The Real Estate sector in India is one of the biggest employment generator after agriculture. This sector comprises of 4 sub-sectors viz. Residential, Commercial, Retail and Hospitality. The housing sector itself contributes about 5-6% to the GDP. The industry was valued at $93.8bn in 2014 and is expected to grow with a CAGR 9.8% to reach $180bn by 2020.

India is well poised for a boom in this sector with increasing disposable incomes which are a direct result of better employment opportunities and economic growth. Growth in sectors like IT/ITES, e-commerce, Pharma etc. have led to tremendous demand in commercial office and warehousing space. This has in turn lead to an increase in residential real estate demand.

There Are Many Key Government Policies Affecting This Sector:

Real Estate (Regulation and Development) Act:

This act is aimed at providing a regulatory framework with the intent of governing and bringing in transparency in the sector. 

Real Estate Regulatory Authority (RERA):

This is established under the Real Estate (Regulation and Development) Act to carry out its schemes and reduce conflicts amongst the key parties viz. developers and buyers. 

Housing for All:

This scheme intends to build over lakh houses per year, totaling to 2cr houses for the urban poor by 2022.

Real Estate Investment Trusts (REITs):

The REITs are expected to improve the funds for developers after the Securities and Exchange Board of India relaxed rules for investment.

Housing in Smart Cities Project:

The 100 smart cities project announced by Government of India (GOI) aims to alleviate the living conditions of the country’s populace by ensuring better living conditions at affordable pricing. 

India requires $1tn of investment over the next 5-6 years in Infrastructure and Housing, with about 70-80% of this being demanded by housing alone. This finance is expected to come from not only the government but also banks and other financial institutions and investments from individuals and companies in form of REITs and other investment funds. 

Impact Of Ind-as Adoption On Real Estate And Construction Sector

Accounting For Development Rights

The new guidance note by Indian Accounting Standard (Ind AS) on Real Estate companies states that, in cases where development rights are acquired in exchange of an asset, its measurement is to be done as per the principles of exchange of assets enunciated under Ind AS 38 Intangible Assets (requiring fair value accounting).

Joint Development Arrangements

Under Ind AS, joint development arrangements my be either classified as jointly controlled entity or jointly controlled operations. Classification and accounting for such joint arrangements are governed by contractual rights and obligation and not merely by proportion of holding. Real estate companies will undergo a significant change due to application of new principles. 

Extended Credit Terms

Under real estate sector, it has been a practice where some amount is paid upfront and balance is to be paid on possession (beyond 12 months). Under Ind AS, this would require recognition of the non-current receivables at their present value. This would impact the revenue recognition on a year on year basis. Further, the unwinding of the discount would be treated as finance income rather than revenue from operations.

Complex Control Structures

Under Ind AS, control’s definition is wider, being based on factors such as risks and rewards as opposed to existing practice where control assessment is largely dependent on the proportion of the voting rights in the investee. This may become a challenge for the real estate companies that have complex investment structures with interests in partnership firms, joint ventures, special purpose vehicles etc.

Determination Whether An Arrangement Contains A Lease 

Ind AS proposes an assessment to determine whether any arrangement meets the lease criteria depending on the nature of the arrangement. This may require an entity to recognize a finance lease receivable in their financial statements and account for the same accordingly.

Asset Retirement Obligations (AROs)

Ind AS requires to include of the present value of the expected cost for the decommissioning of an asset after its use in the cost of the respective asset if the recognition criteria for a provision are met. Thus, the overall impact of this would on the company’s statement of profit and loss in terms of additional depreciation and unwinding of discount.


  • Revenue-Guidance driven by guidance note on Ind AS, issued by ICAI  
  • Capitalization of forex gains/losses on loans 
  • Borrowing Cost 
  • Research and Development Cost 
  • Property, Plant and Equipment 
  • Discounting of certain items 
  • Use of fair value accounting 
  • Restatement of financial statements due to certain items and circumstances 
  • Recognition of proposed dividend 
  • Additional disclosure on related parties 
  • Segment reporting disclosures 
  • Accounting and additional disclosures on income taxes 
  •  Debt equity classification