, the Act mandated the developers to deposit 70% of the funds collected from buyers into a dedicated escrow account to ensure timely completion of projects. All of these provisions have significantly improved accountability and transparency, empowering homebuyers and restoring trust in the sector.
In addition, the introduction of GST streamlined the tax structure for real estate transactions, replacing multiple indirect taxes with a unified tax regime. While the initial implementation faced challenges, GST has simplified compliance and reduced the tax burden on developers and buyers.
The govt. has also enacted the Benami Transactions (Prohibition) Amendment Act, 2016 which has strengthened the legal framework to combat anonymous transactions, which were prevalent in real estate. The law empowers authorities to confiscate benami properties and imposes stringent penalties on offenders, curbing black money and promoting transparency.
Lastly, the Insolvency and Bankruptcy Code, 2016 which provides a mechanism for resolving insolvency cases, including those in the real estate sector. Homebuyers are now recognized as financial creditors, giving them a stronger voice in insolvency proceedings against defaulting developers.
The Courts in the country have come down heavily on erring developers to ensure that the investor confidence in the real estate market remains intact. The govt. too came in support of homebuyers who lost money investing in real estate projects, the Central Govt. took over the board of Unitech Limited and is committed to ensuring that all jammed projects see the light of the day and investor confidence remain unshaken. The govt. also resolves to make the process of purchasing the immovable property easier for NRIs and foreigners.
All of these reforms have had a profound impact on the Indian real estate sector and the delay in delivery of projects has majorly reduced. There is increased transparency in the sector due to mandatory disclosures and regulatory oversight making transactions more transparent and accountable. The reforms have attracted institutional investors and private equity funds, fostering growth and innovation.
While the reforms have been largely successful, the main challenge remains with the execution of legislation. The RERA has office bearers are retired civil servants who focuses majorly on policy making and less on dispute resolution. Some states have been slow in implementing RERA, leading to uneven enforcement. There have been numerous cases where despite holding a favourable order from the Court, the litigants have faced challenges with its execution.
While challenges persist, the reforms have laid a strong foundation for sustainable growth. As the sector continues to evolve, collaboration amongst the government, industry stakeholders, and consumers will be crucial to realizing the full potential of these transformative changes. The future of Indian real estate looks promising, with the protection of investments and a more robust economy.
Author: Adnan Siddiqui
