Analysis of Real Estate Regime in India | Best Real Estate Law Firm in Kolkata
Real estate refers to land development and building activities related to immovable property. As more companies, corporations, and people move to the cities, the Real Estate Regime in India has experienced significant expansion. Building construction has expanded in tandem with urban population growth. In India, property-related laws are essential for the efficient operation of construction projects as well as the sale and purchase of real estate. As there are three tiers of rules and regulations that apply to the real estate regime in India, namely Union territory laws, state laws, and municipal laws, these laws can be complicated.
There are many different facets of the real estate regime in India, including immovable property-related leases, sales, mortgages, and licenses. When performing due diligence before to investing in or buying a property, title checks are also included.
The real estate industry has undergone a revolutionary upheaval by regularizing the transactions and passing the RERA (Real Estate Regulatory Authority) Act in 2016.
The real estate terms and conditions of lease and sale-purchase were still biased in favor of the builder even after so many formalities, and RERA was established in response to the urgent need for new laws and regulations.
The main acts related to property in India which regulate real estate regime in India are:
- The Transfer of Property Act, 1882
- RERA (Real Estate Regulatory Authority) Act, 2016
- The Registration Act, 1908
- For Non-Resident Indians (NRIs) FEMA( Foreign Exchange Management Act, 1999) also apply
- The specific relief Act, 1963
- Land Acquisition Act, 2013
How is real estate ownership established?
With a few exceptions, any transaction involving the transfer of an interest in real estate must be in writing and registered with the “Sub-Registrar of Assurances” office. In civil proceedings, a document of transfer of interest in real property that is compulsorily registrable but has not been registered is inadmissible as evidence. The public shall be regarded to have been notified of the immovable property transactions that have been carried out by needed-to-be-registered instruments upon their registration.
A revenue survey number, a “Record of Right” (in the case of agricultural lands in Maharashtra) or “Property Register Card” (in the case of non-agricultural properties in Maharashtra), and similar papers have been provided to the majority of property holdings after being surveyed by government agencies. These tax records list the original owner’s name (as it appeared at the time of the government’s initial land survey) and any subsequent transfers that may have been reported to the authorities. The revenue documents offer ownership and title devolution evidence that is sufficient in and of itself.
The measures for proving real estate ownership include documents issued by the revenue authorities and documents registered in relation to the property in the office of the Sub-Registrar of Assurances.
Who is eligible to own real estate, and are there any restrictions?
Immovable property cannot be purchased in India by a foreign corporation. However, subject to certain restrictions, a foreign business with a branch office in India may purchase immovable property that is required or incidental to its operations. A foreign corporation with a liaison office in India is not allowed to own real estate there, but they can lease it out for a maximum of five years. A liaison office cannot generate income in India; hence it is not subject to taxation there like a branch office is.
The Consolidated FDI Policy governs foreign direct investment (“FDI”) into India. A foreign portfolio investor may participate in an Indian firm by purchasing or subscribing to certain available products, such as equity shares, compulsorily convertible debentures, preference shares, and other goods.
Except for the creation of Special Economic Zones, industrial parks, and integrated townships, external commercial borrowing is not allowed for investments in real estate or the purchase of land.
A minor is not legally capable of signing a contract in India. However, a minor may be able to acquire property through inheritance, guardianship, or the use of money that has been given to the child. A court order is required to transfer real estate while the owner is still a minor.
Are the structures of real estate owned separately?
Unless there is a written agreement to the contrary, buildings belong to the owner of the land on which they are built because they are an integral component of that land.
Dual ownership may be applicable in cases when land is leased from a lessor to a lessee, allowing the lessee to remove anything he has affixed to the ground. Due to the lessor’s recognition as the owner of the open plot of land and the lessee (who has constructed a structure on the open plot of land), under the notion of dual ownership.
What steps are typically followed throughout the legal due diligence process when purchasing commercial real estate regime in India?
For asset transactions, the buyer’s legal due diligence will entail the following (Take note that neither requests for title nor reports or certifications of title have a consistent format.
- Examining title deeds: checking the terms of the original documents, if any are still available
- searches conducted at the Sub-Registrar of Assurances’ office, typically going back 35 years.
- Online checks for liens against assets owned by LLCs with the Registrar of Companies registration
- consideration of the property’s financial records.
- posting of a public notice soliciting claims within 15 days of publication in two local newspapers
- Requests or questions with the transferor, including those regarding any claims made by third parties,
- Taking into account the property’s survey report or plan, which details its size, borders, and construction
- searches to find out if a developer or project has to be registered, as well as the information and papers that must be made public as part of such registration.
The transferee’s attorneys or advocates are in charge of performing the legal research. In India, notaries often don’t perform legal due diligence; they perform verification, certification, authentication, and attestation of documents.
The asset under inquiry will determine the degree of due diligence. It will need to be a sizable purchase whether the land has structures on it or not.
Share transfers are preferred by shareholders when the asset being transferred is the major asset owned by the limited business and all shareholders are in favor of the transfer because when an asset is transferred, the consideration remains with the company. When deciding how to best structure the transfer, tax ramifications (particularly, tax on capital gains for the transferor and “income from other sources” for the transferee) will also need to be taken into account. Compared to the transfer of assets, shares have a cheaper stamp duty.
Above was an overview of the real estate regime in India.