REAL ESTATE AND INFRASTRUCTURE

DEVELOPMENT LAWS
(BAL 8E1A)
1. GIFT DEED
Property can be transferred from one person to another through several ways; namely, the way of
sale, will, intestate succession or a gift. According to Section 122 of The Transfer of Property Act,
1882, “Gift” is the transfer of certain existing moveable or immoveable property made voluntarily
and without consideration, by one person, called the donor, to another, called the donee, which has
to be accepted by or on behalf of the donee. Hence, the Gift Deed is a document, registering the
voluntary transfer of a property, movable or immovable, from a donor (the person giving the gift)
to a donee (the person receiving the gift).

The Gift Deed is completed when accepted by the donee. The acceptance is, however, to be made
before the death of the donor, when he is still capable of giving and before the donee dies.

Transfer of a Gift is done using the following steps:

1. The drafting of a gift deed
2. Acceptance of the gift by the donee
3. Transfer of property (the gift)

Once a gift deed is made and duly accepted, the transfer of the property attached to the gift deed
needs to be made. The transfer process differs for movable and immovable property. For the
transfer of immovable property, it is mandatory to register the property under Section 17 of The
Registration Act, 1908. The transfer is said to have been effected when the registered instrument
is signed by or on behalf of the donee, in the presence of two witnesses. The transfer of movable
property on the other hand is effected either by a registered instrument signed as aforesaid or by
mere delivery of the property.

Section 126 provides two modes of revocation of Gift –

1. Revocation by mutual agreement:

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 A gift may be revoked upon the happening of an event which is not dependent on the donor
where the donor and donee may agree. The revocation must be in express form and not of
a wish or desire.
2. Revocation by rescission:
The gift is a transfer of ownership without any exchange of money or any consideration
which is made voluntarily. So, where there is no free consent of the parties, the gift can be
revoked or if it is obtained by coercion, undue influence or fraud then the gift is voidable.

C.L.: S. Sarojini Amma v. Velayudhan Pillai Sreekumar

In this case, the Two-Judge Bench of the Supreme Court held that a conditional gift with no recital
of acceptance and no evidence in proof of acceptance, where possession remains with the donor
as long as he is alive, does not become complete during lifetime of the donor. When a gift is
incomplete and title remains with the donor the deed of gift might be cancelled.

The main difference between cancellation and revocation is that cancellation is done when the gift
deed is incomplete and title remains with the donor. Whereas revocation can only be made with
the decree of the Court after the deed is made. Further, if the agreement between the two parties is
not valid, then the gift deed is revocable. Section 10 of the Indian Contract Act, 1872, states that,
“All agreements are contracts if they are made by the free consent of parties competent to contract,
for a lawful consideration and with a lawful object, and are not hereby expressly declared to be
void.” Hence, to contract, the consent needs to be free and the parties should be competent to
contract, so if a gift deed is made without the donor’s free consent, such deed is revocable.
Similarly, a gift deed cannot be executed by a minor since he is not competent to contract as
defined under Section 11 of the Indian Contract Act.

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 2. “ In recent years, the real estate sector in India has exhibited a trend towards greater
organization and transparency, accompanied by various regulatory reform”-Elucidate
those reforms.

India is one of the fastest growing economy in the world. With increasing opportunities in all
sectors of the economy, the infrastructural needs have also substantially increased. This has led to
a real estate boom in India. Originally, the Indian real estate sector was unorganised and full of
practises were not transparent. This caused for a lot of problems to parties that wanted to enter the
market and have rightful possession and thus reforms were long awaited measures required to
make real estate sector transparent and organised.

Reforms that have been brought in by the government in the spirit of increasing transparency and
greater organisation;
1. Government of India support to the repeal of the Urban Land Ceiling Act, with nine state
governments having already repealed the Act
The ULC Act was enacted by the Parliament of India in the year 1976 with a laudable object
to inter alia impose ceiling on the holding of vacant land; to prevent concentration of urban
properties in the hand of few persons and to ensure equitable distribution/ utilization of urban
vacant lands. This law though having a very public motive is a great impediment in the
development of townships and industrial areas and thus the repealing of it is a welcome change
that will make the real estate sector stronger.

2. Modifications in the Rent Control Act to provide greater protection to homeowners

wishing to rent out their properties
Rent Control Act was passed by the legislature in the year 1948 that regulates the rules of
letting out a property and ensures that neither the landlords nor the tenants' rights are exploited
by the other. The real estate market has had difficulty in growing in some areas as the 1948 act
was extremely stringent and pro-tenant. Thus, the changes are a welcome change to help
provide security and protection to the owners making renting properties safer than before.

3. Rationalization of property taxes in a number of states

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 A number of states have exorbitant taxes making development of real estate in such states very
expensive and impractical. Rationalization of taxes will make property buying cheaper and
thus cost of development will go down.

4. The proposed computerization of land records

The preservation of land records in their physical form is impractical and such records can be
lost due to various incidents like fire, etc. The physical records are often misplaced by
government officials and keeping them updated in all offices is a task. Thus, with
computerization of land records, all data is secured and backed up and updates can be done in
real-time to avoid any confusion as to the rights over a property. This step greatly organises
the property document storage process as less area is required and finding the relevant
documents becomes easier.

5. Foreign Investments in India

To increase investments in the Real Estate sector in India, the Department of Industrial Policy
and Promotion permitted FDI up to 100% under automatic route in townships, housing, built-
up infrastructure and construction development projects with certain guidelines with respect to
the land area in question. Norms for safeguarding the investments by putting time cap and cap
on investment have also been provided

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 3. Real Estate Leases.
Expected question in exams:
State the law as to Real Estate Leases.

Or
What remedies are available to a landlord for a breach of the lease by the tenant? On what
grounds can the landlord usually terminate the lease and what restrictions and procedures
apply? What is the effect of the tenant's insolvency under general contract terms and
insolvency legislation?

Or

Can the tenant withhold rent payments in certain circumstances, for example for serious
damage to the leased premises? Can the tenant terminate the lease in certain circumstances?

Negotiation and execution of leases

• Are contractual lease provisions regulated or freely negotiable? Which legislation

applies?
Contractual lease provisions are freely negotiable. Subject to a contract to the contrary, the
Transfer of Property Act 1882 (TPA) provides for certain rights and liabilities which govern the
relationship between the landlord and the tenant.

• What are the formal legal requirements to execute a lease? Does the lease have to be
executed by certain parties or as a deed? How do the formalities differ for a company,
partnership and for individuals?
The Transfer of Property Act 1882 (TPA) stipulates that a lease from year to year or any term
exceeding one year and reserving a yearly rent must be executed by a registered instrument (section
107). Any other type of lease can be made by registered instrument, oral agreement or delivery of
possession. The landlord and the tenant are required to execute the lease deed. The execution
formalities differ for a company, partnership and individuals, in that a company or partnership has

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to authorize a specific individual (and record such authorization in its minutes) by way of a power
of attorney or a resolution to execute the lease deed.
Rent payments

• How are rent levels usually reviewed and are there restrictions on this? Is stamp duty
and VAT (or equivalent) payable on rent? Is a rent security deposit required and
does it have to be managed in a certain way?
The determination of rent is a market driven process and there is no restriction under law other
than certain rent control legislations which vary from state to state. Accordingly, parties are free
to determine the mechanism for rent increases.
Stamp duty is paid on the instrument of the lease, and calculated based on the tenure of the lease
and the rent and security deposit (in some cases) payable. It is very common for leases to provide
for payment of security deposits (typically equivalent to three to six months' rent) as security
against any damage caused to the property by the tenant during the lease period.

Length of term and security of occupation

• Is there a typical length of lease term and are there restrictions on it? Do tenants of
business premises have security of occupation or rights to renew the lease at the end
of the contractual lease term?
The duration of a lease depends on many factors, including the type of leased premises (for
example, commercial, institutional, residential, or government lease). The landlord and the tenant
can contractually agree to give the tenant a right to renew the lease deed at the end of the
contractual term, without any delay or objection from the landlord.
Disposal

• What restrictions typically apply to the disposal of the lease by the tenant? Can the
tenant assign or sublet the lease with the landlord's consent? Can tenants share their
premises with companies in the same group? What is the effect of a legal
reorganisation or transfer/sale of the tenant on the lease and on a guarantee of the
lease?

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The Transfer of Property Act 1882 (TPA) permits tenants to sublease or mortgage their interests
in the leased premises, subject to an agreement to the contrary.
Leasing arrangements generally provide for the tenant's right (with or without the prior consent of
the landlord, which cannot be unreasonably withheld) to:
• Sublease.
• Assign.
• Sub license.
• Encumber the leased premises
• Sub lease the whole or part of the leased premises to its affiliate.
The landlord and tenant can agree that the resulting entity from a restructuring of the tenant can
enjoy the lease for the rest of its duration on the same terms and conditions.

• Does a landlord or tenant retain any liability under the lease after the lease is
assigned?
On assignment or transfer of a lease by the landlord, the landlord does not cease to be subject to
any liabilities imposed on it by the lease, unless the tenant elects to treat the transferee as the person
liable (section 109, Transfer of Property Act 1882).
Repair and insurance

• Who is usually responsible for keeping the leased premises in good repair and for
insuring the leased premises? Are there provisions for the ownership of lease
improvements?
Generally the tenant assumes the obligation to insure the equipment, fixtures and furniture inside
the premises, and the landlord obtains insurance over the buildings/premises. Similarly, any
improvements to the leased premises can be retained by the tenant on termination of the lease,
unless the lease provides otherwise.

Landlord's remedies and termination

• What remedies are available to a landlord for a breach of the lease by the tenant? On
what grounds can the landlord usually terminate the lease and what restrictions and

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 procedures apply? What is the effect of the tenant's insolvency under general
contract terms and insolvency legislation?
Leases generally provide for a mechanism by which the landlord retains the right to terminate the
lease in certain circumstances such as:
• Default in payment of lease rentals
• Breach of any covenant, representation or warranty by the tenant.
The landlord can only determine a lease by forfeiture on breach of an express condition, by serving
a notice on the tenant seeking rectification of the breach which should mention, among other
things, (section 114A Transfer of Property Act 1882):
• Details of the breach.
• Time period within which the lessee should remedy the breach if it is capable of remedy.
If the breach relates to non-payment of rent, the tenant is entitled to contest the forfeiture, by
depositing a sum equivalent to the rent, interest and costs of the suit in the court where forfeiture
proceedings are initiated.
On termination, if the tenant has not vacated the premises, the landlord can initiate eviction
proceedings under the applicable state rent control legislation. However, the eviction process is
quite cumbersome and usually takes a number of years to complete.
Insolvency of the tenant can be one of the termination events under the lease, and in this case the
landlord can reserve the right to sue the tenant to evict him or her from the property.

• Can the tenant withhold rent payments in certain circumstances, for example for
serious damage to the leased premises? Can the tenant terminate the lease in certain
circumstances?
The landlord and the tenant can contractually agree situations where the tenant is permitted to
withhold rent payments, for example, where the landlord fails to carry out necessary maintenance
or repair works in the stipulated period, resulting in the tenant undertaking the work himself, or
other breach of the lease by the landlord.
Tenants can also withhold payment during a force majeure event which renders the leased
premises unfit for the lessee's use. The tenant can withhold rent payments until the leased premises
is repaired and brought back to its original state.

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Apart from termination due to the term ending, lease deeds provide for certain circumstances in
which tenants can terminate the lease, such as:
• The landlord voluntarily filing for bankruptcy/being declared insolvent.
• Fraud, willful misconduct or gross negligence by the landlord.
• Breach of any representation, warranties and covenants by the landlord and/or the
maintenance agency.
• If the leased premises become the subject of any court proceedings rendering them unfit
for the lessee's use.
• A force majeure event which leaves the leased premises unfit beyond repair.

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 4. Explain how Infrastructure contributes to economic development of the country.

Infrastructure is the set of fundamental facilities and systems that support the sustainable
functionality of households and firms by serving a country, city, or other area, including the
services and facilities necessary for its economy to function. Infrastructure is composed of public
and private physical structures such as roads, railways, bridges, tunnels, water supply, sewers,
electrical grids, and telecommunications (including Internet connectivity and broadband access).

In general, infrastructure has been defined as "the physical components of interrelated systems
providing commodities and services essential to enable, sustain, or enhance societal living
conditions" and maintain the surrounding environment. Infrastructure can be divided into two
categories — economic and social. Infrastructure associated with energy, transportation and
communication are included in the former category whereas those related to education, health and
housing are included in the latter.

Inadequate infrastructure can have multiple adverse effects on health of all living organisms as
well as the economy of the state. Infrastructure facilitates both economic and social development.
Infrastructure acts as the support system for production activity in the economy and thereby
contributes to economic development. Infrastructure contributes to economic development of the
country in the following ways:

(i) Infrastructure increases productivity: The availability of quality infrastructure guarantees

increase in production and productivity. Infrastructure ensures easy movement of goods
and raw materials thereby reducing inefficiencies and lead to efficient utilization of scarce
resources and eliminate wastages.

