• Governance and deterrents: Severe penalties in major real estate defaults, such as in China, serve as crucial deterrents against fund siphoning and underscore the need for strict corporate governance given the high ticket sizes of property investments.
• RERA regulatory safeguards: In India, the implementation of RERA has established strong checks and balances, utilizing escrow accounts to practically eliminate the diversion of funds from one project to another.
• Developer selection criteria: Investors should prioritize well-governed, listed developers who are required to account for every rupee, while avoiding non-listed developers to minimize fraud risk.
• Under-construction property risks: While under-construction homes offer lower pricing and cash flow easing, buyers risk paying both rent and a 20-year EMI if delivery fails; hence, purchases should generally be avoided or restricted exclusively to the top 5 listed developers.