CHANDIGARH, 10 Nov — The Punjab government has introduced new real estate regulations requiring promoters to provide a bank guarantee worth 35% of the internal development cost of a project, a move aimed at checking fraud and fixing developer accountability.
The decision, implemented through fresh amendments to the Punjab Apartment and Property Regulation Act (PAPRA) effective November 3, eliminates the earlier option for developers to mortgage plots to cover internal and external development costs.
Previously, promoters could mortgage plots valued at up to 90% of collector rate outside municipal limits and 75% inside to meet their payment obligations. But officials said the practice had led to large-scale misuse. “Several realtors were mortgaging land that was not even registered in their name,” said a senior official in the Housing and Urban Development Department.
Under the new rules, promoters must also submit a bank guarantee for pending external development charges (EDCs), which can no longer be offset through land mortgages.
To ensure transparency in land ownership, the department has further mandated that developers own at least 25% of the project land and provide a registered letter of consent for the remaining portion verified by the sub-registrar.
Officials said the move followed cases in which developers produced fake consent letters from landowners while applying for CLU approvals. The department is expected to issue a standard format for the registered agreements shortly.
According to official estimates, a developer setting up a 10-acre colony in Ludhiana (outside MC limits) will now need to furnish a bank guarantee of ₹616.55 lakh, while those in Patiala and Kharar will be required to provide ₹444.45 lakh and ₹887.62 lakh, respectively.
While the policy aims to strengthen investor safeguards, officials admitted that small developers may find it difficult to comply. “This reform is good for accountability but regressive for small players. Larger builders will find it easier to adapt,” a department source said.
