Empowering Development: Maharashtra's Game-Changing Resolution for Streamlined Procurement of Development and NA Permission

  • June 6, 2023
  • Real Estate Team, Mumbai

The Maharashtra Government on May 23, 2023, vide its resolution bearing number NSP-2022/Pr. Kr. 103/J-1/A (“GR of May 2023”)[1] has simplified the process of obtaining Non-Agricultural (“NA”) permission for the utilization of land. It is expected that this change will cut short the run to multiple authorities and prove to be time-saving.

Introduction

Presently, as per section 42 of the Maharashtra Land Revenue Code, 1966 (“MLRC”), the prior permission of the Collector is required for the non-agricultural use of agricultural land or for putting land assessed for specific non-agricultural use to alternate use. Thus, the grant of NA permission was one of the functions of the revenue department. For construction on land converted to non-agricultural use as per the provisions of MLRC, the landowner is further required to obtain development permission from the planning authority as provided under section 44 of the Maharashtra Regional and Town Planning Act, 1966.

The resolution provides for the grant of both NA and development permission under a single application for certain categories of land as detailed hereinafter. The Building Plan Management System (“BPMS”), which is an online system being used to process construction and building permits is pivotal in facilitating the combined grant of NA and development permission.

The Changes

The GR of May 2023 proposes the following modality for an integrated grant of NA and development permission:

  1. The lands falling within the scope of section 42A (no permission required for change of use of land situate in area covered by development plan), section 42B (provision for conversion of land use for lands included in final development plan area), section 42C (provision for conversion of land use for lands included in the draft regional plan), section 42D (provision for conversion of land use for the residential purpose), or section 44A (no permission required for bona fide industrial use of land) (collectively referred to as “said Lands”), shall be deemed to be cleared for NA use and there is no separate NA permission to be obtained.
  2. Where the said Lands fall under Occupancy Class – I tenure, upon payment of conversion tax, the non-agricultural use license (permission) will be generated along with the development permission using BPMS.

However, if the said Lands fall under Occupancy Class – II tenure, then upon payment of Nazrana (premium) and other expenses that will be payable to the government, as may be verified by the revenue officer, the development permission generated on BPMS shall be granted to the landowner. Further, the NA use license (permission) shall be granted along with the aforementioned development permission. One copy of such NA use license (permission) shall be forwarded to the office of the village revenue records to facilitate the collection of non-agricultural land assessment from the landowner.

The Takeaway

The conversion of land from agriculture to NA, which formerly entailed the involvement of different officials and many months of work, has been simplified by providing single window clearance. A separate application for non-agricultural certification is no longer necessary for land in places where the Development Plan/ draft regional plan/ residential or bona fide industrial use has already been permitted. This will simplify life for farmers, landowners and developers. It is expected that this step will augment Maharashtra’s ranking on the ease-of-doing-business index.

We hope you find the above informative and in case of any queries or clarifications kindly feel free to reach out to us at – mumbai@foxmandal.in

References:

[1] Government resolution dated May 23, 2023, Maharashtra State Revenue and Forest Department, available at: https://gr.maharashtra.gov.in/Site/Upload/Government%20Resolutions/English/202305231835473319.pdf

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Photo by maxsattana: https://www.canva.com/photos/MADBjlIPyXU-investor-immovable-property/

The resolution provides for the grant of both NA and development permission under a single application for certain categories of land as detailed hereinafter. The Building Plan Management System (“BPMS”), which is an online system being used to process construction and building permits is pivotal in facilitating the combined grant of NA and development permission.

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Enemy Property in India: An Overview

The declaration of the Indo–Pakistan War in the year 1965 meant that Indian Goans living in Pakistan were now enemies of India. It is in this war lies the birth of the Enemy Property Act, 1968.

It is said that Karachi, Pakistan gained prominence in the eyes of the British Monarchy during the early 1800s, as the English colonisers began to develop the city as a trade hub, resulting in the Indian Goans migrating to this city.  These Indian Goans made several voyages to Africa and other Asian continent countries in search of better monetary prospects and while doing so they left behind movable and immovable properties in India to build a new life in Pakistan. 

It is a part of the world’s history that India was facing the army of Pakistan on its western borders in the year 1965. The leadership of Pakistan had assumed India to have weakened after the Sino-India War of 1962 resulting in Pakistan attempting to invade India. The war ended in a stalemate even though India had successfully repelled the army of Pakistan. A truce was negotiated between the two warring nations by the United Nations (UN) and the two countries negotiated the terms of the cease-fire in the city of Tashkent, Soviet Union (the city is currently part of Uzbekistan).

Against this backdrop, some Indian citizens having movable and immovable properties in India chose to leave for Pakistan, thereby resulting in the property being taken over by the Indian government. A custodian was appointed under the Evacuee Property Act, 1950 who took over those properties. Such properties came to be known as the evacuee properties and were administered under the said Act.

After Goa’s liberation from the Portuguese, the properties belonging to Goans who left the state were acknowledged under the Goa, Daman & Diu Administration of Evacuee Property Act, 1964. However, during the 1965 war, the Indians who had acquired the nationality of Pakistan and continued to own property in India were in for a shock. All the properties in India belonging to erstwhile Indian nationals were considered as ‘enemy property’. A similar situation took place during the Indo – China War in the year 1962. Under the Defence of India Rules, 1962, properties belonging to Chinese nationals were declared as enemy property and they continue to be identified as enemy property even today.

The Enemy Property Act, 1968

This Act was enacted to provide for “the continued vesting of enemy property vested in the Custodian of the Enemy Property for India under the Defence of India Rules, 1962 and for the matters connected therewith”. The Act inter alia defined enemy property as “any property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm”. All the rights, titles, and interests in, or any benefit arising out of such property would be covered within the ambit of enemy property which may include land, jewellery, bank accounts, commercial properties, investments, etc. The Act provides for the appointment of the Custodian of Enemy Property for India and the Deputy Custodian, etc. and specifies their powers and roles. The Custodian may after making such inquiry as it deems necessary, by order, declare that the property of the enemy or the enemy subject or the enemy firm described in the order vests in it under this Act and accordingly issue a certificate to this effect.

The enemy properties vested in the Custodian under this Act are exempted from attachments, seizures, or sales in execution of the decree of a Civil Court or orders of any other Authority. Further, the Central Government may by general or special order transfer the property back to the person from whom such property was acquired and vested. Furthermore, the Act provides that any person aggrieved by an order of the Central Government, may within the period specified under the Act file an appeal to the High Court on any question of fact or law arising from such orders.

The Central Government has formulated the Enemy Property Rules, 2015, the Transfer of Property (Vested as Enemy Property in the Custodian) Order, 2018, Guidelines for the disposal of Enemy Property Order, 2018, the Procedure and Mechanism for Sale of Enemy Share Order, 2019 and the Procedure and Mechanism for disposal of Immovable Properties Order, 2020 in the exercise of its powers conferred under the Enemy Property Act, 1968.

Notable Case Studies

  1. The onus of proof lies on the Authority to prove that a person has migrated to an enemy state and consequently the property held by him/ her was enemy property – Case references: (i) Ghasitu (through his legal representatives) v Assistant Custodian Enemy Property and (ii) Tanvir Eqbal & Ors v Union of India & Ors.
  2. If the property is recorded in the revenue records in the name of ancestors who are alleged to have migrated to an enemy state, the same would be treated as enemy property – Case reference: Buniyad Hasan v Zila Adhikari Barabunki.
  3. Public purpose is the pre-condition for the deprivation of a person from his property under Article 300 A and the right to claim compensation is also inbuilt into that article, and when the person is deprived of his property the state must justify both the grounds which may depend on the scheme of the statute, legislature and other relevant factors – Case reference: K.T. Plantation Pvt. Ltd & Anr v The State of Karnataka.

Current Scenario

A film named ‘Enemy’ released in the year 2015 was based on the consequences of the Act, where the protagonist comes home after serving in the Indian army during the war of 1965 only to find out that properties belonging to his family would be taken away from them because they were registered in the name of a relative who had migrated to Pakistan earlier.

Apart from the above movie reference, the general statistics/ data available in the public domain show that there are about 16,000 enemy properties across India, with a maximum number of such properties in the state of Uttar Pradesh. In Goa itself, the government has identified 263 properties, which are roughly estimated to be worth INR 100 crores.

The current situation is such that the Act does not allow the heirs or relatives of enemy state nationals living in India to inherit properties, even after they have passed away. Further, any person who bonafidely purchased a property when it was sold can now be ousted from his/ her vested interest in the subject property. These lacunas in the Act have left the judicial courts burdened for the want of judicial intervention.

