Analysis of Real Estate Laws in USA and India

INTRODUCTION
Real estate is anything in reference to land, buildings which may either be residential or
commercial or may include any housing units, commercial office spaces, schools, shopping
complexes etc. Real Estate development means anything in reference to construction or
development of land or buildings and includes residential complexes, commercial centres,
Malls, shopping complexes, buildings like schools, colleges, health centres, hospitals etc.
People in India like all other place in world require an area to reside, a faculty where the
youngsters of family can choose study, requires hospitals, shopping complexes, roads etc.
and all basic amenities to live and all of these are provided by constructing and developing
land and buildings and hence they can be said to be included in real estate development.
Housing, townships, built up infrastructure, industrial parks includes the above mentioned
and are comprised under the broad category of land development.

Real estate is usually in reference to an immovable property. Immovable property has been
defined under The Transfer of Property Act and with help from the general clauses act 1897,
the definition of immovable property can summarized as “immovable property is not a
movable property and includes land or benefits arising out of land, things attached to earth
or permanently fastened to anything attached to earth and attached to earth means
rooted within the earth or embedded within the earth like walls or buildings.1

Laws pertaining to real estate

INDIA:

Here in India real estate is governed by mixture of federal and state laws because according
to Article 246 of Constitution of India, the land is the subject of state list which list two of
the seventh schedule which covers subjects for which only the state can legislate. While on
the other side, the transfer of property, registration of deeds and documents and contracts
falls under the concurrent list which is list three of the seventh schedule.

The undermentioned are some of the important pieces of legislation governing real estate in
India:

 Transfer of Property Act, 188

 Indian Easement Act, 1882

 Registration Act, 1908 and Indian Stamp Act, 1899

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  The Indian Contract Act, 1872

 Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and

Resettlement Act, 2013

 The Real Estate (Regulation and Development) Act, 2016 (RERA)

 Foreign Exchange Management Act, 1999 (FEMA)

 Land Revenue Codes: Many States in India have framed their own land revenue
codes, which govern laws relating to agricultural land-holding, land revenue, types of
tenancy and matters connected thereto, according to its economic and social needs.

USA:

All the state in United State of America follows a mixture of Statutory law and Common law.
There are three structures of laws in United States of America which are: -

1. Federal
2. State
3. Local

As United States of America follows Common law system, whenever there comes a change
in law, equal weight is given to Judicial precedents i.e., case laws and new legislation.
Generally, courts rely on the document’s express provisions except the parties intent is not
clear. Usually contracts for sale or transfer deed should be in writing but rules on parent
evidence and requiring the agreement in writing depends from state to state.

Legal Restrictions on Ownership by Particular Classes of People: -

India: -

Earlier the right to property was a fundamental right under the constitution of India but this
was changed after the forty-fourth amendment of 1978 which removed the right to
property from the list of fundamental right. In its place, a new provision was added, Article
300-A, which provided that "no person shall be deprived of his property save by authority of
law". Hence now, the state is constitutionally approved to legislate and impose legal
restrictions on ownership of land by a certain group of people or on ownership of land
above land ceilings.

People outside India are generally not allowed to acquire any immovable property in India,
except as permitted under established foreign exchange standards. To evaluate their
eligibility to purchase any immovable property in India, non-residents may be divided into
three classes:

1. A person residing outside India who is a citizen of India

2. A person of Indian origin residing outside India and
3. A person not being an India person/origin
Along with these, basic contract act requirements also needs to be followed such as both
the parties should be competent to contract i.e. they should not be of unsound mind, or not
be disqualified by law to which they are subject to or should not be minors. Even though a
minor can own a property if a guardian is provided till the minor attains the age majority.

USA:

In United States of America there are few requirements which bars a foreigner from
acquiring a property for personal use or investment purpose. The only limitations that still
remains is the control of U.S. agricultural and natural resources in certain regions. A
foreigner who is interested in property is required to:

1. Any foreign investment which results in a foreigner or entity owing more than ten
percent of voting securities or corresponding interest in a US business company may
be required to report requiring information to the Bureau of Economic Analysis
(BEA) of the US Department of Commerce.
2. Hold any direct U.S. real investment appreciated over fifty thousand dollars during
the previous calendar year and needs to file an information return.
3. Control a national or overseas corporation and the it needs to file and information
return yearly with the internal revenue service.
4. The federal government have also imposed some economic sanctions and prohibits
specific deals with several countries, entities, individuals and organisation. The
agency of Foreign Assets Control at the US Department of the Treasury (OFAC)
manages and levies these sanctions.
5. CFIUS2, allows certain foreign investment transactions to be blocked where they
might impact US national security. Parties related to such transaction may be
required to make disclosures under these law which includes FIRRMA. 3
6. Under the Patriot Act the US has regulated investment to identify any terrorist
organization and individuals and the parties to the transaction are required to make
certain disclosures.

