Real Estate 2023

Last Updated May 04, 2023


Law and Practice


JSA is a national law firm in India with over 350 attorneys operating out of seven offices located in Ahmedabad, Bengaluru, Chennai, Gurugram, Hyderabad, Mumbai and New Delhi. JSA has dedicated teams with extensive expertise in real estate practice across all offices. Clients include Indian and international entities, including developers, real estate advisers, banks, non-banking finance companies, offshore and domestic funds, real estate investment trusts, high net worth investors, governments, sovereign wealth funds, major retailers, and hotel owners and operators. JSA advises on legal and regulatory issues for various types of real estate projects, including in relation to the construction and development of hotels, malls, residential and commercial complexes, warehouses, information technology and industrial parks, and special economic zones, among other areas.

The legal system in India comprises of civil law, customary and personal law, and common law. Real estate transactions are subject to central and state legislation, personal/religious laws and judicial precedents. There is also subordinate legislation, including rules, regulations and by-laws made by local authorities such as municipal corporations, gram panchayats and other local administrative bodies. Laws relating to real estate in India can be categorised as follows:

  • laws applicable to the acquisition, transfer and registration of immovable properties, such as the Transfer of Property Act 1882 (TOPA), the Registration Act 1908 (Registration Act), the Real Estate (Regulation and Development) Act 2016 (RERA), Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, Benami Transactions (Prohibition) Act 1988, land revenue codes, stamp duty legislation enacted by various states as well as various other local/state/municipal laws, policies and customs;
  • exchange control regulations for foreign investors, such as the Foreign Exchange Management Act 1999 and the rules and regulations framed thereunder (FEMA), including in particular the Foreign Exchange Management (Non-Debt Instruments) Rules 2019 (Non-Debt Rules) and the Foreign Exchange Management (Debt Instruments) Regulations 2019 (Debt Regulations);
  • corporate laws such as the Companies Act 2013 (Companies Act), where any party to the transaction is a company, and the Limited Liability Partnership Act 2008 (LLP Act), where a limited liability partnership firm (LLP) is involved; and
  • personal/religious laws that determine title acquired through inheritance or succession.

The real estate sector has seen a significant increase in investments in equity instruments, while investments from non-banking financial companies (typically in debt instruments) have reduced particularly in Tier 1 cities in India. In the past few years, there has been a significant increase in interest from investors in investing in real estate assets for logistics and warehousing outside Tier I cities and in developing cities in India which are being developed as “smart cities”. The government has emphasised the development of infrastructure in Tier 2 and Tier 3 cities and this has inspired an increase in investment in real estate projects.

Legislative trends show continued emphasis on liberalising the Indian economy, with renewed focus on the development of real estate in a transparent manner and on affordable housing projects.

Significant Developments

The SEBI (Real Estate Investment Trust) Regulations 2014 (REIT Regulations) deal with real estate investment trusts (REITs) and allow individual investors to enjoy the benefits of owning an interest in the securitised real estate market.

In the Union Budget Speech of 2023-2024, the finance minister announced continued measures to improve infrastructure with emphasis on sustainable cities being developed. In this regard, the government has announced that an “Urban Infrastructure Development Fund” will be established to finance creation of urban infrastructure in Tier 2 and Tier 3 cities. The fund, which will be managed by the National Housing Bank, is expected to make available INR100,000,000,000 per annum for the development of sustainable cities. Efforts are also being made to improve property tax governance and ring-fence user charges on urban infrastructure. The government has announced unprecedented budgets for the development of railways, airports and transportation systems in various locations.

The government continues to emphasise affordable housing development, with the outlay for the Pradhan Mantri Awas Yojana being increased by 66% to over INR790,000,000,000.

RERA has been welcomed by purchasers and was framed to regulate and promote transparency, credibility and accountability in the real estate sector in India.

The goods and services tax (GST) has subsumed central taxes as well as state-level taxes, eliminating the multiplicity of taxes and their cascading effect. 

The Benami Transactions (Prohibition) Amendment Act 2016 empowers competent authorities to attach and confiscate benami properties, and aims to curb black money and money laundering in India.

The foreign investment environment, including in the sectors relevant to real estate development such as construction development, has been liberalised. In terms of significant transactions, there have been many investments into India, including various investments made by sovereign wealth funds. Commercial real estate projects have seen large investments with the intention of moving the developed real estate assets into REITs. There has been an increase in platform deals and acquisitions of completed commercial assets, allowing developers to reduce their debt or to invest funds received as consideration in such deals to invest in more projects.

The documents for leasing arrangements have become significantly more sophisticated and, in several cases, facilities in excess of 1 million square feet have been taken on lease in single transactions.

Significant real estate deals in the past 12 months

Several large transactions have been concluded in the past 12 months, which are focussed on monetising developed real estate assets by way of platform deals or REITs. Bengaluru-based real estate developer Prestige Estates Projects Limited closed the USD1.5 billion portfolio sale transaction of its office and retail platforms to Blackstone Group. GIC acquired approximately 3 million square feet of commercial office assets in Bhartiya City, an integrated township project spread over 125 acres located in Bengaluru.

Continued impact of the COVID-19 pandemic in the real estate market

Real estate markets are recovering significantly from the impact of the COVID-19 pandemic, as employers are increasingly adopting a hybrid model (if not entirely asking employees to return to the workplace).

Impact of inflation and increased interest rates

Residential real estate is likely to be impacted by the increased interest rates, as potential homeowners may find it difficult to access home loans on good terms.

Real estate has been revolutionised by the tremendous evolution in information technology in the past decade, notably blockchain and proptech. Blockchain facilitates an entire real estate transaction (buying, selling or renting) without the presence of a middleman, attempting to make the industry transparent and efficient. Proptech streamlines and connects the processes for participants in all stages of real estate transactions, including buyers, sellers, brokers, lenders and landlords.

The state government of Andhra Pradesh has partnered with a Swedish start-up to build its blockchain-based solution. In 2018, NITI Aayog highlighted its efforts towards IndiaChain, a blockchain infrastructure for managing public records and building social applications, which will also be used for maintaining land records. Many state governments (Maharashtra, Telangana, Andhra Pradesh and West Bengal) are working to integrate blockchain-based ledgers in the digital land record system. Certain state governments are also considering measures to digitise records and make the process of land surveys and other procedural aspects (including payment of taxes) easier.

Despite the introduction of these disruptive technologies in India, there may not be any significant impact on the real estate market over the next year due to regulatory and procedural delays and given the scale of changes that need to be implemented.

The government has taken steps to ease the regulations governing FDI and made certain amendments to the policy applicable to FDI in real estate. While there are no significant indications from the government at this time, foreign investors are hopeful that the next progressive step would be liberalising multi-brand retail trading. Most recently, the government has announced various initiatives to increase investments in the warehousing and logistics sectors, development of sustainable and smart cities, and development of Tier 2 and Tier 3 cities; this is expected to result in growth in the real estate sector as well.

The categories of property rights are freehold rights, tenancy (lease) rights, licences and easements.

Freehold Rights

Under a freehold right, a person acquires absolute right, title and interest (including undivided interest) in a property and becomes the sole owner of the property, with unfettered freedom and the right to deal with the property.

Tenancy (Lease) Rights

Under a tenancy (lease) right, a person acquires limited interest and rights in relation to a property, with the right to occupy and deal with the property in the manner contractually agreed between parties. Indian law also recognises the concept of statutory tenants, who are protected under the applicable rent control statute and can be evicted only on limited grounds. However, most modern developments leased to corporates are not affected by rent control legislation, as corporates do not generally derive protection under it.