References:

  1. The Administration of Evacuee Property Act, 1950;
  2. The Enemy Property Act, 1968;
  3. Enemy Property Rules, 2015;
  4. The Transfer of Property (Vested as Enemy Property in the Custodian) Order, 2018;
  5. The Guidelines for disposal of Enemy Property Order, 2018;
  6. The Procedure and Mechanism for Sale of Enemy Share Order, 2019;
  7. The Procedure and Mechanism for disposal of Immovable Properties Order, 2020;
  8. Ghasitu (through his legal representatives) v Assistant Custodian Enemy Property;
  9. Tanvir Eqbal & Ors v Union of India & Ors;
  10. Buniyad Hasan v Zila Adhikari Barabunki;
  11. T. Plantation Pvt. Ltd & Anr v The State of Karnataka.

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Photo by Shamoil on Unsplash

This Act was enacted to provide for “the continued vesting of enemy property vested in the Custodian of the Enemy Property for India under the Defence of India Rules, 1962 and for the matters connected therewith”. The Act inter alia defined enemy property as “any property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm”. All the rights, titles, and interests in, or any benefit arising out of such property would be covered within the ambit of enemy property which may include land, jewellery, bank accounts, commercial properties, investments, etc. The Act provides for the appointment of the Custodian of Enemy Property for India and the Deputy Custodian, etc. and specifies their powers and roles. The Custodian may after making such inquiry as it deems necessary, by order, declare that the property of the enemy or the enemy subject or the enemy firm described in the order vests in it under this Act and accordingly issue a certificate to this effect.

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An Overview of Real Estate Investment Trusts (REITs)

The concept of REITs is steadily gaining significance and investors are increasingly opting for REITs as a way to tap into the growing real estate market and diversify their portfolios. With time, REITs have become considerably popular, particularly among investors having large capital who make use of REITs to invest in high-value real estate projects. Having a wide range of investment options to select from, investors need to consider the implications involved along with their preferences and requirements before making an REIT investment.

Introduction

Real Estate Investment Trusts (REITs) refer to companies that hold ownership and/or operations in real estate. To be considered a REIT, the company must invest a minimum of 75% of its assets in real estate and derive at least 75% of its revenues from real estate-related activities. India saw its first REIT in the year 2019. As of now, there are three REITs in India – Embassy Office Parks REIT, Mindspace Business Park REIT and Brookfield India Real Estate Trust. REIT investments make it possible to have exposure and invest in real estate without having direct ownership over the property. 

Categories of REITs

When it comes to types of REITs, equity REIT is one of the most popular ones wherein rent collected through the leased-out property and proceeds received from the sale of properties is distributed to shareholders. On the other hand, mortgage REITs (also called mREITs) though don’t own real estate, advance loans to finance real estate and make profits through interests. In the case of hybrid REITs, investors have the option of diversifying their portfolios by parking their funds in both mortgage REITs and equity REITs. Accordingly, both rent and interest constitute sources of income for this type of REIT.

Private REITs function as private placements, which cater to only a selective list of investors. These are not traded on National Securities Exchanges (NSE) and are not registered with the Securities and Exchange Board of India (SEBI).

Public non-traded REITs are non-listed REITs which are registered with SEBI to carry out activities under SEBI (Real Estate Investment Trusts) Regulations, 2014. However, they are not traded on NSE. They are comparatively more stable as they are not subjected to market fluctuations. Publicly traded REITs extend shares enlisted on NSE and are regulated by SEBI. Individual investors can sell and purchase such shares through the NSE. REIT companies listed on the Indian stock exchanges are monitored and regulated by SEBI to safeguard the interest of the investors and ensure adherence to industry practices.

Risks Involved

Non-traded and publicly traded REITs pose risks, and these are not necessarily categorised as disadvantages as the cost-benefit analysis and the choices made therein are based on the discretion of the investors.

Having said that, non-traded REITs carry a higher risk than public REITs since there is no information available in the public domain to enable investors to carry out research and determine their values. In this context, the element of trust is integral. They are illiquid and the potential of having a lock-in period for the same is high, meaning thereby that investors may not be able to access their funds for a predetermined period, sometimes up to seven years. Furthermore, non-traded REITs are known for incurring high upfront fees. In the case of publicly traded REITs, the biggest challenge is the high-interest rate risk.

Tax Implications

As mentioned above, shareholders receive dividends and capital gains by virtue of REIT investments and are accordingly required to pay tax on such gains. It is necessary to mention that the dividends received in this manner are not eligible for a lower tax rate and the shareholders are liable to pay the tax as applicable to ordinary income. This is from a shareholder’s perspective. REITs are also legally bound to pay tax and cannot claim any exception available to pass-through entities such as sole proprietorships, partnerships, etc.

Benefits and Limitations

Shares in REITs are affordable for investment, and it poses a good option for small investors. The publicly traded REITs are listed on the stock exchanges which means that potential investors will have access to detailed information and make choices accordingly. Another added advantage of choosing REITs over directly purchasing commercial properties is the prospect of receiving steady dividend income.

Although REITs pose a good investing option, some challenges cannot be overlooked. First, investors are required to pay high up-front fees. The extent of risks, in the long run, is also proportional to the number of investments made and the volatile nature of the real estate market could pose a challenge to earning dividends. REITs as asset classes can lead to investors having restrictions on selling shares for a period of time.

Conclusion

REITs can prove to be a suitable retirement investment considering the steady dividend income that arises out of such an investment and on account of their growth potential. Such an investment will also help in portfolio diversification. Hence, one can connote that REITs could be a good starting point for investors to include real estate in their investment portfolio provided that the risks involved are duly assessed and the applicable tax provisions are borne in mind.

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Photo by SevenStorm JUHASZIMRUS: https://www.pexels.com/photo/green-and-yellow-crane-439416/

REITs can prove to be a suitable retirement investment considering the steady dividend income that arises out of such an investment and on account of their growth potential. Such an investment will also help in portfolio diversification. Hence, one can connote that REITs could be a good starting point for investors to include real estate in their investment portfolio provided that the risks involved are duly assessed and the applicable tax provisions are borne in mind.

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Resuscitating Land Pooling and Urban Regeneration in Delhi

Land pooling policy was notified on October 11, 2018, for six zones spread across 109 sectors in 95 urbanized villages in Delhi. The land pooling technique has been successfully utilised in several states across India. The scheme aims to pool land parcels for the purpose of developing the land in toto and returning the developed land parcels back to the landowners. It creates a win-win scenario for both the state and landowners. Land pooling, unlike other schemes, ensures that the rights of landowners are protected and that the scheme is implemented through a participatory mechanism. Since there is no acquisition of land, the cost of such schemes is significantly lower.

The National Capital Territory of Delhi is one of the oldest cities in India. It is densely populated, and like many other cities in India, it suffers from unplanned development and poor habitation conditions that have plagued the city for decades. For the purpose of planned development and better living conditions, the Delhi Development Act, 1957 (DDA), was enacted, and recently, the Ministry of Housing and Urban Affairs released a set of proposed amendments to the DDA Act to facilitate and operationalize land pooling. The draft was shared for pre-legislative consultation and, this article analyses the recommendations made therein.

 

Objectives of the Proposed Amendments

The benefits of land pooling mechanisms for developing the national capital region were identified, and to facilitate the same, the proposed amendments are being mooted, along with several consequential changes that have been proposed.

The reluctance among a few landowners to participate in the land pooling policy has hindered the state from implementing planned development. In order to achieve contiguity in the land parcels available for land pooling, the proposed amendment also facilitates mandatory land pooling or urban regeneration. The Central Government is empowered to direct the urban local bodies (ULB) or the authorities to notify mandatory policies.

The tools of land pooling will be vital in achieving the goals of planned development. The proposed amendments are aimed at operationalizing two key policies, i.e., land pooling policy and urban regeneration policy.

  1. Land pooling is the assembly and redistribution of land parcels under different ownerships, for the purpose of integrated planning and development.
  2. Urban regeneration in an existing developed area, vacant land, or laldora land of an urbanised village includes re-planning, re-construction, re-development, retrofitting, up-grading, rehabilitation, and renewal (including amalgamation, pooling, and reconstitution of plots). 

It can be understood that land pooling will be implemented in less urbanised land parcels for the purpose of planned development, and urban regeneration will be employed in urbanised land parcels with unplanned development that are a source of danger.

 

Analysis of Chapter IV A

The new chapter IV A under the proposed amendment captures the flow of the two policies. The first step to the implementation of land pooling or urban regeneration is the notification of a land pooling or urban regeneration policy, followed by notification of the area for which the respective policies would be applicable.

