Real Estate

Lease Transactions Under RERA

Real estate is one of the largest industries in India. In the past two decades, the real estate sector has seen a boost in the country, in terms of the quantum of development (commercial and residential properties) and the price of properties. In spite of the same, real estate has remained the most unregulated of sectors, with every State having a different law to regulate properties. Hence, there was no single superior legislation, which would govern this industry.

The absence of a specific, stringent law for this industry led to exploitation of buyers of the property, by the developers. For example, there could be excessive delay in construction and handing over possession of property, biased/arbitrary contracts, deduction in the usable area of the property by developers, and a lack of transparency in the sector, and such like. Due to these issues, the Government of India, introduced a central legislation viz. the Real Estate (Regulation and Development) Act, 2016 (Act) to regulate the real estate industry, resolve the issued faced by buyers and bring transparency in this sector. All the States have been mandated to form the Real Estate Regulatory Authority for the implementation of Act and form rules and regulations under the same.
Continue Reading Lease Transactions Under RERA

REIT IPO Exit

*An eight-part series covering the commercial and legal considerations of REIT listings in India. Click here to read Part 2.

Institutional investors have demonstrated a steadfast interest in Indian real estate in recent years. Private equity investments in the real estate sector peaked at $2.5 billion in the first quarter of 2019 – the highest since 2008.[1] With the lion’s share of investments being cornered by commercial office spaces, retail and hospitality sectors, the introduction of the Real Estate Investment Trust (REIT) framework in India comes at an opportune time, providing investors with an additional avenue for potential exits.

However, as the dust settles over India’s first REIT listing, it is now apparent that a REIT IPO is vastly different and distinct from an IPO by a company in many respects. Given the inherent intricacies and nuances of the REIT framework, investors seeking to exit via a REIT listing will need to re-calibrate, re-assess, and re-think their investment strategies, holding structures, investment documentation as well as exit horizons to expediently navigate the new regime.
Continue Reading Part III – Exit Stage: Preparing for a REIT IPO Exit

 Recent Maha RERA Directions on Change in Promoter

The real estate sector post enactment of the Real Estate (Regulation and Development) Act, 2016 (Act) is witnessing major consolidation primarily on account of financial constraints faced by small and mid-sized developers. Such consolidation has resulted in developers looking to either exit from their existing projects or enter into collaboration with large established developers for completing such projects.

Hence, in the present scenario, it is of the utmost importance for the industry to know the present legal regime under RERA dealing with new developers / promoters taking over an ongoing projects from existing promoters or from lenders during the process of enforcement of their security over the project.
Continue Reading Analysis of Recent Maha RERA Directions on Change in Promoter

Maharera Amendment Rules 2019

Since the enactment of Real Estate (Regulation and Development) Act, 2016 (Act), Government of Maharashtra (GoM) was one of the few States to immediately frame the rules thereunder being Maharashtra Real Estate (Regulation and Development) (Registration  of  Real  Estate  Projects,  Registration of  Real Estate Agents, Rates of Interest and Disclosures on Website) Rules, 2017 (Rules). The Maharashtra Real Estate Regulatory Authority (MAHA RERA) has been taking the lead to enforce and/or provide clarifications from time to time on the Act and the Rules by issuing various circulars and orders. Recently, the GoM has issued a notification on June 6, 2019 amending certain provisions of the Rules (Amendment Rules).
Continue Reading Analysis of the Maha RERA Amendment Rules 2019

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?Continue Reading Part II – What’s So Real About Real Estate Anyway?

 

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. 
Continue Reading No Occupancy Certificate: Not the Only Criteria for Registration with RERA

 

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.  
Continue Reading The 70% Conundrum (Part I) – What Does the Haryana RERA Imply?

 

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.
Continue Reading Part I – REIT Management Frameworks – An Exercise in Navigating Split Allegiances

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.
Continue Reading Paradigm Shift: Tamil Nadu’s New Tenancy Law

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.
Continue Reading Supreme Court’s Diktat on Powers of the NGT: Can Developers Finally Rest Easy? – Part 2