CHANDIGARH, 10 Nov — In a major policy shift aimed at curbing fraud and tightening oversight of real estate developers, the Punjab Housing and Urban Development Department has made it mandatory for promoters to furnish a bank guarantee equal to 35% of the cost of internal development of a project, replacing the earlier option of mortgaging property.
The new provisions, effective from November 3, are part of amendments made to the Punjab Apartment and Property Regulation Act (PAPRA).
Earlier, promoters could pay for the internal development of a project by mortgaging plots valued at 90% of the collector rate outside municipal limits and 75% inside. Officials said the flexibility was often misused. “In many cases, the realtors were mortgaging chunks of land that were not even in their name,” said a senior government functionary.
Under the revised rules, developers must now furnish a bank guarantee for balance external development charges (EDCs) as well, ending the practice of mortgaging land against pending EDC payments.
The government has also made it compulsory for promoters to own at least 25% of the project land and submit a registered letter of consent for the remaining portion. The consent letter must be filed with the sub-registrar, a move intended to prevent fraudulent land ownership claims.
Officials said the change was prompted by recent cases where developers submitted fake letters of consent from landowners while securing change-of-land-use (CLU) approvals. The department, however, is yet to finalise the standard format for the registered agreement that developers must now submit.
Citing examples, an official said that for a 10-acre project in Ludhiana (outside MC limits), a developer would now need to furnish a bank guarantee of ₹616.55 lakh. The amount would be ₹444.45 lakh in Patiala and ₹887.62 lakh in Kharar under the same conditions.
Sources in the department acknowledged that while the move would enhance transparency and investor protection, it could pose challenges for smaller developers. “The new clause will favour big developers who have the liquidity, but it will tighten the noose around smaller players,” an official said.