The amendments limit landowners’ ability to develop an area after it is designated as an area eligible for policy or a mandatory policy area. The authority or the urban local body is empowered under the proposed amendment to appoint a designated officer or agency for the purpose of implementing the scheme.

Another key amendment proposed is that after the minimum threshold under voluntary participation for either of the policies is achieved, it is mandatory for the dissenting landowners to comply with the policy.

Notification of Mandatory Area for Land Pooling/Urban Regeneration at the Direction of Central Government

The proposed Act amendment allows the central government to direct the authorities or ULB to notify mandatory areas for land pooling or urban regeneration for the purpose of speedy implementation of the policy. This helps the implementing agencies effectively implement planned development even without achieving the minimum threshold for voluntary participation.

The flow chart below illustrates the process of notification for each policy area under the proposed amendment.

Land Pooling 

Urban Regeneration

Notification of Mandatory Urban Regeneration Policy by Urban Local Body

Delhi has been continuously facing several calamities, both anthropogenic and non-anthropogenic. Planned development is made mandatory in order to mitigate and avoid them. The urban local bodies are empowered under the proposed amendment to notify the Mandatory Urban Regeneration area independently, without any directions from the Central Government. Any area satisfying any one or many of the below listed conditions can be notified as an area for mandatory urban regeneration under the proposed amendment:

  1. Disaster-prone area that faces an immediate risk of loss of life and property.
  2. Lack of minimum standards of quality due to substandard construction or aging.
  3. Constructions without valid permits on untenable lands.
  4. Habitats with poor access.
Obligations of Land/Property Owners

When an area is declared eligible for land pooling or urban regeneration, or a mandatory area for land pooling or urban regeneration, all land and property owners are required to cooperate fully with the authorities concerned.

 

Policy Implementation

To effectively implement the policies, the following amendments are proposed:

SPVs

The policies are implemented through the formation of a special purpose vehicle (SPV), consortium entity, or joint venture comprised of land or property owners and the implementing agency (DDA/ULB). This ensures a participatory mechanism and protects the interests of landowners at each stage of the policy.

Restrictions on Use and Sale

The policy can impose such restrictions on the transfer or development of land or built-up structures under the Act. This is done for effective implementation of the policy.

Exemption from Stamp Duty

Another key amendment proposed is an exemption from stamp duty implications. This helps in avoiding the multiple stamp duties that are attracted when land is surrendered and then reconveyed after development, which creates a financial burden.

Lis Pendens

The proposed amendment also ensures that pending disputes over the title to land or buildings do not hamper the implementation of the policy. The person with clear title as adjudicated by a competent court will be conveyed a developed land parcel after policy implementation.

Statutory Vesting of Lands

The proposed amendment also provides for the statutory vesting of lands and buildings and empowers the implementing agency to evict people summarily for the purpose of land pooling or urban regeneration.

Exemption from the Right to Transparency and Fair Compensation in Land Acquisition Act, 2013

Since land or property is conveyed back to the owners, the policy shall not attract provisions of compulsory acquisition under the Right to Transparency and Fair Compensation in Land Acquisition Act, 2013. Also, persons whose land is acquired or whose rights over property are affected such persons shall be compensated by the grant of transferable development rights.

 

Key Takeaways

The proposed amendment act aims to create planned development that is essential for any urban center. It assures effective implementation of the policies as they remove the roadblocks that were earlier faced, such as stamp duty implications or a lack of participation by people. Where the minimum threshold for policies is achieved, it is mandatory for the rest of the owners to comply with the policy, ensuring the contiguity of lands. Also, the central government has the power to direct notification of mandatory policy areas, which provides flexibility to the government in implementing policies in a time-bound manner.

The proposed amendment act establishes criteria for an urban local body to notify an area as a mandatory area for urban regeneration; however, there is no provision in the Act seeking to show cause why such notification should not be made from landowners or property owners. And there is no room for challenging the notification for mandatory land pooling or mandatory urban regeneration policy. Therefore, there is a need for setting up a grievance redressal mechanism.

Further, the proposed amendment has introduced the concept of statutory vesting of lands and property for the purpose of the policy; however, it is silent as to when statutory vesting commences – after notification of the policy or after notification of lands for urban regeneration or land pooling, as the case may be.

The Delhi Urban Shelter Improvement Board Act, 2010, also operates in the same domain as urban regeneration policy. The proposed amendments are silent about the superseding effect of the urban regeneration policy over the Shelter Improvement Board Act.

The proposed amendment act has demarcated the roles and obligations of a landowner or property owner; however, it is silent about the occupiers of the land. Since many of the areas have a significant portion of the population residing as tenants and not as owners, it is necessary for the proposed amendment act to address the rights and duties of occupiers of the land or property under the policies.

The proposed amendment act empowers the authorities and ULB to evict people summarily, but it is silent on the provision of transit accommodation or rehabilitation or relocation allowance for persons displaced due to the policies.

The benefits of land pooling mechanisms for developing the national capital region were identified, and to facilitate the same, the proposed amendments are being mooted, along with several consequential changes that have been proposed.

The reluctance among a few landowners to participate in the land pooling policy has hindered the state from implementing planned development. In order to achieve contiguity in the land parcels available for land pooling, the proposed amendment also facilitates mandatory land pooling or urban regeneration. 

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Impact of Work from Home and Rise of Coworking Spaces on the Bengal Real Estate Sector

The COVID-19 pandemic had forced the world to undergo an overnight change with respect to the way it conducted both its personal and professional lives. It brought about boom in some industries, such as e-commerce, ed-tech, etc. and stagnation in others such as travel, hospitality, etc. The real estate industry also underwent some drastic changes, which has affected various stakeholders.

Encouraging Government Interventions

In the recently convened National Conference of Labour Ministers of all States and Union Territories, the Prime Minister said that “flexible workplaces, a work-from-home ecosystem, and flexible work hours” are the needs of the future. Another development with a similar vision of flexible workplaces was the Special Economic Zones (Third Amendment) Rules, 2022 and the Special Economic Zones (Fifth Amendment) Rules, 2022.

On 14th July, 2022, notification no. G.S.R. 576(E) was published by the Ministry of Commerce and Industry, Government of India promulgating the Special Economic Zones (Third Amendment) Rules, 2022, which permitted work from home for Special Economic Zone (“SEZ”) employees and solidified the legal framework of work from home and remote working. By this notification, Rule 43A was added to the SEZ Rules, 2006 which enabled employees (including contractual employees) to work from home or from any other place outside the SEZ up to a maximum of fifty percent of the total employees of the SEZ Unit. It extends to employees of the IT and ITes SEZ units, employees who are temporarily incapacitated, employees who are travelling and also employees who are working offsite. In order to avail itself of this, the SEZ Unit had to submit its proposal for working from home to the Development Commissioner through email or physical application at least 15 days in advance.

However, on 8th December 2022, the Ministry published another notification bearing no. G.S.R. 868(E), bringing about the Special Economic Zones (Fifth Amendment) Rules, 2022, which granted further relaxations to the SEZ work from home norms. By virtue of this amendment, the percentage of employees who can work from home has been increased from 50% to 100% till 31st December 2023. It is also no longer mandatory to get prior approval of the proposal for work from home, and the SEZ unit owners are only required to intimate the same to the Development Commissioner.

Due to pandemic/lockdowns, most officegoers started working from home or remotely. Although remote working existed even before the pandemic, especially among freelancers, it was because of the pandemic that most businesses were forced to adapt to this mode of working even for full-time employees. Although the world is back to normal at present, both employers and employees are refusing to go back to the traditional office setup. The December 8, 2022 notification will now further encourage IT companies and their employees to opt for work from home in the SEZs.

 

Increase in Demand for Residential Spaces & Shifting of People to Tier 2 And Tier 3 Cities

Another interesting trend that has come out of this pandemic is the increase in demand for bigger residential spaces, including luxurious and semi-luxurious apartments. As per the reports of CREDAI, Bengal, the sales of 2 BHK apartments have gone down from 48% in 2019 to 40% in 2021, while on the other hand, sales of 3 BHK apartments have gone up significantly from 44% in 2019 to 54% in 2021. The sales of 4 BHK apartments have also more than doubled during the same period, going up from 2% in 2019 to 4.7% in 2021. This increase in demand for luxurious residences has taken place since individuals who work from home prefer an apartment with a home office, and therefore, they are leaning towards larger residential spaces.

 

The demand for residential real estate is highly dependent on where people go to work, as people prefer to live near their workplaces in order to minimise travel. Now that a large group of people are not required to physically to work regularly, they are shifting to tier 2, tier 3 cities and suburban areas from the metro areas as these places offer affordable housing options and a better standard of living at a lower cost. The tier 2 cities across India have witnessed healthy investment in residential real estate in recent years, with more residential project launches by developers.