(ii) Infrastructure encourages investment: Infrastructure provides for an environment

conducive to investment because lack of facilities discourage investment. For example, an
investor will not invest in absence of basic infrastructure such as transport and
communication.

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(iii) Infrastructure generates linkages in production: Infrastructure promotes economic
development by way of various linkages for-ward and backward linkages. In other words,
infrastructure provides scope for expansion of one industry due to the expansion of the
other by way of forward and backward linkages. The process of economic growth becomes
a dynamic process in the presence of sufficient infrastructure facilities.

(iv) Infrastructure enhances size of the market: Infrastructure widens the size of the market.
The fast and cost-effective movement of raw materials and finished goods in bulk enables
a producer to offer his products across the country and even across international
boundaries. Quality infrastructure also attracts more investments from indigenous as well
foreign investors which makes the market stronger and increases the size of the market.

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 5. Infrastructure development - Public-Private Partnership

Expected Questions: Explain how infrastructure contributes to economic development of the

country.

OR

What id PPP? Discuss its objectives and limitations.

OR

What is PPP. Point out its advantages and disadvantages.

Infrastructure Development

Have you ever thought of why some states in India are performing much better than others in
certain areas? Why do Punjab, Haryana and Himachal Pradesh prosper in agriculture and
horticulture? Why are Maharashtra and Gujarat industrially more advanced than others? How
come Kerala, popularly known as ‘God’s own country’, has excelled in literacy, health care and
sanitation and also attracts tourists in such large numbers? Why does Karnataka’s information
technology industry attracts world attention? It is all because these states have better infrastructure
in the areas they excel than other states of India. Some have better irrigation facilities. Others have
better transportation facilities, or are located near ports which makes raw materials required for
various manufacturing industries easily accessible. Cities like Bengaluru in Karnataka attract many
multinational companies because they provide world-class communication facilities. All these
support structures, which facilitate development of a country, constitute its infrastructure. How
then does infrastructure facilitate development?

WHAT IS INFRASTRUCTURE?

Infrastructure provides supporting services in the main areas of industrial and agricultural
production, domestic and foreign trade and commerce. These services include roads, railways,
ports, airports, dams, power stations, oil and gas pipelines, telecommunication facilities, the
country’s educational system including schools and colleges, health system including hospitals,
sanitary system including clean drinking water facilities and the monetary system including banks,
insurance and other financial institutions. Some of these facilities have a direct impact on

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production of goods and services while others give indirect support by building the social sector
of the economy.

Some divide infrastructure into two categories — economic and social. Infrastructure associated
with energy, transportation and communication are included in the former category whereas those
related to education, health and housing are included in the latter. speedy and large-scale transport
of seeds, pesticides, fertilisers and the produce using modern roadways, railways and shipping
facilities. In recent times, agriculture also depends on insurance and banking facilities because of
its need to operate on a very large scale. Infrastructure contributes to economic development of a
country both by increasing the productivity of the factors of production and improving the quality
of life of its people. Inadequate infrastructure can have multiple adverse effects on health.
Improvements in water supply and sanitation have a large impact by reducing morbidity (meaning
proneness to fall ill) from major waterborne diseases and reducing the severity of disease when it
occurs. In addition to the obvious linkage between water and sanitation and health, the quality of
transport and communication infrastructure can affect access to health care. Air pollution and
safety hazards connected to transportation also affect morbidity, particularly in densely populated
areas.

Public Private Partnership (PPP) Projects

PPP projects are defined as partnerships between the state and the private sector, which
cannot be called, either as complete privatization or complete governmental control. This
means that the PPP projects are essentially partnerships that are formed for a specific purpose
through the creation of a SPV (Special Purpose Vehicle) that has private sector equity as well as
governmental stake in the form of land, water, and other resources that the government can offer
the concessionaires to develop infrastructure around them and in them.
As has been mentioned in the introduction, PPP projects are the way forward for India, which has
limited resources and hence, needs private sector participation as far as possible. Further, given
the need to develop infrastructure on a war footing, the private sector with its deep expertise and
experience in executing such projects would be in a better position than the government in this
respect.

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Problems with PPP Projects
Having said that, the experience of the PPP projects in the infrastructure sector in India has been
a mixed bag with more failures than successes and the succeeding discussion highlights the
problems and suggests some solutions. It would suffice to state here that future partnerships can
learn from the successes and avoid the pitfalls that led to the failure of the other projects.
Perhaps the biggest problem that bedevils the infrastructure sector and the issue of the PPP projects
is that the whole process is not transparent to the various stakeholders other than the governmental
bureaucrats. Further, it is also the case that in instances where the PPP projects have failed, the
blame game that ensues in the aftermath is usually directed towards the private players.
This creates perverse incentives for the other players who might reconsider their investments.
Moreover, with so much of red tape and decision-making paralysis in recent years, investors are
reluctant to invest in the PPP projects in India.
Apart from the problem mentioned above, the other risk that private players carry when they
execute the PPP projects is that of the political uncertainty factor. It is indeed the case with many
projects such as the Hyderabad Metro Rail, the Airport in Bangalore etc that a change in the
government meant a review of the project leading to uncertainty over its continuance. This can
lead to losses for the private players, as they would have invested substantial amounts of money,
which are at risk if the project is cancelled.
Given the pervasive nature of corruption in India, promoters and the private players tend to recoup
the losses that they have incurred by way of bribes and lobbying to the public at large meaning
that the costs are inflated without a scientific appraisal of such projects. Moreover, given the
tentacles of the underground economy, which is estimated to be as big as the official economy, the
sources of finance and funding are concerns for both the government and the other stakeholders.
In other words, there is no mechanism in place that assesses whether the funding and the financing
of the PPP projects is entirely from legitimate sources.

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 6. Special Economic Zones
Expected questions:
Write an essay on ‘Special Economic Zones’
Or
What necessitated Indian Parliament to enact SEZ Act,2005.
Or
What are the objectives of SEZ
Or
Elaborate the facilities & Incentives that are being provided by SEZs
Or
Discuss the potential drawbacks of SEZs.

Special Economic Zone – Definition

An SEZ is an enclave within a country that is typically duty-free and has different business and
commercial laws chiefly to encourage investment and create employment.

• Apart from generating employment opportunities and promoting investment, SEZs are
created also to better administer these areas, thereby increasing the ease of doing business.

SEZ Background
An SEZ Policy was announced for the very first time in 2000 in order to overcome the obstacles
businesses faced.

• There were multiple controls and many clearances to be obtained before starting a venture.
• Infrastructure facilities were shoddy and well below world standards in India.
• The fiscal regime was unstable as well.
• In order to attract huge foreign investments into the country, the government announced
the Policy.
• The Parliament passed the Special Economic Zones Act in 2005 after many consultations
and deliberations.
• The Act came into force along with the SEZ Rules in 2006.

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 • However, SEZs were operational in India from 2000 to 2006 (under the Foreign Trade
Policy).
• Note:- A precursor to the SEZs, the Export Processing Zones were set up in India well
before. The first EPZ came up in Kandla in 1965 to promote exports. This was the first
EPZ not only in India but in all of Asia as well.

Special Economic Zones Act, 2005

“It is defined as an Act to provide for the establishment, development and management of the
Special Economic Zones for the promotion of exports and for matters connected therewith or
incidental thereto.”

The chief objectives of the SEZ Act are:

1. To create additional economic activity.

2. To boost the export of goods and services.
3. To generate employment.
4. To boost domestic and foreign investments.
5. To develop infrastructure facilities.

SEZ Rules
The Rules provide for:

1. Simplified procedures to develop, operate and maintain SEZs and also to set up units and
conduct businesses in the SEZs.
2. Single-window clearance to set up a Special Economic Zone, and also to set up a unit in
an SEZ.
3. Single-window clearance for matters connected to the Central and State governments.
4. Simplified compliance procedures and documentation with a focus on self-certification.
5. Different minimum land requirements for different classes of Special Economic Zones.

SEZs Facilities & Incentives

The government offers many incentives for companies and businesses established in SEZs. some
of the important ones are:

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 • Duty-free import or domestic procurement of goods for developing, operating and
maintaining SEZ units.
• 100% Income tax exemption on export income for SEZ units under the Income Tax Act
for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit
for next 5 years. (Sunset Clause for Units will become effective from 2020).
• Units are exempted from Minimum Alternate Tax (MAT).
• They were exempted from Central Sales Tax, Service Tax and State sales tax. These have
now subsumed into GST and supplies to SEZs are zero-rated under the IGST Act, 2017.
• Single window clearance for Central and State level approvals.
• There is no need for a license for import.
• In the manufacturing sector, barring a few segments, 100% FDI is allowed.
• Profits earned are permitted to be repatriated freely with no need for any dividend
balancing.
• There is no need for separate documentation for customs and export-import policy.
• Many SEZs offer developed plots and ready-to-use space.

Apart from the firms operating in SEZs, developers of SEZs also receive many benefits and
incentives from the government.
SEZs in India
Currently, about 240 are operational in the country. About 64% of the SEZs are located in five
states – Tamil Nadu, Telangana, Karnataka, Andhra Pradesh and Maharashtra.
The following table gives data about the SEZs as of February 2nd, 2020.

SEZs approved 421

SEZs notified 354

SEZs approved in-principle 33

SEZs operational 240

In 2018 – 19, about 20 lakh jobs were created through SEZs. Most of the SEZs being set up are
primarily private investment-driven.

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In the financial year 2017 – 18, the exports from SEZs have grown by about 13% when compared
to the previous financial year.
Examples: SEEPZ Special Economic Zone (Mumbai), Kandla SEZ, Cochin SEZ, Madras SEZ,
Visakhapatnam SEZ, NOIDA Export Processing Zone, Falta SEZ, etc.
Challenges

• Since SEZs offer a wide range of incentives and tax benefits, it is believed that many
existing domestic firms may just shift base to SEZs.
• There is a fear that the promotion of SEZs may be at the cost of fertile agricultural land
affecting food security, loss of revenue to the exchequer and cause uneven growth with
adverse effects.
• Apart from food security, water security is also affected because of the diversion of water
use for SEZs.
• SEZs also cause pollution, especially with the release of untreated effluents. There has been
huge destruction of mangroves in Gujarat affecting fisheries and dairy sectors.
• SEZs have to be promoted but not at the cost of the agricultural sector of the country. It
should also not affect the environment adversely.

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 7. How builder may cheat you
Expected questions:
Explain how builders cheat the home buyers.
OR
Illustrate how it is better to own a house rather live in a rented house.

Frauds in real estate are very common as a large amount of money is involved. Many builders
cheat innocent buyers of their hard-earned money by employing various methods. So, it is very
important for homebuyers to be careful while investing their money to buy a dream home. In this
blog, we will discuss various techniques used by builders to cheat home buyers.
How your builder may cheat you?
1. Fake promises by builders
Fake promises by builders to homebuyers, is one of the common frauds in real estate. To persuade
homebuyers invest their money in the project, builders make a lot of fake promises. Builders make
promises like homebuyers will get possession of the property within a certain period of time and
they say if they don't get possession, 12% returns will be paid on the money invested by them.
There are also cases where homebuyers asked for the returns, and builders gave them cheques
which bounced.
2. Title fraud
Title fraud is one of the most common ways, builders cheat homebuyers. Even individual sellers
employ this technique to make money. Under this fraud, sellers create fake title deeds and pretend
to be the owners of the property. Title fraud is very common on a disputed property, property
which is vacant for a long time or whose owner stays in a foreign country for a long time. After
creating the fake title deeds, sellers sell the property to innocent buyers. By the time the buyer gets
to know he is cheated, the fraudster would have disappeared. So make sure to do proper research,
before investing all your money to buy your dream home.
3. Delayed project
Another problem faced by homebuyers is a delay in the completion of the project. Builders simply
give reasons like they are waiting for certain approvals or there is a shortage of raw materials, but
this isn’t true. There are many projects in India, which are still under construction for the past
several years. Builders usually do this because they want the project to be completely booked or

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to divert money from one of their projects to another. This kind of cheating by builders has caused
a lot of problem to several homebuyers.
4. Changes in the approved plan
In some cases, when the project is completed, there will be a lot of variation when compared to
the approved plan. These variations may be in terms of common area. This will cause a problem
to buyers as they must compromise on the facilities, even though they have paid additional amounts
for the same.
5. Delayed Approvals
In some cases, builders delay various approvals, even if the project is complete. These include
approval for an electricity connection, water connection and so on. In such cases, even if the project
is ready for possession, it is of no use without basic facilities.
6. Rental yield trap
Many builders cheat buyers by promising fixed rental income from the house. Buyers assume that
they will get good rental income from the house and make a purchase without doing proper
research. After receiving possession of the property, buyers find it difficult to rent it out.

