A Handbook

on
Real Estate Investment
A Legal Perspective
 A Handbook
on
Real Estate Investment

A Legal Perspective

Anupam Srivastava
Advocate

2012
 ®
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Published in India
By Manupatra Publishing Pvt. Ltd., Noida
©Manupatra Information Solutions Pvt. Ltd. 2012
www.manupatra.com

First Published 2007

Second Published 2012

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ISBN: 978-81-89542-77-1
Price: Rs. 395/-

Editors: Typesetters:
Manish Shrivastava Prabhakar Jha
Sunita Mietram Suresh Kumar
Madhu.B.Raj

Printed in India by
All Time Offset Printers, Noida, U.P.
"This book is dedicated to the memory of my parents. I owe every
thing in life to them. May their soul rest in peace"
 Preface to Second Edition

Real estate law has witnessed tremendous development in last one year,
both through the judicial pronouncements and through the endeavour of the
legislature in proposing new bills. Some of the proposed bills are a result
of the recommendation of the Apex Court for enactment of laws. The Courts
are becoming alive to ground realities; judgments are being passed which
offer practical solution to issues, which have been the bane for decades.
The Apex Court in a recent judgment recognized that majority of the
landlord-tenant dispute could be resolved if the tenants pay the rent as per
the prevailing market rent, which could be worked out either on the basis
of valuation report or reliable estimates of building rentals in the surrounding
areas, let out on rent recently. The Courts are now coming down heavily upon
the tenants who continue to enjoy the benefits of the tenanted property at
a rate which perhaps was agreed about 15-20 years ago. Such tenants are
now asked to pay the current market rate of rent. The protection of the rent
control laws, perhaps now, would not be abused.

Subsequent to this judgment, a Model Residential Tenancy Act, 2011

has been drafted. The proposed bill has suggested a standard Rent Control
law throughout the country. Since Rent control is a state subject, I wonder
if it would be possible to implement the Model Residential Tenancy Act
throughout the Country. Let us wait and watch.

Another judgment of Apex Court which would have a long lasting impact
on the real estate is wherein the Supreme Court quashed the land acquisition
proceedings in respect of a village in Greater Noida. This judgment has
generated a conflict of rights between the farmers, builders, government,
buyers and bankers, which is difficult to resolve. In this matter the state
government acquired land from the farmers invoking the urgency clause for
industrial development, however, mid way changed the land use from
agricultural to residential. The lands were offered to builders, who raised
several floors upon the land. The intending buyers booked the flats and the
bankers readily extended the loan. The Supreme Court while quashing the
acquisition of land directed the state government to restore the land back
to the farmers. The paradox is farmers do not want the land back as it is
not fit for farming, the builders have sold the flats and pocketed the money,
and the intending buyers have booked a dream flat, taken loan from Banks,
for which the buyers are paying EMI’s. The Banks have lost their security
against which the loan was extended. I guess the officials of the government
who caused this fiasco are indifferent. While all other stake holders are at
a loss.

The far reaching implication of this judgment is an intending buyer

cannot be sure of the title of a builder, even if the land was allotted to the
builder directly by the government, after acquisition under the Land
Acquisition Act.
 The rate of migration to cities in India is greater than the India’s
population growth, which perhaps is the reason for booming growth of multi-
storey projects coming up. We are building more flats/houses however, we do
not have the mechanism to regulate the developer/builder. The end users are
exploited by the developers and are made to agree to their unreasonable
terms and conditions. The terms of the builder’s agreement favour the
developer, the buyer has to either sign on the same or leave it.

The end users had to either suffer at the end of the developer or approach
the Consumer Courts for redressal of their grievance. Though Consumer
Courts have started granting reliefs against the developer, however something
was still amiss. The judgment of Competition Commission of India has
come as ray of hope for the flat buyers. The Competition Commission noted
the manner in which the flat buyers are exploited by the developers and
awarded a compensation of whopping Rs. 630 Crores against the developer!
No doubt this judgment is open to challenge; however, this is a definite
victory for the consumer movement in India.