Since land is a state subject under point 18 in List II of the State List of the Seventh Schedule of the Constitution, states are inclined to formulate their own laws in relation to rent and tenancy. In India, tenancy matters are governed by state-specific statutes/laws, and matters not covered by state legislation are governed by TOPA, which is central legislation.

Additionally, the Ministry of Housing and Urban Affairs released its draft Model Tenancy Act of 2020 in order to increase the efficacy, ease and convenience in regulating the renting of premises in a transparent manner. The states are at liberty to adopt this template and make amends as required, or to make changes to their existing tenancy and rent laws.

Licences and Easements

Licences are governed under the Indian Easements Act 1882 (Easement Act); easements are also recognised separately in Indian law. In licences, a licensee acquires the permission of the owner to use the property, and use is restricted to contractual terms without de jure possession being granted to the licensee. On the other hand, an easement is a right that the owner of a property has to compel the owner of another property to allow something to be done or to refrain from doing something on the servient element for the benefit of the dominant tenement.

Generally speaking, a person can acquire title to immovable property through the following means:

  • an act of the parties, including sale, gift, exchange or lease, governed by TOPA and RERA;
  • succession; and
  • allotment by government organisations/agencies.

Certain states prohibit companies/firms from purchasing/leasing agricultural land, and prohibit people with income above a certain threshold or who are not already agriculturalists from purchasing agricultural land. Certain states also have land ceiling laws that restrict the acquisition of land beyond specified limits.

Documents governing rights/transfers of immovable property are registered before the jurisdictional Sub-Registrar of Assurances. Registrations are mandatory for instruments evidencing a transfer of interest in immovable property of a value more than INR100. Once registered, documents become a part of the public record and can be accessed by anyone. Such transfers also require the payment of duties (such as stamp duty, registration fee and other cess applicable to each state) and are recorded by the revenue departments, which maintain a separate set of documents for each property.

Where transfer is effected through succession, revenue records are updated to reflect the inheritance; these become publicly available once recorded.

Insurance companies in India have started to provide title insurance, although establishing title is often very complicated. Measures are being taken to simplify the manner in which title can be verified, and governments are taking steps to make such records electronic, although it will take some time for all the relevant documents to be sorted methodically and made available in electronic form.

During the early stages of the COVID-19 pandemic, certain state governmental authorities allowed for some additional time to register documents governing rights/transfers of immovable property. In the past few months, the process of registering documents has resumed as was done prior to the COVID-19 pandemic and there has been no continued impact of the COVID=19 pandemic and the associated lockdowns.

Tracing title to property is often complicated, as records are not centrally located and are maintained by different governmental departments. Antecedent documents in each state are often in vernacular languages. Typically, title due diligence is conducted on properties proposed to be purchased generally for the preceding 30-40 years.

When conducting due diligence, one may not discover all litigation (as the details of the litigations are not completely computerised), mortgages by deposit of title deeds and unregistered contracts (which do not require registration under the Registration Act) that have a bearing on the title of the property, so it is important to take detailed representations and warranties. In some states, litigation cases are required to be registered with the Sub-Registrar in order to become binding or be considered as constructive notice to a person buying immovable property subject to litigation.

Taking possession of original title deeds at the time of sale is also extremely important, as they can be used to mortgage/encumber a property. Where the original title deeds are not available, one must ensure there has been no mortgage/encumbrance by deposit of title deeds by the seller or their predecessor-in-interest.

Due diligence also sometimes requires the issuing of public notices in local papers inviting claims in respect of the property and making searches before the court offices, also referred to as negative searches. If any claim is made or litigation is discovered, the purchaser then makes a call on whether or not they should still go ahead with the transaction. As part of the due diligence on vacant land parcels, it is also advisable for the buyer to conduct a survey of the land to confirm the measurement of the available land.

In most transactions, representations and warranties are comprehensive, except where a transfer is on an “as is, where is” basis, and the liability of the seller is limited to the purchase price or a portion thereof. After the COVID-19 pandemic, additional clauses pertaining to force majeure, termination, etc, are being included. Clauses pertaining to termination of the lease and/or force majeure contemplate pandemic and related situations more explicitly; however, landlords insist that where the lessee retains possession of the premises, there should be no provisions for abatement of rent or other benefits under lease documents.

The important areas of law include:

  • laws applicable to the acquisition, transfer and registration of immovable property;
  • Indian exchange control laws for foreign investors;
  • corporate laws where the transferor/borrower/licensor is a company; and
  • succession and inheritance laws.

The buyer will not be responsible for soil pollution or environmental contamination of a property if they can prove that they were not responsible for it. Typically, the buyer is indemnified against any action initiated by the government for contamination of a property prior to its purchase. However, proceedings for environmental contamination are infrequent, although this may change as environmental issues are attracting more recognition.

Approvals are issued with respect to the property, and pass along with the property under the sale transaction to the buyer. Presently, the seller/buyer has no disclosure obligations toward environmental authorities. However, the owner/developer of the property is required to submit periodic reports to the authorities confirming compliance with the terms and conditions of the approvals. The onus is on the owner to make the necessary applications for timely renewals of the consents obtained from the respective State Pollution Control Boards.

The buyer can ascertain the permitted uses of a property based on zoning regulations under state-specific town and country planning statutes. To aid the development of strategic areas, government entities may allot land with certain obligations imposed on its development.

The Constitution of India no longer recognises the right to hold property as a fundamental right. However, Article 300 (A) was included in the Constitution to affirm that no person would be deprived of their property except by authority of law.

State governments are authorised to acquire lands for public purposes. The current land acquisition statute prescribes the following:

  • the payment of compensation of up to four times the market value in rural areas and twice the market value in urban areas;
  • safeguards for tribal communities and other disadvantaged groups, compensation for lost livelihood, and caps on the acquisition of multi-crop and agricultural land;
  • the return of unutilised land to landowners; and
  • a requirement to obtain consent from affected parties in relation to the acquisition of land for companies, except where the acquired land is controlled by the government.

Land parcels acquired by the state governments vest with the state governments free of all encumbrances and any title defects. This reduces the complexity of conducting due diligence on land allotted by the government.

Any transfer of property requires the payment of statutory duties, such as stamp duty and cess (which differ from state to state), and registration fees. Where the asset is under construction, GST is also to be paid by the seller. However, GST is an indirect tax, so it can be recovered from the buyer.

In an asset transfer, the duties are generally paid by the buyer, unless they are otherwise agreed to be shared between the parties. Most stamp acts provide that, where there is no agreement to the contrary, stamp duty will be paid by the purchaser on a sale and by the lessee on a lease.

For share transfer transactions, stamp duty at 0.015% of the consideration for the shares is payable upon transfer. Stamp duty on conveyance need not be paid if property is contributed into a partnership firm. However, any exit from the partnership by the original contributor will in most cases attract payment of stamp duty as if it is a conveyance.

Exemptions on the payment of stamp duty and certain tax benefits are available to entities operating out of free trade zones known as “special economic zones”.

Persons resident outside India can acquire property or invest in real estate in India only in accordance with the FEMA, which restricts such matters.

While foreign investment into real estate construction and development has been liberalised significantly, certain restrictions remain. An important restriction is that the investment has to be locked in for three years, calculated with reference to each tranche of investment, except in cases where the construction of “trunk infrastructure” is completed. Furthermore, the transfer of stake from a person resident outside India to another person resident outside India, without the repatriation of foreign investment, is subject to neither any lock-in period nor any government approval. The lock-in is also not applicable to the construction of hotels and tourist resorts, hospitals, special economic zones, educational institutions and old-age homes.

