Real Estate

When we talk about real estate, there are a lot of things people think of; from creating a home for their family, to investing into properties that will bring significant returns.

And at the intersection of all the possible aspirations are the realtors, working hard to find the right property for every client’s needs.

However, if we as realtors and real estate businesses want to attract clients, we need to promote ourselves. And there’s nothing like real estate content marketing to do the trick.

Real Estate Law

1.1 Please briefly describe the main laws that govern real estate in your jurisdiction. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 12.1. Those relating to tax should be listed in response to questions in Section 9.

Real estate in India is governed and impacted by a combination of Federal (Central) and State-specific laws. This is because, in accordance with Article 246 of the Constitution of India, ‘Land’ is the subject matter under the State List or List-II of the Seventh Schedule to the Constitution of India, which enlists subjects on which only States can legislate, while ‘Transfer of Property other than agricultural land, registration of deeds and documents’ and ‘Contracts other than for agricultural lands’ are enlisted under the Concurrent List or List-III of the Seventh Schedule to the Constitution of India, which are subjects on which both the Central Government and the States can legislate. Additionally, since India is a country with diverse sects, laws relating to various aspects such as devolution, inheritance, etc., are often based on various customary principles and practices applicable to different sects, in addition to codified laws. Over the years, the higher judiciary in India has also made various judicial pronouncements on matters relating to real estate law, which act as judicial precedents and govern the interpretation of applicable laws.

The following are some of the key pieces of legislation governing real estate in India:

Transfer of Property Act, 1882: This Act is a central act and provides general principles of movable and immovable property, such as sale, exchange, mortgage, lease and gift of property, part performance and lis pendens. The States must adopt the provisions of this Act.
Indian Easement Act, 1882: This Act governs the law relating to easementary rights to immovable property.
Registration Act, 1908 and Indian Stamp Act, 1899: The said Acts govern laws relating to payment of stamp duty and requirements for registration of various deeds, documents and instruments relating to transfer of interest in immovable property.
The Indian Contract Act, 1872: This Act governs laws related to contracts in India including the capacity to enter into a contract, execution and implementation thereof and breach and remedies available to the parties thereto.
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013: This Act governs the acquisition of private lands by the Government for certain public purposes or for a company and the compensation and rehabilitative measures to be undertaken thereto by the Government.
Land Revenue Codes: Various States in India have formulated their own land revenue codes, which govern laws relating to agricultural land-holding, land revenue, types of tenancy and matters connected thereto. The said codes encapsulate division and classes of immovable property in a State, restrictions on transfer thereto, powers and duties of revenue officers, rules, regulations and penalties for contravening such codes.
The Real Estate (Regulation and Development) Act, 2016 (RERA): This Act governs development, marketing and sale of real estate projects to protect the interests of consumers in the real estate sector. The Act established an adjudicating mechanism for speedy dispute redressal vide the Real Estate Regulatory Authority and the Appellate Tribunal and mandates compulsory registration of projects and key players in real estate sector. Corresponding RERA Rules and regulations have been adopted by the States to ensure effective implementation of the Central Act at local level.
Foreign Exchange Management Act, 1999 (FEMA) and Foreign Direct Investment Policy (FDI Policy): FEMA and regulations pursuant thereto govern the purchase/sale of immovable property in India by foreign entities and persons not resident in India. The consolidated FDI Policy governs permissibility of foreign investment in the real estate sector in India along with compliance parameters and exit of such investors. Such foreign investment is regulated by the concerned ministries of the Government of India, the Department of Industrial Policy and Promotion (DIPP) and the Reserve Bank of India (RBI).

In addition to the above, the real estate sector in India is also governed by various State/local/municipal laws, policies and customs, including nuances in respect of urban development, slum rehabilitation/improvement, rent control, apartment ownership, building codes/bye-laws, property tax, Special Economic Zones (SEZs), Benami transactions, environmental protection, land pooling policies, land ceiling, land use and zoning norms, Real Estate Investment Trust regulations, and dispute resolution legislations such as the Consumer Protection Act, 1986, the Arbitration & Conciliation Act, 1996, etc.

1.2 What is the impact (if any) on real estate of local common law in your jurisdiction?

The Indian legal system envisages elements of both civil and common law. Whilst most laws in India are codified, principles of common law including that of equity and natural justice are instrumental in the interpretation of legislation, judicial precedents and customs including from a real estate perspective, as these have emerged to have both persuasive as well as authoritative value.

1.3 Are international laws relevant to real estate in your jurisdiction? Please ignore EU legislation enacted locally in EU countries.

While international laws do not have a direct bearing or applicability in the context of real estate in India, several concepts or principles recognised under international law have been historically adopted in some form or other in the legislation governing real estate in India, such as land rights of tribal or Adivasi communities, rights of farmers/agriculturalists to fair and equitable compensation in case of acquisition of lands by the Government, etc.

Real Estate Rights

3.1 What are the types of rights over land recognised in your jurisdiction? Are any of them purely contractual between the parties?

