Real estate

OVERVIEW OF REAL ESTATE LAWS

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“Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.”

- Russell Sage

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Meaning of Real Estate

• ‘Real estate' refers to land as well as building.

• Land along with those improvements to it such as commercial and residential structures, roadways and ports that are all fixed in location.

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Meaning of Real Estate

• Connotes immovable property which can be either land or building or both.

• Real estate transaction - purchase, sale and development of land (residential and non-residential buildings).

• Construction - the process of building new infrastructure on real estate. Given their close inter-linkages, these sectors are often treated as one.

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What is immovable property?

• an immovable object,

• an item of property that cannot be moved without destroying or altering it

• property that is fixed to the Earth, such as land or a house.

• has a fixed address,

• determined by the jurisdiction where it is located.

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What is immovable property?

• "Immovable Property includes land, building, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth but not standing timber, growing crops nor grass". (Sec.2(6) of the Registration Act, 1908)

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Real Estate Sector

• Second largest employment generator sector after agriculture in India.

• Plays a crucial role in the Indian economy.

• The housing sector alone contributes to 5 to 6 per cent of the country’s GDP.

• Not only does it generate a high level of direct employment, but it also stimulates the demand in over 250 ancillary industries such as cement, steel, paint, brick, building materials, consumer durables and so on.

• FDI flows into housing and real estate in April-March 2011-12 stood at US$ 731 million, according to the Department of Industrial Policy and Promotion (DIPP).

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Real Estate Sector

• Emerged as the popular sector for private equity (PE) funds, which witnessed investments worth US$ 1,700 million in the sector during 2011.

• India will continue to maintain a GDP growth momentum of 9-10 percent by 2015 as the country will witness new private equity in capital markets which will inject capital in infrastructure projects.

• Some of the avenues for investment in the sector include: Commercial complexes, Multiplexes, Restaurants and Hotels, Malls and shopping complexes.

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Real Estate Sector

• The residential segment makes up most of the real estate industry in the country.

• Growth primarily driven by increasing urbanization, rise in the number of white-collar professionals and rising incomes, etc.

• Overall, on pan-India basis, the demand for office space is expected to total 180 million sq.ft by 2013, with seven major cities (Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, the NCR and Pune) catering to 75% of the total demand.

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Real Estate Sector

• Although the retail real estate segment has the smallest pie in the real estate industry, it is growing rapidly and the demand for good quality mall space is fuelled by the growth in organised retail and the entry of international retailers into India.

• The hospitality segment has also been witnessing a robust demand, primarily due to a strong growth in tourism, including business and leisure travel.

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Real Estate Sector

• Some of the key trends –• geographic de-concentration of real estate

activity from large metros (such as Bangalore, Mumbai and Delhi-NCR ) to medium and small cities (such as Chandigarh, Pune, Jaipur, Kochi, Visakhapatnam etc.)

• development of mixed-use projects encompassing residential, commercial and retail complexes,

• increase in demand for affordable housing, etc.www.mbcindia.com

Real Estate Laws

• Rules and regulations that regulate every aspect of a real estate property transaction.

• Intricate requirements involved in every real estate transaction be it acquisition, selling, transfer, or foreclosure of a property.

• Real estate laws to safeguard the rights in the property owned or purchased or sold.

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Real Estate Laws

• Matters covered under Real Estate Laws –

– Legal contracts and agreements;

– Dispute resolutions related to real estate property distribution or possession;

– Buying, selling, acquisition, leasing, and disposition of different types of real estate properties.

– Taxation issues concerning real estate;

– Preparing a plan and monitoring the construction of a real estate;

– Drafting deeds and contracts for real estate transactions;

– Overseeing legal issues involved in real estate foreclosures.

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Real Estate Laws of India

Central laws governing real estate transactions in India –

• The Indian Contract Act, 1872 • The Indian Evidence Act, 1872 • The Transfer of Property Act, 1882 • Power of Attorney Act, 1882• The Indian Easements Act, 1882• The Land Acquisition Act, 1894 • The Indian Stamp Act, 1899 • The Registration Act, 1908

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Real Estate Laws of India• The Co-operative Societies Act, 1912• The Wealth Tax Act, 1957• Income Tax Act, 1961• The Specific Relief Act ,1963 • The Urban Land (Ceiling & regularization) Act, 1976

(repealed in most states including Maharashtra)• The Consumer Protection Act, 1986 • The Arbitration & Conciliation Act, 1996 • Foreign Exchange Management Act, 1999 / Foreign

Direct Investment Policy• The Multi-State Co-operative Societies Act, 2002

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Real Estate Laws of India

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011

• Service Tax provisions• SEBI norms for Real Estate Mutual Funds• The Land Acquisition, Rehabilitation and Resettlement,

Bill, 2011 (proposed)

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Transfer of Property Act, 1882

• Deals with transfer of immovable property by act of parties like sales of immovable property, mortgages and charges, leases of immovable property, exchanges, gifts and actionable claims..

