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The Real Estate Regulatory Bill - Half Bridge of Hope

9th December 2015 was a red-letter day in the history of Indian realty, as the Real Estate Regulatory bill got the Union cabinet nod. The bill is based on three major foundation stones: Transparency, Accountability and Efficiency. With a final cabinet nod, the bill is now one step closer to becoming an Act.

The benefits of the bill will be revealed through a domino effect across the sector. From a bird’s eye view, it is quite evident that increased accountability will have positive implications all across the value chain. For instance, with increased disclosures and focus on corporate governance after the establishment of SEBI, the scams in the stock market have reduced considerably as compared to the early 90s.

Compulsory disclosures and registration ensures Transparency, while taking responsibility in case of any unwarranted deviations in the process ensures Accountability. Together these elements generate Efficiency by discarding any kind of deception in prices. Firstly, it may usher sales on carpet area, which is a practice followed in the developed countries including Singapore and UK. Secondly, the escrow account will help in curbing diversion and misuse of funds, ruling out speculative practices.
Transparency Accountability Efficiency
Enterprise Details

Approvals Layout plan - phase-wise

Development Work to be executed, proposed facilities

Details of Professionals and Real Estate Agents

Declarations of Title and encumbrances

No of units to be developed and their carpet area
  "Likely period of time" within which promoter undertakes to complete the project or phase thereof

Minimum 70% of realization to be deposited in separate bank account to cover the cost of construction.

Builders will pay interest to home buyers for any default or delays at the same rate they charge them.

Builders will be liable for structural defect for upto 5years.
  Timely completion will lead to reduced speculation and sales at justified price points.

Deception in prices will go as stock will be sold at carpet area. In tune with practices in developed world

Diversion of funds/ proceeds to different projects and other motives like land accumulation will be curbed.
An important element of the bill is the redressal mechanism, addressed through adjudicating officers and Appellate Tribunal. Discontented buyers can now approach 644 consumer courts at the district level instead of only the Regulatory Authorities proposed to be established mostly in capital cities. This makes it convenient for buyers and reduces the costs of litigation. Also, the bill marks a provision for imprisonment of builders and real estate agents in case of violation of rules.
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Impact on economy

Indian economy has opened up to the world about two decades ago, and we do want foreign funds to roll in. Thus, it becomes imperative that a global standard is maintained and transactions are monitored by a regulator. Moreover, project delays are the Achille’s heel of Indian real estate and one of the key reasons for sky high prices. As far as responsibility for delay is concerned, it lies both with the developer and the Government authorities. Thus, if we look at the larger picture, the delays in execution also have a negative bearing on India’s GDP.

Statistics of Delays
(total supply figures in mn sq ft)
in 1 year
More than
1 year
than 12
12-24 24-36 36-48 48-60 More
than 60
NCR 65 140 201 195 111 84 21 16 833
MMR 59 95 130 83 35 27 19 20 466
Bangalore 73 129 108 67 14 8 8 2 409
Pune 44 48 102 45 12 5 2 2 260
Ahmedabad 33 52 73 33 7 3 0 0 202
Chennai 12 59 72 26 11 5 3 1 190
Hyderabad 23 17 57 25 17 6 9 13 168
Surat 20 39 32 6 1 0 0 0 98
Kolkata 11 25 30 12 9 5 0 0 92
Bhopal 8 32 29 11 1 0 0 0 81
Vadodara 14 28 23 4 0 0 0 0 69
Chandigarh 3 10 26 15 7 4 0 0 65
Jaipur 7 21 20 10 4 0 0 0 62
Other Cities* 24 62 98 47 15 8 3 2 260
Grand Total 396 758 1001 579 244 155 65 57 3255
% 12% 23% 31% 18% 8% 5% 2% 2% 100%
Source: Liases Foras

*Lucknow, Indore, Nagpur, Nashik, Cochin, Bhubaneshwar, Coimbatore, Mangalore, Patna, Thiruvananthapuram, Goa, Kanpur
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Total area delayed more than 12 months 1,100 (Mn sqft)
Cost to Economy (Rs Crore)* 165,064
Proportion of GDP (2014-15) at current prices** 1.32%
* Cost to Economy is estimated at construction and other cost of Rs 1,500 per sqft