Practises for the sale and purchase of the real estate: -

India:

Section 54 of the transfer of property act 1882 deals with the sale of immovable property.

The section deals with three subjects - 1. Definition of sale. 2. Mode of transfer. 3. Contract
of sale.

Definition of sale – Sale is defined as being a transfer of ownership for a price. In a sale there
is an absolute transfer of all rights in property sold. The essential elements of a sale are – 1.

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The Committee on Foreign Investment in the US
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Foreign Investment Risk Review Modernization Act of 2018
The parties, 2. The subject matter, 3. The transfer or conveyance, 4. The price or
consideration.

Mode of transfer by sale – There are only two modes of transfer by sale and these are 1.
Registered instrument and 2. Delivery of possession.

The first overlaps the second, for a transfer may in all cases be made by a registered
instrument. It is only in the case of tangible immovable property of value less than rupees
one hundred that the section allows simpler alternative of delivery of possession. In all
other cases a registered instrument is compulsory. The choice of the simpler alternate is
allowed in the instance of tangible immovable property of value less than rupees one
hundred, since the formality of a registered instrument is not considered essential in view of
the small value, and the obvious evidence of the transfer afforded by the delivery of physical
possession.

The Registration Act does not distinguish between tangible and intangible immovable
property and makes the registration optional in the case of all immovable property of
rupees one hundred.

Contract for sale – A contract for the sale of immovable property differs from a contract for
the sale of goods in that the court will grant specific performance of it unless special reasons
to the contrary are shown. It is not within the competence of the guardian of minor to bind
the minor by a contract for the purchase of land. And as there is want of mutuality the
minor on attaining majority cannot obtain specific performance of the contract otherwise a
contract for the sale of land is subject to general rules applicable to all contracts; and this
and other sections of the act are taken as part of contract act a contract of sale by a minor is
wide but a contract for sale to a minor is valid

Does not of itself create any interest - The last clause of this section abolishes the English
doctrine that a contract for a sale transfers and equitable estate to the purchaser. The Law
of India does not recognize Equitable estate and the English rule that the contract makes the
purchaser owner in equity of the estate does not apply. A person who has contracted to buy
land does not by itself becomes the owner of any interest in the land and is consequently is
not competent to apply to set aside an execution sale of the same land.

USA:

Contrasting many legal systems, there is no duty in the U.S. that title be registered. There is
no requirement to record evidence of ownership, leasehold, easement or other rights. The
act of recording, guards owners or benefited parties from prior, unknown, unrecorded and
subsequently filed/recorded third-party claims. Many of the owners acquire insurance that
they have good title by buying title insurance from title insurance companies, who search
and guarantee the title of the property.
In most jurisdictions, title passes upon the delivery of the deed. Recording of the
conveyance document follows to preserve rights and protect against third-party claims.
Title insurance is utilised in many provinces to protect against any gap interests or claims
arising between execution and recording of the deed.

Generally, the parties enter into a sales contract and sets out conditions and measures that
must be met between the date of signing and date of conclusion. This contract protects
both the parties if any of the required conditions are not met.

TAX
India:

Generally, sale of land and immovable property is subject to stamp duty and registration
charges as GST is limited to the activity of construction of a complex, building, civil structure.
Nevertheless, stamp laws are managed under the Indian Stamp Act and numerous State
stamp acts and rules. Stamp duty charges in India vary from State to State and,
occasionally, even within the State. Stamp duty ranges from 3% to 10%, depending on the
slab decided by the particular State. Stamp duty would only be paid prior to or at the time
of execution of such conveyance deed. Registration fees are paid after the payment of
stamp duty pertaining to such transfer.

USA:

In most territories, there are state and occasionally local transfer taxes on a deed transfer,
which are typically calculated as a percentage of the consideration being exchanged for the
deed. Many states also have mortgage or intangibles taxes payable in connection with
indebtedness secured by real estate. The duty to pay transfer taxes can be allocated by
contract but is usually allocated pursuant to local custom. In certain states, the duty to pay
transfer taxes is joint and several, so although the duty is assigned to one party, the state is
not bound by such allocation and it can seek such payment from the other party if the taxes
are not paid. Payment of the appropriate tax is a condition precent to recording of a deed.
Payments, are however, subject to subsequent audit in many territories

Conclusion: -
What are the differences between the Indian law regarding property rights, which is known
for being highly protective of individuals’ ownership rights, and US law which is known for
its pro-capitalist approach? The United States adopted a liberal set of rules that allow
people to purchase land without prior approval while India has traditionally had more
socialist tendencies with eminent domain eminent domain being used mainly by
municipalities rather than individuals.