Delays in projects were one of the biggest problems faced by the buyers. This was due to range of
reasons from diversion of funds to problems in land acquisition, bad construction etc.
Consequently, the courts were flooded with litigations, police registered are filled with FIR’s
against the promoters, thus choking the entire system. Therefore the coming of the RERA act will
be a boon to all home buyers who have been clamoring for transparency and accountability in the
real estate sector.
First, the registration of projects and brokers with RERA will help the buyers not only in making
informed decision but also prevent frauds caused due to selling of projects without approval plans
with developers, siphoning off money by the brokers etc. Also it will help organize and regulate
the broker segment in India. Now the broker will themselves endeavor to choose a RERA
compliant developer before selling the project.
The compulsory timely compensation in case of delay of projects is expected to reduce litigations
in the court. Moreover, the mandatory mention of carpet area will not provide any room to
developers to employ deceiving tactics between what they promise to give and what they actually

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give. Therefore the act has laid down much responsible and larger role for the developers, thereby,
ensuring greater transparency in project-marketing and execution.

How to decide whether to buy a home or live on rent

Experts advise that youngsters can consider buying a home in the early stages of their career, if
they have a commitment to stay in a particular city. Even though it may seem difficult to manage
the EMIs initially, after 5-10 years when their salaries increase, while the EMIs still remain the
same, it would be a relatively lower proportion of your salary. Moreover, the property prices would
have also appreciated multi-fold.
Landlords in most states also tend to restrict the number of years that a tenant can occupy their
house, due to the weak protection provided by the law to the landlords. With lower interest rates
and the government subsidy for first-time buyers of affordable homes, owning a home is now
possible for many more people.

Why owning a home may be a better choice over a rented home

• Owning a house could also generate additional income, in the form of rentals or from
paying guests.
• Rentals may seem cheaper compared to the EMI in the short run but in the long run, it is
far higher than the cost of the house and the rental cost cannot be recovered.
• A home owner can mortgage the property but a rental property cannot be mortgaged by a
tenant.
• A tenant may have to shift out of a rented home anytime, at the request of the owner.

Own home versus rented home: Financial implications

Case 1: Let us assume that a person lives in a 3-BHK rented home and pays a rental of Rs 20,000
per month. The average rental appreciation is five per cent per annum.
Case 2: A person buys a 3-BHK home for Rs 40 lakhs on a home loan for 20 years.
Assuming that a person has occupied the home for 40 years, here’ a look at the financial
calculations:

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 Detail Calculation

Case 1 (Living on rent)

Assumed rent (per month) Rs 20,000

Rent appreciation (per annum) 5%

Expected rent after 20 years (per month) Rs 40,000

Expected rent after 40 years (per month) Rs 80,000

Amount paid in 40 years Rs 2.9 crores

Case 2 (Living in one’s own house)

Assumed home loan amount Rs 40 lakhs

Tenure 20 years

Interest rate 8.3%

EMI Rs 34,200

Total amount paid in 20 years Rs 82 lakhs

Rent amount saved by a home owner who lives for 40 years (i.e., excess amount
Rs 2.1 crores
paid by the tenant in the last 20 years)

In the example above, the cost of living in a rental property for one’s whole life, would be much
higher than living in one’s own home. Moreover, the capital value of a home also increases over a
period of time, whereas, you get no such benefit in a rental home.

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 8. Main aspects of RERA

Expected Question: Examine how consumers will be benefited from RERA,2016.

• Timely delivery of flats

• Developers often make false promises about the completion date of the project, but
hardly ever deliver.

• Strict regulations will be enforced on builders to ensure that construction runs on time
and flats are delivered on schedule to the buyer.

• If the builder is not able to deliver the flats on time, he/she will have to refund the
purchaser with interest.

• Furnishing of accurate project details:

• In the construction stage, builders promote their projects defining the various amenities
and features that will be part of the project. But not everything goes as per plan, with
several features missing.

• As per the Act, there can't be any changes to a plan.

• And if a builder is found guilty of this, he/she will be penalized 10% of the project’s
costs or face jail time of up to three years.

• Specifying carpet area:

• Generally, builders sell flats on the basis of built-in area, which includes a common
passage area, stairs and other spaces which are 20-30% more than the actual flat’s area.

• But, not all buyers are aware of the concept of carpet area.

• With this Act it will become mandatory to declare the actual carpet area.

NOTE: Built-up area, Super built-up area, Carpet-area are technical expressions… we
will discuss in detail in our subsequent classes.

• All clearances are mandatory before beginning a project:

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 • Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer,
enticed by the offers, does not bother about the clearance.

• But, due to delays in getting clearance, the buyer does not get the flat on time.

• This Act ensures that developers get all the clearances before selling flats.

• Each project should have a separate bank account:

• Developers raise funds through pre-launch offers and use them to purchase some other
land or invest it in other projects.

• This Act will make it compulsory that a separate bank account be maintained for each
project.

• Each transaction will have to be recorded, and diversion to another project will not be
entertained.

• After sales service:

• As per an interesting clause in the Act, if the buyer finds any structural deficiency in
the development of the building, the buyer can contact the builder for after sales service.

• But, the buyer should approach the builder within 5 years of purchase to rectify such
defects without further charges.

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 9. CARPET AREA AS PER RERA.

Expected question:
Elaborate the definition of Carpet Area as provided by RERA. How it differs from the ordinary
understanding of carpet area.

The area of a property is often calculated in three different ways – carpet area, built-up area and
super built-up area. Hence, when it comes to buying a property, this can leads to a lot of disconnect,
between what you pay and what you actually get. Not surprisingly, the maximum number of cases
registered in the consumer courts, are against developers on the issue of cheating, vis-à-vis the size
of the flat. According to the provisions of the Real Estate (Regulation and Development) Act, 2016
(RERA), it is now the duty of the developer, to make buyers aware of the carpet area and quote
prices based on this and not the super built-up area.

What is the carpet area?

Carpet area, or the net usable area, is the space where one can spread a carpet. Built-up area
includes the carpet area, plus the extra areas certified by the authorities, such as the area of the
outer and inner walls, dry balcony area, etc. Super built-up area includes the carpet area, the built-
up area, as well as a share of the balance area, such as the stairs, lobbies and galleries, which can
be used by the entire building.

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For example, if the built-up area is 1,000 sq ft, 30% (that is, 300 sq ft) is generally not usable and
is usually the dry balcony, staircase, etc., while 700 sq ft is the remaining area that will be used
and is hence the carpet area.

Carpet area and affordable housing

Residential units in metro cities with 60 sq metres of carpet area and 90 sq metres of carpet area
in case of non-metro cities, are considered as affordable housing. Any alteration to this
understanding is decided by the authorities.

Carpet area under RERA

According to the RERA, carpet area is defined as ‘the net usable floor area of an apartment,
excluding the area covered by the external walls, areas under services shafts, exclusive balcony or
verandah area and exclusive open terrace area, but includes the area covered by the internal
partition walls of the apartment’.
An easier description would be: Anything inside the outer walls of an apartment, but excluding the
balconies, verandah or open terrace and shafts. One expert says“Now the balcony’s area will not
be included, even if it is an exclusive balcony for the flat. The area of the lift lobby, staircase lobby
or any space that you can be in, before you enter the house through the main door, cannot be
included. Also the common/exclusive shaft that is used to vent the air from kitchen/lavatory, is
excluded. However, a walk-in wardrobe will be included,” he explains.
Another expert points out that “Many promoters provide information on the built-up area, rather
than the carpet area, which is less than the built-up area.” Now, a clear definition will align
customers’ expectations, with the actual measurements of the flat.

Mandatory disclosure of carpet area and its impact

Buyers will now understand the exact measurement of the flat they can reasonably expect to
receive from the developer. Furthermore, they will know exactly what part of the flat is included
in carpet area and what part is included in verandas and terraces. Additionally, developers will

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have to be more stringent in planning their projects, to ensure exact rendition of plans to actual
carpet area.

• The earlier practice of including balcony, terrace, verandas, flower beds and void spaces
within the meaning of carpet area, by unscrupulous developers, will now come to an end.
• In certain cases, corner apartments, or other apartments placed at certain advantageous or
disadvantageous positions, usually used to get a little more or less carpet area. While the
apartments at advantageous positions that had greater carpet area were always priced at a
premium, the ones which lost some carpet area were never sold at a discount, as the
‘missing’ carpet area was usually obfuscated in the super built-up area.

• Good design and efficiency will now become crucial. Previously, an inefficient design,
which used too much of common area space, would fare the same as a good design, as both
could have the same super built-up area, but different carpet areas.

How it will help home buyers?

In many projects, loading accounts for approximately 30%-35% of the total area. Accurate
information about a project’s site, layout and plot, will empower the buyer to take an informed
decision. It would also become easy for owners to understand the components of their tax liability
on property and the rights and easements associated with a property, when it is part of a larger
common structure or building.
As per the RERA guidelines, a builder must disclose the exact carpet area, so that a customer
knows what he is paying for. However, the act does not make it mandatory for the builders, to sell
a flat on the basis of carpet area. Bankers, investors, developers and brokers, need to start practicing
RERA and disseminate the information. All the changed definitions are supposed to be practiced
and executed on the ground by the real estate fraternity, so that there is clarity and benefit for the
end-users,” he concludes.

Change in price if the carpet area is altered

In the case of an apartment, the promoter has to confirm the final carpet area that has been provided
to the buyer, after the construction is completed and the occupancy certificate is granted. The real
estate law specifies that in case of alterations, the total payable price will be recalculated. If there

27
is a reduction in the carpet area, the excess amount would be refunded within 45 days, with an
annual interest rate as prescribed in the rules. Note that the increase in the area cannot be more
than 3%. In case there is an increase in the carpet area, the developer can demand a higher amount
in the next payment. The cost will be calculated at the same rate per sq ft, as agreed.

Penal action against developers for false information

Section 61 of the RERA says that for providing false information and other such contraventions,
the promoter may have to pay a penalty of 5% of the estimated cost of the real estate project.

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 10. Undivided Share of Land AND Rights of the apartment owner.

Expected Questions:

What is Undiveded Share of Land

OR
Explain the legal significance of UDS
Enumerate the legal rights of the apartment owner.

There are a lot of factors that a buyer needs to address while buying a new house to get the
perfect property. Many buyers decide on their purchase based on the built-up area offered
and the additional amenities attached to the flat. However, they often overlook the most
important factor in any real estate purchase, which is the actual land that one will own. This
is more so in the case of apartments.

It is important for the buyers of apartment flats to understand that, as a matter of fact, they do not
buy a structure alone. They also buy a part of the land upon which that structure stands and it is
their right to own an undivided share of land.

What is Undivided Share of Land (UDS)?

Undivided Share of Land or UDS is a part of the plot given to the owner of the flat in an apartment
complex on which the entire structure is built. This share of land has no defined boundaries and
each and every flat built on that particular plot will have associated UDS.
Simply put, when you buy an apartment, you technically buy two things. One, the constructed part
of the building where the owners will actually reside, while the second is a proportionate share of
the land on which the property is built. The latter share of land allotted to the flat buyer is known
as an undivided land share or UDS.
Importance of Undivided Share of Land
Price appreciation in real estate is actually an appreciation of land prices. This is the reason
that the amount of land you own would matter. Following is the importance of UDS:

• It is your right: The worth of your property is primarily decided by your undivided share
inland in an apartment building. Buying a flat is not exactly a great investment because the

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 value of the constructed area depreciates with time. The older the construction, the lower
the market value of the property. The land on which the building is built appreciates, but the
building itself depreciates in value.
• It decides the legality of the structure: The legality of a housing project also depends on
whether UDS is in compliance with the FSI (floor space index) permitted to the developer.
A look at your undivided share in land and such detail would reveal the illegality of a
structure.
• It is a criterion to get a home loan: In case you are taking a home loan, the bank will look
for the UDS while granting you credit. In case you are buying a property in resale, they will
check for the share certificate from your housing society along with other documents to
process your request for a home loan. At the time of property registration, too, the sub-
registrar would check the share certificate. The home loan insurer would go for a similar
exercise.
• Your future depends on it: In case of a natural calamity, a buyer is compensated depending
on his UDS. In case, if the government decides to acquire the land and take down the project
or the project is taken up for redevelopment, the same would be true. If you decide to sell
your property in future, you will naturally have to show proof of your undivided share of
land.

Legal Implications of UDS

Legal implications of UDS whether stated explicitly or not, do exist. For example, if an apartment
building is to be demolished for reconstruction or comes under acquisition for a government
project to be made available for demolition, the compensation administered to the flat owner
depends on the percentage of the undivided land share in the property.