In respect of completed projects, FDI is permitted in certain projects, such as the operation and management of townships, malls/shopping complexes and business centres, with a lock-in of three years (calculated with reference to each tranche of investment) being applicable to investments in such completed projects. Earning of rent/income on the lease of a property not amounting to a transfer will not amount to real estate business. This provision enables FDI in completed projects if the building is leased and units are not sold, provided that the foreign investor has been present in the company developing the project during the construction development phase. Foreign Venture Capital Investors can invest in securities issued by entities engaged in certain specific sectors prescribed by the Reserve Bank of India (RBI).

Exchange control laws regulate foreign investments in India by countries having land borders with India. If the investing/acquiring entity or a beneficial owner in an investing/acquiring entity is an entity set up in, or an individual resident in China, Pakistan, Afghanistan, Nepal, Bhutan, Bangladesh or Myanmar, such investing/acquiring entity would require prior government approval for their proposed investment or purchase of shares (or other equity-linked securities) in an Indian company. “Beneficial ownership” has not been defined; however, typically this is pegged to 10% of the shareholding held by the beneficial owner in any investing/acquiring entity. To ensure compliance with this requirement, dealer banks in India have been authorised by the RBI to secure necessary declarations and undertakings from foreign investors certifying that the necessary threshold of beneficial ownership has been complied with. The above-mentioned requirement for government approval will also be triggered in the event of transfer of ownership of any existing or future FDI in an entity in India, which directly or indirectly results in the beneficial ownership falling within the restriction set out in this paragraph.

Certain additional conditions may need to be fulfilled, especially under any project-specific approvals obtained, lease documents, etc, in relation to a transaction wherein (for instance) a foreign entity is investing in, or gaining control over, an Indian investee entity, or if there is any reconstitution of the board of directors of the Indian investee entity, or where the Indian investee entity takes on additional debt and if any charge is created on the project land, pledge of shares, etc. In any change of control, there may be additional compliance requirements, including obtaining pre-facto approvals and/or authorisations in connection with the proposed transaction under such project-specific approvals obtained and/or lease documents.

Typical fundraising means for real estate sector companies include FDI, REITs, alternative investment funds (AIFs), debt financing through loans and debt capital markets and external commercial borrowings (ECBs).


The foreign exchange regime prohibits foreign investment into companies that are engaged purely in “real estate business”, ie, dealing in land and immovable property with a view to earning profit therefrom not including the development of townships, the construction of residential/commercial premises, roads or bridges and REITs registered and regulated under the REIT Regulations. Accordingly, FDI up to 100% is permitted under the automatic route for companies engaged in these sectors, subject to certain limited conditions.

Entities engaged in real estate broking services are also permitted to receive up to 100% FDI under the automatic route.

FDI may be through subscription to equity shares and instruments that are compulsorily convertible into equity and are required to comply with pricing guidelines and reporting obligations prescribed by the RBI.

Each phase of a construction development project would be considered as a separate project, so an investor can potentially exit before the completion of an entire project, subject to a lock-in period of three years, as mentioned in the FDI policy and extant laws in India, see 2.11 Legal Restrictions on Foreign Investors.


This is a relatively new mode of fundraising, although several developers and investors are considering REITs as an attractive means of fundraising or liquidating investments and exiting. REITs in India are private trusts set up under the Indian Trusts Act, 1882 and compulsorily registered with SEBI. The set-up of REITs would include the sponsor (who sets up the REIT), the manager (who manages the REIT’s assets, investment and operations) and the trustee (a SEBI-registered debenture trustee who is not an associate of the sponsor or manager, and who holds the REIT assets in trust for the benefit of the unitholders/investors). REIT Regulations have been modified to permit, inter alia, REITs to issue debt securities for raising funds.


AIFs are privately pooled investment vehicles that collect funds from investors (Indian or foreign) for making investments and are regulated by the SEBI (Alternative Investment Funds) Regulations 2012. AIFs have to be compulsorily registered with SEBI. AIFs may invest as private equity or debt funds, or both.

One INR25,000 Crores Category II AIF has been formed under the Special Window for Affordable and Mid-Income Housing. The fund aims to provide last-mile financing to enable the completion of the construction of stalled housing projects. This scheme was approved by the cabinet on 6 November 2019. The AIF has been providing last-mile debt financing to companies to complete projects that were stuck due to lack of funding for the developer.

Debt Financing

The most common means of fundraising for real estate developers is by the issuance of NCDs to non-banking finance companies, banks, financial institutions and other private lenders. Debt investments by banks are subject to certain prudential norms relating, inter alia, to the exposure of banks to such investments, as stipulated by the RBI. While previously a preferred means of raising funds, market conditions have affected investments by non-banking finance companies in recent times. Further effective from 1 October 2022, the RBI has stipulated that the real estate developers are required to obtain all the permissions required from the relevant government/other statutory authorities for the project prior to funding by such non-banking finance companies for the development of the real estate project – this has restricted access to funds by the real estate developers in the early stages of the project development.


The RBI has recently eased the definition of beneficiaries eligible for ECBs to include all entities that can receive FDI. Funds borrowed under ECBs cannot generally be used, inter alia, for real estate activities, except when used for:

  • the construction/development of industrial parks/integrated townships/special economic zones;
  • the purchase/long-term leasing of industrial land as part of a new project/modernisation of expansion of existing units; and
  • any activity under the “infrastructure sector” definition.

Restrictions on ECBs for funding real estate transactions broadly remain similar under the new framework. In lieu of the existing sector-wise limits, all eligible borrowers are now permitted to raise up to USD750 million or equivalent per financial year under the automatic route.

Typical security includes:

  • mortgages;
  • hypothecation or escrow of project receivables and cash flows (subject to compliance with RERA);
  • a pledge of shares of the company engaged in developing the project, its parent, and/or associate entities; and
  • the provision of corporate and personal guarantees, which are typically created in favour of a security/debenture trustee acting for the benefit of the lender.

Where security is in the form of a mortgage, a mortgage deed will have to be registered with the jurisdictional Sub-Registrar of Assurances. Where an equitable mortgage is created by the deposit of title deeds, the recording of the deposit of deeds may need to be registered in certain states in India. The security interest created on such assets (tangible or intangible) is also required to be registered with the Registrar of Companies (ROC) and the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), which is a central database for all security interests created and was established to check and identify fraudulent activity in secured loans.

FDI in Indian companies cannot be secured and investors must bear risks typical to equity investments. Accordingly, foreign investors investing under the FDI route are not permitted to have assured returns at the time of exit. However, investments made in NCDs can be secured, including where they are issued to permitted foreign investors. Security in such cases is typically created in favour of a security/debenture trustee. In ECBs, a pledge over shares of an Indian company in favour of a foreign lender requires compliance with ECB guidelines and the approval of the authorised dealer bank (AD Bank). The creation of a charge over assets situated in India in favour of a foreign lender will be subject to compliance with Non-Debt Rules and Debt Regulations, and approval from the AD Bank.

Stamp duty is payable on all documents. State-specific statutes determine the stamp duty payable on different kinds of documents. Insufficiently stamped documents may be impounded and may not be admissible as evidence in Indian courts until the deficient stamp duty (along with applicable penalties) has been paid. Some documents need to be registered under the Registration Act, with payment of the applicable registration fees. Certain documents, such as powers of attorney, are also required to be notarised and are subject to notarisation fees.