• Does not apply to transfers by the operation of law such as transfer of immovable property necessitated by Order of Court for insolvency or forfeiture among others.

• Property of any kind may be transferred.

• The property may be movable or immovable, present or future

• Transfer can be made orally, unless transfer in writing is specifically required under any law.

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• Sale - transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. (Sec.54)

• Rights and liabilities of buyer and seller of immovable property enumerated under Sec.55.

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• Mortgage - transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement that may give rise to a pecuniary liability. (Sec.58)

• The transferor - mortgagor,

• the transferee - mortgagee;

• the principal money and interest of which payment is secured for the time being - mortgage-money,

• instrument (if any) by which the transfer is effected - mortgage-deed.

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Transfer of Property act, 1882

• Lease of immovable property - transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

• The transferor - lessor,

• the transferee - lessee,

• the price - premium

• money, share, service or other thing to be so rendered - rent.

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Transfer of Property act, 1882

• Gift - transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. (Sec.122)

• Donee must accept the property during the lifetime of the donor and while he is still capable of giving. In case the donee dies before acceptance, the gift is void.

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The Indian Easements Act, 1882

• Act deals with easements and licence.

• An easement is a right which the owner or occupier of certain land possesses, as such, for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and continue to present something being done, in or upon, or in respect of, certain other land not his own. (Sec.4)

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The Indian Easements Act, 1882

• Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license. (Sec.52)

• The main difference between a Lease and a License is that in a Lease, there is transfer of interest in the property while in the case of license, there is no such transfer although the licensee acquires only a personal right to occupy the property.

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The Indian Stamp Act, 1899

• Basic purpose - to raise revenue to Government.

• Fiscal enactment on the basis of which stamp duties are levied on transactions in the shape of stamp on instruments, leviable with stamp duties on them.

• Instruments mentioned in Schedule I chargeable to duty as prescribed in the schedule.

• Includes all usual instruments like affidavit, lease, bond, memorandum and articles of company, bill of exchange, mortgage, conveyance, receipt, debenture, share, insurance policy, partnership deed, proxy, shares etc.

• If not listed in the schedule, no stamp duty is payable.

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• Instruments where stamp duty is not payable -

– Documents, executed on behalf of the Government;

– Testamentary documents;

– Documents, required to be made for judicial or non-judicial proceedings;

– Any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act, 1894, or under Act 19 of 1838, or the Indian Registration of Ships Act, 1841,

– Any instrument executed, by, or, on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone.

– Securities dealt in depository and corporatization and demutualization schemes and related instruments.

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• Instruments executed in India to be stamped before or at the time of execution.

• Instrument executed out of India to be stamped within three months after it is first received in India.

• In case of bill of exchange or promissory note made out of India, - to be stamped by first holder in India before he presents for payment or endorses or negotiates in India.

• The expense of providing the proper stamp to be borne by the executant of the document.

• Normally, the person paying the duty himself may decide the stamp duty payable and pay accordingly.

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• Instrument not ‘duly stamped’ cannot be accepted as evidence by civil court, an arbitrator or any other authority authorized to receive evidence.

• But can be accepted as evidence in criminal court.

• Can be admitted in evidence on payment of duty or the amount required to make up such duty, together with penalty.

• Unstamped or deficiently stamped document - not void

• Effective from the date of its execution though incapable of being made use of as evidence until properly stamped.

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The Registration Act, 1908

• To provide a method of public registration of documents • Give information to people regarding legal rights and

obligations arising or affecting a particular property. • Aid in preventing fraud. • Inviolability and importance to certain classes of

documents.• Instrument which creates a right or interest in the rents,

profits, benefits and income from an immovable property, is a document to be compulsorily registered.

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• Compulsorily registerable documents - • sale, • conveyance, • exchange, • gift, • settlement • partition, • mortgage, • lease, • release

– of immovable property of the value of one hundred rupees or more - compulsorily registerable. (Sec.17)

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• Documents to be presented for registration within 4 months from the date of execution.

• Wills can be presented or deposited at any time.• Document relating to an immovable property - executed

out of India but to be presented for registration in India within 4 months after its arrival in India.

• Document to be presented for registration in the office of a Sub-Registrar within whose sub-district, the whole or some portion of the immovable property is situated.

• Compulsorily registerable documents cannot be produced as evidence in a court of law.

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The Land Acquisition Act, 1894

• Land Acquisition - action of the government whereby it acquires land from its owners in order to pursue certain public purpose or for any company.

• Subject to payment of compensation to the owners or to persons interested in the land.

• Authorizes governments to acquire land for public purposes.

