REAL ESTATE LAW

Definition: Real estate is the property, land, buildings, air rights above the land and
underground rights below the land. The term real estate means real, or physical, property.
“Real” comes from the Latin root res, or things. Others say it’s from the Latin word rex,
meaning “royal,” since kings used to own all land in their kingdoms.

4 Types of Real Estate

There are four types of real estate:

1. Residential real estate includes both new construction and resale homes. The most
common category is single-family homes. There are also condominiums, co-ops,
townhouses, duplexes, triple-deckers, quadplexes, high-value homes and vacation homes.
2. Commercial real estate includes shopping centers and strip malls, medical and
educational buildings, hotels and offices. Apartment buildings are often considered
commercial, even though they are used for residences. That's because they are owned to
produce income.
3. Industrial real estate includes manufacturing buildings and property, as well as
warehouses. The buildings can be used for research, production, storage and distribution
of goods. Some buildings that distribute goods are considered commercial real estate. The
classification is important because the zoning, construction and sales are handled
differently.
4. Land includes vacant land, working farms and ranches. The subcategories within vacant
land include undeveloped, early development or reuse, subdivision and site assembly.
Here's more at Land Broker Transactions.

Introduction to real estate sector

The real estate sector is one of the most globally recognized sectors. In India, real estate is the
second largest employer after agriculture and is slated to grow at 30 per cent over the next
decade. The real estate sector comprises four sub sectors - housing, retail, hospitality, and
commercial. The growth of this sector is well complemented by the growth of the corporate
environment and the demand for office space as well as urban and semi-urban
accommodations. The construction industry ranks third among the 14 major sectors in terms
of direct, indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in
both the short term and the long term. Bengaluru is expected to be the most favoured property
investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and
Dehradun.
Market Size
The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing
sector alone contributes 5-6 per cent to the country's Gross Domestic Product (GDP).

In the period FY2008-2020, the market size of this sector is expected to increase at a
Compound Annual Growth Rate (CAGR) of 11.2 per cent. Retail, hospitality and commercial
real estate are also growing significantly, providing the much-needed infrastructure for
India's growing needs.
The private equity investments in real estate increased 26 per cent to a nine-year high of
nearly Rs 40,000 crore (US$ 6.01 billion) in 2016.

Sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand
for office space in recent times. The office space absorption in 2016 across the top eight cities
amounted to 34 million square feet (msf) with Bengaluru recording the highest net absorption
during the year. Information Technology and Business Process Management sector led the
total leasing table with 52 per cent of total space uptake in 2016. Mumbai is the best city in
India for commercial real estate investment, with returns of 12-19 per cent likely in the next
five years, followed by Bengaluru and Delhi

Policy Changes in year 2016

The real estate sector in 2016 saw a lot of changes that provide much relief to the common
home buyers. While the Budget also tried to push for the initiative of 'Housing for all', the
Supreme Court's judgments also provide much relief to the ordinary citizens against the real
estate developers.

1) Real Estate Regulatory Act

The Real Estate (Regulation and Development) Act, 2016 which came into force in March
2016 has laid down a regulatory framework which is set to change the way real estate sector
operates in India. It aims to enhance transparency, bring greater accountability, set disclosure
norms to protect the interest of all stakeholders and also ensure speedy execution of property
disputes in due course.
2) Benami Transactions Act
The Benami Transactions (Prohibition) Amendment Act, 2016 lays down stringent rules and
penalties associated with dealings related to "benami" transactions. It establishes a regulatory
mechanism to deal with disputes arising with such transactions and levying penalties as
needed to increase the institution investor participation and regulating the sector with an aim
to make India an attractive investment destination.
3) Demonetisation
The recent demonetization of Rs. 500 and Rs. 1,000 rupee notes by Honorable Prime
Minister is perceived as a significant reform. In the long run, this measure along with Real
Estate (Regulation and Development) Act, 2016 (RERA) will align the real estate sector to
the international standards of doing business resulting in more fund flow from institutional
investors, banks, and higher unit
Real Estate Investment Trust
Keeping in mind the necessity for additional capital requirements in the sector, the Securities
Exchange Board of India (SEBI) took an innovative step and introduced infrastructure
investment trust (InvIT) regulations for infrastructure projects. These regulations have been
in effect since 26 September 2014, and are expected to alleviate the burden on the banking
system by making available fresh and patient capital for the infrastructure sector. The real
estate sector is closely related to infrastructure and is fundamental to its growth. And given
the capital-intensive nature of this sector and the limited options available to real estate
developers and owners for raising funds, real estate investment trusts (REITs) offer a way
forward.

The realty sector has much to cheer about from the Union budget 2016. Finance minister
Arun Jaitley has removed the last significant tax hurdle in the way of Real Estate Investment
Trusts (REIT), given incentives to first-time home buyers and tried to make affordable
housing
The real estate sector in India has been lucrative for savvy investors over the last decade, but
it has not been without accompanying uncertainties. The introduction of REITs (Real Estate
Investment Trusts) will open up a platform that will allow all kinds of investors – even those
with smaller budgets - to make safe and rewarding investments into the Indian real estate
market. The best thing about REIT is that investors can start with as small a sum as Rs. 2 lakh
to secure units in exchange.

The REIT platform has already been approved by the Securities and Exchange Board of India
(SEBI) and like mutual funds, it will pool the money from all investors across the country.
The money collected from the REIT funds will subsequently be invested in commercial
properties to generate income.

A REIT will need to be registered via an IPO or initial public offering. REIT units, as such,
will have to get listed with exchanges and consequently traded as securities. The SEBI board
has kept the minimum asset sizes to be invested in at Rs 500 crore. However, the minimum
issue size would have to be less than Rs 250 crore. As with stocks, the investors here would
be able to buy the units from either primary and/or the secondary markets.