Rights of the Apartment Owners

• A resident has the right to attend the general assembly meeting and discuss the subjects.
• A resident has the right to get a copy of the co-operative society act and the bye-law.
• A resident has the right to get the list of members and managing committee.
• A resident has the right to get reports such as balance sheet, profit, and loss A/c, details of
income and expenditure of the society.

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 • A resident has the right to get attended or addressed his complaints and grievances.
• A resident has the right to take the decision about the penalty to be charged on members,
violating by-laws of the society, and to determine its amount.
• A resident has the right to participate in all activities of the society.
• A resident has the right to the occupation of flats as well as the undivided share of land.
• A resident has the right to transfer/inherit the property.

The sum of all the undivided land shares for each apartment owner must be proportionate to the
area of the land in which the apartments are constructed.
In case of co-operative housing societies, the UDS must legally be in the name of the society as
the flat owners are the shareholders of the society.

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 11. Real Estate Project – Common Area – Rights of the Apartment owner.
Expected questions:

1. What is the Real Estate Project under RERA,2016

2. What is Common Area in Real Estate Project?
3. Rights of the Apartment Owner.

What is The Real Estate Project under RERA, 2016?

Real Estate Project means the development of a building or a building consisting of apartments,
or converting an existing building or a part thereof into apartments, or the development of land
into plots or apartment, as the case may be, for the purpose of selling all or some of the said
apartments or plots or building, including the common areas, the development works, all
improvements and structures thereon.

What is Common Area in Real Estate Project?

Common Area is explained in section 2(n) of The Real Estate (Regulation and Development)
Act, 2016. It is explained as details of all facilities , amenities , whether proposed or not and its
percentage of completion are required to be provided.
Common Areas include the following areas of a building:

• The entire land where the real estate project is developed.

• All the staircases, lifts, lobby areas of staircase and lift, fire exits, and common entrances of
the buildings.
• Open parking areas, play areas, parks, jogging tracks, common basements, terrace, and any
common storage spaces.
• The houses to accommodate the building’s security and community service personnel.
• The central services installations used by all the people in the building or society such as
electricity, water, gas, sanitation, air-conditioning, the system for water conservation and
renewable energy.
• The water tanks, sumps, motors, fans, compressors, ducts, and all apparatus connected with
installations for the common use of the residents in the building.
• The community and commercial facilities as provided in the real estate project.

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Rights of an allotee regarding the Common Area under RERA, 2016
An Allottee can-

1. Seek information related to sanctioned plans, layouts plans, approvals from the competent
authorities.
2. Seek information on the progress towards completion and provision of basic amenities like
water, electricity, sanitation.
3. Demand possession of the unit allotted. The possession of the common areas are demanded
by the association of allottees.
4. Demand refund or compensation in case builder makes any breach of clause as per RERA.
5. Demand access to or copies of necessary documents related to physical handover of unit
and common areas.

Section 17 of the Real Estate (Regulation and Development) Act, 2016 provides that the
promoter of a project shall-

• Execute a registered conveyance deed in favor of the allottee along with the undivided
proportionate title in the common areas to the association and,
• Hand over possession of same to the allottees and the common areas to the association of
the allottees, in a real estate project, and the other title documents pertaining thereto – within
specified period as per sanctioned plans as provided under the local laws.

Thus from a reading of Section 17 of RERA with its proviso, it is clear that promoters are bound
to execute and register the conveyance deed in favor of the allottee or association within the period
provided under local laws. In the event there are no local laws prescribing such period, an outer
time frame of three months from the date of issue of Occupancy Certificate has been stipulated.

Rights of the Apartment Owners

• A resident has the right to attend the general assembly meeting and discuss the subjects.
• A resident has the right to get a copy of the co-operative society act and the bye-law.

33
• A resident has the right to get the list of members and managing committee.
• A resident has the right to get reports such as balance sheet, profit, and loss A/c, details of
income and expenditure of the society.
• A resident has the right to get attended or addressed his complaints and grievances.
• A resident has the right to take the decision about the penalty to be charged on members,
violating by-laws of the society, and to determine its amount.
• A resident has the right to participate in all activities of the society.
• A resident has the right to the occupation of flats as well as the undivided share of land.
• A resident has the right to transfer/inherit the property.

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 12. Enumerate the functions and duties of the Promoter under RERA.

The Real Estate (Regulation and Development) Act, 2016 defines A Promoter under Section 2(zk)
as any of the following persons:
1. A person who constructs any independent building or a building consisting of apartments, or
converts an existing building into apartments, to sell all or allot the apartments to any other
persons and includes his assignees.
2. A person who develops land into the project, whether or not the person also constructs
structures on any of the plots, to sell it to other persons, whether with or without structures.
3. Any development authority or other public body in respect of allottees who builds or constructs
which is owned by them or placed at their disposal by the Government.
4. Any such authority that owns the plots or placed at their disposal by the Government for selling
purposes of the plots or apartments.
5. A State-level co-operative housing finance society and a primary co-operative housing society
that constructs buildings or apartments for its members or in respect of the allottees.
6. Any person who acts as a builder, contractor, developer, estate developer, or claims to be the
holder of the power of attorney from a landowner on which the apartment or building is
constructed, or any plot is developed for the purpose of sale.
7. Any person who constructs any building or apartment for sale to the general public.

Under the RERA Act, there is compulsory registration of Promoters and every project must
be registered with the RERA. In order to protect the interest of allottees, the Act has imposed
various obligations and restrictions on the Promoter to ensure fairness and transparency in their
dealing with allottees.

FUNCTIONS AND DUTIES OF THE PROMOTER:

• To get the proposed real estate project registered with the RERA;
• To create a web page and display the project on the website of RERA so as to make the details
therein available on the public domain wherein he shall:
i. share the details of the proposed project for public viewing;
ii. quarterly updates of list of bookings of apartments, plot, garages;

35
 iii. quarterly up to date status of the project;

iv. quarterly up to date list of approvals taken and pending approvals.;

• The Promoter shall not to advertise or make an offer for sale without registering the project.
Further, under Section 11(2), the advertisements or prospectus issued or published by the
promoter shall mention the website address of an Authority.;
• The Promoter shall make available certain documents at the time of booking and issue of
allotment letter such as Sanctioned plans, layout plans, along with specifications, approved by
the competent authority, to be displayed at the site or such other place as may be specified by
the regulations made by the Authority;
• The stage-wise time schedule for completion of the project, including the provisions for civic
infrastructure like water, sanitation, and electricity.
• To obtain the completion certificate and the occupancy certificate and completion certificate
from the relevant competent authority as per local laws or other laws for the time being in force
and to make it available to the allottees individually or to the association of allottees, as the
case may be.
• To obtain lease certificate, where the real estate project is developed on leasehold land,
specifying the period of the lease, and certifying that all dues and charges in regard to the
leasehold land have been paid, and to provide the lease certificate to the association of allottees;
• To refund the amount received in case of failure to give possession on time;
• To compensate the allottees for loss due to defective title of the land etc.;
• Under Section 13 (1), the Promoter shall not accept a sum more than ten percent of the cost of
the apartment, plot, or building as the case may be, as an advance payment or an application
fee, from a person without first entering into a written Agreement for sale, in the prescribed
form, with such person.
• To pay the outgoings until the promoter transfers the physical possession of the real estate
project to the allottee, including land cost, ground rent, municipal or other taxes, etc.
• After executing an agreement for sale for any apartment etc. not to mortgage or create on such
apartment, building or plot, even if a mortgage is done it must be ensured that it will not affect
the rights and interest of allottee.

36
• Enable the formation of association or society or co-operative society of the allottees or a
federation of the same under the applicable laws.
• For providing and maintaining all the essential services, on reasonable charges, until the
making over the maintenance of a project by the association of allottees.

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 13. Real Estate Agent.
Expected question:
Explain the functions of a Real Estate Agent under the RER Act, 2016.
Or.
Explain the procedure prescribed for a person to become a Real Estate Agent.

Under the Real Estate (Regulation and Development) Act (RERA), which came into force on May
1, 2017, real estate agents will need to register themselves, to be able to facilitate a transaction.
The agent segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000
to 9,00,000 agents. However, it has traditionally been unorganized and unregulated.

Impact of inclusion of agents under RERA

Once agents are managed under the RERA regulations, investors’ and home buyers’ trust is likely
to increase and this could lead to an increase in sales and revenue for both, agents and builders.
According to experts - “It will go a long way in cleaning up the sector and making it more attractive
for all stakeholders. Customers will now be protected on all fronts and can make their purchase
decisions with a lot more confidence.”

RERA rules to be followed by real estate agents

Every state’s regulatory authority has in place a set of guidelines, to be followed by the agents/real
estate agents. The law states that no real estate agent can facilitate a sale or purchase of any
property, or even act as mediator, if he/she is not registered with the state Real Estate Regulatory
Authority.

Rules for registration of agents

Every real estate agent is mandated to make an application to the state Real Estate Regulatory
Authority, for registration, along with the fee and documentation that is prescribed. For example,
MahaRERA charges Rs 10,000 from an individual, proprietor, or proprietorship firm and Rs one
lakh from partnership firms, societies, private limited/limited company, LLP, etc.
Once the authority scrutinises your application, it will grant a single registration for the state or
union territory, as per your case. The authority may even reject your application at this stage with

38
sufficient reason that will be provided to you in writing. However, before such a rejection, your
reasons will also be heard. If you do not receive any communication from the authority, consider
your application to be accepted. Note that the authorities shall deliver the registration number,
along with the certificate, within 30 days from the date of registration.

Documents needed for registration of real estate agents

1. Application form and prescribed fees.

2. Personal information, such as name, address and type of enterprise.
3. Income tax returns for the previous three years preceding the date of application for
registration.
4. Details of projects, promoters and their advertisers, with whom the agent associated for
business over the last five years.
5. Any detail of civil, criminal cases that are pending against the agent or his/her firm.
6. Copies of letterheads, rubber stamp, receipts that the agent intends to use.

Quote your registration number

Once you are registered with the Real Estate Regulatory Authority, you will receive a registration
number and you must quote this number in every sale that you facilitate. The registration also has
an expiry date, prior to which you must renew it with the necessary fees. The certificate is valid
for five years and renewal needs to be done at least 60 days prior to the expiry of the registration.

Penalty against defaulting real estate agents

The RERA has stringent rules in place, to ensure that all stakeholders are compliant. The same
stands true for agents . In case of violation, such as securing registration with misrepresentation of
facts, fraud, etc., the authority can suspend the agent’s registration for a time period that it deems
appropriate. A penalty of Rs 10,000 per day during the period of failure and a maximum of up to
5% of the value of the deal or project value, will be levied on an unregistered agent dealing with a
registered project. However, the agent will be allowed an opportunity to be heard.

Important rules to be followed by real estate agents in India

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 • Agents cannot facilitate the sale of a property that is not within a planning area and not
registered with the authority.
• Real estate agents must maintain books of records, documentation and accounts.
• It is punishable by law to be involved in any unethical practice, which includes making
false statements regarding quality, grade, registration, approval status, advertisements and
other misleading information or service that cannot be offered as per rules. All
advertisements, marketing, selling or purchase papers, should have the registration number.

RERA makes real estate agent professional

According to some experts the agents are important stakeholders and it is an excellent move to
bring them under the ambit of RERA.
It will bring a lot of accountability in the industry and the ones who believe in professional and
transparent business, will reap all the benefits. Now, the agents will have a much larger and
responsible role to perform, as they will have to disclose all the appropriate information to the
customer and even help them chose a RERA-compliant developer.
Experts observe: “Home buyers and investors put their hard earned money in properties, trusting
the agents and the builders. Unfortunately, some agents sell properties where the title is unclear or
the property is disputed, merely for their own financial gain. With RERA, all this cheating will
come to an end.”
With RERA in force, agents cannot promise any amenities or services that are not mentioned in
the documents. Moreover, they will have to provide all information and documents to the home
buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced,
unprofessional, fly-by-night operators, as agents not following the guidelines will face hefty
penalty or jail or both.

The early days of RERA and agent compliance

Initially, states were not ready with the infrastructure and resources to implement RERA. Agents,
especially the smaller ones were worried about the increased cost of compliance, which would eat
into their profits. Now, this sector will become an untenable marketplace for freelancers and part-

40
time operatives because agents will no longer be able to afford to operate without an institutional
framework.
Another issue, is that there is no time-frame for agents to register themselves, or a body that could
train and certify the agents on guidelines. It is a great idea to have a proper system and at the same
time agents’ interests should also be kept in mind.
“A lot of agents do not have a clarity on the Act and are confused. It would take the agents some
time, to understand and abide by the norms, but in a few months, when things get clearer, I think
it should be good for all.