Certain corporate authorisations are required under the Companies Act, such as board resolutions and shareholder resolutions. Any charge is required to be filed with the ROC and, in the case of non-compliance, such security interest would be held as void against the liquidator and the other creditors of the company in the event of the winding-up of the company, although the obligation for the repayment of money secured by the charge will continue to subsist.

The RERA contains restrictions on the ability of companies and real estate developers to secure their borrowings.

Where the borrower in default is solvent, it is not particularly difficult for a lender to seek to enforce its security pursuant to the provisions of the Insolvency and Bankruptcy Code 2016 (IBC).

Separately, banks and financial institutions that have lent monies to a borrower are entitled to enforce their security interest without the intervention of a court/tribunal, subject to strict compliance with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI). The SARFAESI defines borrowers to mean any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution, and includes a person who becomes borrower of an asset reconstruction company consequent to the acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance or who has raised funds through issue of debt securities. However, it should be noted that action under the IBC and SARFAESI cannot be taken simultaneously, since a moratorium is declared upon the admission of an insolvency application under the IBC by a National Company Law Tribunal.

As a general rule, where the priority of security is not contractually agreed between the parties involved, security created earlier in time will rank in priority to security that is created subsequently. A first ranking charge will have priority over a second ranking charge at the time of the enforcement of security. However, it is possible for existing secured debts to become subordinated to new debts when an intercreditor agreement setting out the ranking of debt or a subordination agreement is signed.

Typically, in Indian lending transactions, shareholder/promoter loans are unsecured and subordinated.

Lenders will not ordinarily incur liability under Indian environmental laws simply by holding a security interest. If a lender takes over management and control of the borrower after the enforcement of security, such lender may incur liability as the person in possession of the polluting premises, or as a person responsible for the conduct of the borrower’s business.

The optimum outcome of an insolvency application under the IBC is a successful corporate insolvency resolution process (CIRP). However, when a CIRP fails, liquidation follows. There are also provisions for voluntary liquidation. Where such a debtor goes into liquidation, the IBC provides the manner in which secured debt will be discharged. Typically, workmen’s dues are prioritised over dues to lenders who have relinquished their security interest to the liquidation process. Similarly, wages and dues owing to employees (other than workmen) are ranked pari passu with such lenders who have relinquished their security to the liquidation estate.

The exposure of the real estate industry in India to external commercial borrowing per se has been negligible because of RBI restrictions on external commercial borrowings in the sector and the availability of replacement screen rates. Therefore, the expiry of the London Interbank Offered Rate (LIBOR) index in 2021 has had limited impact. Early-stage measures taken by lenders to adopt other screen rates have also mitigated the impact. Lenders in India have now shifted to other benchmarks.

Planning authorities are constituted for the implementation and governing of zoning regulations for the orderly development of a state. Considering the changing dynamics of a city, every state facilitates the updating and revising of an existing master plan at least once every ten years, by carrying out a fresh survey of the area within its jurisdiction, to revise the existing master plan and indicate the manner in which the development and improvement of the entire planning area is proposed.

Certain states facilitate the acquisition of lands by government organisations or agencies for industrial and residential developments. The developments in such areas are mainly governed by the rules and regulations framed by such government organisations/agencies.

Any change in the zoning regulations will require the prior consent of the state government, but this process is time-consuming and consent is not assured.

The construction of new buildings and refurbishments in any state is governed by the National Building Code, the applicable town and country planning statute, and the applicable municipal law, including the building by-laws framed by the respective planning authorities. The building and development control regulations state that various approvals are required to be obtained from different authorities for the construction or refurbishment of buildings.

Development must comply the zoning regulations and building by-laws. Zoning regulations sometimes have provisions for the protection and preservation of properties that are identified as heritage properties. Consents from the pollution control board, the environmental department, the fire department, the airport authority, the water supply and sewerage board and the electricity board are also required.

There is no single regulatory authority or statute to govern the entire real estate sector, so the relevant authorities have been covered separately.

An application must be submitted to the jurisdictional planning authority along with all relevant title documents, plans/designs/drawings of the development, and in-principle approvals from the relevant authorities.

Once the planning authority is satisfied that the building, when constructed, would comply with the building by-laws, it provides consent.

In some jurisdictions, a certificate is also often issued by the planning authority after the pillars are constructed, confirming that the construction has commenced in compliance with the sanctioned plan.

Pursuant to completion of the development, the planning authority also issues a certificate confirming that the building is fit to be occupied. Although minor deviations are compounded by collecting a fee, major deviations in the development may result in the project not being issued a completion certificate.

The applicable town and country planning/municipal statutes prescribe timelines within which the planning authorities are required to grant approval or reject plans for the development of buildings.

Where a plan submitted for approval to the authority has been rejected or not expressly approved, the applicant may prefer an appeal to a higher authority, which is required to grant or reject the application within a prescribed time period. Where no response is received, the plan is often deemed to have been approved.

In the event of any arbitrary action initiated by a planning authority, the aggrieved party can approach a High Court, invoking its high prerogative writ jurisdiction.

Government entities enable parties to procure land for the development of strategic projects/areas – whether industrial, commercial or residential – by entering into:

  • concession agreements;
  • development agreements whereunder the developer is required to develop the property and is entitled to lease/sell built-up spaces in favour of third parties; and
  • lease-cum-sale agreements.

The property is conveyed in favour of the allottee only upon compliance with the conditions in the agreements.

Where land is allotted by the government, the process of obtaining approvals for the implementation of the project is generally faster. In some large projects, the developer may be required to lease/relinquish a small portion of the property in favour of the electricity supply company for the setting up of a sub-station to supply power to the development.

The above-mentioned regulations and restrictions are enforced by authorities fairly commonly – as noted, if the development is not in compliance with laws, approvals such as the completion certificate evidencing completion of the project would not be given.

Real estate assets can be owned/held by private limited companies, public limited companies, Limited Liability Partnerships (LLPs) and partnerships. In addition, REITs are increasingly being considered by investors.

Private and public limited companies are required to be incorporated under the Companies Act 2013 and to adopt charter documents which would set out the objects and regulate the operations of the entity.

LLPs are incorporated under the LLP Act 2008. Foreign investment into LLPs engaged in construction development activities requires regulatory approval.

Partnerships can also hold land, but foreign investment requires regulatory approval.

REITs are set up and operated in accordance with the REIT Regulations 2014.

Typically, foreign investors prefer private limited companies, while domestic investors prefer partnerships and LLPs for smaller holdings. LLPs are also increasingly being preferred for smaller ownership of holiday/luxury rental real estate on time share basis or similar arrangements amongst partners of LLPs.

There are no minimum capital requirements for public limited companies, private limited companies, LLPs or partnerships. REITs are required to comply with regulations relating to asset size and minimum offer.

Private limited companies are required to have at least two directors on their board, while public limited companies need at least three directors. One-person companies can be incorporated by Indian citizens who are resident in India. It has been proposed that non-resident Indians should be allowed to incorporate one-person companies.

Public companies also need to comply with additional requirements, such as having independent directors on their board.

LLPs and partnerships are required to have at least two partners/designated partners.

Separately, companies that have paid-up capital over a prescribed threshold are also required to appoint a company secretary.

The costs for entity maintenance vary based on the type of entity involved. Annual compliance costs for a private limited company would typically be around GBP15,000 and similar or lower costs can be anticipated for compliance by LLPs.

The law recognises the concepts of leases and licences that permit a person, company or other organisation to occupy and use real estate for a limited period without acquiring the absolute title to said real estate.