How does a REIT work?

REIT is a process to generate funds from a lot of investors to directly invest in profitable real
estate properties like offices, residential units, hotels, shopping centers, warehouses and
more. All trusts with REIT will be listed with stock exchanges as they would be structured
like trusts. Consequently, REIT assets will be held with independent trustees for unit holders /
investors.

Role of the trustees

Trustees with REIT have defined duties which typically involve ensuring compliance and
adherence to all applicable laws that protect the rights of the investors.
The objective of REITs
A REIT’s objective is to provide the investors with dividends that are generated from the
capital gains accruing from the sale of the commercial assets. The trust distributes 90% of the
income among its investors via dividends. Apart from minimum entry level, a REIT is
supposed to provide diversified and safe investment opportunities with reduced risks, and
under a professional management to ensure the maximum return on investments.

The advantages with REITs include:

Income dividends: 90% of distributable cash at least twice in a year
Transparency: REIT will showcase the full valuation on a yearly basis and will also update
it on a half-yearly basis
Diversification: According to the guidelines, REITs will have to invest in a minimum of two
projects with 60% asset value in a single project
Lower risk: At least 80% of the assets will have to be invested into revenue-generating and
completed projects. The remaining 20% of the properties that include properties like under
construction projects, equity shares of the listed properties, mortgage- based securities, equity
shares that derive a minimum of 75% of income from Government securities or G-secs,
money market instruments, cash equivalents and real estate activities.

The REIT concept has been in the news for some time now. However, the real estate
regulations rolled out so far have not quite helped bring them to Ground Zero in India as yet.
REITs’ exemption from tax on the distribution of dividends would make it much more
attractive for investors. According to a recent report by Cushman & Wakefield, commercial
properties in India that are ‘REITable’ investment opportunities are between $43 billion and
$54 billion across the top cities.

Are REITs more attractive than actual property purchase?

Investing in REIT can be compared to investing in Gold Bonds. Indians are partial to buying
physical gold rather than in Gold Bonds, implying that having one’s own investment in
property will always provide Indians greater satisfaction than mere paper investments. The
Indian property market is now almost stabilized and it is the right time to buy self-owned
homes. While it is human tendency to wait and watch, the bottom of the market cannot be
fathomed accurately at the best of times.

At the end of the day, REITs are investment instruments and not a means to acquire actual
property – which is always high on every Indian’s wish-list. A budget that clearly favours
purchase decisions for first- time home buyers and is a step closer to the Prime Minister’s
mission to provide Housing for all by 2022 is in place. 2017 is certainly the year to make
home ownership a reality.

Mode of Transfer of Real Estate Property

Transactions related to transfer of properties in India are governed by various sate and central
laws such as transfer of movable properties is a subject matter of Sale of goods Act and
transfer of immovable properties is a subject matter of Transfer of property Act. Real estate
properties are mainly immovable properties so transfer of real estate properties is a subject
matter of Transfer of property Act.

The Transfer of Property Act, 1882 happened to be one of the early legislations of the
nineteenth century. The Act is having an important place in the statute book with the main
objective to render the system of transfer of immovable property a system of public transfer.
Registration is therefore generally insisted upon for completing transfer, except in cases of
transactions of small value. Property is a very wide term and would include anything which
carries some value and over which the right of ownership may be exercised. The word
property in its most comprehensive sense includes all legal rights of a person except his
personal rights, which constitute his status or personal condition.' Under English law,
property is generally classified into real property and personal property. Real property
comprises of all properties admitted to specific recovery and is freehold interests in land.
Property in respect of which only a personal action lay was classified as personal property,
i.e., which comprised of all forms of property other than real property. The distinction in
English law between real and personal property is paralleled in Indian law by the distinction
between immovable and movable property.

Definition of Immovable Property

It is a surprising fact that the Transfer of Property Act does not contain a comprehensive
definition of immovable property. Section 3, Para 2 merely says: "Immovable property does
not include standing timber, growing crops or grass". This is a negative definition and is not
satisfactory. We can find a workable definition of immovable property in the General Clauses
Act, 1897, which reads as follows; "Immovable property include land, benefits to arise out of
land and things attached to the earth".
So basically Immovable property means “Land, benefits to arise out of land and things
attached to the earth". But does not include standing timber, growing crops or grass.
There are different modes by virtue of which immovable property can be transferred.
1. Sale,
2. mortgage,
3. lease,
4. gift,
5. exchange etc.
Section 54 of the transfer of Property Act (IV of 1982) defines sale as under : "Sale" is a
transfer of ownership in exchange for a price paid or promised or part-paid and part-
promised.
Section 54 deals with three subjects
I) Definition of sale
II) Mode of transfer by sale
III) Contract for sale

According to first part of section 54 "Sale" is a transfer of ownership in exchange for a price
paid or promised or part-paid and part-promised
In vidhyadhar vs manik rao and another it was held that in order to constitute a sale, there
must be a transfer of ownership from one person to another i.e. transfer of all rights and
interests in the property which possessed by that person are transferred by him to another
person. Transferor cannot retain any rights in that property or else it would not be sale.

And also we can understand that price is an essential part of sale but actual payment of whole
of the price at the time execution of sale deed is not a sine qua non to the completion of sale.
In Narsingh Nath vs Banmali AIR 1970 it was held that the title to the property may pass to
the purchaser after registration though the consideration or price has not been paid.

Second part of section 54 of Transfer of property act deals with sale how made
Such transfer, in the case of tangible immovable property of the value of one hundred rupees
and upwards, or in the case of a reversion or other intangible thing, can be made only by a
registered instrument.

In the case of tangible immovable property of a value less than one hundred rupees, such
transfer may be made either by a registered instrument or by delivery of the property.
Position in Uttar Pradesh