The Securities and Exchange Board of India (“SEBI”) at its board meeting on June 27, 2019 approved the following important proposals, which become effective on the formal amendment of the respective regulations. A brief summary of the significant changes are set out below: Continue Reading SEBI Board Approves Framework for DVRs, New Definition of ‘Encumbrance’ and Clarifications to the Insider Trading Regulations
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
*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?
The 2005 Report of the Expert Committee on Company Law (JJ Irani Committee Report) had noted that an effective insolvency law:
“should strike a balance between rehabilitation and liquidation. It should provide an opportunity for genuine effort to explore restructuring/ rehabilitation of potentially viable businesses with consensus of stakeholders reasonably arrived at. Where revival / rehabilitation is demonstrated as not being feasible, winding up should be resorted to.
Where circumstances justify, the process should allow for easy conversion of proceedings from one procedure to another. This will provide opportunity to businesses in liquidation to turnaround wherever possible. Similarly, conversion to liquidation might be appropriate even after a rehabilitation plan has been approved if such a plan was procured by fraud or the plan can no longer be implemented”. Continue Reading Is Liquidation Irreversible? Schemes of Compromise or Arrangement for Companies in Liquidation
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
Prosecuting insider trading cases has always been a challenge for the Securities Exchange Board of India (SEBI). Primary evidence is difficult to come by, which impacts success rates as well as investigation timelines.
On June 10, 2019, SEBI released a discussion paper (Discussion Paper) proposing amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (Insider Trading Regulations) to establish systems and processes (both within listed companies, as well as, at SEBI) that incentivise individuals to report insider trading violations, if they come to their knowledge. In terms of the Discussion Paper, the informant may be rewarded up to INR 1 crore (approx. USD 150,000) if SEBI undertakes disgorgement of at least INR 5 crores (approx. USD 0.72 million) as a result of any action taken on the basis of true, credible and original information. Continue Reading Bounty Hunting in Corporate India – Understanding SEBI’s Latest Discussion Paper on the Insider Trading Regulations
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?
The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 (“New Framework”) on June 07, 2019[1] in which the RBI has continued the core principles of its circular dated February 12, 2018 (“February 12 Circular”) and has added provisions encouraging both informal and formal restructuring in India. The New Framework creates an enabling framework for restructuring and resolutions outside the Insolvency and Bankruptcy Code, 2016 (“IBC”) as well as encourages use of IBC as a restructuring tool. It applies to banks, financial institutions as well as large non-banking financing companies (“NBFCs”) (the February 12 Circular did not apply to NBFCs) and also requires asset reconstruction companies to adhere to the relevant resolution framework under the inter-creditor agreement (see below). Continue Reading BANKS TO LEAD RESOLUTION EFFORTS – THE NEW RBI FRAMEWORK FOR RESOLUTION OF STRESSED ASSETS
Fintech has massively transformed money flow and settlement transactions among millennials. Out of numerous existing fintech models, one is peer to peer (P2P) lending. P2P lending platforms play the role of an intermediary between two individuals, the lender and the borrower. With the upscaling growth rate of such platforms it has become a target for regulatory attention and the Reserve Bank of India (RBI) came up with regulation on October 4, 2017, vide the master direction bearing number DNBR(PD) 090/0.10.124/2017-18 (Master Direction) on non-banking financial peer-to-peer lending platforms.[1]
The Master Direction covers all prospective and existing P2P platforms (NBFC-P2P), which perform as P2P lending platforms on the fulfilment of certain conditions (one of which includes holding a net-owned fund of INR 2 crore). These registered P2P lending platforms would appear on the RBI list of registered NBFC-P2Ps as and when granted the certificate of registration. As per the last updated list[2], there are 11 NBFC- P2Ps registered while more than 50 still exist and are awaiting clearance from the RBI, Department of Non-Banking Regulation, Mumbai. Continue Reading Peer to Peer Lending in India: A Chinese Lesson Well Learnt!
*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