The simple difference between a lease and a licence is that a lease is the transfer of a right to enjoy the premises for a limited time, while a licence is a privilege to do something on the premises which would otherwise be unlawful without permission. The transaction is a lease if it grants an interest in the premises; it is a licence if it gives a right to a permissive user with no interest in the premises.

The law does not differentiate between different types of commercial leases. Most commercial leases are based on a fixed rental and fixed term concept. There are triple net leases where the tenant bears the cost of the property tax, the insurance of real estate and maintenance charges, and profit-sharing leases where the rent is based on a percentage of the lessee’s revenue, but these are not as common.

Rent or lease terms are freely negotiable in contracts entered into between parties, except in a few states in India where some properties are regulated by rent control statutes and where there are statutory tenants. The rent and the lease terms largely depend on the city, the location of the building and market rents payable for similar buildings. While some state governments proposed that landlords of residential premises should not evict tenants during the COVID-19 pandemic, such restrictions are not generally in force any longer.

Duration of Lease Term

There are no regulations governing the term of a lease, which can be contractually agreed and recorded by the parties in the lease deed.

The initial term of a lease is generally between three and five years. Tenants can also opt for longer leases of ten years. It is common to have an agreement to lease for a longer period (paying nominal stamp duty) and to execute lease deeds thereunder, as such structuring arrangements result in a lower stamp duty payment.

Maintenance and Repair

Maintenance and repair of the actual premises occupied by the tenant are generally the tenant’s responsibility. In most cases, major or structural repairs (that are not attributable to the tenant) are excluded from the tenant’s scope of responsibility.

Frequency of Rent Payments

In most commercial leases, rents are payable on a monthly basis in advance. For retail leases, malls, hotels and so on, the lease rent or a portion thereof can be based on the turnover of the lessee’s revenue at the establishment. Where a furnished space is provided, rent may be payable on the furniture and fittings only until the cost of such furniture and fittings has been fully depreciated.

COVID-19 Issues

Under TOPA, the tenant has the option to terminate the lease if the property is destroyed or becomes unfit for occupation because of fire, tempest, flood, violence by mob or any other irresistible force. After the outbreak of COVID-19, several tenants were not using the premises due to the lockdown imposed by the government, which resulted in claims for waivers and reductions of rents. In some cases, landlords agreed to such. Courts have held that the inability to use the property due to the lockdown is a temporary event and such an event will not entitle the tenant to seek the suspension of rent, unless there is a clause in the rent deed that specifically exempts the payment of rent during a period when the tenant is unable to use the property during a pandemic.

In a typical commercial lease in India, the rent will escalate every three years; the rate of escalation is generally between 10% and 15%.

The concept of a rent review and escalation of rent based on market rent is not common in Indian leases. Where a rent review is agreed to in a long-term lease, the prevailing market rent is determined by an independent expert. The determination of rent is typically subject to certain exclusions, including disregarding:

  • any goodwill attached to the premises by reason of the tenant’s business or occupation of the premises; and
  • the effect of any improvements made by the tenant at the premises.

VAT has been subsumed by GST, which is payable on leases of property/asset for commercial use, and is borne by the tenant. The tenant can claim input tax credit, subject to conditions, of such tax paid to the landlord. Also, tax on the lease rent is deducted at source in terms of the Income Tax Act 1961 by the tenant prior to paying rent to the landlord.

In most commercial leases in India, a tenant is required to pay the landlord an interest-free refundable security deposit, which is held by the landlord as security for the tenant’s obligations during the lease term. The quantum of the deposit is commercially agreed but the practice differs from state to state and can start at three months’ rent and go up to 12 months’ rent.

In addition to rent, tenants usually pay maintenance charges and a fixed parking fee based on the number of parking spaces provided exclusively to the tenant. The landlord (or its nominee) generally takes responsibility for the maintenance and repair of the common areas, the cost of which is charged back to the tenants on a fixed-cost basis (with an agreed escalation) or on an actual cost-plus basis, with the landlord receiving a management fee of 15% to 20% of the cost incurred in providing the services.

All such payments (other than municipal taxes borne by the tenant) made to the landlord for use of the property are subject to withholding tax as well as GST. Any non-refundable deposit is subject to the deduction of tax at source as rent.

Utilities (including power, back-up power, water, etc) are paid by each tenant of the building based on actuals.

In most instances, insurance obtained is a fire and perils policy covering loss of property. The cost of insurance is sometimes charged back to the tenants as part of the maintenance charges.

In India, business interruption (BI) insurance is not sold standalone and is dependent upon property coverage. BI cover in India can be taken as a separate policy only in conjunction with fire insurance/machinery/boiler explosion policy or as part of a package in products such as industrial all-risk insurance, which covers both property damage and business interruption.

It offers protection to the net profit, standing charges and an increase in the cost of working to maintain normal output/turnover.

The COVID-19 pandemic and consequent lockdown orders are unlikely to trigger payments under such BI policies because they have not resulted in physical damage to the insured property of the policyholders. It appears that such policies would exclude the impact of the COVID-19 pandemic in the coverage.

The Supreme Court of India has consistently held that when interpreting insurance contracts, the terms of the policy will govern the contract between the parties and it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. Thus, it is unlikely that courts will interpret BI policies to cover the COVID-19 pandemic or the lockdown, unless such situations are specifically covered by the policy.

The usage of a project/building is dependent on the zoning of the land and any conditions running with the land. At times, land is allotted to a landlord for a determined purpose, such as biotechnology or IT-related uses, and the landlord would impose the same restrictions on the tenants. Non-compliance with the usage provision could result in a termination of the lease.

Generally, a tenant is only permitted to perform non-structural alterations at the premises (including fit-outs); structural alterations are only permitted with the prior consent of the landlord. The landlord may impose conditions, such as requiring the landlord’s consent on the contractors to be engaged or the materials to be used. The landlord may also require the tenant to reinstate the premises to the condition prior to the alteration upon the expiry or termination of the lease.

Where a tenant takes land on lease for a long period, the tenant would have the right to develop the land as they require, subject to applicable law. Upon the expiry or termination of the lease, development on the land would revert to the landlord, at no cost or at an agreed cost, based on the contractual understanding.

Under Indian law, the owner of the land and the owner of the building constructed thereon can be different people. Any gain on a transfer of development rights in a property is subject to tax as income of the landlord. The transfer of development rights to the tenant for developing the land and for commercial exploitation is subject to GST and is taxable in the hands of the tenant (under the “reverse charge mechanism”). GST payable by the tenant is subject to conditions and is calculated in the manner prescribed under law.

Laws relating to leases do not differentiate between residential, industrial, commercial or retail leases, but commercial treatment may differ from market to market.

No asset class distinctions relating to leases have been introduced due to the COVID-19 pandemic.

Usually, a tenant’s insolvency will result in the termination of the lease as the tenant would not be able to comply with its obligations under the lease.

Payment of a refundable security deposit/premium is the most common security provided to the landlord. At times, the landlord may require the tenant to provide a bank guarantee for securing certain payment obligations.

If contractually permitted, the tenant may continue to occupy the premises as a monthly tenant after the expiry or termination of the lease or in the specific instance where the landlord does not refund the security deposit in time. In all other cases, the tenant would have to leave the premises on the date of the expiry or termination of the lease failing which, the landlord would have the right to approach the court to evict the tenant, who will have the status of a trespasser. The landlord would also have the right to claim mesne profits from the tenant for such unauthorised occupation.

