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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Money oils the wheels of commerce.

Since the 1970s, high denomination notes of Rs. 500 and Rs. 1000 had become the usual legal tender in India: inflation had virtually made the lower denomination notes “loose change”! The Reserve Bank of India Annual Report 2015-16, noted that as at end-March 2016, these notes together accounted for 86.4% of the total value of banknotes in circulation[1].

Historically, India has been a high-tax jurisdiction, weighted down by the “license-and-tax” raj (an elaborate system of regulations and licences, discretionary permissions and consents, promoting crony capitalism and red tape). India continues to be ranked high in corruption[2], and relatively low in competition[3]. It is widely perceived that citizens resorted to their own means to counter this system: under-and-over invoicing deals, incurring fictitious expenses, relying on money laundering and hawala schemes (informal money transfer schemes outside formal financial channels). Tax-evaded monies began to be stored in non-Rupee form, and it is alleged that the two biggest beneficiaries were gold and real estate, with the residue parked in foreign currencies. Counterfeit and fake currency, with cross-border connotations, added to the pain.

Especially in the real estate sector, news reports abounded about builders paying bribes to obtain approvals to commence, continue and complete construction; unaccounted cash being paid to buy agricultural lands; speed money paid to update land records; builders demanding “top-up” monies from flat and office buyers, and rooms-full of Rs. 500 and Rs. 1000 notes found in search and seizure raids[4]. All this has given a bad reputation to the real estate sector. Such reports, coupled with some builders acting as if “they were beyond the law” (by including absurd clauses in sale documents, causing unjustifiable delays in completing projects, and delivering poor construction quality) primed the climate for regulating “unaccounted money” in real estate. The recently enacted Real Estate (Regulation and Development) Act 2016 (RERA), and the recently amended Benami Transactions (Prohibition) Amendment Act, 2016,[5] are steps in this direction. The introduction of a national Goods and Service Tax (GST) in India from April 2017 will also add a fillip.

The Indian government has since banned Rs. 500 and Rs. 1000 denomination notes from midnight November 8, 2016.

With this background, what will demonetisation mean for the real estate sector in the next few years? We venture some thoughts below.
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