Water seepage is a major problem in construction industries particularly when the buildings are constructed in the damped environment. A large number of waterproofing compounds containing hydrophobic groups are used. Majority of such compounds block the pores at the outer surface but do not affect the pores inside. Due to percolation of water inside, the outer surface is ruptured in due course of time. Because of this, number of harmful ions enter inside and make the structure weak and less durable. In order to overcome this problem the effect of a water proofing agent with a brand name KIM (KRYSTOL INTERNAL MEMBRANE) on the hydration of cement has been studied. It is found that KIM has a retarding effect during the hydration. In the presence of KIM the setting times are increased, non-evaporable water contents and free lime are decreased. Heat evolution profile and X-ray diffraction studies have shown the retarding effect of KIM during cement hydration. Water percolation and expansion in the corrosive atmospheres are reduced whereas the compressive strength at 28 days is increased. Based on the results of the study the overall mechanism of action of KIM as waterproofing material in cement and concrete is also discussed.