The Norms, Laws, Policies Governing Real Estate in India
The Central Acts, the local municipal laws of each state and union territory and the recently issuedconsolidated FDI Policy 2010 are some of the norms that govern the various transactions and practices in the Real Estate. Sale, lease, mortgage, licence are some of the transactions that aregoverned by the above mentioned laws and policies.The laws and policies shall be accordingly described along with the transactions that come into play when investor ventures into Real Estate domain.
The investor who wishes to invest in a land, building that is investor wants to buy land or wants to sell, mortgage, let on lease etc. any immovable property as mentioned is required to first foremost know whether he is competent to enter any of above mentioned transactions:
The investor is first required to check whether he is competent to contract because the first basis of investment is being competent to contract.
The contract act governs the section 11 which states that a person is required to be :
• A major i.e. above 18 years of age.
• Of sound mind i.e. not insane.
• Not prohibited under the law of country to contract.
A resident and a citizen of India are not prohibited to invest or buy an immovable property in India. A non-resident is however prohibited to buy any immovable property in India. A non-resident is though allowed to enter into a lease agreement in relation to an immovable property for the purpose of residence in India for a period of not more than 5 years. This is governed by the Foreign Exchange Management Act and subsequent notifications issued under the same.
The lease agreement has to be executed in accordance to the provision of the Transfer Property Act i.e. section 105 that states that lease is an agreement to transfer only an interest to enjoy the immovable property for a certain period of time for a fixed period and for a consideration.
The investor secondly is required to get title check of the immovable property or know the conditions upon which the investment can be made with respect to the land or immovable property:
The registration act, 1908 mandates that all written document that are creating interest or transferring interest in immovable property for a consideration of a value more than 100 rupees is mandatorily required to be registered in the land Registry.
An investor may choose to get a title check of the property in which he/she is investing. The investor after paying a prescribed fee can check about the property in which he is investing. The registry records all details with respect to the immovable property that includes all holders who held the property, any dues against the property.
The person in case is investing in society flat or office space may check whether the respective society is registered under respective Society Act. However, these investments are subject to the following conditions:
• A minimum of 10 hectares i.e. 25 acres of land shall be required to be developed in case of serviced housing plots.
• Construction developments projects shall be characterized with a minimum built up are of 50,000 sq. meters.
• The investor would not be permitted to sell underdeveloped plots (underdeveloped connotes, where roads, water supply, street lighting, drainage, sewerage and other conveniences as applicable under prescribed regulations, have not been made available)
• The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities as laid down in the applicable building control regulations, bye -laws, rules and other regulations of the State Government / Municipal / Local Body concerned.
• The investor shall be responsible for obtaining al necessary approvals, including those of the building / layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements, as prescribed under applicable rules/bye-/regulations of the State Government / Municipal Body / Local Body concerned.
The third requirement is execution of the agreement of sale or lease by the investor:
The transaction that the investor or person dealing with real estate wish to affect that may be sale or lease or mortgage is governed by the transfer of property act. The transaction can be effected by written document that may either be transferring an interest or transfer the whole interest that is property in whole to the transferee. Transferee is the person in whose favour the interest is created and transferor is the person who transferring the interest. This document is required to a valid contract in the eyes of law and thus satisfies the provisions of contract act.
By virtue of the contract act and section 10 in this regard, the agreement to enforce as a contract is required to be:
• Between the parties who are competent to contract as mentioned above.
• There is meeting of mind that is both parties are aware of the contents of the agreement and agree on the same. The seller is required to disclose to the buyer of the immovable property about any material defect in the property and in case of misrepresentation, the sale can be set aside option of the buyer.
• There has to be valuable consideration i.e. consideration should be of reasonable value. Absence of consideration makes the agreement void in eyes of law that is it has no legal effect except in case of gift. The investor may than choose to execute an agreement of sale of immovable property, a lease agreement, a mortgage agreement as per transactions and these are governed by the section 54, 58, 107 of the transfer of property act.
Fourth requirement after execution of the document:
Stamp duty is required to be paid on all above mentioned documents and these documents as mentioned above are required to be registered with the Registrar of land registry. Stamp duty is governed by the stamp act and local prevalent rates of stamp duty imposed by the states are paid accordingly on the documents.
Some states have double stamp incidence whereby first stamp duty is paid for the transaction of acquiring land and other for development of it. These written documents that are effecting the transaction are required to be registered with Registrar of land Registry.
The Registration act prohibits a non-registered document that is transferring or conveying title from being admitted as evidence in court. This registered document in fact acts as a notice to all people that property has been conveyed to the person in whose name it is registered and is notice of the transaction and thus it is advocated to register such a document as an unregistered document has no value in eyes of law and a registered document is preferred over a unregistered document in case in future if any challenge comes against the transaction.
After the registration of the document, the title or the interest is transferred and hence in case of lease, the transferee is after the registration of the same becomes the lessee, in case of sale, the transferee becomes the owner of the property or henceforth the transferee acquires titles with respect to the executed document or agreement.Google+ image
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