 

Rise of Co-Working Spaces

As a result of the change in mindset of employers and employees, a new form of commercial real estate has gained popularity recently, namely, “co-working spaces.” A lot of companies, especially small businesses and start-ups have opted for this model across India instead of investing in individual spaces, as it offers both cost-effectiveness and flexibility. Some of the reputed coworking spaces, such as Colliers, Awfis, Coworks have already set up spaces in different cities across India. Due to this huge demand for coworking spaces, companies such as Awfis, Workport Coworking, East India Works Eden, My Cube and Seamus Management have already set up coworking spaces in Kolkata.

 

Future Trend

Now that offices are transitioning from work-from-home models to hybrid models and some workplaces are also calling their employees back to the office, the demand for office space and coworking space transactions has started to pick up again. Although the employees of the IT/ITeS sector in SEZs still have the liberty to work from home, most employers in other sectors have mandated that employees come back to the office. It will be interesting to see if the volume of rentals and leasing in office spaces goes back to the pre pandemic conditions or is affected by the rise of “co working spaces” and the new notification dated December 8, 2022 allowing 100% work from home in SEZs until December 31, 2023.

 

Now that offices are transitioning from work-from-home models to hybrid models and some workplaces are also calling their employees back to the office, the demand for office space and coworking space transactions has started to pick up again. Although the employees of the IT/ITeS sector in SEZs still have the liberty to work from home, most employers in other sectors have mandated that employees come back to the office. 

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Can Environment Protection and Economic Development Go Hand-In-Hand?

Sustainable development is an organising principle for meeting human development goals while also sustaining the ability of natural systems to provide natural resources and preserve the ecosystem services on which the economy and society depend. It is the duty of the State to implement a coherent and coordinated program in which economic development should not be allowed to take place at the expense of our natural resources.

With the principle of sustainable development in mind, the Hon’ble Supreme Court (“Hon’ble SC”) issued a decision on 03.06.2022 in the case In Re: T.N. Godavaraman Thirumulpad vs. UOI & Others[1] to categorically lay down the extent of Eco-Sensitive Zones (“ESZ”) that surround protected forest lands. Strict rules have been laid down with the intention of ensuring that development and preservation of the environment go hand in hand.

What is Eco-Sensitive Zone (ESZ)?

Fragile areas surrounding protected forest lands are known as eco-sensitive-zones (“ESZ”), otherwise known as “shock-absorber” or “transition zones,” and the extent of the ESZ for each protected forest land is declared by the Ministry of Environment, Forestry and Climate Change (“MoEF&CC”). The ESZ for each protected forest is a vital element for preserving and protecting the environment from hazardous activities.

In the year 2002, a ‘Wildlife Conservation Strategy-2002’ was adopted in the meeting of the National Board for Wildlife, wherein lands falling within 10 kms of the boundary of each protected forest land were to be declared ESZ and the Chief Wildlife Wardens of every State were requested to list out areas that fall within 10 kms of the boundaries of the protected forest lands. However, in response, several State Governments raised issues over the applicability of the 10 km rule as certain protected forest lands were located in urban areas, which had an uninterrupted flow of development.

Guidelines For Eco-Sensitive Zone (ESZ)

 

Taking into account the concerns raised by the state governments, the MoEF and CC issued a guideline on February 9, 2011 to ensure that development does not come at the expense of the environment and vice versa.

 

In a nutshell, the rules laid down in the Guidelines specifying the extent of each ESZ are as follows:

  • As provided in the Wildlife Conservation Strategy, 2002, the extent of an ESZ can go up to 10 kms.
  • In areas with delicate ecosystems and connecting habitats that suit the needs of a full suite of native animals and plants and are beyond 10 km in width, these shall be included in the ESZ.
  • In the context of a particular Protected Area that is specifically designated by the State Government, the area of the ESZ could be of variable width and extent.

Irrespective of the above guidelines, issues were still being raised before the Hon’ble Supreme Court, seeking modification of the restrictions pertinent to ESZ.  

Observations of Hon’ble Supreme Court

To put the question of ESZ to rest once and for all, the Hon’ble SC in the case In Re: T. N. Godavaraman Thirumulpad vs. UOI & Other, passed an order (“June Order”) that extensively dealt with ESZ and the activities permitted therein. The relevant directions that were laid down in the June Order are as follows:

  1. Each protected forest land must have an ESZ of at least 1 km measured from the protected forest land’s demarcated boundary.
  2. When the ESZ that is already prescribed by law goes beyond 1 km, the wider margin of the ESZ shall prevail.
  3. The minimum width of the ESZ may be diluted with the approval of the Central Empowered Committee, MoEFF & CC, and the Hon’ble SC.
  4. A 10 km buffer zone (ESZ) is to be implemented for any sanctuary or national park for which no proposal has been submitted.

It is noteworthy to mention that the Hon’ble Supreme Court had also observed that the above-mentioned directions may not be feasible for all sites, such as Sanjay Gandhi National Park in Mumbai (“SGNP”), Gandhi National Park in Mumbai (“GNP Mumbai”), and Gandhi National Park in Chennai (“GNP Chennai”), as these sites have gone through tremendous development in close vicinity and are located in urban areas.

However, because the Hon’ble Supreme Court’s observations on special cases were left vague, causing uncertainty, the aforementioned order had a disastrous effect on the Mumbai real estate industry, halting construction in areas surrounding the SGNP and directing local authorities to cancel Commencement Certificates issued to builders.

Subsequently, the CREDAI-Maharashtra of the Housing Industry had filed an Interim Application[1] before the Hon’ble SC, seeking clarification on the applicability of the 1 km rule in special cases such as SGNP. The Hon’ble SC had clearly set forth in the Interim Order that the directions laid down in the June Order are not applicable to special cases as a 1 km wide “no development zone” may not be feasible in all cases. Further, the Hon’ble SC mentioned that specific exceptions with regard to SGNP and GNP Mumbai had already been made in the June Order.

 

Present Situation of Guindy National Park, Chennai

GNP, Chennai, is a habitat for faunal species and the city’s vital lung, with a land area of 270.57 hectares (ha) and was designated as a Forest Reserve land in 1978, when it was known as the “Guindy Deer Park.” Right from the begining, GNP has been a tourism attraction point surrounded by numerous buildings such as the Gandhi Mandapam, IIT, Cancer Institute, Rajaji Memorial Historical Monument, etc. All of this being a source of pride, GNP has recently become a source of contention in discussions about sustainable development.

On application of the aforementioned Interim Order of the Hon’ble SC, it can be presumed that the ‘1km rule’ laid down in the June Order is inapplicable to GNP Chennai as it has been carved out as a “Special Case”. The relevant portion of the June Order is extracted hereinbelow, for ease of reference.

“We have considered CEC’s recommendation that the ESZ should be relatable to the area covered by a protected forest but the Standing Committee’s view that the area of a protected forest may not always be a reasonable criterion also merits consideration. It was argued before us that the 1 km wide “no development zone” may not be feasible in all cases and specific instances were given for Sanjay Gandhi National Park and Guindy National Park in Mumbai and Chennai metropolis respectively which have urban activities in very close proximity. These sanctuaries shall form special cases.”

However, in pursuance of the June Order, a PIL[2] has been filed by a Social Activist before the Hon’ble High Court, Madras seeking to demolish the headquarters of the Tamil Nadu Forest Department that has been constructed close to GNP Chennai with the alleged intention to protect and preserve the habitat.

An affirmation of the June Order by the Hon’ble High Court, Madras, would therefore dispel all ambiguity with regards to the rules applicable to GNP Chennai and provide the necessary clarification on what path the real estate industry in Chennai could embark on.

References: 

[1] W.P. (Civil) No. 202 of 1995 dated 03.06.2022

[1] I.A. No. 110348 of 2022 dated 23.09.2022.

[2] W. P. No. 27372 of 2022

Image Credits: Photo by Amit Jain on Unsplash

The Hon’ble Supreme Court’s observations on special cases were left vague, causing uncertainty and it had a disastrous effect on the Mumbai real estate industry, halting construction in areas surrounding the Sanjay Gandhi National Park in Mumbai (“SGNP”) and directing local authorities to cancel Commencement Certificates issued to builders.

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Concurrent Remedies under RERA and Consumer Protection Act: Which is more effective?

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

–Franklin D. Roosevelt, U.S. President                                       

By stating a quote said by the then-former U.S. President, we come to an understanding that owning a house that can be called your own is something that every individual dreams of. But, in most cases, the hurdles that a buyer has to overcome in achieving his dream lead to a lot of financial and mental distress. This distress can be caused by a variety of factors, the most common of which is fraud or cheating by unscrupulous builders and real estate agents. 

