Real Estate Laws in India

The broad terrain and enormous land area of India covering an area of 3,287,263 km2 has always
attracted large-scale production of real estate and the economic boon, the increase in disposal
profits, the increase of nuclear families and the rise of cities and towns in Tier II and III have
paved the way for more growth in the real estate sector. A recent leading magazine survey has
announced that India has a next famous real estate development destination. Together with the
opening of the real estate sector to FDI or Foreign Direct Investment in 2005, these
circumstances have led to the growing interest of investors in the real estate market.
Nevertheless, the investor also faces a serious problem of lack of clarification about the activities
that are prevalent in this highly unorganised market. At the same time, the laws and policies of a
country play a very important role in influencing the actions of investors who invest in or plan to
invest in the real estate market, and this article is intended to define and offer a detailed overview
of the norms, procedures and policies regulating the real estate sector that can benefit an Indian
investor or a foreign investor. First of all, it is important to consider what the word real estate
means and what real estate construction entails in order to understand the different rules that
regulate the same principles.

Real Estate means:

In terms of property, real estate is something that can be residential or industrial that can include
any housing units, commercial office facilities , schools, shopping malls, etc. Creation of real
estate involves something related to land or housing growth or creation that includes apartment
complexes, retail centres, malls, shopping centres, structures such as schools , universities, health
centres , hospitals, etc. People in India need a place to stay, a school where family children can
go to college, hospitals , shopping malls, highways, etc. and other basic facilities to live in, like
every other place in the world, and all of these are given by constructing and expanding land and
buildings and can therefore be said to be included in real estate growth. Employment, townships,
built-up facilities, industrial parks comprise the following which are found in the large category
of production of real estate. Real estate is still connected to an immovable asset. Immovable
property is defined under the Property Act and the concept of immovable property can be
outlined by the general clauses Act 1897 as' immovable property is not a movable property and
includes land or advantages derived from land, things attached to earth or permanently attached
to something attached to earth and attached to earth means rooted in earth or embedded I

The norms, laws, policies governing Real Estate in India

Any of the principles that regulate the different transactions and activities in real estate are the
Central Acts, the local municipal rules of each state and union territory, and the recently released
consolidated FDI Regulation 2010. Sales, rentals, mortgages, permits are some of the
transactions regulated by the laws and policies listed above. The laws and policies are defined
accordingly, along with the transactions that come into play in the real estate realm of investor
enterprises. The investor who wants to invest in a land, building that the investor wants to
purchase or sell, mortgage, let on sale, etc. Any immovable property as described above must
first of all know if he is qualified to enter into any of the transactions described above:

The investor is first required to check whether he is competent to contract because the first
basis of investment is being competent to contract.

The contract act governs the section 11 which states that a person is required to be:

 A major i.e. above 18 years of age.

 Of sound mind i.e. not insane.
 Not prohibited under the law of country to contract.

Indian nationals and civilians are not forbidden from owning or purchasing land in India.
However, the purchase of any immovable property in India by a non-resident is forbidden.
However, a non-resident may enter into a lease agreement with regard to immovable property for
the purposes of residence in India for a term not exceeding 5 years. The Foreign Exchange
Management Act and corresponding notices issued under it regulate this.

The leasing arrangement must be performed in compliance with the rules of the Transfer
Property Act , i.e. section 105, which specifies that the leasing is an arrangement to transfer only
an interest for a specified date and for payment in order to possess the immovable property for a
certain period of time.
A foreign corporation that has not cooperated in Pakistan, Bangladesh , Sri Lanka, Bhutan,
Afghanistan and Iran and has established a branch office in India to conduct business can acquire
immovable property that is an office space for carrying on the same business, i.e. without the
prior permission of the Reserve Bank of India. However, by means of international inward
remittance by proper banking networks as prescribed, an international corporation is obliged to
acquire the said property and is required to make a declaration of the same in Type IPI within 90
days of the acquisition of the same. In the event of the liquidation of the above business, the
selling proceeds resulting from the sale of such property are needed to be repatriated to a home
that is a foreign country in the event that the requisite permission from the RBI is needed to be
received.