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 14. Completion Certificate.
Expected question
Explain the importance of a completion certificate for developers as well as home buyers.

What is a Completion Certificate?

A completion certificate is a document that is awarded, after the inspection of a real estate project,
stating that it has been constructed according to the approved building plan and that it meets all
the necessary standards set by the local development authority or municipal corporation. This
certificate needs to be obtained by developers, as well as owners of standalone properties. It is
required, to ensure the supply of utilities like water, electricity and drainage system.

Importance of a completion certificate for developers

A completion certificate contains all the details about the building, including the location,
identification of the land, details about the developer/owner, the height of the building and the
quality of materials used. It also states whether the project has been built according to the building
plans and in accordance with the rules and regulations set by the local municipal authority,
including the distance from the road, distance maintained between neighbouring buildings and so
on. In many states, a completion certificate is necessary, for the developer to obtain water and
electricity connections to the property.
On October 22, 2020, the Madras High Court (HC) also ruled that housing projects across Tamil
Nadu will not be able to get electricity in the absence of a completion certificate. The HC ruling
came on a Tamil Nadu Generation and Distribution Corporation (TANGEDCO) order dated
October 6, 2020, through which it has withdrawn the necessity for builders to have a CC to apply
for power connections.

Details provided in Completion Certificate

Among the many details provided in a completion certificate are:

• Details of the land.

• Every detail about the building plan.
• All details about the builder.
• Approved height of the building.

42
 • The location of the project and its distance from other buildings in the nearby area.

In essence, a completion certificate assures the concerned authorities that a property satisfies all
the requirements set by them and adheres to the building plan that was authorised, before the
construction began. It also assures home buyers that the property is safe to live in and will have a
regular supply of water and electricity.
It is also possible for a developer to obtain a provisional completion certificate, if they need to
hand over the building/apartment to the home buyer when there is some work yet to be done.
However, this certificate is valid only for six months, after which the developer needs to apply for
the final certificate, once the construction is complete.

Provisional completion certificate

In cases where a majority of the work at the project is done and offering possession to buyers
becomes important, a provisional completion certificate is issued to the developer. This document
is typically valid only for a limited period, within which the builder must finish the pending work
and apply for the completion certificate.

Importance of a completion certificate for home buyers

It is not advisable to take possession of a new property that does not have a final CC. Without a
valid certificate, a project or a building is deemed to be illegal and can, therefore, invite penalties
or even eviction from the property. In cases where the developer has not obtained the completion
certificate yet, a buyer can approach the local municipal authorities individually, or form a
residents’ welfare association (RWA), to ensure that the process is completed before they take
possession of their properties.
In the recent times, the authorities have allowed residents to take possession of partially completed
housing projects, especially in projects that have been stuck for a long time and where completion
is possible in a phased manner. This has been commonly seen in housing projects of insolvent
builders such as Amrapali and Unitech. In such a scenario, taking possession of the unit is alright,
because it is being done on the order of the authorities concerned.

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 15. Powers and Functions of Real Estate Regulatory Authority.
Explain: Elaborate the powers and functions of Real Regulatory Authority.
Concept of RERA Authority
The term RERA Authority stands for Real Estate Regulatory Authority. It was established by
the Government to monitor the working of the Real Estate Sector.
This authority mandates builders and promoters to disclose all the material information about the
project. Moreover, every real estate agent must register them and their project with authority.
The main function of the RERA Authority is to provide relief to the buyers by quick dispute
redressal. They are also responsible for enforcing accountability and transparency in the industry.
Within one year from the enforcement of the RERA Act, 2016, every state government needed to
establish a RERA Authority. Further, all the duties and functions of RERA Authority are
prescribed under the RERA Act. The government has to power to set up one or more RERA
Authority in the State or UT.
Further, this authority is a Body Corporate in nature. That means it has the feature of the common
seal and perpetual succession. It can hold, acquire, and dispose of both immovable and movable
property and can also enter in contract.
Functions of RERA Authority
Section 34 of the RERA Act, 2016 specifies the functions of RERA Authority, which can be
summarised as:

1. Register and Regulate: This authority can register and regulate both real estate agents and
real estate projects.
2. Publish and Maintain Records: It needs to publish and maintain records of the projects
for public viewing.
3. Maintain Database of Promoters: It needs to maintain a database on its website of all the
real estate projects. The database contains the information and photographs of the
promoters or the projects whose license has been revoked.
4. Maintain Database of Real Estate Agents: The authority must maintain a database of
the real estate agents registered with it. It also provides information and photographs of
agents whose license has been revoked or rejected.

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 5. Fix Regulations: A RERA Authority needs to fix rules and regulations for each area under
its jurisdiction. It can also prescribe the fees to be charged from the allottees, promoters, or
the real estate agent.
6. Ensures Compliance of Obligations: This authority ensures compliance of all the
obligations cast upon the promoters, allottees, and agents.
7. Ensures Compliance of Orders: It needs to confirm that all the regulations and orders
passed by it are duly followed.

Functions of RERA Authority for Promotion of the Real Estate Sector

A RERA Authority can make recommendations to the Central Government for assisting the
growth and promotion of the real estate sector. The areas on which it can make suggestions are
as follows:

1. Protection of the interest of the promoter, developers, allottees, and real estate agents;
2. Formation of a single-window mechanism for confirming time-bound approvals for
completion of projects;
3. Creation of Robust Grievance Redressed System against the act, commission, and omission
of the competent authority;
4. Methods to promote Investments in the Real Estate Sector;
5. Measures to raise financial assistance for affordable housing sector;
6. Ways to promote the construction of affordable and environmentally sustainable housing;
7. Measures to encourage the use of appropriate construction fixtures, materials, fittings and
techniques;
8. Ways to encourage project grading on various factors of development including promoters
grading;
9. Procedures to provide amicable resolution of disputes between allottees and developers;
10. Ways to facilitate digitization of land records;
11. To provide RERA advice to the Government in the issues concerning the development of
the Real Estate Sector. Such advice must be given within 60 days from the receipt of the
reference from Government;
12. Any other matter that the authority finds necessary for the promotion and growth of the
Real Estate Sector.

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Powers of the RERA Authority
In India, the powers of the RERA Authority are as follows:

1. To Call for Information from any Promoter, Allottee or Real Estate Agent;
2. To Conduct Examination of the Books of Account, Documents, and Records of the
Promoter or Agent;
3. To have all the Authorities and Power of a Civil Court under the Code of Civil Procedure,
1908;
4. To Issue Interim Orders to Restrain the Promoters, Agents or Allottees from Carrying out
any activity in contravention to provisions;
5. To Impose Penalty on any Promoter or Agent for doing an act in violations to the
provisions of the Act;
6. To refer a matter/ case to the CCI (Competition Commission of India) . The term matter
denotes a monopoly situation which has abuse the interest of allottees;
7. To Amend or Rectify any order within two years for any mistake evident from the record;
8. To Recover the amount of Interest, Compensation, or Penalty from the Promoters, Agents,
or Allottees.

Conclusion
In India, RERA was implemented by the government to solve problems that homebuyers face. It
was also launched to create accountability and transparency in the estate industry. The RERA
Authority acts as a watchdog over the affairs of the Real Estate Sector. Both the real estate project
and the Real Estate Agent need to obtain registration from the authority.

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 16. Write an essay on retrospective operation of RERA, 2016
APPLICATION OF RERA ON REAL ESTATE PROJECTS
On May 1, 2017, the Real Estate (Regulation and Development) Act, 2016 (RERA or the Act) was
enacted. The Act has introduced new obligations on real estate developers and in cases of default,
prescribes penal liabilities. Significantly, the Act applies not only to future projects but also to
ongoing projects, where construction began prior to May 1, 2017. Consequently, it appears that
the Act may well erode and interfere with the accrued/vested rights of developers and customers,
under contracts executed among them prior to May 1, 2017.

Impact of retrospective application of RERA

The Act applies to all ongoing projects, where completion certificates have not been obtained,
irrespective of whether construction began prior to May 1, 2017. For instance, Section 3(1) of the
Act, restrains a developer from advertising and selling any space in a project, without registering
the project with the Real Estate Regulatory Authority (the Authority). For ongoing projects for
which a completion certificate has not been issued, this registration is to be obtained mandatorily
within a period of three months from May 1, 2017. Any violation of Section 3, could result in a
penalty of up to 10 per cent of the estimated cost of the project. In cases of continuing defaults,
imprisonment is also prescribed. The Act also provides for penal consequences, in cases of
breaches of obligations committed during registration.

One issue, however, is that when developers commenced construction, they had no knowledge of
the provisions of the Act or the proposed penalties, in the case of defaults. Therefore, bringing
these projects within the purview of the Act at this point of time, may amount to punishing the
developers for delays or other irregularities, which occurred during a period when the Act was not
in force.

On the question of retrospective application, Bombay High Court in Neelkamal Realtors Suburban
Pvt. v. UOI (2018 (1) ABR 558) explained that the application of the RERA to all pre-RERA
transactions, contracts and projects that are functional at the moment shall not be confused as being
a retrospective application. In light of any developmental project that has not received its certificate
of completion, an ongoing transaction between the allottee and Builder/ Promoter has been

47
included within the ambit of RERA to protect and foster the interest of the consumers and regulate
the real estate market, and hence, the High Court upheld the validity of Section 3 of RERA.

Grounds for prospective applicability

1. As a general principle, laws are to be applied prospectively. The Supreme Court of India, in
CIT v Vatika Township (P) Ltd ((2015) 1 SCC 1), held that a new legislation ought not to
change the character of past transactions carried out upon the faith of the then existing law.
Therefore, the Act, being a substantial new legislation, ought to operate prospectively. Further,
the Act is neither clarificatory nor declaratory of the existing laws. Rather, it is substantive,
creating rights and liabilities and therefore, presenting all the more reason for its prospective
application. The Act has also made certain validly executed agreements void, thereby, taking
away vested rights that have already accrued by way of such agreements.

2. The Act provides for penal consequences in cases of default. Article 20(1) of the Constitution
provides that no person shall be convicted of any offence, except for violation of a law in force
at the time of the commission of the act charged as an offence, nor be subjected to a penalty
greater than that which might have been inflicted under the law in force at the time of the
commission of the offence. Prior to May 1, 2017, the relationship between a developer and a
purchaser was governed by the terms of their contract. However, the Act, in its sweeping
manner, provides for penal provisions against a developer, even for acts that were not
punishable when committed, namely modification of specifications, alteration in super area,
minor structural changes, etc. Therefore, it appears that such penal provisions, if made
applicable to ongoing projects, may violate Article 20(1) of the Constitution of India and
thereby, be unconstitutional.

3. The rule of prospective application of statutes, is applied more strictly in cases of statutes
providing for penal consequences. Article 20(1) of the Constitution makes it a constitutional
right to not be punished for acts which were not punishable when committed.

4. There is no saving clause under the Act, which protects developers for acts which were earlier
permitted or for which the parties, by agreement, had fixed damages as a relief. The accrued

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 rights of such developers will be abated, if ongoing projects where such agreements have
already been executed, are brought within the purview of the Act.

5. Another point of concern is the possible delay of a project that is on the verge of completion.
It is possible that a developer may contractually have agreed to hand over possession of
flats/apartments in a real estate project, before May 1, 2017. However, due to reasons beyond
the control of the developer, the handing over of the property may have been delayed. Under
the existing contract, the developer may have had to compensate the buyer for such delay on a
fixed-sum basis. However, under the Act, the developer is now obligated to refund the entire
investment made by the buyer, along with interest and compensation. Further for an alleged
delay, which is to be treated as a violation of the Act, the developer is also liable to pay a
penalty. The delay can also give a right to a buyer to apply to the Authority for the revocation
of registration, which will impact the developer’s right to carry on trade.

Therefore, the Act, in that sense, not just erodes accrued rights, but also tampers with the justified
expectations of persons who, in acting reasonably, believed that the legal consequences of their
actions will be determined by the known state of the law established at the time of their actions.
While the Act attempts to ensure fairness and transparency for consumers, this cannot be permitted
to play out in a manner that imposes unfair and inequitable considerations on developers.

Some states, namely Uttar Pradesh and Andhra Pradesh, while framing their respective rules, seem
to have considered such points and already appear to have excluded such ongoing projects from
the purview of the Act, in cases where the developer has already made an application seeking the
issuance of a completion certificate. Other states though like Rajasthan, Madhya Pradesh and
Odisha and the Union Territory of Delhi, have retained the extant language of the Act. However,
the state rules, being delegated legislation, will not prevail over the Central Act. Constitutionality
is the touchstone of all legislations. It remains for the courts to answer, if approached, whether the
Act will withstand the challenge of constitutionality.

