What’s So Real About Real Estate Anyway?

*An eight-part series covering the commercial and legal considerations of REIT listings in India. Click here to read Part 1.

India is an outlier in global Real Estate Investment Trust (REIT) regimes. It is the only country with dedicated legislation for REITs and Infrastructure Investment Trusts (while the US and Japan permit REITs to hold certain infrastructure assets, there is no separate legislation). In a way, this showcases the maturity of the regulatory thought process, and it has already been recognised that there is a compelling case for other developed jurisdictions to introduce a similar InvIT model, which meets the needs of investors as well as protects existing REIT legislation (Source: EY – Global perspectives, 2018 REIT Report).

On a standalone basis, ‘non-traditional’ REITs listed only in the US are the second-largest REIT sector globally (with a market cap of USD 480 billion). These non-traditional asset types include healthcare, data centres, billboards, communication towers, student accommodation, single family rental and fiber optic transmission lines (Source: EY – Global perspectives, 2018 REIT Report). Surprisingly, if most of these asset classes were to plan a REIT listing in India, they would have to think twice – their assets may or may not be eligible ‘real estate’ within the meaning of the REIT Regulations. Which brings us to the question, what exactly is real estate for the purpose of the REIT Regulations?


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No Occupancy Certificate - Criteria for Registration with RERA

The Maharashtra Real Estate Regulatory Authority (MahaRERA) in its recent order has held that mere non-procurement of an occupancy certificate by a developer does not make the developer liable to register the real estate project[1] under Section 3 of the Real Estate (Regulation and Development) Act, 2016 (Act).

This order has been passed following a complaint filed by Sulatana Dalal (Complainant) against Asia Group (Developer), before MahaRERA in relation to a project named as ‘Miracle Mall’ situated at Bhiwandi, Thane, Maharashtra. The Complainant’s contention was that even though the building was completely occupied, the Developer had failed to obtain an occupation certificate and committed breach of law. Against this background, the Complainant sought directions from MahaRERA to register the building under the provisions of the Act. 
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 70% Conundrum - Haryana RERA

There is a requirement under the Real Estate (Regulation and Development) Act, 2016 (Act) to keep aside 70% of receivables from allottees in a separate, designated bank account (RERA Account). This has, from the outset, been viewed as a measure of great reform that would prevent siphoning of funds and ensure that money collected for the purpose of a particular project is, in fact, used for that project. However, the manner and method of utilisation and withdrawal of money lying in the RERA Account has always been a matter for considerable discussion and debate.

Illustratively, the Uttar Pradesh Real Estate Regulatory Authority has, in April 2019, directed banks not to adjust interest payments against the money that is required to be deposited in the RERA Account. This issue has recently come to the fore and become a matter of serious deliberation in Haryana.  
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Part I - REIT Management Frameworks

*This is the first part of an eight-part series covering the commercial and legal considerations of REIT listings in India

Setting up a Real Estate Investment Trust (REIT) involves a number of synchronised actions by all parties to the REIT including the Sponsors, Sponsor Group, Trustee, Manager, Special Purpose Vehicles (SPVs) and their respective stakeholders.

Apart from settling the trust, one of the principal obligations of the Sponsors includes contribution of the initial portfolio of assets to the REIT (immediately preceding the closure of the public issue). While the assets may be transferred through various means, the favoured (and tax efficient) option is for the Sponsor to swap its shares in the SPVs housing the portfolio assets in exchange for REIT Units. Thus, the REIT becomes the shareholder and owner of the assets, the Sponsors become Unitholders of the REIT and the REIT Manager (which is typically controlled/ managed by the Sponsors), is entrusted with the responsibility of managing the affairs of the newly acquired assets, through an investment management framework.
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Tamil Nadu Tenancy Law Post

The law relating to tenancy in the state of Tamil Nadu was earlier governed by The Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (TNLRC Act). The said act was enacted for achieving three purposes[1]: (a) to regulate the leasing of residential and non-residential buildings; (b) the control of rents; and (c) to prevent unreasonable eviction of tenants.

