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Real Estate Laws

When we talk about real estate it means the development of land and construction in relation to immovable property. There has been tremendous growth in the real estate sector in India as a result of more influx of industries, corporates and hence population in the cities. With the increase of the population in cities the building construction has increased. The laws to govern real estate are necessary for smooth functioning of constructions and sale and purchase of immovable property. These laws can be complex as three tiers of laws and regulations apply on this sector, i.e- Union territory laws, state laws and municipal laws. India is a big country in terms of area, population and is also culturally diverse and hence specific laws as per the requirement of that particular state or area might be necessary.

The various aspects of real estate include- lease, sale, mortgage, license etc. relating to immovable property. Title check also come under the due diligence work that is required before investment in a property or purchasing a property.

There has been a revolutionary change in the real estate sector by regularising the transactions by enacting RERA (Real Estate Regulatory Authority) Act, 2016.

Even after so many formalities the real estate terms and conditions of lease and sale-purchase were one sided in the favour of the builder and considering this factor a dire need of coming up with updated rules and regulations was felt and RERA came into place.

The main laws which regulate real estate are:

  • The Transfer of Property Act, 1882
  • RERA (Real Estate Regulatory Authority) Act, 2016
  • The Registration Act, 1908
  • Stamp duty has to be paid as per state requirements
  • For Non-Resident Indians (NRIs) FEMA( Foreign Exchange Management Act, 1999) also apply
  • Investors have to abide by local laws and bylaws
  • Clearance as per environmental laws have to be taken before starting with any project for construction of immovable property
  • The specific relief Act, 1963
  • Other labour laws including for regulating minimum wages and safety insurance provisions
  • Land Acquisition Act, 2013

The above list of laws is not exhaustive.

A look at the provisions under RERA-

  • Under RERA, registration of land by builders is made compulsory and this Act provides duties of the promoters. The registration under this Act can be exempted in certain cases, e.g.- where the area of land is too small.
  • The Act regulates the selling and giving possession of the property to the purchaser. In case there is delay in giving possession the builder has to provide penalty to the customer/buyer as per the guidelines provided under the Act. Under the RERA real estate agents also have to get registered.
  • The RERA provides for a separate real estate courts for property disputes and the special courts established under RERA has jurisdiction over the same. For such disputes the district courts do not have jurisdiction and hence they cannot pass an injunction.

What is land pooling?

The government has tried to address the grievances of the people whose land had to be acquired for building purposes. Instead of compensating dispossessed persons monetarily now the government allots them another land where they can settle down. It is better (not best) for dispossessed people because they are not uprooted and it is more economic for the government as well. This scheme is called land pooling.

We will have a quick look as far as the foreign investment is concerned as the same is important for real estate.

Laws like Foreign Direct Investment (FDI) Policy, 2010, FEMA (Foreign Exchange Management Act), 1999, govern the foreign investment in real estate as well. From the 1990s the government has been liberalising the Indian market and as a result many legislations, including the regulations for foreign investment and FEMA came into place. The foreign investment has been made easy however there are some exceptions to the type of property the foreign investors can invest into.

Before investing an investors needs to check the title of the property and clear the due diligence process. Investing is easy but if it comes to winding up of the company then certain regulations need to be followed because the money from India will be going outside India. In case of winding up permission from RBI (Reserve Bank of India) is mandatory.

Foreign entities cannot directly invest in a property to earn profit, however they can invest in a property for purposes of construction being done for public purposes. Foreign entities can own a property on the leasehold basis, the duration of which is usually 99 years. A Non- Resident Indian can lease a property in India but not more than 5 years as per the FEMA rules.

To conclude

we can see that the laws governing real estate have a wide scope. One has to particularly focus on legal compliance if they are in the real estate industry. The enactment of RERA has regularised the real estate industry and has been very helpful for the consumer. It has been helpful to the builders as well making the real estate legal procedures less cumbersome. Due to better regulation risk for investors reduces and they are more open to investing in real estate so it is a win -win situation for the builders, investors and purchasers.

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