Under TOPA, a lessee may transfer absolutely, or by way of mortgage or sublease, the whole or any part of their interest in the property, and any transferee of such interest or part may again transfer it, subject to the lessee not ceasing any of the liabilities attached to the lease and there being no contract to the contrary. In respect of a statutory tenant, state legislation also prescribes restrictions on transfers. For example, under the Maharashtra Rent Control Act 1999, tenants cannot sublet or assign their interest in the premises without the express consent of the landlord. The sublessee has to abide by the lease agreement executed between the lessor and the lessee.

Events of default and termination rights are contractually agreed between parties, including the granting of a cure period following an event of default before the termination rights arise.

Leases of immovable properties from year to year or for any term exceeding 12 months or reserving a yearly rent require mandatory registration at the office of the Sub-Registrar of Assurances. The Registration Act requires the deed to be registered within four months of its execution. An extension of an additional four months may be granted by the registrar at his discretion, by levying a penalty, provided such non-presentation of the instrument within four months of execution was due to unavoidable circumstances. After registration, the lease is recorded in the local Registry of Deeds.

Stamp duty is payable on the lease deed before it is registered.

Although licences are not normally required to be registered, certain states mandate it. For example, under Section 24 of the Maharashtra Rent Control Act, a leave and licence agreement is compulsorily required to be registered.

Where a tenant is in breach of the lease, the landlord would have to follow the procedure set out in the lease deed to evict the tenant. The process of eviction of the tenant may take between three and seven years. This may include giving the tenant an opportunity to cure the default if the lease deed provides for such a step. Thereafter, the landlord can issue a notice of termination and initiate legal action to recover the premises (and mesne profits) where the tenant remains in occupation. Where termination is during the lock-in period, the landlord may seek lease rent for the balance of the lock-in period.

A third party cannot terminate a lease unless contractually agreed. In the event of a condemnation event by a government body, the lease will stand terminated as the property will vest with the governmental authority concerned. Compensation payable for such acquisition is typically paid to the owner of the property, unless the sharing of compensation is contractually agreed between the owner and the lessee.

Construction industry contracts are typically lump-sum turnkey fixed-price contracts, bill of quantities-based contracts (item-rate contracts) or work package-based contracts.

For projects where a detailed bill of quantities is possible, owners opt for an item-rate contract, which gives them greater control of the contract price. For large infrastructure sector construction projects, lump-sum turnkey construction contracts are common.

In India, fixed-price contracts prove problematic since the prices of raw materials fluctuate quite significantly, being dependent on the rate of inflation.

Split structure and design-and-build structures are commonly used for risk allocation and rewards for construction projects. Owners have a right to review and certify the contractor’s compliance. Contractors are often responsible even after completion, during any agreed/latent defects liability period.

In a split structure, owners appoint an architect for design and a contractor for construction. This is prevalent for the construction of real estate or manufacturing units.

For design-and-build structures, the owner enters into a lump-sum turnkey contract with a qualified entity who is responsible for the entire project, entailing managing, supervising and co-ordinating all other contractors/subcontractors to ensure that work is carried out safely as per the project schedule and to meet the owner’s standards.

The owner may, at the contractor’s cost, have the contract performed through a third party in the case of non-performance by the contractor. This right has been bolstered with the Specific Relief (Amendment) Act 2018.

Standard indemnity provisions are prevalent in construction contracts, and the limitation of liability usually varies between 50% and 100% of the contract price.

Contractors may be required to provide the owner with a corporate guarantee or a fund-based performance guarantee.

The retention of payments is also common, and such guarantee/retention amount is released after completion of the defect liability period.

Warranties as to workmanship and quality, fit-for-purpose warranties, adherence to technical specifications and adherence to prudent industry practice are generally undertaken by contractors, subject to industry-specific and technical exceptions.

Lastly, contractors are usually required to obtain and maintain adequate insurance.

It is common to penalise delays in the performance of work by requiring the contractor to pay damages, or by deducting liquidated damages from payments due.

Usually, an “advance payment bank guarantee” (ABG) is required to be furnished by the contractor upon payment of the “mobilisation advance” by the owner. In most cases, the ABG is valid until the completion of construction.

In addition to the ABG, a “performance bank guarantee” (PBG) is also sought by owners to secure the performance of the work/construction commissioned by the contractor. Such a PBG would be required to be furnished on the effective date of the contract along with the ABG, and is usually valid until the expiry of the defect liability period.

Unless contractually agreed, the contractor is not permitted to create a lien on the property.

In most states, a building comprising more than a prescribed number of floors can only be occupied after an occupancy certificate has been obtained from the relevant planning authority.

VAT has been subsumed by GST, which is payable on the leasing, licensing or transfer of development rights of land (at 18%), and on the transfer of under-construction property. The leasing of residential apartments for residential use is exempt from the levy of GST.

GST on transfers of under-construction property varies for different types of projects:

  • on affordable residential apartments, GST is 1%;
  • on residential apartments (other than affordable residential apartments), GST is 5%; and
  • on commercial apartments, GST can be 5% or 12%, depending on the type of project, with restrictions on the availability of input tax credit.

However, GST is not applicable on the sale of constructed property. The burden of such taxes can be passed on to the buyer commercially.

There are certain circumstances or structures in which the stamp duty payable on the transfer of immovable property can be lower than typical stamp duty rates for conveyance, for instance where the property is contributed by a partner into a partnership firm. However, in general such structures will have to be individually analysed.

Municipal taxes are generally calculated based on the location, size, age and occupation of the property (self-occupied or occupied by tenant). Sometimes, taxes are based on rents received. There are no exemptions for the payment of property taxes, except for properties used for charitable purposes/religious institutions.

Tax consequences in India follow the residential status of the person who earns the income. Resident status is determined for every tax period (measured by financial year, ie, the period from 1 April of a given year to 31 March of the following calendar year).

Deemed Resident (Individuals)

Apart from the above, an Indian citizen having India-sourced taxable income exceeding INR1.5 million during the relevant tax year will be deemed to be a resident of India if they are not liable to tax in any other country by reason of domicile or residence or any other similar criteria.

A company is a foreign company when it is incorporated outside India and the place of effective management of such a company is in India.

Any income of a non-resident, including a foreign company, from property situated in India is subject to tax in India, and withholding tax applies.

The income of a foreign company is usually taxed at a rate of 40% (plus applicable surcharge and cess). However, gain on the sale of real estate held as an investment is taxed at a rate of 20% (plus applicable surcharge and cess) or 40% (plus applicable surcharge and cess), depending on the period of holding. The outward remittance by non-residents is guided by the FEMA. Where the payment of consideration for the purchase of a property is from a person resident in India, such payment is also subject to withholding tax at the rate of 1%, subject to certain thresholds.

Where consideration received on the transfer of an immovable property (whether held as a capital asset or as a business asset) is less than 90% of the value of the property for the purpose of the payment of stamp duty as per local laws, the value of the property for the payment of stamp duty is deemed as consideration received for the levy of income tax under the IT Act. Similarly, where the consideration paid for the acquisition of an immovable property is less than 90% of the value of the property for the purpose of payment of stamp duty as per local laws, the difference between the value of the property for the payment of stamp duty and the consideration discharged is taxed as income of the purchaser, at applicable rates.

Tax on non-resident taxpayers may, however, be reduced if favourable tax treaty provisions apply.

Rental income also qualifies for the following deductions/rebates:

  • a deduction equal to 30% of rental income (for allowance towards repairs and maintenance);
  • property taxes paid to the local authority; and
  • interest paid on loans used to purchase the property.