• Enacted for building an adequate stock of urban land for public interest purposes such as low-income housing, road widening, development of parks and other amenities.

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The Land Acquisition, Rehabilitation & Resettlement, Bill, 2011

• Land Acquisition Act, 1894 - found to be inadequate in addressing issues relating to involuntary acquisition of private land and property - does not address the issues of rehabilitation and resettlement to the affected persons & families.

• Bill seeks to balance the need for facilitating land acquisition for various public purposes including infrastructure development, industrialisation and urbanisation, while at the same time meaningfully addressing the concerns of farmers and those whose livelihoods are dependent on the land being acquired.

• Bill - introduced in Lok Sabha on 7th September 2011 - referred to the Parliamentary Standing Committee on 13th September 2011.- Standing Committee on Rural Development submitted report on 17th May 2012.

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Draft Real Estate (Regulation & Development) Bill, 2011

• Prepared by Ministry of Housing and Urban Poverty Alleviation

• To establish a Regulatory Authority and an Appellate Tribunal

• regulation of development of colonies and promotion of construction, sale and transfer of properties, role of promoter, Real Estate Regulatory Authority, Appellate Tribunal, Offences and Penalties etc.

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Rent Control Act

• Provides for payment of fair rent to landlords and protection of tenants against eviction.

• State Government has the exclusive jurisdiction to legislate on the subject.

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Property tax

• Levy charged by the municipal authorities for the upkeep of basic civic services in the city.

• Generally levied on the basis of reasonable rent at which the property might be let from year to year.

• Owners of the property are liable for the payment of tax.

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FDI Guidelines

• FDI policy issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.

• An NRI or PIO - not allowed to invest in a firm or proprietorship concern engaged in real estate business.

• LLPs with FDI – not allowed to operate in real estate business.

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FDI Guidelines

• Ban on deployment / investment of funds received from issue of ADRs/GDRs in real estate .

• FDI upto 100% - allowed under the automatic route in townships, housing, built-up infrastructure and construction-development projects .

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Real estate laws of Maharashtra

Important laws -

• Bombay Stamp Act, 1958,

• Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963

• Maharashtra Apartment Ownership Act, 1970

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Other laws governing real estate transactions in Maharashtra –

• The Mamalatdar Court Act, 1906• The Bombay Money-lenders Act, 1946• The Bombay Preventation Of Fragmentation And Consolidation Of

Holding Act, 1947• The Bombay Rents, Hotel And Lodging House Rates Control Act,

1947• Bombay Tenancy And Agricultural Lands Act, 1948 • The Bombay Provincial Municipal Corporations Act, 1949• The Bombay Prohibition Act, 1949• The Bombay Highway Act, 1955

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http://www.landsofmaharashtra.com/userfiles/file/THE%20BOMBAY%20PREVENTION%20OF%20THE.pdf


• The Bombay Village Panchayat Act, 1958• The Bombay stamp act, 1958• The Maharashtra co-op society act, 1960• The Maharashtra agricultural lands (ceiling on holdings) act, 1961• Maharashtra Ownership Of Flats (Regulation Of The Promotion Of

Construction, Sale, Management And Transfer) Act, 1963• Maharashtra land revenue code 1966• Maharashtra regional and town planning act, 1966• Maharashtra apartment ownership act, 1970• Maharashtra restoration of lands to schedule tribes act 1974• Maharashtra housing & area development act, 1976

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• Maharashtra Project Affected Person Rehabilation Act, 1989

• Development control regulations, 1991

• Maharashtra groundwater regulation for drinking water purposes act,1993

• Maharashtra Rent Control Act, 1999

• Maharashtra gunthewari developments (regularisation, upgradation and control) act, 2001

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Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and

transfer) Act, 1963

• Enacted to regulate the promotion of construction, sale, management and transfer of flats purchased on ownership basis, in the State of Maharashtra.

• Applies to a stage before the construction of a building and deals with persons who promotes the construction of block or building of flats on ownership basis.

• Not apply to the Maharashtra Housing and Area Development Authority and the Boards established under the Maharashtra Housing and Area Development Act, 1976.

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transfer) Act, 1963

• Deals with the general liabilities and responsibilities of a promoter, formation of a co-operative society or company, conveyance of title, deemed conveyance, general liabilities of flat purchasers, punishment, etc.

• A promoter is a person who constructs or causes to construct a block or building of flats or apartments for the purpose of selling some or all of them to others and in case the person who builds and the person who sells are different, then the term promoter will include both.

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transfer) Act, 1963

• Failure to comply with the provisions with regard to promoter’s liabilities, agreement of sale, maintenance of separate accounts, formation of co-operative society or company and conveyance of title - imprisonment for a term which may extend to three years or with fine or with both.