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 17. Builder-buyer agreements
Ireo Grace Realtech Pvt. Ltd. vs Abhishek Khanna (2021) ibclaw.in 07 SC.
Facts
The plaintiff was developing a residential project called The Corridors in Gurgaon. Several
purchasers filed complaints before the National Commission seeking a refund of the instalments
they had paid, plus interest, because the plaintiff had failed to give possession within the agreed
period of 42 months + 6 months grace period. However, the purchase agreements prevented a
buyer from terminating until 12 months after the expiry of the 42 + 6 months period, and further
restricted compensation for delayed delivery to ₹7.5 per square foot per month for a period of 12
months.

National Commission
The developer said the National Commission did not have the power under the Consumer
Protection Act to nullify the terms of a contract alleged to be unfair or one-sided. This is evident
from a comparison with the clauses of the Consumer Protection Act 2019 which specifically grant
this power to the consumer fora. The National Commission disagreed and set aside the offending
clauses in the purchase agreement as being one-sided and unfair. The National Commission
directed the developer to refund the instalments it had received along with interest of 10% per
annum.

Supreme Court
The Supreme Court referred to Sec 2(1)(c) of the 1986 Act which says that a complaint can be
filed in respect of an unfair trade practice, and to Sec.2(1)(r) which provides an inclusive definition
of an unfair trade practice. The Supreme Court held that the consumer foram are able to declare
contractual terms as unfair or one-sided “as an incident of the power to discontinue unfair or
restrictive trade practices”. While the 2019 Act specifically defines an “unfair contract” and says
these can be declared null and void, this is only “a statutory recognition of a power which was
implicit under the 1986 Act”.
The Supreme Court said that a delay in delivering possession amounts to a deficiency in service
entitling the buyer to receive a refund of the moneys paid along with reasonable compensation.
The compensation for delayed possession under the agreement of ₹7.5 per square foot per month

50
equated to only 0.9% to 1% interest per annum, and was clearly inadequate. In cases where the
buyer was entitled to a refund, the Supreme Court has directed the payment of interest at 9% from
the stipulated delivery date till the actual date of refund to buyers.
Conclusion
This decision effectively brings the position under the 1986 Act to a similar standing with the 2019
Act, and the decision may not be restricted only to claims against developers. Aside from this, the
specific inclusion of “unfair contract” provisions and the power to set the same aside under the
2019 Act may require sellers and service providers to revisit the practice of using standardised
“take it or leave it” contracts in its dealings with consumers.

Builder-buyer agreements after RERA

Considering that agreements that favoured builders were a key pain-point for the buyer
community, the real estate law tried to address this, by laying the ground rules for drafting and
executing builder-buyer agreements, referred to as agreement to sale in the Real Estate (Regulation
and Development) Act, 2016. An agreement for sale, according to the law, refers to an agreement
entered into between the promoter and the allottee.

Key provisions:
Builder has to submit agreement pro-forma
While registering a project, a builder has to submit, along with his application and other
documents, the pro-forma of the allotment letter, agreement for sale and the conveyance deed
proposed to be signed with the buyers.

Builder-buyer agreement is the guiding document

The law states that the builder will have to carry out his responsibilities as mentioned in the
agreement to sale.

Clause on earnest money

A developer cannot ask for more than 10% of the property’s value from the buyer, at the time of
signing the builder-buyer agreement. The parties are legally bound to register this agreement, to
provide it legal validity.

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Details in builder-buyer agreements
Section 13 (2) of the law prescribes that the builder-buyer agreement contain each and every detail,
leaving little scope for confusion in terms of the builder’s responsibilities.
“The agreement for sale shall specify the particulars of development of the project, including the
construction of building and apartments, along with specifications and internal development works
and external development works, the dates and the manner by which payments towards the cost
are to be made and the date on which it is to be handed over, the rates of interest in case of default,
and such other particulars,” says the law.

Failure to provide promised amenities

If a builder has promised a certain facility in the builder-buyer agreement, he is legally obliged to
provide it. If he fails to do so, the buyer can, within five years of getting the possession, point this
out to him and he will have to rectify the mistake in a month’s time.
“In the event of the promoter’s failure to rectify such defects within such time, the aggrieved
allottees shall be entitled to receive appropriate compensation in the manner as provided under this
Act,” says the law.
Even otherwise, if the promoter fails to discharge any obligations imposed on him under the terms
and conditions of the agreement for sale, he is liable to pay a compensation.
Also, after the builder executes an agreement for sale, he cannot mortgage or create a charge on
such property. If that were to happen, it would have no impact on the buyer whatsoever, says the
Act.

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 18. What do you understand by the term ‘Eminent Domain’? Discuss its relevance in the
present-day context'.

1) Eminent Domain: Meaning

The primary owner of land is the king or in modern sense the elected Government in power. As
such the right of ownership will always remain with the king or the elected government,
notwithstanding the fact that land is transferred to individual citizens for agricultural or other
purposes by the king or the government as the case may be.

The institution of private property has been a controversial topic with conflicting views, one
completely denying the right to own private property and the other supporting the holding of the
private property.

Doctrine of ‘Eminent domain’, in its general connotation means the supreme power of the king or
the government under which property of any person can be taken over in the interest of general
public. However, over the years such taking over the property by the king or the government has
been made possible only after compensating the land owner of such property.

Thus eminent domain explained as the power of the king or the government to take over the
property of a private person when it is needed for a public purpose. Doctrine of ‘eminent domain’
is based on two maxims namely,
1. salus populi supreme lex esto which means that the welfare of the people is the paramount
law.
2. necessita public major est quan, which means that public necessity is greater than the
private necessity.

Eminent Domain is power of the sovereign to acquire property of an individual for public use
without the necessity of his consent. This power is based on sovereignty of the State. Payment of
just compensation to the owner of the land which is acquired is part of exercise of this power.
Eminent domain power is regarded as an inherent power of the State to take private property for
public purpose. This power depends on the superior domain of the State over all the property within

53
its boundaries. An incidental limitation of this power is that the property shall not be taken without
just compensation.

2)Eminent Domain And Constitution

The expression “eminent domain” means permanent (eminent) dominion (domain) of the state on
the property. The power of the State to take private property for public use and consequent right
of the owner to compensate now emerge from the constitution of India.

The Constitution of India also recognizes the power of eminent domain. However, this power of
the state has been in limelight, more for the mischief that it is allegedly imputed to bring about.
Soon after Independence, the Supreme Court was charged with judging the constitutionality of
certain laws, which were intended to abolish the feudal zamindari (landowning) system

In entry 42 list III of seventh schedule under Indian Constitution, both union and States government
are empowered to enact laws relating to acquisition of property.6 The use of eminent domain
power for land acquisition is also justified when the public purpose in question can be served by
only a specific piece of land, which has no substitute

Acquisition or taking possession of private property which is implied in clause (2) of Article 31 of
Indian Constitution, such taking must be for public purpose. The other condition is that no property
can be taken, unless the law authorizes such appropriation contains a provision for payment of
compensation in the manner as laid down in the clause.

3)Limit on the Doctrine

The power of eminent domain was under the scrutiny of the Court. In explaining the power, the
Court held that eminent domain was “the power of the sovereign to take property for public use
without the owner’s consent”.
Meaning is that the power in its irreducible terms i.e.,
1. power to take,

2. without the owner's consent, and

3. for the public use.

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The reference to the 'sovereign ’ was a portent of one of the problem is that it has dogged the
existence and uses of the eminent domain power, that is, the relationship between the state and the
people. The power to take and the unqualified nature of 'public use', has made dispossession and
mass displacement of people.

The Supreme Court in Sooraram Reddy v. Collector, Ranga Reddy District, has articulated the
following grounds for review of this power:
1. malafide exercise of power;

2. a public purpose that is only apparently a public purpose but in reality a private purpose or
collateral purpose;

3. an acquisition without following the procedure under the Act;

4. when the acquisition is unreasonable or irrational;

5. when the acquisition is not a public purpose at all and the fraud on the statute is apparent

Although the power to determine what constitutes public purpose is primarily with government,
Courts have powers to review such decisions. In practice, however, the Courts have generally
placed limitation on themselves.
1. Compensation for the property acquired.

2. The interest of the community is always superior to the interest of the individual.

4)Article 300-A and the Doctrine of Eminent Domain

Article 300-A which merely says, “No person shall be deprived of his property save by authority
of law”. Hence, the rights in property can be curtailed, abridged or modified by the State only by
exercising its legislative power. An executive order depriving a person of his property without
being backed by a law is not constitutionally valid.
In addition to that, to say valid it must satisfy the following three tests:
(i) The authority which has enacted the law must have the legislative competency to do so;
(ii) It must not infringe upon any other fundamental right guaranteed by part III of the Constitution;
and
(iii) It must not violate any other provision of the Constitution.

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In Basantibai v. State of Maharashtra the Court did seek to interpret the Article 300-A favourably
to the property owners by reading therein the twin requirements of ‘public purpose’ and
‘compensation’. Under Article 300-A the legislature cannot sanction the deprivation of property
for a public purpose. However, the Parliament not intended to confer an absolute right on the
legislature to deprive a citizen of his property merely by the passing of a black-letter law.

5)Distinction between Eminent Domain Power & Police Power

In Chiranjit Lal v. Union of India, Supreme Court held that the eminent domain is the inherent
right in every sovereign State to take and appropriate the private property belonging to an
individual for public purpose. The State under its police power also regulates the use and
enjoyment of private property.

The police power can, however, be distinguished from eminent domain power. While under police
power, State merely regulates the use and enjoyment of property; under the eminent domain, State
can take the property from the owner for public use.
Notwithstanding this all pervasive nature of police power is that exercise of police power restricted
only to maintenance of law and order situation. In as much as police is only an assisting machinery.
This power seems to be synonymous with the power of eminent domain.

However there is vital difference between these two powers.

1. Eminent domain is a sovereign power exercised subject to public convenience, with the
ultimate object of meeting public welfare and public purposes and where as the police
power is exercised to ensure, interalia that the law and order is enforced to protect property
right, to achieve public purpose etc.,

2. Eminent domain power is unopposed authority subject to payment of compensation to the

person interested and whereas the police power is subject to scraping of the executive and
judicial wing of the government.

3. Eminent domain power originates out of the constitutional provisions and whereas the
police power originates out of legal provisions, which shall not be contrary to constitutional
provisions.

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 4. Exercise of eminent domain power operates sometimes harshly and unequally and requires
special sacrifices from the persons interested whereas such a situation does not arise while
operating police power.

5. Exercise of the power of eminent domain deprives the right in the property, and whereas
exercise of the police power provides security to the person and property

6)Distinction Between Power of Taxation vis-à-vis Power of Eminent Domain

Powers of taxation and right of eminent domain have much in common. Both are inherent powers
in any government and sometime both operate on property. Besides this, both are generally
asserted for public use and benefit. It is, therefore, not surprising that both cases confused with
each other.

Nevertheless, there is a clear line of demarcation between these two powers. In Laxmanappa
Hanumantappa v. Union of India, it was held that deprivation of property by imposition or
collection of tax does not amount to acquisition or requisition of property under Article 31(2),
which has been deleted by the Constitution (forty fourth amendment) Act, 1978.

In Chemili Singh v. Slate of U.P., it has been held that compulsory acquisition of land for
providing houses to dalits cannot be challenged on the ground of violation of right to livelihood
which is an integral part of right to life under Article 21.

The following are some of the differences between the power of imposing taxes and power of
eminent domain.
1. The power of taxation is not exercisable in respect of certain transactions of the society
whose income is below the level of imposing taxes, whereas such exclusion is not, while
exercising the power of eminent domain.

2. The power of taxation of the State is legal power and whereas the power of eminent domain
is an inherent power of the State.

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3. Taxation power is exercised to impose and collect taxes and whereas the power of eminent
domain is exercised to acquire and hold immovable property of persons for public purposes
which is a question of fact in each case.

4. While exercising the power of taxation the State need not pay any compensation to the
person connected instead of that citizen has to pay taxes to the State and whereas in case
of power of eminent domain, the State is under an obligation to pay compensation to the
person interested.

5. The power of taxation can be exercised against any property, movable or immovable,
whereas, the power of eminent domain can be exercised generally

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19. Salient features of Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013.

What is land acquisition?

Land acquisition is a process by which the government (state or union) can acquire private land
for the purpose of infrastructure development, urbanisation or industrialisation. In return, the
government will pay a suitable compensation to the land owner, as per the market value and would
be responsible for the rehabilitation and resettlement of the affected land owners.

What is the Land Acquisition Act?

the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and
Resettlement Act, 2013, also known as, The Land Acquisition Act, regulates and governs the
entire process of land acquisition. The Act chalks out the provision for providing fair remuneration
to the land owners, bringing transparency to the system and directs the government to rehabilitate
those who are most affected, because of their land being taken away.
Provisions and purpose of land acquisition
As per the Act, the government of India (state, as well as central) can procure land for its own use
or for public sector companies or for ‘public purpose’, which can include any of these:

• For any work related to state or national security or defence services of India, which
includes naval, military, air force or other armed forces, under the purview of the state or
central government.