If the foreign corporation is incorporated in any of the countries referred to above, namely
Pakistan , Bangladesh, Si Lanka, Bhutan, Iran and Afghanistan, the prior permission of the
purchase of immovable property for the service of the branch office or the said business venture
must be taken from the RBI. A foreign corporation seeking to create a liaison office shall be
forbidden from possessing immovable property and must enter into a lease arrangement
regulated only by the act of transfer of property and this lease shall not have a period of more
than 5 years. This are regulated by the Act on the Control of Foreign Exchange or FEMA. As
mentioned above, a non-resident may not obtain any immovable property but may invest in
Indian entities engaged in the construction of real estate under the RBI's recently released
consolidated FDI regulation. The non-resident is allowed to invest in an Indian company through
the automatic route referred to in the policy, whereby the said investor is not required to obtain
prior permission from the RBI or the Department of Industrial Policy and Promotion ( DIPP),
Ministry of Commerce, for the said proposal. However, after the inward remittance or issue of
the shares, the investor is obliged to notify RBI of the same within 30 days. Indian non-residents
or persons of Indian descent or PIOs living in India are allowed to invest or purchase real estate
in India. They do not, however, obtain (excluding tea plantations) agricultural land, woodland,
and plantation property. The FEMA Rules and FDI Strategy control these.
The investor secondly is required to get title check of the immovable property or know the
conditions upon which the investment can be made with respect to the land or immovable
property:

The Registration Act of 1908 specifies that any written agreement establishing interest or selling
interest in immovable property with a value greater than 100 rupees must be registered in the
Land Registry. Basically, these papers or deeds are deeds that signify the immovable property
ownership that may be sale deeds, lease deeds, or mortgage deeds. Sales agreements which, in
the present case, transfer immovable property in the name of the investor or of the transferor, are
registered with the Registry.

An investor can want to obtain a title check of the asset he / she is investing in. The investor will
verify the property in which he is investing after paying a specified fee. The register documents
all the particulars of the immovable property, including any dues against the property, including
all shareholders who owned the property. The investor may claim a certificate of encumbrance
that certifies that there are no valid dues remaining against the land. In the event of an investment
in a company flat or office room, the individual can verify whether the company is registered
under the respective Society Act. By virtue of the FDI scheme, but subject to certain conditions,
a foreign investor may invest in real estate in India. The foreign investor may spend 100% of
FDI in Townships, Highways, Infrastructure and Building Development Projects, including but
not limited to schools, housing, commercial facilities, theatres, etc. Regional infrastructure such
as highways, bridges, etc. However, these investments are subject to the following conditions:

 In the case of serviced housing parcels, a minimum of 10 hectares, i.e. 25 acres of land, is
required to be created.
 Proposals for building construction are distinguished by a minimum of 50,000 sq. Uh.
Meters.
 In the case of wholly owned subsidiaries owned by international firms, the international
owner is expected to include 10 million US dollars as a minimum capitalisation, which is
10 million US dollars as a minimum capital charge, and to provide a minimum of 5
million US dollars in the case of a joint venture with an Indian company.
 In the event of a mixture of these, it is appropriate to comply with any of the above.
 The funds must be taken in within 6 months of the launch of business in India.
 The initial investment cannot be repatriated after three years of the expiration of the
minimum capitalization. The lock-in period commences on the day of the last receipt of
the FDI payment or on the day of the minimum capitalisation. However, with the prior
permission of the government through the Foreign Investment Promotion Board ( FIPB),
an investor could be able to leave sooner.
 Within 5 years from the date of securing all legislative clearances, 50 percent of the
project should have been created.
 The investor will not be allowed to sell underdeveloped parcels (underdeveloped
connotes have not been made available where highways, water source, street lighting,
irrigation, irrigation and other conveniences as applicable under the specified regulations)
 Before being approved to dispose of the serviced housing plots, the investor must have
this facility and receive the completion certificate from the municipal authority / service
agency concerned.
 The scheme shall comply with the codes and standards set out in the relevant building
control legislation, bye-laws , guidelines and other legislation of the State Government /
Metropolitan / Local Authority involved, including land use requirements and the
provision of community services and general facilities.
 The investor shall be responsible for securing all required permits, including building /
layout designs, the construction of internal and peripheral areas and other infrastructure
services, the payment of construction, external development and other fees and the
fulfilment of all other specifications as laid down in the relevant State Government /
Municipal Government Regulations / Bye Regulations. The State Government /
Metropolitan / Local Authority concerned, which approves the construction /
development plans, will control the compliance of the developer with the above
conditions.
 In the case of investments in the construction and growth of hotels , hospitals or
investments in special economic zones (SEZ), a foreign investor is not subject to the
above-mentioned requirements. However, the investor is subject to the Special Economic
Zone Act and is expected to comply with the criteria for the design and development of
SEZ operations during the undertaking
  A foreign investor may invest 100% of the FDI in an Indian company engaged in
industrial park development. Industrial parks are those areas of land which are built
specifically for industrial activity. They are built and fitted with all highways, schools
and power supply facilities and are allocated for industrial activities. Until investing, a
foreign investor is expected to recognise the following requirements that are necessary to
compile when investing and to implement when establishing the same requirements.