Hence, it is vital for a buyer to know about the various legal remedies at his disposal. Furthermore, it is crucial to understand which of the various legal remedies is the best approach. This article analyses the various legal recourses available and the forum that would best redress the buyers’ concerns.

 

The Real Estate (Regulation and Development) Act, 2016

 

RERA prescribes that the promoter shall not accept more than 10% (ten percent) of the total value of the real estate property before entering into the agreement for sale[1]. Further, the promoter is required to maintain a separate account with 70% (seventy percent) of the project funds. If the builder wants to modify the sanction plan under RERA, he requires the consent of two-thirds of the allottees. Under RERA, if any defect is brought to the attention of the promoter within a period of 5(five) years of handing over possession of the property, it shall be the duty of the promoter to rectify the defect[2].

RERA mandates that every real estate project be registered with the Real Estate Regulatory Authority. Without the registration of the real estate project, the promoter is not allowed to book, sell, or invite any person to purchase the project[3]. The applications must be filed addressing it to RERA with the necessary approvals from the local authorities, along with a development plan, proforma of all agreements that are signed by the company, details relating to contractors, real estate agents, architects, structural engineers, and other people concerned with the project, the details of the total carpet area of the apartments for sale in the project and a declaration signed with an affidavit confirming that it is free from all encumbrances. The following provisions bind the promoters as well as the real estate agents, providing the buyers with holistic protection.

Non-compliance or default with any of the aforementioned provisions resulted in a penalty of up to 10% (ten percent) of the total project cost and up to three years in prison[4]. The builders are also mandated to deposit 70% (seventy percent) of the project funds into a separate bank account to avoid the problem of builders diverting the funds of the project to another new project[5].

Grievances with regard to violations of the RERA can be filed on the RERA website, which acts as a single repository for all real estate project data and filing grievances[6]. The Real Estate regulatory authority has been prescribed a resolution time of 60 (sixty) days from the date of receipt of the application[7]. Further, the tribunal can hear appeals of the authority’s rulings within 60 (sixty) days[8]. Any appeal from the tribunal lies before the High Court and must be filed within a period of 60 (sixty) days of the decision. If there is a pending case before the Consumer Forum pertaining to the damages caused by the false advertisements and non-adherence to the project specification, approved plan, or failure to complete the project on the specified date, the case can be withdrawn and filed before the RERA adjudicating officer[9].

 

Overview of the Consumer Protection Act, 2019

 

The Consumer Protection Act of 1986 and the new Act of 2019 were enacted to provide a simple and quick solution to consumers’ grievances against any deficiency in services or defect in goods. It is organised into three levels: the District Forum, the State Commission, and the National Commission (“Consumer Forum”). The Act defines “product seller,” and it includes a seller of immovable property only if that person is engaged in the construction of flats or homes or the sale of constructed homes[10]. As a result, builders and real estate agents are covered by the Act.

Under the said Act, only consumers can file a complaint, the term consumer is defined as a person who buys goods for consideration but doesn’t include a person who obtains such goods for commercial or resale purposes[11]. As a result, for the purposes of this article, those individuals are considered consumers who purchase a home or other property for personal use rather than commercial use.

In case of any defect or deficiency in the product or services, the consumer can file a complaint before the consumer forum within a period of 2 (two) years from the date on which the cause of action arose[12]. The consumer forums have a pecuniary limit. Hence, the District forum entertains complaints where the value of goods and services is not more than 1 crore rupees[13], State Commissions can entertain complaints that are above 1(one) crore and below 10 (ten) crore[14] and all complaints above 10 (ten) crores need to be filed with the National Commission[15].

Under the Act, the complaint is disposed of within a period of 3 (three) months from the date of receipt of the notice by the opposite parties[16]. The Act empowers the forums to grant compensation for loss incurred and punitive damages in appropriate cases.

 

 

Does RERA Reduce the Scope of CPA?

 

Before the enactment of the RERA, the Consumer Forum used to deal with matters relating to allottees. Following the enactment, the Consumer Forum’s jurisdiction to deal with allottee-related issues was not barred by the RERA. The standing committee also clarified that the jurisdiction of the Consumer Forums was not taken away by the establishment of the Real Estate Tribunal. Further, the consumer also has the discretion to withdraw the complaint pending before the Consumer Forum, with the permission of the said forum, and file an application before the adjudicating officer under RERA[17].

In Experion Developers Pvt. Ltd. v. State of Haryana and Ors.[18] the court referred to Section 71 of the RERA, which enables the consumer whose complaint is pending before the Consumer Forum to withdraw and go before the adjudicating officer. But the court held that the said provision has to be read with Section 88 of the said act, which explicitly states that the provision of RERA is in addition to and not in derogation of any other law. As a result, the court concluded that the complainant was not required to withdraw and transfer the complaint before the adjudicating officer. The complainant was empowered to simultaneously pursue remedies in both the forum on the strength of section 88 of the act.

The Apex Court, in Pioneer Urban Land and Infrastructure Ltd v. Union of India and Ors [19], held that buyers of flats could avail concurrent remedies under Consumer Protection Act and RERA.

In M3M India Pvt Ltd v. Dinesh Sharma[20] the court considered the question of whether the proceedings before the consumer forum can commence after the commencement of the RERA. It was held that the remedies that are provided under RERA and the Consumer Protection Act are concurrent in nature and the jurisdiction of the commission or the Consumer Forum will not be ousted by RERA, specifically Section 79 of the Act.

In Malay Kumar Ganguly v. Dr. Sukumar Mukherjee[21] the Supreme Court held that even though the proceeding in the National Commission is a judicial proceeding, within the definition of the Civil Procedure Code it is not a Civil Court. Although the National Commission has the trappings of a Civil Court, it cannot be termed a Civil Court. Therefore, the bar that has been provided under Section 79 of RERA is not applicable to the Consumer Forum. This judgement was strongly relied on in the below-mentioned judgement.

Further, in M/s Imperia Structures Ltd v Anil Patni & Another[22] Section 79 of the RERA bars the civil court from entertaining any suit or proceeding in respect of any matter over which the Authority, the adjudicating officer or the Appellate Tribunal is empowered by the RERA. The Apex Court held that it did not bar the complainant from filing complaints under the Consumer Protection Act. The section only imposes limitations on the Civil Courts’ ability to try issues that the adjudicating authority is empowered to entertain. As the Consumer Forum is not the same as the Civil Court the limitation does not apply.

Section 18 of the Act states that there is no bar to any aggrieved party from pursuing any other remedy that is available. Section 88 of the Act states that the provisions of the Act are in addition to and not in derogation of any other laws in force. However, on the contrary, Section 89 of the act provides that RERA shall have an overriding effect. The court cleared up the confusion by stating that even though Section 89 states that the Act shall have an overriding effect, the buyers can still approach the other forums under Section 18 of the Act. Thus, it is clear that parallel proceedings in different forums can exist. The court established that the aggrieved party could avail of parallel remedies under RERA as well as under the Consumer Protection Act.

A Comparative Study of RERA and Consumer Protection Act

 

The following are the requisite pointers that can be considered to determine which forum best serves the needs of homebuyers. 

Limitation Period

RERA has not provided any limitation period within which a complaint needs to be filed. However, according to the Consumer Protection Act, the complaint must be filed within two years of the cause of action. Hence, if the time period since the cause is more than 2 years, then the complainant can’t file a complaint before the Consumer Forum; the only remedy available at the complainant’s disposal is adjudication under the RERA.

Filing of a Complaint

Under RERA, any person who has been aggrieved by the builder or developer can file a complaint. However, under the Act, only a person who is a consumer can file a complaint. As a result, if a person does not fall within the definition of “consumer,” or if he has purchased a property for commercial purposes, or if any other person is dissatisfied with the developer, the only recourse is to approach RERA for adjudication.

Under RERA, the complaints are filed on the RERA website, and the process is simplified with minimal to no opportunity for modification because many States have distinct prescribed methods for filing complaints under RERA (including the format). However, under the Act, the complaint must be submitted in writing to the relevant authorities; it involves a complex procedure and includes documentation evidence; as a result, it appears to be a more time-consuming process. 

Pecuniary Limitations

The Act has prescribed pecuniary limitations based on the value of the property. Suppose the complainant’s property is above Rs. 1 crore, then he has to approach the State Commission and if its above Rs. 10 crores, he has to approach the National Commission for filing a complaint. Whereas RERA does not have any pecuniary limitations based on the value of the property. Hence, the complaint can be filed before the regulatory authority of the state in which the property is situated. Suppose the value of the property is more than Rs. 10 crores, then it is convenient for the buyer to adjudicate the dispute before RERA as the National Commission that is given jurisdiction under the Consumer Protection Act is situated in New Delhi.