• For building public infrastructure but excluding private hospitals, private educational
institutional and private hotels.

• For any project involving agriculture or allied industries, such as dairy, fisheries or meat
processing, owned by the government or by farmer’s cooperatives.

• For industrial corridors, manufacturing zones or other projects listed in the National
Manufacturing Policy. This can also include mining activities.

• For water harvesting, conservation structure projects or for planned development or

improvement of village sites.

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 • For government-aided educational and research institutions.

• For planned development, such as creating housing projects for the weaker sections, in
rural or urban areas.

• For developing residential projects for the poor or landless, or for people affected by natural
calamities.

Importance of consent

When the government acquires land for public purposes and controls the land bank directly, the
land owners’ consent is not a necessity. However, when the land is acquired for setting up private
companies, the consent of at least 80% of the affected families is mandatory. If the project is
undertaken through a public-private partnership, then, 70% of the affected families have to give
their consent for the land acquisition process.

Compensation under the Land Acquisition Act

Section 26 of the Act that deals with compensation for the land owners. It outlines the proposed
minimum compensation, based on multiples of the market value. Usually, the market value is
multiplied by a factor of one of two times, for land acquired in rural and urban areas.
The market value of the land is determined by the average sale price for similar types of land
situated in the nearest village or nearest vicinity area. This sale price is assessed, by considering

60
one-half of the total number of sale deeds or the agreements to sell, in which the highest price has
been mentioned.
The compensation can also be a consented amount, in case the land is acquired for private
companies or public-private partnership projects.

Shortcomings of Land Acquisition Act

The land Acquisition Act, 2013, was amended in 2015 which resulted in the following
shortcomings:

• The Social Impact Assessment was a must for every acquisition in the Act but the
mandatory requirement was removed for security, defence, rural infrastructure and
industrial corridor projects in the amendment.

• Consent is not mandatory for government projects in the latest amendment. This can result
in forceful evictions of land owners, without proper alternate arrangements for their
rehabilitation and resettlement.

• Earlier, multi-cropped land could not be acquired for any purpose but according to the
latest amendment, even multi-crop irrigated land can be acquired for security and social
infrastructure projects.

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 20. Kedar Nath Yadav v. State of West Bengal & Others (2016)

This case focuses on the compulsory acquisition of land by the State of West Bengal for a car
manufacturing unit under the auspices of “public purpose”. The Supreme Court of India
determined that the acquisition had not been for a public purpose, but for the benefit of a company,
and ordered the return of the land to local farmers. In doing so, the Court emphasized the need to
adhere to proper legal procedures, especially in light of impacts on the most vulnerable sections of
society, which include poor agricultural workers.

Summary:
In 2006, the Government of West Bengal agreed to let Tata Motors Ltd. (Tata Motors) construct
and operate a car manufacturing unit in their state (Small Car Project). Accordingly, the West
Bengal Industrial Development Corporation, Ltd. (WBIDC) acquired approximately 1000 acres of
agricultural land for the project pursuant to the Land Acquisition Act, 1894 (L.A. Act), affecting
the livelihoods of approximately 25,000 people – farmers, sharecroppers, landless laborers, and
rickshaw pullers. The claimants in this case were five farmers and small landowners. Objections
were filed with the Land Acquisition Collector, who concluded subsequently that the land was
being taken for a public purpose, namely employment creation and socio-economic development.
The Collector then made an award of compensation to the existing landowners and the land was
acquired by WBIDC. The acquisition proceedings were challenged before the High Court of
Calcutta and were dismissed.

As a result of numerous local protests, the Small Car Project was halted and relocated to the State
of Gujarat in 2008. The new Government of West Bengal then enacted the Singur Land
Rehabilitation and Development Act, 2011 (Singur Act) for the purpose of taking over the land
covered by the lease to Tata Motors. Tata Motors challenged the constitutionality of the Singur
Act before the Supreme Court of India (Court), arguing that it conflicts with the earlier L.A. Act
and that the government cannot change its mind simply because a new political party takes power.

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In considering the validity of the land acquisition, the Court rejected the arguments of Tata Motors.
In relation to the preliminary objection regarding a change in political power, the Court noted that
it is well established that a state government can change earlier laws especially if they were against
public policy.

The Court determined that the land acquired by WBIDC for Tata Motors was not for a public
purpose under the L.A. Act, but rather by the state government for a company. In this context, the
previous government exercised its eminent domain power (i.e. the right of a government or its
agent to expropriate private property for public use, with payment of compensation) without
following the required procedure set forth in the L.A. Act (namely Sections 3(f), 4, and 6, and
VII), depriving those who lost their land of their constitutional and fundamental rights. Further,
the Court found that the inquiry contemplated under 5-A2 of the L.A. Act was not duly conducted
by the Collector as some of the objectors had not been given a chance to be heard and the Collector
denied their objections without genuine consideration.
The Court quashed the acquisition of the landowners’ land, declaring it illegal and void. The Court
ordered the Government of West Bengal to conduct a survey to determine what land needed to be
returned, and then to return it. The Court further ordered that the compensation which had already
been paid to the landowners not be recovered by the state government, as reparation for having
been deprived of the occupation and enjoyment of their lands for ten years; and permitting the
landowners who had not already withdrawn their compensation to do so.

Enforcement of the Decision and Outcomes:

The decision is being implemented. The factory is being dismantled. The land is being returned to
the farmers. The decision has been a morale booster for the farmers of West Bengal who are
currently mobilizing against land acquisition in another part of West Bengal.

Significance of the Case:

For the first time, the Supreme Court of India drew a sharp distinction between acquisition of land
undertaken by government on public purpose grounds versus for the benefit of a private company.
Notably, the Court stated that “ Such an acquisition, if allowed to sustain, would lead to the attempt
to justify any and every acquisition of land of the most vulnerable sections of the society in the

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name of ‘public purpose’ to promote socio-economic development.” In the case of land acquisition
for companies, the legal provisions are very strict and require a prescribed procedure, including
negotiations with farmers. In this regard, and considering the pace of economic development, the
Court confirmed that “when the brunt of this ‘development’ is borne by the weakest sections of
the society, more so, poor agricultural workers who have no means of raising a voice against the
action of the mighty state government, as is the case in the instant fact situation, it is the onerous
duty of the state Government to ensure that the mandatory procedure laid down is followed
scrupulously”. This is the first time that farmers have been given back their land and
simultaneously been allowed to retain the compensation paid by government for acquisition.

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 21. BELAIRE OWNER’S ASSOVIATION V. DLF LTD.
FACTS:
The DLF Case began when the owner’s Association of Belaire (a DLF building complex in
Gurgaon) filed a complaint against the builder for breach of Sec.4 of the Competition Act which
dealt with Abuse of Dominance by a seller in the market. On hearing the evidence, the CCI
pronounced DLF guilty for grossly abusing dominant market position in Real Estate sector as it
imposed unfair sale condition not only imposed on Belaire apartments but also DLF Park Place
and Magnolia.

DLF builders launched a housing complex, ‘Belaire’ which, as per initial plan consisted of 368
flats in total in 5 multi-storied residential building consisting 19 floors each to be constructed in
DLF City, Gurgaon. Payments schedule was linked to projected stage wise competition of the
project with some amount to be paid at the time of booking of the flat, 2 months after the booking
date and remaining as per scheduled stage wise competition of the project. The advertisements of
the builder also guaranteed additional facilities such as clubhouse gymnasium etc., and ensured
completion of the buildings within 36 months from the launch of the project.

When the construction began, 5 buildings itself were constructed, however each building’s floor
number increased from 19 to 29 leading to an increase in total number of flats from 368 to 564.
Additionally, the facilities ensured by the builders were compressed due to shortage of area and
the delivery of the apartments were delayed to the owners by 2 years, even though the apartment
owners made their payments well on time.

The Belaire Owner’s Association (BOA) filed a complaint against the DLF Ltd. with Competition
Commission of India (CCI) accusing them of abuse of dominant position by their use of contracts
with the apartment owners. The BOA alleged various clauses of the Apartment Buyer’s Agreement
(ABA) entered into with the developer on buying flats as arbitrary, unfair and unreasonable.
CCI analyzed this information and held that prima facie case of abuse of dominance existed and
requested the Director General (DG) to conduct further investigation. DLF immediately
challenged the CCI’s jurisdiction but dropped the matter subsequently. The DG conducted an in-

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depth investigation and discovered that the conditions imposed by DLF did violate certain
provisions of the Competition Act.
The CCI on the basis of DG’s in- depth investigation held that the Act is applicable in the instant
case. It delineated the real estate market on the basis of services provided by developers for
construction of high-end buildings in Gurgaon.

ISSUES AND ARGUMENTS:

1. Whether the provisions of Competition Act, 2002 shall be applied to the facts and
circumstances of the case?
CCI ordered that the Competition Act is applicable to this dispute. However, DLF appealed against
this with the counter arguments that:
a) ‘Sale of Apartment’ can neither be termed as sale of goods nor sale of services thus Sec. 4(2)(a)
of the competition Act is not relevant. And applicable to this case.
b) Furthermore, the terms and conditions of the agreement were executed in December 2006 prior
to introducing the provision relating to the Abuse of Dominance under this Act.
c) It was also urged that prior to effective enforcement of this provision, there no legally
recognized concept of an enterprise having a Dominant Position. Therefore, dominance of an
enterprise after May 20th 2009 (the day anti-competitive agreement and the abuse of
dominance were notified as provisions for amendment in Competition Act [Amendment]
Bill,2009) shall be deemed to have contravention of Sec.4(2) if any discriminatory or unfair
condition was imposed.

Relying on the jurisprudence laid down by in MRTP Commission and several Supreme Court
judgements, the COMPAT concluded that housing activities undertaken by DLF Ltd. are
considered as ‘Services’ as it may have a wide interpretation. COMPAT also stated that though
the agreements entered into between the DLF and Owners were prior to the Competition
[Amendment] Act,2009 the provisions of the same shall extend to even agreements entered prior
the enforcement of such provisions.

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2. What was the relevant market in the context of Sec.4 read with Sec 19 of the Act?
CCI ordered that the relevant product market (RPM) is of services of builder in respect of high-
end or luxury residential accommodations and the relevant geographic market (RGM) is Gurgaon.
The DLF appealed against this order on the ground that:
a) There is no difference between luxurious or high-end residential accommodation on one
hand and economic or low-end residential units on the other. Therefore, both belong to the
same product market.
b) The RGM for the purposes of the case should be National Capital Region. Gurgaon in itself
does not constitute RGM.

COMPAT completely agreed with CC’s finding on RPM as well as RGM. COMPAT also accepted
CCI’s application of SSNIP test that small increase in price does not affect the customers as they
will not move to non-luxurious apartments or outside Gurgaon. Since the decision to buy this kind
of accommodation at this location is not easily substitutable with a decision to purchase a similar
apartment in any other geographical location, it was thus decided that high end residential
apartments in Gurgaon constitute relevant market.

3. Whether DLF is occupying a dominant position in the above relevant market?

Sine DLF had the highest market share in the real estate sector of 45%, there were minimal
competitive constraints on DLF. Moreover, DLF had an early mover’s advantage in the real estate
sector which naturally had entry barriers due to high cost of land and brand value incumbent market
leaders. As per the DG’s report, CCI concluded that DLF was way ahead of its competitors and
faced almost no threat in the market due to low market concentration by virtue of brand value and
financial strength. Based on the above contentions, CCI ordered that DLF was in fact a dominant
player in the real estate market in India.

DLF appealed against this order on the counter that:

a) There being an intense competition, none of the market players are in ‘dominant’ position.
b) DLF doesn’t enjoy the position of strength in the relevant market, there are no entry barriers
into the market and also there is no question of countervailing buying power.

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 c) The DG’s conclusion on market share was derived through a faulty ‘All India Sales Figure’
as large number of real estate companies were not considered and no reliable analysis of
market share can be made bases on sales figure alone.

COMPAT did not find any errors in the considerations given by CCI about the dominant position
of DLF Ltd. in the real estate market. In fact, COMPAT affirmed that DLF had a market share of
45% which was twice as compared to the market share of the nearest competitor which was 19%,
leading to hardly having any competition constraints. It also held that DLF had an early mover’s
advantage and occupied a leadership position in the market with natural entry barriers such as high
cost of land and brand value of incumbent market leaders. The market having low-level of
concentration, DLF faced negligible level of threat from the competitors and enjoyed ‘position of
strength’ in the market. Therefore, it was established that DLF had a dominant position in the real
estate market.