Industrial parks shall consist of at least 10 units and no single unit shall occupy more than 50 %
of the total allotted land. The assignable region here corresponds to:

 In the case of built land parcels, the net site land accessible to the unit except the general
facilities area,
 In the case of built-up space, the floor area and the space used to have common amenities
 In the case of a mixture of the two, the net land area and floor area required for the
allocation of units excluding the land are then created and set up and used for the
provision of general services.
 The required amount of the land to be assigned to commercial activity in an industrial
park shall not be less than 66 per cent of the overall allocated land.

The third requirement is execution of the agreement of sale or lease by the investor:

A transaction to be influenced by an owner or an individual concerned with real estate that may
be a sale or lease or mortgage shall be regulated by an act of transfer of ownership. The contract
can be influenced by a written agreement that may either transfer an interest to the transferee or
transfer the whole interest in the whole asset to the transferee. The transferor is the individual to
whose benefit the interest is generated, and the transferor is the individual to whom the interest is
passed. This paper is necessary in the eyes of law to be a legal contract and hence fulfils the
terms of the contract act.

By default, of the Contract Act and, in this respect, Section 10, the arrangement to be executed
as a contract shall be:

 Between the parties that are qualified to enter into contracts as mentioned above
  There is a meeting of mind where all sides are aware of and agree on the substance of the
arrangement.
 The purchaser is expected to report any structural flaw in the property to the buyer of the
immovable property, and in the event of misrepresentation, the buyer's option to sell will
be put aside. The customer will demand the seller's damages. Section 55 of the Sale of
Property Act and section 14 of the Indian Contract Act, respectively, regulate this.
 Valuable consideration must be granted, i.e. fair value should be taken into account. In
the eyes of law, lack of respect leaves the deal invalid that it has no moral consequence
except in the case of gift.

An owner may opt to execute an arrangement relating to the sale of immovable property, a lease
agreement, a mortgage agreement relating to transactions, and these are regulated by sections 54,
58, 107 of the Act relating to the transfer of properties. An purchaser can purchase a minor's
immovable property only with the consent of the court and is necessary to verify that the minor's
guardian is allowed to enforce the selling agreement. In the event that the guardian is not allowed
to enter such a transaction and yet enters such a transaction, the transaction may later be set aside
by a minor with the achievement of a majority, so that the investor is obligated to search in
advance to prevent such a circumstance.

Fourth requirement after execution of the document:

Stamp duty is payable on all of the above-mentioned documents and, as mentioned above, these
documents are expected to be registered with the Land Registrar. The stamp duty shall be
regulated by the Stamp Act, and the local prevailing stamp duty rates levied by the States shall
be charged on the documents accordingly. Some states have a double occurrence of stamps,
whereby the first stamp duty is charged for the acquisition of land transaction and others for its
production. These written papers carrying out the transaction must be registered with the land
registry registrar. As mentioned above, any paper transmitting an interest in immovable for a
value in excess of 100 rupees is required to be registered in compulsory form.