• Criminal breach of trust of any amount advanced or deposited with the promoter by the purchasers - imprisonment for a term which may extend to five years, or with fine, or with both.

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The Maharashtra Apartment Ownership Act, 1970

• Enacted to provide for - ownership of an individual apartment in a building - to make such apartment heritable and transferable property.

• Applies only to property, the sole owner or all the owners, by giving a declaration that it is used or proposed to be used for residence, office, practice of any profession or for carrying on any occupation, trade or business or for any other type of independent use.

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• Also applicable if the land is given on lease for the apartment owners.

• Each apartment owner entitled to the exclusive ownership and possession of his apartment in accordance with the Declaration executed and registered by him.

• Each apartment owner should execute a Deed of Apartment in relation to his apartment.

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Three main documents covered under the Act –

• Declaration in Form A

• Deed of Apartment

• Bye-laws

Declaration is the instrument by which the property is submitted to the provisions of the Act.

The transfer of apartments by the sole owner or owners of the property to an apartment owner and subsequent transfer from an apartment owner to his transferee should be by a Deed of Apartment.

The administration of every property should be governed by the bye-laws.

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• All the apartment owners can remove the property from the provisions of the Apartment Act by executing an instrument to this effect. This will be subject to the consent given by the holders of all charges and other encumbrances affecting any of the apartments.

• Subsequent resubmission of the property to the provisions of the Apartment Act is not barred.

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The Maharashtra Housing (Regulation and Development) Bill, 2012

• On 16th July 2012, Maharashtra Legislative Assembly passed Maharashtra Housing (Regulation and Development) Bill 2012.

• Aimed at protecting the interests of flat buyers

• Contains provisions to set up a regulatory body for the housing sector and facilitate deemed conveyance in layouts involving two or more buildings

• Mandatory for developers to register themselves with a regulatory authority & provide details of their projects.

• Will replace the Maharashtra Ownership Flats (Regulations of Promotion of Construction, Sale, Management, and Transfer) Act, 1963.

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Highlights of the Bill

• Highlights of the Bill –– Establishment of Housing regulatory authority and

Housing Appellate Tribunal – Detailed disclosures by the promoter– Registration of housing project and display on the

website of the Housing regulatory authority – Written agreement for sale– Detailed responsibilities of the promoters– Maintenance of accounts of sums taken and audit by

a Chartered Accountant.– No alterations/additions without consent

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Highlights of the Bill

– Refund of amount received by promoter with interest not exceeding 15% p.a., for failure to give possession of the flat within the stipulated period

– Formation of Co-operative Society/ Company/ Apex Body/ Federation

– Duty of the promoter to convey title and execute document according to the agreement

– General liabilities of flat purchaser– Measures to be taken by the promoter for protection and safety

of the property building– Promoter’s responsibility regarding the account of sums taken

from or on behalf of unit purchasers or flat purchasers

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Our ServicesI. Our Services with respect to real estate laws include:• Legal documentation and advice on Sale/Purchase/Lease of Property• Verification of Title Deed of the Property • Land Use Regulations• Finance Agreements• Building, Development and Construction Contracts• Projects and retail property transactions• Real estate investment and development projects• Property joint ventures• Property related acquisitions and dispositions• Property related project finance• Formation of Trusts and estate management• Taxation and Accounting• Registration and Stamp Duty• Developing Special Economic Zones • Foreign Direct Investment in Real Estate • Valuation of Real Estate Valuation & Advisory Services• Arbitration and Consulting• Litigation Support• Tax Appeals• Compliance with Development Control Regulations

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Our Services

• Malls, Multiplexes and commercial premises

• Real Estate marketing and Brand Management

• Conveyancing

• Mortgages property

• Property on lease

• Gift

• Exchange

• Inheritance

• Advisory on Wills

• Acquisition, sale and transfer of Immovable property in India by Non Resident Indians and Persons resident outside India

• Portfolio Strategy

• Assessment of Financial Viability

• Real Estate Venture Capital Investment Negotiations

• Property Specific Joint Venture agreements

• Regulation Compliance

• Arrangement of fund with Real Estate Fund

• Green Building consultancy

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Our ServicesII. We also assist in Drafting, Vetting and Registration of various Documents related to real estate namely:• Purchase of a Flat• Purchase of an Apartment in a Building (Commercial / Residential)• Purchase of a Plot of Land• Purchase License of Land /Apartment (Lease / Freehold)• Development Agreement• Lease Agreement• Construction Agreement• Rent Agreement• Sale/ Purchase Agreement• Agreement to Sell• Deed of Mortgage of Property• Relinquishment Deed• Transfer Deed• Surrender Deed in Cooperative Housing Society• Gift Deed of Property • Will • Power of Attorney• Bank Guarantee and Bank Loan agreements • Overdraft agreements

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