How India's Real Estate Developers Work
Pre-Sales: Funding With Buyers' Money
How developers sell flats before they're built to fund construction, why this helped cause stalled projects, and how RERA's escrow rules changed it.
Indian developers often sell flats before they’re built.
How pre-sales work
- Buyers pay a booking amount and instalments linked to construction.
- This money funds building.
Benefits
- Developers need less debt.
- Buyers get lower prices than for ready flats.
Risks for buyers
Before regulation, some developers diverted buyers’ money to buy new land or start other projects, leaving earlier projects stalled.
RERA’s rule
Under RERA (2016), developers must put 70% of buyers’ money in a separate account for that project.
Ready vs under construction
Buyers weigh the discount on under-construction flats against delay risk.
A flat costs less when booked at launch than when ready, but the buyer takes on the risk of delays.
Pre-sales mean buyers fund construction.
- Pre-sales fund construction.
- Diverted money caused stalled projects.
- RERA requires 70% in a project account.
- Buyers trade discounts against delay risk.
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