Central laws governing Real Estate in India

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Central laws governing Real Estate in India

Much of the over 100 laws governing various aspects of real estate dates back to the 19th century. Despite the plethora of laws, the situation appears to be far from satisfactory and major amendments to existing laws are required to make them relevant to modern day requirements. The Central laws governing real estate include:

Indian Contract Act, 1872

Transfer of Property Act, 1882

Registration Act, 1908

Special Relief Act, 1963

Urban Land (Ceiling and Regulation) Act (ULCRA), 1976

Land Acquisition Act, 1894

The Indian Evidence Act, 1872

The Indian contract act:

This act defines the competency of a person to contract. The set of laws under this act specifies when the party is competent to enter a contract. Common English laws are the basis for thru laws drafted under this act. A contract applicable to reality can be entered into by an individual, a company, a trust, a sole proprietorship, by a partner of a firm, manager of an HUF and a foreigner. Following are the prerequisites to a valid contract:

A valid agreement

A lawful Consideration

A lawful object

An intention to enter the contract

Along with the above requirements, the validity under the law of the land shall be fulfilled.

Transfer of property act

Any transfer of property in India is regulated by the transfer of property act. This act lays down the general laws to abide by while dealing with a property through sale, mortgage, lease, gift or lien. It includes provisions even for the part-performance of the contract to transfer. Under this act, any person who acquires a fixed (immovable) property or any other interest is assumed to have a notice of the previous owner or possessor of the property.

Registration Act

This act deals with registration of the documents in India. The aim of the act is to conserve the evidence, title, assurances, publishing of documents and prohibition of frauds. It lays down the provisions and formalities which are prerequisite to registration of an instrument. The instruments which are compulsory to register are:

Documents of gift of an immovable property.

Instruments which are non-testamentary and which operate to declare, create, limit, assign or extinguish, whether it is in the present or in future, any title or share, any right, whether contingent or conferred to or in an immobile property.

Non-testamentary instruments which recognize the payment or receipt of any consideration by virtue of instruments in (2) above.

Lease of any fixed or immovable property from one year to another, or for any period exceeding a year, or reserving an annual rent.

Mortgage (except the one by way of deposit of title deeds), sale and mere exchange of a fixed estate are required to be registered on account of the Transfer of Property Act. Apparently, thus, all the above- mentioned instruments shall be in written form.

Section 17 of the registration act advances optional registration. A document which is not registered will not impact the property included in it, nor can be presented as an evidence for any transaction related to the property. There is an exception that in the case of a contract or a suit for specific performance or as a proof of part-performance of a contract under the Transfer of property act, the unregistered document can be presented as evidence. Henceforth, the doctrine of part-performance under section 53A of the transfer of property act and section 49 of the registration both protects the purchaser in case of possession of a sale deed which is not yet registered. As per section 49 of the act, any unregistered document cannot be presented as evidence before any court of law except as secondary evidence under the Indian evidence act. So an overall effect has been that big amount of property transactions have been attained without complete registration. Moreover, other instruments such as power of th attorney, an agreement to sell a will have been uncritically are used to impact the change of ownership.

Special relief act

Special relief act 1963 is an act which lay down remedies for many facets of law. The provisions covered under this act aim to enforce the rights of a common man. As the name shows, this act operates for the relief of the citizens. It is used to bring in force the civil rights of an individual. As per this act, any individual who has been deprived of possession of a property without his consent for the same (except by virtue of any law under any act) can recover his/her right to possession by filing a suit within the period of 6 months from the date of violation of his possession right. In a suit which deals with the part performance of any contract, the court shall assume that a contract in which pecuniary compensation for its non-performance will not afford sufficient relief to be a contract to transfer an immobile property. The court of law may also grant a mandatory/fixed ruling for prevention of the violation of such a contract or for damage of an award.

Urban land (ceiling and regulation) Act (ULCRA), 1976

This act has a large impact on development of the urban area. It barred the development on large belts of accessible land. Under the legislation of this act, a ceiling is fixed on the empty urban land that an individual in an urban cluster can acquire and retain. A person under this act includes a firm, a family, an individual, a joint stock company, and association of persons or a body of individuals. This limit of ceiling ranges from 500-2000 sq mt (square meters). The share of the vacant of the land which is in excess of the limit is either to be improved by the holder for any specified purpose or to be submitted to the competent authority allotted under this act for a small amount of compensation. As per this act, one need to present an appropriate document to approve that the clauses under this act are not attracted or shall produce it in front of the registering officer for the documents which are to be mandatorily registrable under the Indian registration act.

