Regulating the unregulated: real estate at the crossroads

By Deepti Mohan, Vidhii Partners
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Following the global meltdown, the real estate sector in India has bounced back with renewed energy and vigour. There is potential for substantial growth and estimates show that the real estate sector contributes significantly to India’s GDP. However, a recent survey by KPMG shows that the real estate industry in India is perceived to be most prone to corruption. This is unsurprising as the sector is largely unregulated and unorganized and is dominated by small players and family run businesses with only a regional presence.

Need for a market regulator

Faced with problems of poor construction, delays, departure from original plans, misleading advertisements and lack of maintenance, Indian consumers have often felt short-changed. With legal recourse being costly and time-consuming, investors are often left high and dry. Thus the long felt need for a market regulator.

Deepti Mohan,Partner,Vidhii Partners
Deepti Mohan
Partner
Vidhii Partners

State enactments

Development and construction activities in India are governed by state and municipal laws, leading to inconsistent practices across the country. States like Maharashtra, Karnataka and West Bengal have enacted laws to regulate the construction and sale of flats by promoters and developers, namely The Maharashtra Ownership Flat (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963; The Karnataka Ownership Flat (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972; and The West Bengal Building (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993, respectively.

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Deepti Mohan is a partner of Vidhii Partners and can be reached at deepti.mohan@vidhiipartners.com.

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Raghuvanshi Mills Compound

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