4. Whether DLF has abused its dominant position in the relevant market?
CCI ordered that DLF has abused the dominant position in the real estate market through their
unilateral powers to alter the provisions in the buyer’s agreement without giving any rights to the
buyers, DLF’s discretion to change inter se areas for different uses such as residential commercial
etc., without informing the buyers and DLF’s sole discretion to determine ownership rights. DLF
countered these orders with the following argument:
a) Alleging mere abuse is not enough unless the same is corroborated with necessary evidence.
b) The conditions imposed in the agreements are standard clauses inserted as per industry practice
and are no way a reflection of abuse of dominant position. Moreover, several benefits have
been provided by DLF to the buyers and the same is not to be ignored.
c) Further, there is no law which acts as an impediment to launching new projects prior to
submitting building plans, layout of the project.
d) All agreements have been entered between the partied consensually and are thus binding;
thereby the issue of abuse of dominant position does not arise.

COMPAT recapitulated its view that CCI is not in a position to examine the buyer’s agreement
which came into existence when sec.4 was not available to the parties. CCI was wrong to hold that

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these clauses were one-sided, unfair and heavily leaned in the favour of DLF. However, COMPAT
also held that DLF has abused the dominant position in the market on account of various
impositions of unfair and discriminatory conditions in sale of services within the meaning of Sec
4(2)(a).
These include:
i. Mysterious silence on the part of DLF to let the informants know the number of additional
floors, which the planned to and would be constructing which in fact they knew at the very
moment of starting of the construction. The intimation about the increase of the number of
floors after 20th May,2009 amounts to an imposition of unfair condition
ii. The unfairness lies on the sinister silence on the part of DLF about the increase in the
number of floors. The informants did not have even a ghost of idea as to how many persons
they shall share the lifts with or the common area or for that matter sharing the swimming
pool or the gymnasium. Here the DLF had a duty to let the informants know about the
proposed increase and obtain their views on same.
iii. Moreover, DLF started constructing additional floors before the final approval from the
concerned authorities which came in 2009 is wholly illegal and unauthorized. Therefore,
DLF was actually offering to the informants a piece of illegal and unauthorized
construction which amounts to imposing unfair conditions against the wishes of the
consumer.

Thus, COMPAT held that the DLF has abused its dominant position and committed breach of sec.
4(2)(a)(i) and (ii) of the Act.

HELD
As there was a clear abuse of dominant position by DLF in the real estate market, as per the CCI
order, the COMPAT imposed a penalty of INR 6,300 million which was 7% turnover of the DLF.
However, the order of CCI upon inflicting fine for similar instances to other apartments such as
Park Place and Magnolia was rejected by the COMPAT as all the three buyer’s agreements were
similar and the penalty could not be imposed on DLF for the same reason again.

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22. Whether a State Legislature can enact a Law on Land Acquisition which goes contrary
to LARR.
The Supreme Court will soon decide whether states can avoid using the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of
2013 (or LARR) when acquiring private properties for public projects.

The Supreme Court case relates to an appeal filed by the Tamil Nadu government against a Madras
high court order from July 2019. The high court had struck down an attempt by the Tamil Nadu
government in 2014 to exempt the application of the LARR to three state laws that have provisions
for the acquisition of land. These provisions are similar to the British-era Land Acquisition Act of
1894, which the LARR had repealed and replaced.

The colonial law had allowed governments to forcefully acquire land from people and pay them
arbitrary amounts as compensation. This had led to land conflicts across India and demands for a
fair and people-friendly legislation. The LARR was enacted by parliament and brought in force
across the country from January 1, 2014. It introduced provisions like seeking consent, justifying
acquisition through social impact assessments, compensating at least twice the land prices, and
compensating non-landowners.

However, since 2014, three states – Tamil Nadu, Maharashtra and Karnataka – took legislative
routes to exempt the LARR and instead use local laws similar to the 1894 law to acquire land for
infrastructure and industrial projects.

The outcome of the case would provide clarity if states, with the approval of the president, can use
Article 254 of the constitution to revive or create their own land acquisition laws that are contrary
to the LARR, and do not carry its entitlements such as public’s right to give consent and participate
in acquisition processes. And it would adjudicate on the argument of landowners that the usage of
state land acquisition laws instead of LARR is a violation of Article 14 of the constitution, which
guarantees the fundamental right to equality before law.

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Indeed, the state used the laws for high-profile projects such as the Salem Expressway and Chennai
Metro, both of which faced opposition by landowners who either did not want the project at all or
complained about low compensation.

Union of India v Tarsem Singh (2019)

Measuring over 5.8 million kilometres, the Indian road network encompasses the length and
breadth of the country and includes national highways, expressways, state highways, district roads
and village roads. It is one of the largest road networks in the world. The private sector has played
a decisive role in creating this network, which presently enables around 65% of all goods to be
transported and an estimated 90% of passenger traffic.

National highways are critical to the economic progress of the country. According to a press release
on behalf of the Ministry of Road Transport and Highways (ministry), as at 31 December 2019
India has 132,500 kilometres of national highways. With a view to achieving the objective of
completing the development of 200,000 kilometrs of national highways by 2022, the government
has proactively taken a number of major policy decisions.

These aim to promote the participation of private investment and operation. Not only has the
government allowed 100% foreign direct investment in the road sector through the automatic
route, but it has also periodically issued notifications to prevent obstacles and facilitate work.
These have included the notification in July 2019 that the ministry proposed to expedite acquisition
of land for road projects by enabling the determination of compensation for such acquisition in
accordance with the Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013 (New Land Acquisition Act), extending the measures
undertaken by the government to expedite highway projects and reinforcing the role of the private
sector in the expansion of the road network.

Despite these forward-looking amendments, issues such as environmental clearances and the
underestimation of total project cost by the ministry have continued to plague this sector. One of
the most problematic obstructions has been the undue delay in land acquisition primarily caused
by disputes over the amount to be paid as compensation to the landowner. These disputes have led

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to refusals by landowners to hand over possession of the respective sites. In such circumstances,
the judiciary has had to rule in a number of related cases to resolve these issues.

The recent decision of the Supreme Court in Union of India v Tarsem Singh (2019) dealt with the
payment of compensation. It also adjudicated on the constitutional validity of section 3J of the
National Highways Act, 1956 (National Highways Act), to the extent it excluded payment of
compensation and interest from the provisions of section 30 of the New Land Acquisition Act, in
respect of land acquired under the National Highways Act. It should be noted that section 3J of the
National Highways Act specifically provides that the New Land Acquisition Act shall not apply
to land acquisition undertaken under the National Highways Act. The Supreme Court observed
that the compensation paid to a landowner is in consideration of the fact that the landowner might
not be willing to part with his land. Further, the value for the land is fixed legislatively and,
therefore, the landowner is not even allowed the freedom to negotiate the value of the land to
secure the best price for the property to be compulsorily acquired. Thus, compensation is the
amount paid in consideration of the compulsory nature of acquisition.

The court held that there was no valid reason to differentiate between sets of landowners whose
lands were being acquired for the purpose of national highways on one hand and landowners whose
lands were acquired for other public purposes on the other, as this would be in violation of article
14 of the constitution. This article guarantees to every person the right of equality before the law
or the equal protection of laws. The Supreme Court held that compensation and interest payable
in accordance with section 30 of the New Land Acquisition Act is payable in the case of
acquisitions made under the provisions of the National Highways Act. Significantly, the Supreme
Court declared that section 3J of the National Highways Act is unconstitutional, to the extent that
it is in violation of article 14 of the constitution. From the determination of the amounts of
compensation that have not been mutually agreed to delayed payments, landowners have suffered
greatly in the past few years due to policy paralysis and ambiguity. Further, bearing in mind that
the acquisition of land for national highways is considered to be an essential policy, the non-
payment of compensation has been a harsh fact of life for landowners. For the reasons set out
above, this contentious issue has been finally put to rest and there will be respite for the sector
overall.

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 23. The Building and Other Constructions Workers (Regulation of Employment and
Conditions of Service) Act, 1996
The Building and Other Constructions Workers (Regulation of Employment and Conditions of
Service) Act, 1996 hereinafter referred to as the “BOCW Act” is a social welfare statute enacted
by the Indian government to provide a safe and healthy working environment for the workers
engaged in construction activities. This act watchdog the employment and working conditions of
the building and other constructions for workers and it aims to provide welfare measures for the
construction workers. The ambit of BOCW Act in India is wide because countries like India where
the construction sector rises with a pace, there are many workers engaged in this sector and to
safeguard their interest the presence of this legislation is a must.

Is there a need for the Building and Other Construction Workers Act

In India, more than 80 crore workers, whether skilled or unskilled are engaged in the construction
sector. The construction industry is majorly labour-intensive, and most of the workers are
unskilled, unorganized and generally work in inhuman and miserable conditions. These
construction workers are part of the vulnerable segments of the unorganized sector in India. In
order to address these inhumane working conditions, ill-treatment, poor facilities, poor health, and
necessary safety measures in the construction sector, the government enacted the Building and
Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.
Giving construction workers their due

Most of the construction workers are uneducated, unskilled, migrants, socially backward, and have
low bargaining power, so the employer usually looted them by giving fewer wages for the work
they did. Also, construction workers tend to work with uncertain working hours with an inherent
risk of life. Section 45 of BOCW Act, 1996 deals with the responsibility of the employer for the
payment of wages and compensation to each construction worker employed by him and if the
employer, in any case fails to comply with this section, then he is liable to pay compensation to
the workers employed by him in full or the unpaid balance which is due in accordance with Section
8 of the Workmen Compensation Act, 1923.

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How is BOCW cess calculated
Section 3 of Building and Other Construction Workers Welfare Cess Act, 1996 mentions that one
percent of the construction bill or cost of construction incurred by the employer to build
construction is equal to the amount of cess and the same amount is deposited to the welfare board
and the fund is utilized for the welfare of the workers or in the welfare schemes for the workers
working in the building or a construction site.

Amount of cess = 1% of the Cost of construction

For example, if the total cost for construction of a building is Rs. 1 Crore then the total amount of
cess is one percent of 1 Crore i.e. Rs. 1 Lakh.

Its role during the COVID-19 pandemic

There has been a huge impact on the employment of construction workers during the COVID-19
pandemic. Due to the countywide lockdown for this pandemic, the rate of unemployment among
construction workers have risen. With an aim to provide financial assistance and relief to
construction workers, the Central Government directed all the State Governments to use the
unutilized cess welfare fund as these funds provide the social securities to those construction
workers who are registered with their respective State Governments.

According to a report generated by the Ministry of Labour and Employment, till March 2019 there
was approx. Rs. 49,625 Crores of cess reserved by the states and Union Territories, but only less
than Rs. 20,000 has been utilised. There are wide differences in the amount of cess collected among
the states. If we talk about the utilization of funds, as many as 21 states and Union Territories
utilize less than 30 percent of the amount of cess they collected for the welfare of construction
workers. Only Kerala was the state who utilized substantial percent of the amount of cess they
collected, but states which had the highest cess welfare funds failed to provide welfare to the
construction workers.

Now, what the government of the states and Union Territories can do is to utilise the remaining
cess funds for the welfare of construction workers during the pandemic and also by implementing
those unutilised funds for the upliftment of corona warriors like doctors, medical staff, police, etc.

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Should this enactment be repealed under the new labour law codes
The Indian government is preparing the New Labour Code on Welfare and Social Security which
is going to replace around 15 social security or social welfare laws including the BOCW Act, 1996.
Many benefits that are accessible under these Acts may not exist under this New Labour Code,
and its revocation could be proved as the most disastrous thing for the construction workers as the
registrations of workers will expire.

Also, there is already a large gap between the registered construction workers with the welfare
boards and the estimated number of construction workers engaged in the construction sector. If we
talk about the data, less than 50% of estimated construction workers are registered with such
welfare boards. This New Labour Code will lead to the shutdown of 29 State and 8 Union
Territories’ BOCW boards and the construction workers will have to again register themselves
with the respective state welfare boards. These newly formed state welfare boards will also take
other unorganised sector workers under its ambit and all these workers would be listed in the same
place. Also, the cess funds which have been collected for the construction workers would be
merged with the social assistance fund.

If the new Labour Code is enacted, it would be beneficial for the construction workers because the
scope of welfare measures would be increased in the construction sector, and also it would provide
the overall benefit to the labour class engaged in the labour sector of the Republic of India.

Conclusion
It is commendable that the Indian government has made social welfare arrangements for the long-
neglected construction workers, but there have been some grey areas left in the statute which
requires clarification and enforcement until the judiciary has stepped in to resolve the
matter. Section 2(1) (i) of the BOCW Act defines ‘employer’ and includes both contractor and
owner of the construction site under its ambit. Hence, the contractor and owner start shifting their
liability and responsibility to one another. Also, the State Governments have to be accountable for
the unutilized cess collected fund and must implement the remaining funds for the welfare of
construction workers.

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