Real Estate Sector
Overview of the Sector
The Indian real estate sector is a cornerstone of the country’s economy, contributing significantly to GDP growth and employment generation. It encompasses a wide range of segments including residential, commercial, retail, industrial, and hospitality. As one of the fastest-growing sectors in India, real estate development is closely linked to urbanization, infrastructure expansion, and rising household incomes.
Over the past decade, the sector has undergone significant transformation. Government initiatives such as the Pradhan Mantri Awas Yojana (PMAY) for affordable housing, the Smart Cities Mission, and Real Estate (Regulation and Development) Act, 2016 (RERA) have contributed to increased transparency, buyer protection, and organized development. Urban migration, a growing middle class, and improved access to housing finance have continued to fuel demand for residential and commercial spaces.
The commercial real estate segment, particularly in metropolitan cities, has seen robust demand from IT/ITES companies, co-working operators, logistics players, and global corporations. In recent years, the rise of REITs (Real Estate Investment Trusts) has created new investment opportunities in the sector. REITs allow investors — both retail and institutional — to earn dividends from income-generating real estate assets such as office parks and commercial complexes. With SEBI regulations in place, REITs have brought liquidity, compliance, and institutional credibility to Indian real estate investments.
Joint Development Agreements (JDAs) have also become a common structure for real estate projects, especially in urban areas where land is scarce. Under JDAs, landowners and developers collaborate to jointly undertake a project, with revenue or area-sharing arrangements. While JDAs enable landowners to unlock value without upfront capital, they introduce complexities in revenue recognition, taxation (including GST), and profit-sharing, requiring careful financial planning and audit oversight.
Despite the progress, the sector faces several financial and regulatory challenges. Fund flow tracking, project-wise accounting, and compliance with RERA, GST, and income tax laws can be intricate. Delays in project approvals, cost overruns, and customer advances must be properly accounted for. Transparent financial reporting and strong audit systems are essential to build stakeholder confidence — whether it’s homebuyers, lenders, investors, or regulatory authorities.
The emergence of technology in real estate, such as digital platforms for property listings, virtual site visits, and online documentation, is also reshaping the way the industry functions. Developers are increasingly adopting ERP systems and digital tools for better project and financial management, which in turn supports more accurate audit and compliance practices.
In conclusion, the Indian real estate sector presents immense opportunities, supported by policy reforms, growing urban demand, and evolving investment models like REITs and JDAs. However, success in this sector requires not just operational capability, but also sound financial governance, structured reporting, and adherence to ever-evolving compliance frameworks.
The real estate industry operates within a capital-intensive, regulation-heavy environment involving complex project structures, long gestation cycles, and multi-stakeholder engagement. Entities in this space — including developers, real estate investment firms, joint development partners, and asset managers — face intricate financial reporting obligations and compliance risks, making a rigorous audit framework indispensable.
Financial complexities in the real estate sector arise from the treatment of project revenues, recognition of construction-linked milestones, unsold inventory valuation, and cost allocation across multiple phases. Revenue recognition under Ind AS 115 requires careful evaluation of performance obligations, contract modifications, and handover criteria. Projects under Joint Development Agreements (JDAs) add further complexity in recognizing landowner entitlements, revenue sharing, and cost absorption structures.
Audit complexities intensify in areas such as capital work-in-progress tracking, borrowing cost capitalization under Ind AS 23, and validation of project-specific loans, escrow accounts, and interest servicing. Developers operating across multiple SPVs (Special Purpose Vehicles) must consolidate financials while ensuring intercompany balances and related party transactions are accurately disclosed and eliminated.
Compliance with the Real Estate (Regulation and Development) Act (RERA), GST on construction services, TDS on immovable property transactions, and income tax provisions under Sections 43CA and 50C necessitates close audit scrutiny. Internal audits must also evaluate booking processes, customer advance reconciliations, vendor payments, and project profitability.
REITs (Real Estate Investment Trusts), with their regulated structure and periodic distribution obligations, require audit procedures that ensure NAV accuracy, fair valuation of leased assets, and regulatory compliance with SEBI and income tax norms.
In a sector characterized by high financial exposure, regulatory oversight, and public trust, auditing ensures financial discipline, strengthens investor confidence, and mitigates operational and compliance risks — making it essential for institutional integrity and sustainable growth.
The real estate sector is governed by complex financial structures, evolving regulations, and long project lifecycles. At P. Srinivasan & Co., we offer specialized audit services tailored to real estate developers, construction companies, property investment firms, and joint development entities. Our audits focus on key areas such as revenue recognition under Ind AS 115, verification of construction-linked billing, allocation of project costs, and treatment of unsold inventory and work-in-progress. We also evaluate the financial implications of Joint Development Agreements (JDAs), including landowner entitlements, profit-sharing mechanisms, and transfer of development rights.
Given the sector’s capital-intensive nature, we ensure proper capitalization of project-related expenditure, interest during construction, and depreciation of real assets. Our audits cover compliance with statutory obligations under the Income Tax Act, GST (including anti-profiteering norms), and the Real Estate (Regulation and Development) Act (RERA), particularly with regard to project-wise accounting and disclosures.
We also review escrow mechanisms, customer advances, and fund utilization in accordance with regulatory guidelines. Internal audits assess procurement efficiency, contractor payments, and adherence to project timelines and budget controls. For entities managing Special Purpose Vehicles (SPVs) or real estate investment platforms such as REITs, we assist in consolidated financial reporting and related party disclosures.
With a deep understanding of the industry’s risks and financial intricacies, P. Srinivasan & Co. helps real estate businesses enhance transparency, ensure compliance, and build investor confidence — laying the foundation for sustainable growth and regulatory alignment.
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Systems & process setup & implementation
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Tax advisory
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Authenticating Records
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Mergers & Acquisitions
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