Penalty

The Act is empowered only to grant pecuniary compensation. It doesn’t enforce any preventive measures nor does it provide for any specific performance or imprisonment of the defaulting party. RERA, however, is exclusively empowered to provide certain non-compensatory remedies. Further, it is also empowered to impose imprisonment for up to 3 (three) years on the defaulting developers.  If the consumer is only seeking compensatory relief, then the consumer forum is the right forum to approach. But if the buyer is looking for a deterrent remedy, then filing a complaint before RERA is a better option.

Commercial Dispute

The Consumer Forum doesn’t deal with commercial issues. RERA has no such bar on the adjudication of commercial issues. Therefore, if an individual doesn’t fall within the definition of “Consumer” as defined under the Act, then the best and only recourse available in the hands of the buyer is to file a complaint under RERA.

Time Period for Disposal of Dispute

The resolution time specified under RERA is 60 (sixty) days[23]. Similarly, the Act states that every complaint shall be disposed of as expeditiously as possible within a period of 3(three) months from the date of receiving notice from the other party[24].  However, in practice, disposing of matters in both forums takes much longer.

 

Conclusion

 

For regulating the “real estate” sector, the “Real Estate Regulatory Authority Act” is a landmark piece of legislation imposing time-bound obligations on promoters. Consumers’ or homebuyers’ rights are intended to be protected by ensuring fair play.

It is worth noting that RERA has not only been actively involved in maintaining transparency and accountability in the real estate sector, but has also assisted consumers and homebuyers in obtaining possession quickly and easily.

From the above analysis, we can deduce that RERA has finally ended up being an extension of the “Consumer Protection Act” which helps to address the growing need for transparency in favour of consumers as well as builders.

In light of the preceding comparative study and judicial pronouncements, we can safely conclude that it is entirely up to the allottee to choose either a concurrent remedy or a single forum to resolve his or her disputes. But it is a tedious process for a common man to simultaneously approach two different forums, the RERA or the Consumer Forum. 

The concurrent remedy has broadened the range of remedies available to home buyers. Both acts have their benefits and drawbacks in terms of resolving the buyers’ issues. The most effective forum for the buyer to approach for resolving his issue is highly dependent on the facts of the case and the remedy that the aggrieved party is seeking from the respective forum.

Concurrent Remedies under RERA and Consumer Protection Act: Which is more effective?

References: 

[1] Section 13 of the Real Estate (Regulation and Development) Act, 2016

[2] Section 14(3) of the Real Estate (Regulation and Development) Act, 2016

[3] Section 3 of the Real Estate (Regulation and Development) Act, 2016

[4] Section 59 of the Real Estate (Regulation and Development) Act, 2016

[5] Section 4(d) of the Real Estate (Regulation and Development) Act, 2016

[6] Section 31(1) of the Real Estate (Regulation and Development) Act, 2016

[7] Section 29(4) of the Real Estate (Regulation and Development) Act, 2016

[8] Section 44 of the Real Estate (Regulation and Development) Act, 2016

[9] Section 71 of the Real Estate (Regulation and Development) Act, 2016

[10] Section 1(37) of Consumer Protection Act, 2019

[11] Section 1(7) of Consumer Protection Act, 201

[12] Section 69(1) of Consumer Protection Act, 2019

[13] Section 34 of Consumer Protection Act, 2019

[14] Section 47 of Consumer Protection Act, 2019

[15] Section 58 of Consumer Protection Act, 2019

[16] 38(7) of of Consumer Protection Act, 2019

[17] Section 71 of the Real Estate (Regulation and Development) Act, 2016

[18] Experion Developers Pvt. Ltd. v. State of Haryana CWP No. 38144 of 2018

[19] Pioneer Urban Land and Infrastructure Ltd v. Union of India and Ors 2019 SCC OnLine SC 1005

[20] M3M India Pvt Ltd v. Dinesh Sharma W.P.(C)43/2019

[21] Malay Kumar Ganguly vs. Dr. Sukumar Mukherjee AIR 2010 SC 1162

[22] M/s Imperia Structures Ltd v Anil Patni & Another (Civil Appeal No. 3581-3590 of 2020)

[23] Section 29(4) of the Real Estate (Regulation and Development) Act, 2016

[24] Section 38(7) of the of Consumer Protection Act, 2019

 

Image Credits: Photo by energepic.com

The concurrent remedy has increased the scope of remedy that the home buyer can avail. Both acts have their benefits and drawbacks in terms of resolving the buyers’ issues. The most effective forum for the buyer to approach for resolving his/her issue is highly dependent on the facts of the case and the remedy that the aggrieved party is seeking from the respective forum.

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The Dawning of Data Centres in West Bengal

It is rightly said that “Data” is the new oil in today’s digital world. Data consumption and cloud-based services have grown exponentially in the past decade, and they are increasing their efficiency by making use of cloud computing and artificial intelligence. Consequentially, the requirement for storage and management of data has grown as well. This demand, along with the government initiatives for digitising India, has given rise to the growth of data centres in the country.

The data centre industry is expected to grow further in the next few years to provide support for the upcoming 5G technology. Data centres require round-the-clock uninterrupted availability of power to operate effectively. However, such requirements inevitably increase carbon-di-oxide emissions. Therefore, there has also been a significant push towards the establishment of “Green Data Centres” – a sustainable solution that is dependent only on renewable energy.

In view of the increasing significance of data, data centers, and the associated regulatory requirements of data localization, the Legislature has also brought about various reforms such as the Digital India programme in order to regulate the entire data industry. However, a comprehensive framework specifically aimed at regulating the construction and operation of data centers is still needed.

 

Concept of Data Centres

 

A data centre is a physical facility that houses all virtual activities and is used to store applications and data, for edge computing, hosting content, and delivering cloud-based services. Data centres cover the three sectors of property, energy, and technology, and thus, various segments such as real estate and construction, hardware equipment, utilities (power, water, cooling), networking, and software services all come within their ambit.

 

National and Global Context

 

The last few years have seen rapid growth in the digital industries such as gaming, Edtech, OTT platforms, e-commerce, etc., in India. These industries are heavily dependent on data centre support. Further, the fast growth in cross-border transactions and the digitisation of transactions has impelled the Indian government to implement data localization mandates in order to ensure data protection and sovereignty. Consequently, global players are now looking to invest in establishing data centres in India, which makes it important to examine the facilities offered to the data centre industry by leading nations in this sector.

 

United States

Different states in the US provide different incentives to investors for setting up data centres. For example, Alabama exempts data centres from sales and property taxes, Hawaii offers job creation incentives, Florida offers industry tax refunds through the Florida Enterprise Zone, and so on.

 

China

China is the world leader in internet consumption; hence, data centres have grown there rapidly. At present, it is placed in the second position in the market capacity of data centres, right after the US. The Chinese Government has incentivised the construction of data centres through the allocation of land for the same and making it available at favourable prices. China’s National Development and Reform Commission has launched a project called “Eastern Data Western Calculation,” which aims to move the data collected from developed regions of the country to less developed ones.  Apart from this, several local governments in the central and western regions of the country offer tax benefits for setting up data centres.

 

Singapore

Singapore has several facilities, such as a country-wide fibre network, a corporate tax exemption for a data centre company under the Pioneer Certificate Incentive, a concessionary tax rate of 5% or 10% for a company under the Development and Expansion Incentive, on-site power plants, dual power feeds, etc. to incentivise the setting up of data centres.

 

Regulatory Framework in India

 

The size of the digital economy in India is estimated to grow from $ 200 billion in 2017-2018 to $ 1 trillion by 2025.

Currently, there is no single legal framework regulating the construction and operation of data centres in India. Several guidelines have been issued from time to time by various government departments relating to the data centre industry. One such draft guideline named “Data Centre Policy 2020” was published by the Ministry of Electronics and Information Technology and proposed to give the status of “infrastructure” to data centres, putting the data centre industry on the same pedestal as roads, railways, and power, which would enable them to avail long-term credit from domestic and international lenders at easier terms. Some of the other salient features proposed by this policy are:

  • Data centres are to be declared an Essential Service under “The Essential Services Maintenance Act, 1968” to enable continued service during calamities or crises.
  • Data centres are to be recognised as a separate category under the National Building Code of India 2016 as they require different norms than other commercial spaces.
  • Four Data Centre Economic Zones (DCEZ) are proposed to be set up by the Government of India, which will host an eco-system of both non-IT and IT infrastructures such as hyper scale data centres, cloud service providers, IT companies, and R&D units.
  • Incentives for setting up data centres will be available to both private sector and public sector Data Centre Parks/Data Centre Developers and Data Centre Operators.

The Telecom Regulatory Authority of India (TRAI) had also published a consultation paper on “Regulatory Framework for Promoting Data Economy Through Establishment of Data Centres, Content Delivery Networks, and Interconnect Exchanges in India,” which provides a list of clearances required to build a data centre, some of which are listed below:

  • Environment Clearance from the Ministry of Environment, Forestry and Climate Change
  • Consent to Establishment from the Metropolitan Development Authority and Central Pollution Control Board
  • Provisional Fire No Objection Certificate (NOC) from the State Fire and Rescue Services/National Fire Protection Association
  • Storm Water Permits and Sewage Discharge Approval from the State Pollution Control Board
  • Tree Cutting NOC from the Central Pollution Control Board: Forest Department
  • Drainage/Garden NOC from the Metro Water Supply and Sewage Board
  • Building Permit/Approvals, and Commencement Certificate from the Metropolitan Development Authority
  • Telecom Permit from the state’s Service Provider/Controller of Communication Accounts
  • Water Supply from Metro Water Supply and Sewage Board
  • Power Connection Feasibility, Design, and Sanction from the State Electricity Board
  • Traffic Approval NOC from the Commissioner of Traffic
  • NOC for High-Rise Structure from Airport Authority of India
  • Registration with DIC from the Director of Industry
  • IEM Registration with the Ministry of Commerce
  • 220kV power connection cable laying from a substation to project premises and 220kV power connection substation testing and charging from the State Electricity Board
  • Form V Approval (Labour) from the Labour Department: State Government
  • Plinth Checking Certificate from the Metropolitan Development Authority
  • Electricity Safety License from the Central Electricity Authority/Chief Electrical Inspector to the Government/Public Works Department Electrical Inspector
  • Elevator Permits and Certification from the Central Electricity Authority/Chief Electrical Inspector to the Government/Public Works Department (PWD) Electrical Inspector
  • Diesel Generator System Approval from the Central Electricity Authority/Chief Electrical Inspector to Government/PWD Electrical Inspector
  • High Speed Diesel (HSD) License from the Petroleum and Explosives Safety Organization/Chief Controller of Explosives Department/PWD: Electrical Inspector
  • Lift Operating Permits from the PWD Lift Inspector
  • Occupancy Certificate from the Metropolitan Development Authority
  • Completion Certificate from the Metropolitan Development Authority
  • Consent to Operate Certification from the Central Pollution Control Board
  • Preliminary Explosive License and Final Explosive License for HSD from Petroleum and Explosives Safety Organization/Chief Controller of Explosives Department

Several states have promulgated their own data centre policies, such as Maharashtra, through its IT/ITES Policy of 2015; Telangana, through its Telangana Data Centre Policy of 2016; Uttar Pradesh, through the Uttar Pradesh Data Centre Policy of 2021; Tamil Nadu, through the Tamil Nadu Data Centre Policy of 2021; Karnataka, through the Karnataka Data Centre Policy, 2022-27 and West Bengal, through the West Bengal Data Centre Policy of 2021.

 

Regulatory Framework in West Bengal

 

On September 6, 2021, the Department of Information Technology and Electronics, Government of West Bengal, introduced the “West Bengal Data Centre Policy 2021,” which will be valid for a period of five years from the date of the notification.

The nodal agency for the proper implementation of this policy is WBEIDC Limited (WEBEL), and they will promote it at both a national and international level.

In 2022, it was announced that the Bengal Silicon Valley Tech Hub being developed at New Town, Rajarhat, is expected to become the main area for the development of the data centre units in the state. The biggest advantage for West Bengal is that the new submarine cable landing station is being developed at Tajpur in West Bengal and ancillary units will be created in the two electronics manufacturing clusters at Kalyani and Falta for supporting the data centres.

Data centre organisations will be classified as “Essential Services,” as has also been proposed in the National Policy.

In order to attract data centre companies to set up data centres in West Bengal, various other incentives have been proposed in the policy. The companies setting up data centres in West Bengal will be entitled to a hundred per cent exemption of stamp duty and registration fees for any transaction relating to the setting up of data centres in the state, and there will also be a waiver of electricity duty from the commencement of commercial activities up to five years.

Among the non-financial incentives, the data centres will also be entitled to:

  • Dual-power grid networks to ensure electricity supply without interruption
  • “Industrial” status is given to electricity supplied to data centres
  • Affordable power backup infrastructure
  • Companies who wish to establish captive firms will get single-window approvals and permits
  • Quality power and internet facilities are to be provided to Edge Data Centres being set up at various IT parks or industrial parks
  • Uninterrupted Power Supply and Internet Connectivity
  • Uninterrupted and high-speed water supply
  • A support system to be provided to set up captive water treatment plants for the Data Centre Parks
  • Extra FAR for data centre buildings.

West Bengal is becoming a lucrative option for setting up new data centres, and various corporate houses such as Reliance Jio, Adani Enterprises, and Hiranandani Group are also in the process of setting up data centres in the state. Several factors need to be taken into account before setting up a Data Centre and real estate is a significant one among them because data centres are one of the most expensive real estate investments. Extensive due diligence should be performed on the project site to ensure that it has a clear title and easy access to transportation and other utilities. In addition to this, all the relevant licenses and permissions should be obtained from the competent authorities to avoid legal issues in the future. Considering the progressive policies implemented by governments at both the central and state levels, it will be interesting to see how the data centre industry develops and how these policies affect it. 

Image Credits: Photo by Akela999 from Pixabay 

West Bengal is becoming a lucrative option for setting up new data centres, and various corporate houses such as Reliance Jio, Adani Enterprises, and Hiranandani Group are also in the process of setting up data centres in the state. Several factors need to be taken into account before setting up a Data Centre and real estate is a significant one among them because data centres are one of the most expensive real estate investments. Extensive due diligence should be performed on the project site to ensure that it has a clear title and easy access to transportation and other utilities.

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Insights on the National Logistics Policy, 2022

On September 17, 2022, the National Logistics Policy (“NLP”) was unveiled by the Prime Minister. The objectives of the NLP are broadly aimed at enhancing efficiency across the logistics value chain by improving connectivity across destinations, adopting technology, simplifying procedural documentation and strengthening the warehousing sector.

While India ranks 44th on the World Bank’s Logistics Performance Index of 2018, the NLP envisions improving India’s ranking to feature amongst the top 25 countries by 2030. The NLP proposes to support this upward journey by means of the initiatives detailed hereinafter.

Identifying the Action Areas

The Comprehensive Logistics Action Plan (CLAP) envisaged in the NLP identifies the following action areas wherein the policy aims to undertake interventions:

  • Developing an ‘Integrated Digital Logistics Systems’ to create a cross-sectoral database for logistics stakeholders.
  • Setting standardisation norms for assets and benchmarking quality of services.
  • Developing human resource and skill building aligned towards logistics by the ministries involved in different sectors.
  • Supporting state level logistics plans and institutional framework development.
  • Streamlining EXIM (export-import) processes to improve trade competitiveness and integration with global value chains.
  • Improving regulatory interface in the logistics sector.
  • Formulating ‘Sectoral Plans for Efficient Logistics’ in different sectors to complement the development of facilitative processes in logistics management.
  • Developing a network of logistics parks, including Multi-Modal Logistics Parks (“MMLPs”),[1] by providing framework guidelines for the development of these parks and encouraging private sector investment in the same.

Inducing Standardisation

The NLP emphasises standardisation with the aim of reducing cost and improving efficiency. To provide a compilation of existing operational standards, the launch of the NLP was accompanied by the launch of the ‘E-Handbook on Warehousing Standards’,[i] which will act as a guiding document for inter alia manufacturers, commerce agencies, logistics service providers, and others involved in the logistics sectors. The E-Handbook on Warehousing Standards, inter alia, prescribed the standards for the construction of warehouses, palletisation standards, and transportation standards.

The NLP foresees that standardisation would support the development of the co-warehousing segment, which allows businesses to use common warehouse and allied office space as per requirement. This will be beneficial to small businesses and start-ups and will also open up another avenue for private sector investments in the Indian warehousing market.

