India: Global Realty Industry – A distant dream?!

Last Updated: 21 January 2003
Article by Raghavachari Nambi

"In order to be class of your own, you need to excel over others."


‘Roti, kapda and makaan’ for all has been the mantra of our state and its leaders from the days of our independence. The housing shortage still looms large on our faces despite having lived in independent India for over five decades now. Roughly, 75% of urban population is still living in slums / juggis / jhopdis and ramshackle dens. According to a recent estimate, we still need about

200 million houses towards our cherished goal of ‘home for all.’

In most of the foreign countries like Australia, New Zealand, U.S.A. and Europe, the Indian immigrants are able to buy a house within 2-3 years of their stay. The situation in India is different.

Due to heavy investments required in the sector, the industry is now allowed FDI in integrated townships. Are our builders ready for such a situation? It is proposed to analyse our preparedness to attract foreign capital in this sector.

Technocracy & Corporate governance

Most of the builders are not technocrats and they have become builders by sheer accident or due to their good fortunes. In order to build up credibility amongst investors and financial institutions, a minimum qualification must be prescribed. Corporatisation can improve the industry by attracting foreign capital (resource gap USD 20 billions). The entry of MNCs, FDIs and joint ventures are likely to catalyse developments in this direction.

Till the entry of Larsen & Toubro, Great Eastern Shipping, Unitech and industrial houses such as Godrej, Rahejas, Tatas and Mahindras, not many public limited companies were on the arena. This is mainly attributable to Land ceiling laws prevailing at that point in time. Even now many states have not taken steps to scrap the land ceiling laws. The Confederation of Real Estate Developers Association of India (CREDAI) has recently released a self-imposed 28-point code of conduct to be adopted by its members to establish transparency and fair dealings between developers, promoters and builders with their customers. The code covers everything right from the title of the sale deed to quality of construction, the components of costs and description of amenities.

Market Infrastructure - Legal Shackles:

Despite the fact that the construction industry is the second largest in this country next only to agriculture in terms of employment and size of operations, the industry is exposed to draconian laws, which await reforms with changing times. The doing away with the classification of lands and uniformity in regulation of multi storeyed buildings in a proactive way will add to the land bank. Added to this, the high stamp duties in some states act as deterrent to the promotion of the industry on balanced lines. The Ownership Apartment Acts passed by most of the states have, to some extent, redressed the problem of the investors. Still the high land costs, steep hike in registration charges and spiraling cost of building materials are making the ownership of a house beyond the reach of a common man. The computerisation of Land records and the registration process under the Act would go a long way in scientific management of natural resources.


It is necessary that transparency be brought about in real estate development in the interests of the developer as well as the purchaser. The prescribed code of conduct recommends that all issues should be clearly spelt out in the flat purchasers agreement and there should be no room for surprises and unexpected add-ons in terms of costs and the purchaser be allowed to peruse all relevant documents and sanctions at the time of signing the agreement. The code further adds that the price of the premises should not be enhanced once the agreement for sale is executed unless the escalation clause has been mutually agreed upon at the time of signing the agreement. The saleable area should have various components and these have been detailed in the code suggested. The urgent need is to improve the time of delivery, transfer with clear legal title, deliver at agreed prices and to improve the quality of construction in conformity with the National Building Code of India, 1970.


The industry has been witnessing continuous upgradation of technology in the last few years. The typical distribution cost (in %) for an apartment is Land (20%), Foundation (15%), Structure with walls (15%), Plastering / painting (15%), Woodwork (10%), Flooring / CP / Sanitary (20%), Statutory fees / registration (5%). As far as the interiors are concerned, one can spare a significant amount of immediate expense under the heads of woodwork, furnishing and flooring material and fittings upto 50% of the post construction costs. The use of CAD / CAM, project management software, web marketing / e-tailing of properties etc are still in their nascent stages of development.

Market trends

The retail sector has started following international norms atleast in terms of the scale and format combined with local consumer ground realities. The broad objectives pursued can be classified as under:

  • Continuous brand building and brand recognition.
  • Providing value for money product.
  • Providing unique consumer experience (shopping centers, department stores, food and shopping combined etc).
  • Allowing consumers to participate in global experience whilst retaining distinct local flavour.
  • Ensuring a consistent long-term cash flow for shareholders and thereby ensuring the success of the business. The success stories so far revolve around the following attributes.

  • Judicious location - adequate footpath and car parking.
  • Tenant mix - room for wide range of complimentary occupiers.
  • Consumer friendly design, which allows free circulation within the mall.
  • Highest management quality.
  • Economic pricing - model based on flexibility of operation and turnover.

The performance of retail property would be linked to its ability to attract consumers consistently and to induce them to spend money.

Quality Standards

Changing attitudes and competition in a global market have focused management attention on quality. Construction firms account for a small fraction of ISO 9000 companies world-wide. The standards incorporate basic quality management principles that are similar for most industries (in fact the standards are remarkably generic). The introduction of ISO 9000 in a construction company may often be difficult because the management of the company will be open to scrutiny and criticism, which is often difficult for management to endure.

Regulatory Exchange and an Apex Body – need of the hour

There is an urgent need to establish a property exchange like the stock exchange where sale and transfer of property can be achieved. Centralising the knowledge and information of available real estate could help in better sales as this information could percolate to all levels in the industry. Despite its role as an economic barometer for the country, largest employment generator and largest in terms of industry size, the industry does not have an independent regulatory authority of the like of SEBI to promote, regulate, monitor and supervise, control and punish the offenders. There is also dearth of training institutions for workers who are forced to take up employment overseas on comparatively low wages due to poor skills.

Service Providers

The Estate Agent Association of India or similar recognised institutions should be authorised to issue a Diploma in estate agency for successful candidates. The industry must ensure that the rates and commissions prescribed by the Estate Agents Association of India alone is honoured by the builders / promoters / developers. Builders / promoters and developers can follow similar system. The architects / interior decorators must be qualified for the services they provide and shall be accredited members of the professional bodies to which they belong. The legal profession is already on the job of upgrading the skills of their members in providing qualitative services to the society, which interalia includes granting permission to foreign legal firms to open offices in India.


As can be seen from the above, we have just begun and the road is still long to traverse. As we gather more experience with cross border cultures, international technology, expertise and experience, the market would mature and the customers would benefit. The need is to galvanise people into a movement. Otherwise our grand vision of building organisations of the likes of Insituforin Technologies Inc., Bechtel, Mitsubishi, Wimpey and Waters would be a distant dream. This is a stupendous task calling for a movement of all concerned for achieving the cherished goal of globalising the industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

© Copyrights reserved by RSN & Associates, Chartered Accountants, Chennai, India.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions