The ongoing West Asia conflict has thrown up an opportunity in crisis for the regulatory architecture of real estate, highlighting the need to strengthen and reset existing frameworks to create a robust, transparent and agile policy ecosystem to make real estate resilient and future-ready to withstand any such external shocks

Vinod Behl

The West Asia war has brought in a significant amount of volatility in foreign capital inflows as investors tend to de-risk their investments, opting for safer assets ,rather than long-term realty play. In this situation, policy measures are required to stem the sliding FDI and catalyze capital inflows into real estate. The government is working on key structural reforms including removal of the minimum capital requirement, relaxed lock-in periods and permitting foreign funds to exit or transfer ownership more easily.

The focus of these relaxations will be to attract specialised funds and global institutional; investors for affordable housing, student housing, c0-living, industrial and logistics parks.The government is also working on launching dedicated funds to promote sustainable development.

In a major policy move, the government’s decision to exempt foreign investors from paying tax on interest income and capital gains from government securities , will considerably improve post-tax yields and in turn spur foreign funds inflows.

The landmark reform of IBC needs to be further revamped to fully achieve the desired results. The IBC process is painfully slow in resolving insolvency cases. Though the IBC code prescribes resolution within 330 days, the cases have been lingering on for 500-600 days.The government has risen to the occasion as the recent IBC (Amendment )Act 2026 aims to strengthen the law to improve its efficacy. Regulatory frameworks have also been strengthened , allowing transfer of property possession and formal registration to homebuyers fulfilling their contracts, even while the cor[porate insolvency resolution process is ongoing.
Further, capacity augmentation of National Company Law Tribunal and National Company Law Appellate Tribunal to speed up cases. For fast tracking resolution of IBC cases, ICRA has suggested creating a dedicated mechanism for low-ticket cases. (See Torbit Talking Point on Page 2).

The West Asia crisis has further deepened the crisis of stalled homes which range between 4.3 to over 5 lakh units worth INR 10.8 lakh crore. The global conflict has caused major disruption in supply chains leading to escalated freight costs and increase in raw material costs adversely impacting the construction and completion of delayed/stuck projectsBecause of this situation, real estate industry bodies are seeking project extensions under the ‘force majeure clause’.

War has badly hit the affordable housing segment which was already at the crossroads. There is an alarming situation on the supply front. The share of affordable housing in the overall housing market has dropped below 20%. The supply is further shrinking as developers are finding it difficult to construct affordable homes due to shrinking margins in view of cost escalation of building materials, land, besides the unrealistic price cap set by the government.

The government needs to bring a comprehensive policy reform to revive affordable housing. It has to come up with dedicated zones for affordable housing with higher FAR , besides unlocking idle PSU land for affordable housing . The unrealistic price cap of affordable homes needs to be enhanced. Further, to push supply, 100 percent tax subsidy to developers of affordable housing needs to be restored and GST on construction cost lowered. To aid developers to boost the supply of affordable housing, they should be incentivized to build and lease affordable housing for industrial and migrant workers. Further, the government must enhance capital allocation for SWAMIH Fund and ensure faster deployment of funds for speedy completion and delivery of stuck residential projects.

On the demand side, the government needs to come up with a policy to provide tax exemption on capital gains and rental income to investors in Affordable Housing REITs, in order to get long-term funding. To provide relief to homebuyers, stamp duty registration charges need to be exempted or at best reduced and interest subsidy schemes for first time buyers of affordable housing should be expanded.

The government must also seize the opportunity to revamp the ground breaking reform of RERA.As currently there are gaps among states with regard to implementation of RERA, Unified RERA portal must be enforced for implementation across states. RERA authorities also need to be empowered to enforce its own verdicts. Single-window clearance mechanism be brought in to boost project executions and check project delays. The supply side incentives like additional FSI be provided to developers undertaking stalled projects and enforce strict monitoring of escrow accounts to check fund diversions. Further, redevelopment projects should be brought under the purview of RERA.Meanwhile Insolvency and Bankruptcy Board of India (IBBI) is considering direct role for real estate regulator after SC ruling. The proposal is about involving RERA early in the insolvency resolution process to speed up the revival of stalled housing projects.

The government as part of its reform agenda, is actively unlocking capital by monetizing CPSE assets through REITS,thereby easing fund pressures. The implementation and consolidation of 29 central labour laws into 4 labour codes, has considerably simplified compliance for real estate contractors. Jan Vishwas 2.0 expanded Act , decriminalising over 500 arcaic minor legal provisions , is set to benefit smaller contractors and MSMEs.

Going forward, Modi government is mulling to teak housing laws by bringing in amendments to the NHB Act during the Monsoon session of parliament. This will give RBI greater authority over housing finance companies which manage loans of more than 9.5 trillion . The changes are likely to consolidate regulatory framework of housing.The central government is keen to take more policy measures to help insulate the economy and the real estate sector , from global shocks arising out of West Asia war.