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The Punjab Housing and Urban Development Department has introduced a major regulatory change in the real estate sector, making it compulsory for builders to furnish a 35% bank guarantee for internal development works. The mandate, effective from November 3, has replaced the long-used option of mortgaging plots – a practice that often caused disputes and exposed buyers to financial risk.
This shift is now one of the most significant Mohali real estate news 2025 developments and is expected to reshape compliance standards across Mohali, Zirakpur, Kharar, and the wider Tricity region.

Local brokers say the move has been anticipated for months, especially after multiple homebuyers in Mohali’s peripheral areas reported delays or disputes linked to projects where land ownership remained unclear.

A Move to Curb Fraud and Increase Accountability

According to senior officials, the department observed repeated cases where developers mortgaged land that was not registered in their name. This loophole enabled colonies to be launched without verified ownership, leaving investors exposed if disputes surfaced later.

By mandating a bank guarantee, the government aims to ensure that funds for internal development – roads, parks, drainage, water supply, and electricity infrastructure – remain protected regardless of the developer’s financial condition.

Officials in the housing department told CityNest Realty that the amendment was introduced after several high-value complaints, including cases from Mohali’s Kharar-Landran Road belt and parts of Aerocity, where land records did not match submitted documents.

What Changes Under the Amended Rules

The amendments to the Punjab Apartment and Property Regulation Act (PAPRA) introduce two major shifts:

1. No more mortgaging plots for internal development costs

Earlier rules allowed promoters to mortgage land at:

• 90% of collector rate outside municipal limits
• 75% of collector rate inside municipal limits

This mortgage acted as a security against development charges. However, repeated misuse led to a complete ban.

2. Bank guarantee required for external development charges (EDCs)

Developers who previously mortgaged plots for outstanding EDCs must now provide a bank guarantee for the full pending amount.

In addition, developers must now prove:

• Ownership of at least 25% of the project land
• A registered letter of consent (LOC) for the remaining land

The LOC clause is critical for Mohali’s fast-growing private colonies, where multiple landowners often combine parcels to form a residential project. Officials revealed that several CLUs (Change of Land Use permissions) were previously issued on forged consent letters.

However, the department has not yet released the final format for the registered agreement, leaving some procedural uncertainty.

Impact on Mohali, Zirakpur & Kharar Developers

In the Tricity belt – especially Mohali, where private townships in Sectors 77-123, Airport Road, and the Kharar corridor have expanded rapidly – the new rules may significantly influence project launches.

A CityNest Realty analyst said many smaller developers who relied on land mortgage flexibility may face challenges arranging bank guarantees. “This will raise the entry barrier for new colonies, but it may also filter out speculative players who caused most consumer complaints,” the analyst noted.

Estimated Bank Guarantees Across Cities (Department Data)

• Ludhiana (outside MC limits): ₹616.55 lakh
• Patiala (outside MC limits): ₹444.45 lakh
• Kharar (outside MC limits): ₹887.62 lakh

For Mohali, officials said the numbers will vary based on collector rates and project acreage, but new applications around Mullanpur, New Chandigarh, and Aerocity are expected to see similar financial requirements.

Why the Rule Matters to Homebuyers

For homebuyers in Mohali and nearby markets, the new rule brings a higher degree of safety.
A bank guarantee ensures that even if a developer faces liquidity issues, funds earmarked for internal development cannot be diverted.

Property consultants in Mohali’s IT City and Zirakpur told CityNest Realty that many stalled projects over the past decade began with unclear land titles or incomplete development infrastructure. The new framework may reduce such risks by enforcing up-front financial discipline.

However, some experts argue the increased compliance burden may push property prices marginally upward, as developers factor guarantee costs into project budgets.

Industry Reaction: Mixed but Cautiously Optimistic

While larger national and regional builders are likely to adapt easily, smaller local developers believe the rule could slow down new project announcements.

A Kharar-based promoter said the requirement is “regressive for small developers,” as suggested by officials quoted in government communication. Still, the broader market sentiment is that transparency will outweigh short-term friction.

The amendment is also likely to influence ongoing applications with GMADA, especially for group housing projects around AeroCity, Sector 82-Mohali, and the PR-7 Airport Road stretch.

For now, the real test will be how smoothly the department implements the new clause and how quickly the format for registered landowner agreements is released.’

CityNest Realty Insight

CityNest Realty analysts believe the new bank guarantee rule will significantly reduce title-related disputes and strengthen consumer confidence in Mohali’s developing corridors. However, higher financial barriers may consolidate the market in favour of larger, well-capitalised developers.

Author Credit: Written by CityNest Realty