Why India Must Regulate Contractors: The Missing Piece in Real Estate Accountability

India’s real estate market—valued at over USD 265 billion in 2024—is expanding rapidly, especially in Tier 2 and Tier 3 cities. Urbanisation and infrastructure projects under Smart Cities Mission, PM Awas Yojana, and metro expansions have driven an unprecedented construction boom.
However, one critical stakeholder remains unregulated—the contractor. Developers conceptualise and sell projects, but it’s the contractor who translates the blueprint into physical reality. Yet, no legal mechanism holds them directly accountable for quality, safety, or timelines.

Existing Regulatory Framework: A Partial Net

The Real Estate (Regulation and Development) Act 2016 (RERA) was designed to protect homebuyers and bring transparency by registering developers and real-estate agents. It mandates escrow accounts, delivery timelines, and defect liability for five years after possession.
But contractors—who actually construct—are outside its scope. Current oversight relies on scattered provisions:

• Indian Contract Act 1872: governs general contracts but lacks construction-specific accountability.
• Building & Other Construction Workers (BOCW) Act 1996: covers worker safety and welfare but not performance or quality.
• National Building Code (NBC) 2016: sets design and safety standards but depends on local enforcement.
• Municipal by-laws: differ by state, leaving wide disparities in compliance and penalties.
  Together these form a patchwork—reactive rather than preventive.

Key Risks in the Current System

1. Structural Integrity Risks: Use of sub-standard materials, poor workmanship, or skipped curing stages cause cracks, leaks, and even collapses years after completion.
2. Safety & Labour Violations: Sub-contracting to unregistered vendors leads to untrained labourers working without harnesses, helmets, or wage compliance.
3. Financial Opacity: Developers may be fined for project delays under RERA, while contractors escape accountability.
4. Reputational Gaps: Buyers rarely know which contractor built their project, enabling repeat offenders to operate under new developer partnerships.

Proposed Framework for Regulating Contractors

A national contractor registry should be established—similar to RERA’s developer database—to record licensing, grading, and blacklisting.
Each licence could depend on:

• Proven track record (completed projects > 3)
• Safety record and zero-fatality certificates
• Quality audit scores
• Financial and labour compliance

Registered contractors could receive performance scorecards, publicly accessible to regulators, developers, buyers, and lenders. Grading metrics might include:

• Timely completion rate
• Number of defects reported post-handover
• Labour violations record
• Environmental compliance

A mandatory declaration of contractor details on every project under RERA would bring transparency. Linking contractor payments to verified milestones via escrow mechanisms can deter negligence and encourage compliance.

Benefits of Regulation

• For Homebuyers & Investors: Reduced risk of defects, delays, and abandonment; improved trust and long-term value.
• For Developers: Higher reputation and easier financing; better screening of reliable partners.
• For Authorities: Lower enforcement load through pre-qualified, track-record-verified contractors.

Challenges & Implementation Risks

• Resistance from small contractors fearing cost and compliance burdens.
• Need for coordination among central ministries (Housing, Labour, Urban Development).
• Risk of corruption in licensing and grading if not digitised.
  Digital tracking, geo-tagged site reports, and third-party audits can mitigate these issues.

Conclusion

India’s ambition to build safe, sustainable housing depends on ensuring that those physically constructing it are accountable. A regulatory system covering contractors will complete the RERA framework, strengthen buyer confidence, and raise construction standards to global levels.

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