It’s about dawn for the new fiscal budget to be unveiled by the Union Finance Minister Nirmala Sitharaman. Ahead of February 1, the real estate industry strives to see certain reforms be in its favour that will help it to be recognized as an industry and bring down the hassle related to finances within it. Seeing the new fiscal year unveiled soon, several key areas are bound for transformation, bringing increased security, efficiency, and transparency to escrow accounts processes in real estate transactions.

Let’s throw light on some of the foreseeable reforms for escrow accounts in real estate transactions in the new fiscal year to unfold.

1. Enhanced Security and Fraud Prevention

In the Budget 2024, we expect that there will be reforms that will strengthen the security measures within escrow accounts. The implementation of stringent protocols aims to prevent fraud and unauthorized access to escrow funds. Also, the integration of new-age technologies, such as blockchain, is expected to play a crucial role in enhancing the security and transparency of real estate transactions.

Also Read: Budget 2024: What FM Nirmala Sitharaman can do to enhance the appeal of New Tax Regime

2. Digitalization and Technology Integration

With India seeing several positives in terms of digitization of traditional manual processes, we can expect the Budget 2024 to shed light on digitalization in real estate transactions. The promotion of digital platforms for managing escrow accounts is set to streamline processes, reducing paperwork and expediting transactions. We see the incorporation of smart contracts as another technological leap that promises to automate certain areas of the escrow process, hence reducing the potential for errors.

3. Transparency and Reporting Requirements

We do expect increased transparency and reporting standards in escrow transactions. New regulations are anticipated to mandate more detailed reporting on the status of funds, interest earned, and any fees associated with the escrow process. Regular updates to all parties involved will become a requirement, ensuring transparency and accountability throughout the transaction lifecycle.

4. Standardization of Practices

To induce consistency and reliability, Budget 2024 is likely to introduce and enforce standardized practices in managing escrow accounts. Clear guidelines will define the amount of money that can be held in escrow, the conditions for releasing funds, and the roles and responsibilities of escrow agents. This standardization will bring clarity to the complexity of real estate transactions.

5. Consumer Protection Measures

In a bid to strengthen consumer interests, the upcoming reforms will see revised regulations surrounding escrow transactions. These measures will prioritize consumer safety by ensuring that funds are handled responsibly. Additionally, the implementation of robust dispute resolution mechanisms will help address any issues that may arise during escrow transactions, providing a safety net for both buyers and sellers.

6. Legal and Regulatory Framework Updates

We also hope there is recognition of the provision of a responsive legal and regulatory framework during the announcement of Budget 2024. Regular reviews and updates are expected to address any gaps or emerging challenges in the real estate industry. The adaptability of laws to accommodate technological advancements and changes in the market is crucial to maintaining a responsive regulatory environment, especially in the case of intricacies involved in real estate transactions.

7. Education and Awareness Initiatives

Recognizing the importance of informed stakeholders, the budget is highly likely to allocate resources for educational campaigns. These initiatives aim to educate real estate professionals, buyers, and sellers about the critical role of escrow accounts and the reforms being implemented. Informed stakeholders contribute to a smoother, more efficient real estate ecosystem.

8. Environmental, Social, and Governance (ESG) Considerations

A stimulating area of the anticipated reforms involves the integration of ESG principles into escrow practices. This ensures that funds are managed in a socially responsible and environmentally-sustainable manner, aligning with the broader global shift toward responsible and ethical business practices.

The anticipated reforms for escrow accounts in real estate transactions that are expected to be highlighted in Budget 2024 represent a significant jump forward for the industry. Stakeholders must stay updated through collaboration with local real estate authorities, legal professionals, and official government sources. By doing so, they can position themselves to lead the transformative changes, contributing to a secure, efficient, and transparent real estate ecosystem.

(By Sachin Gupta, Co-founder and Chief Product Officer, TransBnk. Views are personal)