Structured Real Estate Transactions

Gains (long term) arising on sale of shares of an Indian company holding real estate assets are generally taxable at 10% (plus applicable surcharge and cess) where the seller is a non-resident or foreign company.

Indian tax laws require transfer of shares to take place at a fair market value calculated in a prescribed manner.

However, the set-off of loss arising from interest paid in excess of rental income is subject to certain limitations. It is mandatory for parties entering into a purchase or sale of immovable property to obtain and quote their Permanent Account Number (PAN) allotted by the Indian tax authorities on the conveyance document.

Depreciation and other business expenses may be claimed as deductions only if the taxpayer is in the business of commercially letting out properties, or where plant and machinery that are inseparable from the property are let out together with the property.


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Trends and Developments


Veritas Legal is a mid-sized law firm in Mumbai, India, with a multi-service offering across practice areas and sectors. The Real Estate practice accounts for almost a third of the firm’s law practice and boasts a highly qualified and experienced team of solicitors, who routinely advise on all aspects of traditional real estate deals as well as complex corporate real estate investments and matters. The team is adept at advising on the entire property life-cycle, right from the title investigation and initial acquisition or investment to development, leasing, and financing, right through to the final exit. The team has advised clients on joint ventures and developments, agreements relating to hotel operations and management, internationally branded residential projects, long-term leases, and domestic and offshore investments in real estate ventures in India. Additionally, the team advises on legal issues relating to land use and development, as well as other regulatory issues.

Overview of the Indian Real Estate Sector


Traditionally, the real estate industry has been one of the key drivers of the Indian economy, and in the recent past, on account of the country’s demographic advantage coupled with the introduction of new regulations and initiatives by the Indian government, it has become a key contributor to the national GDP and one of the largest employment creators in India.

During the 2013-19 period, the growth of the real estate industry plateaued for various reasons, including the uncertainty surrounding the manner of implementation of new laws, such as the Real Estate (Regulation and Development Act), 2016 (RERA) and the Goods and Services Tax Act, 2017 (GST) which brought in the biggest tax reform so far, as well as the implementation of the demonetisation scheme of the Indian government in 2016.

Now, with those issues having passed, and with the effects of the COVID-19 pandemic having been ameliorated, the Indian real estate sector has been witnessing significant growth over the last few years.

This article is intended to summarise and analyse some of the recent trends and developments in the real estate sector in India that have made it one of the central drivers of India’s economic growth and one of the few sectors that has proved to be largely immune to the volatility of the changing economic conditions.

Changes affecting commercial, residential and retail spaces

The real estate industry in the past was traditionally heavily ring-fenced from foreign investment through strict regulations and policies. Prior to 2005, foreign investment in Indian real estate was only permitted through a joint venture with an Indian company or via a wholly-owned subsidiary/local partner and was restricted only to the development of townships and settlements. However, in subsequent years and especially after 2016, the Indian government took a strategic decision to significantly liberalise foreign investments in real estate. Now, 100% foreign direct investment (FDI) under the Make in India initiative (an initiative launched by the government of India along with action plans prepared for various sectors with the objective of facilitating foreign investment for enhancing international co-operation and contributing to the ease of doing business in India) is permitted under the automatic route in mega-projects such as townships, industrial parks, shopping complexes, business centres, roads and bridges, and city or regional-level infrastructure.

While the above measures have enabled a tremendous influx of foreign investment in the real estate sector, the government has continued to restrict foreign investment in the construction of farmhouses, trading in transferable development rights and the “real estate business”, ie, dealing in land and immovable property with a profit motive, and the same remains prohibited to date.

Thus, the Indian government has ensured that while foreign investment becomes available for developments that are capital-intensive, such as townships, industrial parks, etc, the small-scale development projects remain incubated within the industry and can be undertaken only by Indian organisations, ensuring that the industry is not entirely taken over and dominated by international players.

Further, the influx of foreign investment in Indian real estate has also brought higher quality standards to the sector while allowing the ever-growing demand for residential, commercial and retail real estate in India to be met in a timely manner.

The relaxation in FDI rules also saw approvals being granted to foreign investment being undertaken through real estate investment trusts (REITs), ie, investment vehicles listed on the Indian stock exchange and operating under the purview of the national regulatory authorities. These trusts have facilitated foreign investment in Indian real estate projects by private equity/venture capital funds and Non-Resident Indians.

The change in socio-economic trends due to the COVID-19 pandemic has also disrupted the Indian real estate industry; however, it has perhaps also caused the biggest revolution in the sector in recent memory. The pandemic resulted in consumers and providers of real estate re-calibrating their interests, including for example the following.

  • Flexible office space – Prior to the pandemic, the commercial sector in real estate was the most popular choice not only among providers (ie, developers) but also consumers. However, market uncertainty and slower business activity, coupled with the increase in popularity of the work-from-home concept, have resulted in lower demand and reduced prices for traditional office spaces. Managed offices offering flexibility and customisation have gained popularity especially among start-ups and smaller organisations. On the flip side, it is also interesting to note that organisations are expanding and acquiring commercial spaces in various locations, especially in Tier 2 and Tier 3 locations, to provide satellite offices for their employees.
  • Premium homes – The residential real estate market witnessed an unprecedented boom during and after the pandemic, on account of factors such as consumers’ focus shifting from having a comfortable office space to having a comfortable and larger living space and increased disposable income in the hands of the upper and upper-middle classes of society. Premium homes by established developers have been the subject of most new project launches to cater to this rising demand.
  • Experiential retail – The COVID-19 pandemic saw a drop in footfall in physical retail stores and a shift to online shopping. This presented large malls with an opportunity to re-consider how space is utilised and larger spaces are now being allocated towards experiential retail including family entertainment zones, food and beverage outlets, sports and gaming zones, etc. Simultaneously, online retailers are also expressing interest in opening physical stores as shoppers return to malls, in an attempt to create and capitalize on the recall potential of the online brand. Further, now that restrictions have eased, people have resumed most of their normal activities leading once again to an increased footfall in malls, restaurants, and outdoor spaces in general, which has in turn has led to a demand for such real estate.

Data centres, IT and e-commerce

The IT and e-commerce industry is the largest private sector employer in India and amounts to 55% of the global outsourcing market size. A majority of start-ups, including multiple unicorns, in India are engaged in the IT and e-commerce sector.

In recent years, Indian real estate has seen a huge demand for data centres, mainly on account of low cost of set-up in India and certain amendments to the existing data protection policy proposed by the Ministry of Electronics and Information Technology under the Draft Digital Personal Data Protection Bill, 2022, like introducing the requirement of data localisation, which requires companies to keep at least one “serving” copy of all customer information collected by them on an Indian server or data centre.

Additionally, with the growing use of telecommunication services and the implementation of 5G, and cloud computing, India has been experiencing a rise in the need for data storage facilities. This, in turn, is positively influencing the demand for resilient data centre infrastructure and consequently bolstering market growth.

Further, with the ever-increasing influence of the digital economy and the popularity of e-commerce, there has been a huge demand for data centres and industrial warehouses across the country by large national and international technology, e-commerce and third-party logistics (3PL) firms. This has escalated demand and resulted in higher land/rental prices for such data storage and data centre facilities.

Last but not least, given the recent supply chain disturbances faced globally as a result of nationwide outbreaks of COVID-19 in China, there has been an urgent need to counter this risk of disruption by diversifying to alternative locations to improve the resilience of the supply chain, and by this India only stands to gain.