Under the Registration Act 1908, the document referred to above is required to be registered with
the registrar. Non-Registration of a document does not affect the sale or lease or mortgage
operation carried out by the instrument, although it is relevant since the court accepts only
registered papers.

The Registration Act prevents the entry as evidence in court of a non-registered document which
transfers or conveys the title. In fact, this recorded document serves as a notification to all
persons that property has been transferred to the entity in which name it is recorded and is a
notification of the sale which is thus encouraged to register such a document as an unregistered
document has little legal validity and a registered document is favoured to an unregistered
document in the future if there is a challenge.

After the registry of the deed, the title or possession is transferred and, hence, in the case of a
lease, the transferee becomes the lessee after the registry of the same, in the case of a sale, the
transferee becomes the owner of the property or, from now on, the transferee acquires the title in
respect of the transaction or arrangement signed.

Prohibition with respect to some transactions entered by NRI or PIO:

A native of India and a citizen of India are allowed to enter into some form of immovable
property transaction. There are certain limitations placed on non-residents, however, and these
are:

 The NRI may transfer any immovable property to a resident of India or may transfer
immovable property to a person residing outside India other than agricultural land,
farmland or plantation property, but who is a citizen of India or PIO.
 NRI may only transfer agricultural land, farmland or plantation land to NRI and Indian
residents, but may only give the aforementioned gifts to Indian residents.
 Without any RBI approval required, NRI may mortgage immovable property to an
approved dealer or housing finance institution in India.
 This transfer should be made from funds which are passed from ordinary banking
channels or from accounts kept in India and this payment can not be made either by way
of a traveller's check or in foreign currency or from outside India..
  The NRI is allowed to repatriate, but only the amount not exceeding the amount paid for
the foreign exchange property obtained through ordinary banking channels and the
amount of repatriated sales profits should be limited to 2 residential properties subject to
certain conditions.
 If the NRI wishes to sell this land, it is not able to do so until three years after the
purchase or payment of the last instalment.
 PIO is willing to sell a citizen of India immovable land.
 PIO may donate immovable property to a person residing in India or NRI or PIO, but
permission must be obtained from the RBI in the event of a non-resident who is not of
Indian descent.
 Only a person and citizen of India may sell and donate agricultural land or plantation land
or farmland to PIO.
 Without getting permits, PIO may mortgage immovable property to an authorised dealer
or housing financial institution.
 A non-resident who is not of Indian descent can, after obtaining RBI 's permission,
mortgage only to an approved dealer or housing and financial institutions. This are
covered under the FEMA Rules.

Any of the rules regulating real estate remain and they are not an exhaustive list regulating real
estate. For example , a particular Relief Act, under which a person who, without his permission
and without due process of law, is disposed of of immovable property may recover possession of
the same by filing a claim for the same within 6 months of dispossession. Under the Land
Acquisition Act 1894, any immovable property may be purchased by the government or society
or cooperative society registered under the Corporation and Private Company Registry Act by
issuing a notice for public purposes. Building hospitals, colleges or subsidised housing or
apartment buildings can be part of this civic goal. Real estate is also governed by the rent control
act that regulates the release of immovable property. Several states have their own rent control
regulations, such as the Delhi Rent Control Act, which controls the release of rental premises not
exceeding 3,500 Indian rupees in Delhi.

The consumer protection act also regulates real estate as it is amended to include housing in the
definition of service and thus if a developer has insufficient housing services then consumers will
go to the consumer dispute redress forums to search for the same. The Real Estate (Regulation
and Growth) Bill, 2011 has recently been proposed in Parliament to resolve some of the concerns
facing urban real estate development and consolidate real estate legislation and intends to create
a real estate regulatory authority and set up an appellate court to hear disagreements and appeals
from the Real Estate Regulatory Authority's order. The object of this bill is to encourage the
well-designed construction of urban real estate with a view to protecting the interest of customers
who invest in real estate and assisting in planned development. In the end, it can be said that
India's real estate is regulated by a largely elaborate system of laws and policies, and some of the
laws that function in the real estate sector are described above.