This sexagenarian old TNLRC Act was enacted when the real estate industry was evolving. At that point of time, the supply of rental assets was limited and the ownership of assets was concentrated in the hands of few landlords. Therefore, the TNLRC Act was enacted as a piece of social reform to protect tenants from exorbitant rent and frivolous eviction but it was quite often tainted as a law as it was unfairly tilted towards the tenants.
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National Green Tribunanal Act and Real Estate

The first part of this two-part blog discussed the facts that led to the filing of appeals before the Supreme Court challenging the NGT’s judgment dated May 4, 2016 and certain key issues discussed by the Supreme Court in its Judgment disposing of these appeals. In this piece, the second part of the two-part blog, we discuss other significant issues that have been dealt with in the Judgment and analyse the findings to deduce the reasoning employed by the Supreme Court in reaching its decision.
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Supreme Court’s Diktat on Powers of the NGT: Can Developers Finally Rest Easy?

Introduction

The Hon’ble National Green Tribunal, Principal Bench, New Delhi (NGT), vide the judgment dated May 4, 2016 in the Original Application No. 222 of 2014 (Original Application), passed certain orders, which had wide scale impact on the real estate developers in the city of Bengaluru. The NGT directed that the buffer zones maintained around lakes and rajakaluves (drains) were to be increased substantially more than provided under the zoning regulations in the Revised Master Plan 2015 (RMP 2015). The RMP 2015 provided for buffer zones of 30 meters from the centre of the lake, for primary rajakaluves it was 50 meters from the centre of the rajakaluve, for secondary rajakaluves, it was fixed at 25 meters and for tertiary rajakaluve it was 15 meters. The Hon’ble Supreme Court of India (Supreme Court) has recently passed a judgment in Civil Appeal No. 5016 of 2016 and other connected appeals on March 5, 2019 (Judgment). These appeals were filed challenging the NGT’s judgment dated May 4, 2016.

In this first part of a two-part blog, we discuss the facts that led to filing of the present appeals before the Supreme Court and a couple of key issues discussed in the Judgment.
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State Real Estate Authorities Powers

The Indian Real Estate industry is experiencing a major overhaul on account of the strict implementation of the Real Estate (Regulation and Development), Act, 2016 (RERA), the Prohibition of Benami Property Transactions Act, 2016 (PBPT Act) and the Insolvency and Bankruptcy Code, 2016 (Insolvency Code).

While implementation of RERA is gaining momentum across the country with each passing day, the State Real Estate Authorities (Regulator) established under the RERA have emerged as a powerful tool for ensuring proper and effective implementation of RERA by the states across India. This article aims to provide an overview of the powers and functions of the Regulator and how it is using these powers to protect the interests of property buyers in India.
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On June 6, 2018, the Government once again amended certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), by promulgating an ordinance[1] (the 2018 Ordinance) which introduces sweeping changes to the both substantive as well as procedural aspects relating to the insolvency process. Some of the key changes are analysed below.

Homebuyers – A New Class of ‘Financial Creditors’

The 2018 Ordinance has amended the definition of ‘financial debt’ to include amounts raised from ‘allottees’ in respect of a real estate project (as defined under the Real Estate (Regulations and Development) Act, 2016 (RERA)). Accordingly, homebuyers will now be entitled to a seat on the ‘committee of creditors’ (CoC) of the corporate debtor. However, given the large number of homebuyers for a project, they will be treated as a class of creditors and be represented in the CoC by an ‘authorised representative’ to be appointed by the National Company Law Tribunal (NCLT).


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2017 is upon us, but many readers seem to have missed some very important and progressive changes to the Maharashtra Tenancy and Agricultural Lands Act, 1948 (Act) made last year on 1 January 2016! Two sections (63, and 63-1A) of the Act govern the ability to sell and buy agricultural lands (AL) for non-agricultural (NA) use.

Here is a comparative note on the pre-amendment and post-amendment law under Section 63-1A affecting AL bought for NA bona fide industrial use.
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