Another effort towards the empowerment of consumers and regulation

of the real estate sector is introduction of a new bill titled as Model Real
Estate (Regulation of Development) Bill which proposes to regulate the
development of real estate and looks after the interest of the allottees. The
bill in a big way proposes to regulate the role of Promoter. It makes the
promoter liable for activity undertaken in relation to construction by fixing
responsibility on him at various stages of the construction such as
responsibility of promoters regarding veracity of the advertisement or
prospectus published; to take measures for protection and safety of property;
to make available for inspection, all documents and information to persons
intending to take plot or building or apartment in the real estate project;
responsibility regarding the account of sums taken from or on behalf of the
allotees.

The present edition incorporates all the new legal developments in the
field of real estate to keep the readers abreast with the latest. The
conventional law of transfer of property which was incorporated in the
previous edition has been further elaborated and updated. This book is still
designed to be a hand book on the subject of real estate laws, which answers
every possible question which may come in the mind of any person desirous
of venturing out in the realm of immovable property.

I would like to thank my wife Monika and daughters Stuti and Khushi
for bearing with me for eating the family time for completing this book.

I am looking forward for the comments/views of the readers on this book

so that I may improve upon the subsequent edition of this book.

Anupam Srivastava
The Chambers of law
A-17, Hauz Khas, New Delhi-110016
Anupam@tcl-india.net
 Preface to First Edition

The wish and desire of an individual to acquire and own immovable

property has existed since time immemorial; the property has been held
traditionally as a matter of pride and transferred only in the extreme
hours of need. The sentimental attachment towards the property lately
has eroded a bit and it is now freely transferred. An individual now
looks at the property from the perspective of investment and mode of
earning profits.
Notwithstanding the change in the perspective of individuals to-
wards the immovable property, unfortunately the fundamental laws for
acquiring and transferring immovable property has not much changed.
Transfer of Property Act, 1882 still governs the laws for transfer of im-
movable property. It is indeed ironical that a legislation, which was
framed about 125 years ago, still governs the immovable property in
India. The ancillary laws relating to registration, stamping, etc are also
about 100 years old.
The liberalisation of the Indian economy has led to development of
real estate in India in a very big way. Real estate is stated to be the
second largest sector in India with 250 industries dependant upon it.
The investments in real estate is not limited to Indian nationals alone,
the government has permitted Foreign Direct Investments (FDI) in In-
dia. The government is encouraging investments in real estate sector
by Non-resident Indians (NRI), Persons of Indian Origin (PIO) and for-
eign nationals. Of course the investments in real estate in foreign ex-
change are subject to guidelines provided in Foreign Exchange Man-
agement Act, 1999 and rules framed for acquisition and transfer of im-
movable property in India.
Liberalisation of the rules of foreign direct investment and repa-
triation coupled with developments on the dual citizenship side, would
lead to lucrative prospects beneficial both to the individual and the
economy. For non-resident Indians and foreign citizens, desirous of avail-
ing these investment avenues, this book ought to serve as an excellent
handbook. Due care has also been given to personal laws, as the realm
of personal laws plays a significant role in the transfer of immovable
property. This aspect warrants particular attention in view of recent
developments whereby, the economic interests of women have sought to
be secured through amendments to personal laws.
This book is an attempt to consolidate the laws relating to immovable
property in one bound. It is attempted to be a fusion between the tradi-
tional laws of transfer of property enacted almost 100 years ago with
more liberal laws for investments made in recent times. Immovable
property can be acquired and transferred in six different modes namely
sale, mortgages, lease, gift, exchange and inheritance. With the excep-
tion of inheritance, all the modes of transfer are governed by Transfer of
Property Act, 1882. Inheritance, however, is governed by personal laws.
Each mode of transfer has been dealt with as an independent chap-
ter. The respective transaction has been examined on the touchstone of
Transfer of Property Act, 1882, Indian Stamp Act, 1899, Registration
Act, 1908, Income Tax Act, 1961 and Foreign Exchange Management
Act, 1999. The Chapter of inheritance has been examined from the per-
spective of respective personal laws of Hindus, Jains, Buddhist, Sikhs,
Muslims, Parsis, Christians and Jews. The children born out of wed-
lock in an Inter-faith marriage have a separate set of personal laws to
themselves, which has also been examined.
The book has been prepared keeping in mind persons who are eager
to venture into the realm of immovable property and is not intended as
a ‘legal commentary’. The book has answered in brief all possible ques-
tions which may arise with regard to property transactions. The book is
designed to be a handbook on Real Estate Laws of India. The relevant
provisions of laws have been reproduced in the footnotes of each chap-
ter, the idea being to provide all relevant information in the chapter
itself and eliminate the need to go through several books to find them.
Appendices have been annexed at the end of the book, which will also
be very useful for the readers.
I would like to acknowledge gratitude for Ms Divya Chaturvedi who
painstakingly went through the drafts and cross-checked the citations.
I would also like to register a note of appreciation for Mr. M.S. Ananth,
my associate, for general assistance rendered.
I would also like to thank my father, my wife Monika, daughters
Stuti and Khushi for providing me with the moral support and encour-
agement to complete this book.
Though efforts have been made to provide accurate and complete
information in this book, however I would be happy to invite comments
and suggestions from the readers and look forward to improve the sub-
sequent editions.
Anupam Srivastava
The Chambers of law
A-17, Hauz Khas, New Delhi-110016
Anupam@tcl-india.net
 Publishers Note