The types of rights over land recognised in India vary diversely in nature, which form part of a larger bundle of rights existing by operation of law, contract, inheritance, etc., including:

Freehold Rights: These refer to absolute right, title and interest in the land, perfected against the world at large. Hence, the owner of such an estate enjoys absolute ownership for perpetuity and can use the land for any lawful purposes in accordance with the local laws and regulations.
Leasehold Rights: These refer to an exclusive right and interest to hold/possess and use a property by a lessee or a tenant, in terms of the lease deed executed by lessor or landlord (being vested with title to the property) and the lessee or tenant for a fixed tenure. Leasehold rights are rights in rem.
Licence Rights: These refer to a right of a licensee to enter/occupy/use a property, on a non-exclusive basis, whereby no interest or easement is created in the property in favour of the licensee. The said rights are neither transferable nor heritable and constitute rights in personam.
Mortgage Rights/Charge on Property: A mortgage or charge creates an interest on behalf of the lender/mortgagee on the immovable property for the purpose of securing (i) the payment of money advanced or to be advanced by way of loans, (ii) an existing or future debt, or (iii) the performance of an engagement which may give rise to a pecuniary liability. In India, the various types of mortgagee rights that can be created in respect of immovable property are (i) simple mortgage, (ii) mortgage by conditional sale, (iii) usufructuary mortgage, (iv) English mortgage, (v) mortgage by deposit of title deeds/equitable mortgage, and (vi) anomalous mortgage.
Easement Rights: An easement is a right which the owner or occupier of certain land possesses, as such, for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and continue to prevent something being done, in or upon, or in respect of, certain other land not his own; e.g. Right of Passage, Right to Light, etc.
Development Rights: Development rights are rights that allow developers to make changes to their property (by way of carrying out construction/development thereon) within the limitations imposed by State or local law. A special type of development right is represented by the Transferable Development Rights, which can compensate owners to utilise development potential generated on a given land parcel on another land parcel, as the same could not be utilised on the original land parcel owing to applicable development norms. Such Transferable Development Rights are recognised by certain States and are subject to detailed local laws and building bye-laws. One mode of acquiring development rights in land is to enter into joint development agreements with the title holders of land for joint development of real estate projects. These are contractual rights.
Rights of Specific Enforcement for Part Performance: Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract.
Subsurface Rights: Subsurface rights are rights to the earth below the land, and any substances found beneath the land’s surface. Mineral rights are a type of subsurface right.
Transferable and Non-Transferable Rights (TDRs): The Transfer of Property Act provides for rights which are transferable and non-transferable.

3.2 Are there any scenarios where the right to land diverges from the right to a building constructed thereon?

Technically speaking, it is possible, in situations of contract for joint development of an immovable property, for the title in land and in the superstructure to vest in different entities, namely the original landowner and the developer. However, apartment ownership laws in different States in India provide for the transfer of ownership rights in an apartment (i.e., part of the superstructure) along with proportionate undivided rights in the underlying land. This is achieved by both the developer and the landowner jointly conveying their respective rights (in the apartment and the underlying land) to the buyer of the apartment.

3.3 Is there a split between legal title and beneficial title in your jurisdiction and what are the registration consequences of any split? Are there any proposals to change this?

A beneficial owner is a legal term where specific property rights (for example, the right to occupy and/or use the property) in equity belong to a person other than a person who holds the legal title/ownership of the property. Therefore, beneficial title could emerge out of the beneficial rights provided in certain arrangements to mortgagees, lessees, licensees, temples and endowments, etc. Hence, there are certain situations where there may be a split between the legal title and beneficial title in relation to immovable property. Depending upon the nature of rights created, the deed through which such beneficial rights in the property are conveyed may require registration. Another case in this regard could be the creation of a restricted estate (e.g. a ‘life estate’, i.e, the right to enjoy the benefits of a property during the life of the beneficiary whereafter the said rights revert to another person/residual owner) as against an absolute estate in favour of a female Hindu, through a will or other instruments. While there appear to be conflicting judicial pronouncements in this regard, in general, it is understood that where a Hindu male confers a life estate in a property in favour of his wife, such life estate would extinguish upon her demise, provided that the life estate was not created

Real Estate Market

In addition to the buyer, seller and the buyer’s finance provider, the people who may be involved in a real estate transaction are:

Developer: In cases of joint development/collaboration, typically a project developer collaborates with the landowner and then develops the mutually agreed upon project on the said land. The sale of the developed project or any part thereof, to the buyer, is completed through execution of a sale deed by both the landowner and the developer executing the deed in favour of the buyer. Typically, developers not only undertake the construction development of a project but also decide upon the final design of the project, are responsible for obtaining all approvals, arrange financing for the development, decide on marketing, etc.
Agent/Broker: Real estate agents/brokers are licensed professionals who arrange real estate transactions, putting buyers and sellers together and acting as their representatives in negotiations. Under RERA, a ‘real estate agent’ means any person, amongst others, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, in a real estate project, by way of sale.
Land Aggregator: A land aggregator aggregates land, required by a developer, to develop a project envisaged by the developer. Accordingly, the land aggregator aggregates larger parcels of land by bringing together multiple landowners and facilitating their collaboration with the developer. The land aggregator is often also expected to prepare title reports, demarcate property boundaries, assist with zone regulations, conversion of land use, registrations of deeds, obtaining approvals and sanctions for the land, etc.
Liaison: A liaison is a person who liaises between two organisations to communicate and coordinate their activities. They are appointed/employed to achieve the best utilisation of resources or employment of services of one organisation by another.
Surveyor: A surveyor is an individual who conducts surveys of properties and is often deployed by the developer or the buyer for the development or purchase of a large property.
Registered Valuer: Where a valuation is required to be made in respect of any property (or in certain cases of stocks, shares, debentures, securities or goodwill, or any other assets or net worth of a company or its liabilities), it shall be valued by a person having such qualifications and experience and registered as a valuer.
Architects: Architects involved in a real estate transaction typically advise on zoning, development potential, reservations, planning permissions, etc. with respect to the transaction.
Accountants/Tax Consultants: Accountants/tax consultants involved in a real estate transaction would typically advise on the structuring and tax-efficient mechanism for concluding the transaction.
Lawyer: Lawyers in terms of real estate transactions would typically include lawyers from both/all parties who would be entrusted with the task of conducting legal due diligence, preparation, review and negotiation of the transaction documents in respect of the property.