Co-working and co-living spaces

Although the co-working and co-living space market was prevalent in India prior to the pandemic, the demand grew to new heights during the pandemic and in its aftermath.

With Indian society moving from a mindset focused on procuring stable jobs to freelancing work and entrepreneurship, the demand for co-working spaces among freelancers and start-ups has progressed immensely. Further, with more of the working population moving to urban and metro areas and living independently (departing from the typical Indian culture of extended families living together), there has been a significant increase in the demand for co-living spaces among consumers who want a new way of living that offers shared spaces such as gyms, libraries, laundry and more, along with the comfort of living in a community at a cheaper price.

Interestingly, many of these co-living spaces also offer flexible accommodation and office services, together with restaurants, bars, and fitness facilities right at one’s doorstep, along with access to numerous community-based events. These have in turn developed into social spaces and often serve as a substitute for offices in which social interaction would have normally taken place.


“Hybrid” properties have emerged as one of the biggest trends since the pandemic, benefiting hugely from the increase in work-from-home manpower and the so-called “digital migrant”, ie, those with laptops and the ability to work from anywhere.

The pandemic had a serious and lasting impact on the hospitality industry: many businesses experienced a shutdown and there was complete closure of some hotels owing to the sudden depletion of customer demand, decreased footfall and lack of cash flow support. For such assets, some hotel owners had to divest their businesses and properties, while other survivors may look to rebranding or renovation to reposition and enhance competitiveness.

With lessening anxiety came winds of change and people were eager to get back to meeting each other, head to their favourite restaurants, and go on vacations (including staycations). The pent-up demand resulted in consumers flocking out of their homes back to dining at their favourite restaurants, spending money on travel and vacations; the sector has witnessed a surge as innumerable hotels, restaurants, curb-side pick-ups, cloud kitchens and coffee shops started opening up.

Vacation homes

The second-home market is another sector that witnessed robust growth during the COVID-19 pandemic and continues to be popular among developers and high-net-worth individuals. Prominently, realty developers are actively engaging in such projects away from the major cities to cater to the demand for second homes in natural settings for holidays or weekend getaways.

Growing demand in Tier 2 and Tier 3 cities

Tier 2 and Tier 3 cities in India such as Ahmedabad, Pune, Jaipur, Chandigarh and Indore have experienced significant improvements in infrastructure, increased connectivity and job opportunities coupled with an upgrade in the choice and quality of real estate which has resulted in these cities emerging as key markets in the real estate sector in recent years.

Pro-active government initiatives such as the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Make in India and the Smart Cities Mission have brought about a new wave of industrialisation resulting in Tier 2 and Tier 3 cities becoming the preferred choice for investment and manufacturing and industrial hubs. As seen in past cases, such as NOIDA and Gurugram, an increase in manufacturing and industrial activities in any area also leads to an increase in the demand for residential real estate in the area.

Further, several multinational companies, especially those belonging to the IT or IT-enabled services (ITES) sector, have a footprint in such cities due to the low cost of skilled labour and other overheads which result in a higher return on investment as compared to the metro cities. As per research conducted by property platform MagicBricks, the cities of Nagpur and Coimbatore saw a 49% and 27% YoY (year-on-year) increase in their respective residential demand in Q3 of 2022 and this robust growth is only expected to continue as leading developers add projects in such cities to their portfolio.

Industry consolidation

Prior to the occurrence of events such as the introduction of RERA, the GST and demonetisation, the real estate sector was becoming increasingly overcrowded by small-scale developers. The ripple effect caused by these transformational events resulted in the “survival of the fittest” players in the Indian real estate industry as a majority of small-scale developers were unable to cope with the stringent compliance and transparency measures introduced by RERA, witnessed a dearth of capital following the elimination of unaccounted income during demonetisation and therefore shifted focus to undertaking smaller development projects in a disciplined manner.

Today, penetration by new developers into the real estate market has become difficult due to increased scrutiny and due diligence by lending institutions and the larger players adopting aggressive marketing strategies and having access to more capital as a result of being listed public companies. However, that said, there are numerous cases of conglomerates that have minimal presence in the real estate sector engaging in real estate activities.


Advancements in technology have been transforming different industries worldwide and the Indian real estate industry is no different. Though the usage of technology or “proptech” as commonly referred to in this sector is still in its initial stages, it is increasingly being used as a tool by real estate professionals to increase efficiency and competitiveness. Some of the key ways in which technology is being integrated in the otherwise traditional real estate sector includes the following.

  • Property websites ‒ With the advent of multiple property websites such as,,, etc, it has become very easy and convenient for consumers to buy, sell, rent and rent out residential as well as commercial real estate in India. Also, these platforms serve as a one-click access to information which was typically available only through property brokers at additional costs.
  • Virtual reality and AI ‒ Leading real estate developers now utilise virtual reality and artificial intelligence as standard practice to give potential purchasers virtual tours of a potential project or unit prior to completion along with 3D renders in order to boost consumer confidence and assist with sales.
  • Apartment management portals ‒ Mobile applications to assist with the daily operation of residential complexes/housing societies are being widely used and revolutionising the manner in which gated communities are being kept secure, booking of common areas and amenities, and payment of maintenance charges.


The Indian real estate industry has undergone a complete transformation in the past decade as a result of several laws and regulations being actively introduced to increase accountability and transparency. Further, the interests of consumers are also now well protected as they have access to enough information on the specifications and status of projects and grievance redress mechanisms.

The sector has also witnessed a noticeable shift in both residential and commercial consumer preferences as result of socio-economic factors. The manner in which we live and work has changed drastically since the COVID-19 pandemic and the industry has been compelled to acclimatise itself to such changes. The influx of foreign investment has also accelerated the progress of the industry with several international corporates, manufacturers, retailers and hospitality chains investing in the Indian property market.

The new global paradigm has set the stage for the realty sector in India, and the Indian real estate industry is expected to continue being a key contributor to the Indian economy in the coming years, developing further sophistication as a result of the various factors and events explored above especially with the government providing its support. The expeditious progress being made by India as a nation, globally coupled with the importance of real estate as an asset class for Indians, shall further fuel the growth of this industry.

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Law and Practice


JSA is a national law firm in India with over 350 attorneys operating out of seven offices located in Ahmedabad, Bengaluru, Chennai, Gurugram, Hyderabad, Mumbai and New Delhi. JSA has dedicated teams with extensive expertise in real estate practice across all offices. Clients include Indian and international entities, including developers, real estate advisers, banks, non-banking finance companies, offshore and domestic funds, real estate investment trusts, high net worth investors, governments, sovereign wealth funds, major retailers, and hotel owners and operators. JSA advises on legal and regulatory issues for various types of real estate projects, including in relation to the construction and development of hotels, malls, residential and commercial complexes, warehouses, information technology and industrial parks, and special economic zones, among other areas.

Trends and Development


Veritas Legal is a mid-sized law firm in Mumbai, India, with a multi-service offering across practice areas and sectors. The Real Estate practice accounts for almost a third of the firm’s law practice and boasts a highly qualified and experienced team of solicitors, who routinely advise on all aspects of traditional real estate deals as well as complex corporate real estate investments and matters. The team is adept at advising on the entire property life-cycle, right from the title investigation and initial acquisition or investment to development, leasing, and financing, right through to the final exit. The team has advised clients on joint ventures and developments, agreements relating to hotel operations and management, internationally branded residential projects, long-term leases, and domestic and offshore investments in real estate ventures in India. Additionally, the team advises on legal issues relating to land use and development, as well as other regulatory issues.

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