Since intrinsic defects in the legislation itself, the purpose of acquiring excess land could not be attained. The provisions contained under sections 19, 20 and 21 proved detrimental for the aims of the legislation. So far, various state government and various union territories have been able to recover only 19020 hectares of excessive land. The unused land was locked up in various legal affairs. This only assisted in a hike of the land prices to an unethical level.

The above legislation was retracted in 1999.

Any individual duly authorized by the state government or the government itself in consideration with this under the provisions of this law. The reconsideration of the act is presumed, to have eradicated large quantity of litigation and released large belts of land into the market. Though the repealed act is not yet applied in all the states. At the beginning the repealed act was applied to Punjab, Haryana and all union territories. Later it was adopted by the state government of Uttar Pradesh also.

Land acquisition act, 1894

This act lays down guidelines about how the government acquires land from individual landowners. This act allows the government to obtain land from individual landowners for some public work, by paying compensation which is determined by the government. The public purpose includes provisions for rural or town planning, land development, housing for poor and homeless or any other housing, education and health project for public welfare. At present, the act obstructs rapid accession of the land at affordable prices, which results in cost overruns.

The Indian Evidence Act, 1872

As per this act, any person who asserts that another person is not the owner of the property for which he is showing his possession, and whenever the ownership of that person come in question, the responsibility of proving that the ownership is not true lies on the person who declares the same and not on the owner.

Laws of the state governing real estate

While each state has its own set of laws, which govern planned development, rules for construction and Floor Area Ratio (FAR) or Floor Space Index (FSI) and formation of societies and condominiums, two laws that exist in every state, are the Stamp Duty Act and the Rent Control Act.

Rent control Act

In India, the laws of rent are in existence since a long time. Initially, after the Second World War, the rent laws in India were provisionally created in order to protect the tenants from exploitation. Later, these rent control laws became a permanent set of laws. The rent legislation prevents undue elimination of the tenants and provides for payment of the fair rent to the landlords. Besides this, it eventually allows the tenant to disaffect the property. Notwithstanding, the reality boom and the inflation, the tenants inhabiting the properties since 1947 are paying the same fixed rent. Some of the unfavorable effects of the rent control act include:

Investment in the housing for rental basis is affected adversely.

Termination of the present housing stock in the rental market .

The deterioration of the physical state of the housing stock.

Stagnation of the revenue of municipal property which is based pn the rents.

Eventually, results in fall in the clauses of civic services.

A Rise in legal fairs between the tenant and the landlord.

In fact, the rent control act is the only most significant reason behind the multiplication of slums in India by creating a major scarcity of housing for the poor families. The marginalized families generally reside in rented accommodation. With the rise in modernization, labor mobility and urbanization, the need for such rented accommodation will only increase. Henceforth, it is the need of the hour to increase the rental housing stock. The appraisal of rental stock of housing can significantly affect the economy in following ways:

It trims the scarcity of housing for a large chunk of the population who are unable to afford the ownership.

Since residential construction is a labor- intensive work, investment in it will generate employment for any kind of labor.

Housing industry has both forward and backward links with other industries.

It makes housing economical and reasonable for the marginal section of the society by stabilizing the prices of real estate and preventing speculation

It assists in keeping a check on an escalation of slums.

In the absence of rent control, unmaintained housing in an urban area would be eventually pulled down and substituted by modern apartments and other complexes. It will lead to a more coherent use of major locations and also form a regular process of urban reconstruction.

This not took place in India because rent control merged with security of tenancy extends no incentive for owners to engage in a renovation. This is the reason why many building in the major locations of our country appear worn out. It gives the cities in India a much scruffy look as compared to the cities in other developed nations.

As happened in many prime cities worldwide, the repeal of the act could release a construction boom. It will not only meet up the rising demand for residential construction but it will also have a positive effect on employment creation.