**Estimated GDP 2014-15, at current prices is Rs 125.41 lakh crore (Source: Central Statistics Office)

Source: Liases Foras

For our analysis we have considered the total supply across the 25 cities under our coverage universe. About 34% of this supply is more than 12 months delayed. This estimated delay of residential projects amounts to 1.32% of the estimated GDP (2014-15) at current prices. Construction and sale of an apartment, which is the base of real estate sector, has the capacity to catapult the growth of an entire ecosystem on its own. Once the execution delays are reduced considerably, housing sales will receive a boost. The Indian economy will stand to benefit through this equation in a three dimensional way:
Increased sale of houses
create ancillary demand.
There will be automatic
demand for furniture,
consumer durables, fit-outs,
automobiles, fiber optics and
telecom companies.
This will spur job
creation and expansion
of industries giving a
boost to commercial
segment. Benefits of this
will also trickle to retail
realty as increased
income implies
enhanced purchasing
An upbeat economy
with a functional
regulatory mechanism
will place India on a
global footing and
make it one of the most
sought after
destinations for
international investors.
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Impact of the Real estate Regulatory bill on the residential market: HUGE
18,562 projects
7,957 Developers
*1.69 billion sq feet inventory
*3.25 billion sq feet of supply
Rs 1,91,757 crores of annual business turnover
Rs 18,47,002 crores worth of supply
Source: Liases Foras
Unsold stock falling under the jurisdiction of bill > 5,000 sq ft plots Source:
% Unsold Stock coverd under billSource: Liases Foras (Sep-15 qtr)
Almost 100% of the unsold stock in these tier I cities fall under the purview of the Real Estate Regulatory Bill. Only 0.35% of the unsold stock on a Pan India basis remains untouched by the bill, which is a miniscule percentage. Even in the current depressed state of market, about Rs 18, 47,002 crores worth of supply would come under the purview of the Real Estate Regulatory bill. This is only for the primary supply. There also exists a secondary market, which we estimate is of an equal size. So, the quantum under the bill’s ambit is huge. Also, the revised bill includes compulsory registration of projects of 500 sq mtrs or 8 flats, against the previous norm of 1000 sq mt or 12 flats. With a vast universe under coverage, the bill is expected to have far-reaching positive effects on execution and accountability.
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Only half the problem solved

While the bill protects consumer interest, faster approvals are also crucial for developers to prevent delays. Against this backdrop, regulatory authorities aim to promote single window system of clearances for real estate projects, wherein the projects and promoters both can be graded along with digitization of land records. However, the bill has a long way to go as far as faster sanctioning process is concerned. Thus, the problem is only Half-Solved.

A nation's economy has its foundation in consumer confidence. The bill will be instrumental in alleviating dwindling confidence and weak sentiment that prevails across the sector. With increased transparency, real estate sector will start to look up and find itself on a global footing.

The Government of India has also mooted an ambitious policy called "Housing for All" for the urban poor, and without the proper regulatory mechanism in place, this policy will be unable to yield the desired results. The amendments are in the right direction, but it is imperative that they be implemented within the time frame when the momentum is intact. With the Cabinet nod to the amendments, the Bill is very close to becoming an Act, after which it’s the State’s responsibility to bring it to effect by appropriate measures.
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The data of real estate projects has been collected through field surveys as well as primary and secondary research. As a result of the methodology, sources of information are not always under control of Liases Foras. The information and analytics also undergoes estimates and compilations derived out of statistical procedures. Liases Foras does not by any means guarantee the accuracy of the information provided in the above document. However, Liases Foras undertakes due care and statistical checks in the collection of the data and its research. LiasesForas makes no representation or warranty regarding the standing, credit or otherwise of any person, firm or company mentioned in the above document, or the suitability of the information for any purpose.A person is required to undertake his own due diligence with regard to its investment decisions, and investment decisions should not be purely based on the document presented above.

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Mr. Pankaj Kapoor

Founder and MD-Liases Foras Real Estate Ratings and Research Pvt. Ltd

Email id:

Ms. Namrata Sen Chanda

Content Manager

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About Us. Liases Foras: The pioneer in scientific reasearch in real estate Strategic Partner: dmg::information

Founded in 1998, Liases Foras is a non-brokerage research centric firm that offers data and advisory services. Our works on industry and scientific prognosis of the local market is highly regarded. We have an organized and structured data source on real estate and property trends in India, which is updated on quarterly basis by primary market survey.

With a team of MBA’s, Urban planners, architects, chartered accountants and statisticians Liases Foras is progressively done studies in field of valuation, risk assessment, future forecasting and price behaviour. Our clientele includes leading mortgage companies such as HDFC Ltd, Axis, among others, real estate fund houses, developers, government bodies and leading international research organizations. We are also research partner for CNBC Awaaz real estate awards from 2012 onwards.
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