We are happy to bring the second edition of the book “The Handbook of Real
Estate Investment” to our readers.
Real estate has witnessed phenomenal growth in recent years all over
the world. This growth can be attributed to the growing retail, hospitality
and entertainment industries, economic services and information technology
(IT)-enabled services. This handbook, written in the Indian context, aims to
serve as a guide to modes of acquisition, transfer and the implications
thereof, and disposal of real estate from all relevant legal perspectives, both
for foreign and domestic investors.
The handbook explains the property laws and statutes through a textual
treatment, describing the complicated laws in an understandable and
contemporary manner. It is an attempt to create cohesive fusion between
traditional laws like Transfer of Property Act, 1882 and modern laws relating
to foreign exchange such as the Foreign Exchange Management Act, 1999.
Real estate transactions have been dealt with under various heads like sale,
mortgage, lease, gift, exchange and inheritance. Complexities of inheritance
have been taken up vis-à-vis personal laws touching upon testamentary and
non-testamentary succession. The exhaustive list of annexures appended to
the book including state-wise list of stamp duties for conveyance, checklists
for purchase and sale, lease and mortgage of immovable property, will act
as a ready reckoner for professional and lay persons alike. The model forms
covering agreement to sell, deed of mortgage of house and lands, mortgage
by conditional sale, usufructuary mortgage, English mortgage deed, lease
deed, agreement for exchange, will and gift deed, etc., makes this handbook
a richly varied and detailed account on the topic of real estate.
In this edition we have added a new chapter on Real Estate and
Consumer Protection Act, 1986 and the Competition Act, 2002 with special
reference to recently decided DLF case emphasizing on builder’s dominant
acts. Text of the model bills Model Real Estate (Regulation of Development)
Act [which stresses upon the need to regulate the real estate sector], Model
Residential Tenancy Act, 2011 and the Land Titling Bill, 2011 have been
incorporated as appendix to this book.
The handbook in detail has discussed judgments which would have
impact on real estate sector in India. It has dealt with several proposed
laws, which are consumer friendly and which may bring transparency in the
real estate transactions. These proposed bills are currently at the stage of
inviting comments.
Our endeavour has been to keep the edition as current as possible and
thus, the most recent case decided by Supreme Court on the issue questioning
validity of sale done on the basis of agreement of sale, or will, or power of
attorney dated 11th October 2011 has been included.
 The handbook will be of immeasurable value to real estate agents,
corporate counsel, investors, legal practitioners, government officials, students
of law and those pursuing real estate management courses. Even for lay
persons planning to invest in real estate, the handbook will act as a guide
and will be of immense assistance in providing knowledge about finer legal
aspects involved in real estate.
We thank the author and members of the Manupatra team for
painstakingly working on this edition.