Improving Interfaces

The NLP provides for development of two main portals, viz., the ‘Unified Logistics Interface Platform’ (“ULIP”) and ‘E-LogS: Dashboard for Ease of Logistics Services’ (“E-Logs”), to provide digital platforms that facilitate the regulatory and operational processes in the logistics sector. The key features of the aforementioned portals are summarised below:

Feature ULIP E-Logs
 
Objective To provide a single window platform that enables the exchange of information on a real-time basis amongst different stakeholders. Furthermore, to ensure the authenticity of every logistics department transaction. To provide a digital system for registering and monitoring problems encountered in the logistics sector and facilitating time-bound resolution of the same.
Key Constituents

Comprised of three layers, the Integration layer and the Governance layer of this platform provide for coordination amongst different ministries and departments.

The third layer, being the Presentation layer, is to be developed by private players to provide an interface with the end-customer.

This dashboard will be accessible to registered users who can login to register their issues with supporting documentation and communicate the same to other stakeholders using the same portal.

Decisions on such issues will be taken by the relevant ministry/department and the decision will be uploaded by the Service Improvement Group (“SIG”), which is responsible for overall coordination and monitoring in relation to E-Logs.

The NLP provides that the SIG will be constituted by nominated officers from various ministries and will be tasked with the resolution of issues pertaining to “services, documentation, processes and policy, along with the identification of interventions for improving the user interface.”
Benefit to Stakeholders

It is expected that ULIP will, inter alia, help:

·         Governmental agencies can access information for better planning;

·          allow transporters to track cargo in real time and identify cheaper logistics modes; and

·         simplify the documentation process for logistics service providers and enable value-added services for end customers.

 Authorized users who are dissatisfied with the resolution of their issues can track the progress of the resolution and make suggestions.

 

Way Ahead

The NLP sets a positive tone for the efficient expansion of logistics services in India by addressing fundamental concerns such as time and efficiency of transportation, reducing logistics costs, and simplifying operational and regulatory processes with technology-based interventions. In addition to the above-summarised features, the NLP also focuses on ‘Logistics Ease Across Different States’ (LEADS), which is a survey taken across states and union territories to assess the viewpoint of stakeholders, document issues faced on the ground in relation to the logistics sector, and identify mitigation measures to ameliorate the identified issues. This reflects the efforts being made towards the development of practically viable mechanisms that facilitate improvements in the logistics sector, which is further strengthened by the framework of the NLP.

The realisation of the policy objectives, however, largely depends on achieving coordination amongst the different central ministries and other stakeholders. Given that state governments may have their own policies framed around the development of logistics parks, it is important to ensure that states adapt the National Logistics Policy in harmony with the existing benefits being offered for setting up logistics parks under state-specific policies, especially when it comes to setting up MMLPs. Ensuring the existence of statutory provisions in relation to the components of NLP would help provide a check on the working of the mechanisms stipulated thereunder. For instance, rules and regulations on management of information communicated via ULIP and E-Logs can provide a safe transaction environment for stakeholders utilising these portals.

A major concern of players in the logistics sector linked to the cost of financing logistics projects, may continue to pose an obstacle while addressing the objectives of the policy. Thus, formulating ancillary options for availing finance at discounted rates would be a boost to the policy. Similarly, the inclusion of an exemption on Goods and Services Tax could help ease the burden of compliance under the policy for smaller players.

References:

[1] MMLPs are aimed at providing a host of facilities in the logistics chain such as storage, distribution and facilitating transportation by serving as a common point for shift in intramodal transportation of goods.

[2] Logistics Division, Department of Commerce, Ministry of Commerce and Industry, Government of India, E-Book on Launch of National Logistics Policy.

[3] E-Handbook on Warehousing Standards- available at pdf (dpiit.gov.in)

[4] The World Bank, Country Score Card: India 2018, available at Country Score Card: India 2018 | Logistics Performance Index (worldbank.org).

 

While India ranks 44th on the World Bank’s Logistics Performance Index of 2018, the NLP envisions improving India’s ranking to feature amongst the top 25 countries by 2030. The NLP proposes to support this upward journey by means of the initiatives detailed hereinafter

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Rectifying the Parallel Regime of RERA & WB-HIRA

The Supreme Court issued an important verdict on May 4, 2021, when it declared that the West Bengal Housing Industry Regulatory Act, 2017 (WB-HIRA) is “repugnant” to the Parliamentary law of Real Estate (Regulation and Development) Act, 2016 (RERA). The state law created a “parallel regime” and encroached upon the identical Central law RERA, 2016, enacted the year before, and was in direct conflict with the central legislation by lacking necessary safeguards to protect consumers.

Background

The Bench of Justices D. Y. Chandrachud and M. R. Shah in Writ Petition (C) No. 116 of 2019 [Forum for People’s Collective Efforts (FPCE) & Anr. vs. State of West Bengal & Anr.], in its 190-page judgment, struck down as unconstitutional West Bengal State law WB-HIRA meant to protect home buyers, enacted in 2017, a year after the Centre passed the RERA, stating that if Parliament had passed legislation, it was not open for states to enact similar statute.

Before Parliament enacted the RERA in 2016, state legislatures had enacted several laws to regulate the relationship between promoters and purchasers of real estate. Before the WB-HIRA, one of the laws the state legislature had enacted was the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 (the “WB 1993 Act”). Upon receiving the assent of the President, the Act was published in the Calcutta Gazette, Extraordinary on March 9, 1994.

In the State of West Bengal, the Real Estate (Regulation and Development) Bill, 2016 (the “RERA Bill 2016”) was introduced and draft rules under the RERA were framed on August 18, 2016, but no further progress was made in that regard. On August 16, 2017, the motion to pass the WB-HIRA Bill was adopted in the State Legislative Assembly. The Housing Industry Regulatory Authority was established under Section 20 of the West Bengal Housing Industry Regulatory Act, 2017 to regulate and promote the housing sector, to ensure the sale of plots, apartments or buildings, as the case may be, or sale of real estate projects in an efficient and transparent manner, to protect the interests of consumers in the real estate sector and to establish a mechanism for speedy dispute redressal and for matters connected therewith or incidental thereto. The State enactment received the assent of the Governor of West Bengal and was published in the Official Gazette on October 17, 2017, and came into effect from June 1, 2018.

The WB-HIRA repealed the WB 1993 Act. The remaining provisions of WB-HIRA were enforced by a notification dated March 29, 2018, issued by the Governor of the State of West Bengal in exercise of the power conferred by sub-section (3) of section 1 of WB-HIRA. Thereafter, on June 8, 2018, the State of West Bengal framed rules under WB-HIRA.

Because the Supreme Court declared the provisions of WB-HIRA to be invalid and struck them down in the current judgment, there will be no revival of the provisions of the WB 1993 Act, which were repealed upon the enactment of WB-HIRA, because the provisions of the WB 1993 Act are repugnant to the corresponding provisions of the RERA, which were impliedly repealed upon the enactment of the RERA in 2016.

The State Legislature has encroached upon the legislative authority of Parliament and this exercise conducted by the State Legislature is unconstitutional. The valuable safeguards introduced by Parliament in the public interest and certain remedies created by Parliament were absent in WB-HIRA.

Inconsistencies with RERA

RERA is a complete and exhaustive code which regulates the contractual relationship between a builder/promoter and a buyer/consumer in the real estate sector and provides remedial measures. RERA regulates the rights and obligations between promoters and buyers of real estate, in addition to the provisions of the Indian Contract Act, 1872. The enactment, in ensuring the actual transfer of property to the buyer, furthers the objects of the Transfer of Property Act, 1882. It provides for the enforcement of contracts through remedial measures that are in addition to the remedies provided in the Consumer Protection Act, 1986 and its successor legislation of 2019. RERA, in other words, is a special statute governing the real estate sector, encompassing rights and obligations found in different central enactments.

WB-HIRA covers the identical field of regulating the contractual behaviour of promoters and buyers in real estate projects. The State law is a ‘copy and paste’ replica of the central legislation (except for certain provisions which are inconsistent with RERA) and covers the field which is occupied by the central enactment. WB-HIRA is a “virtual replica” of the Central Law. A significant and even overwhelmingly large part of WB-HIRA overlaps with the provisions of RERA, but it does not complement the central law by fortifying the rights, obligations, and remedies.

The important provisions of WB-HIRA which are inconsistent with RERA are mentioned herein below:

  1. Force majeure events – The RERA restricts force majeure events to fire, cyclone, drought, flood, war, earthquake, or any other natural calamity that hinders the development of the projects, while WB-HIRA includes “any other circumstances as may be prescribed” as an added eventuality.
  2. Planning Area – The RERA specifies that only the projects that fall within the planning areas are subject to the RERA. According to Section 2 (zh) of the RERA, a “planning area” is a planning area or a development area, a local planning area, a regional development plan area, any other area specified as such by the appropriate government or any competent authority, while the WB-HIRA does not define the term “planning area”.
  3. Garage Area – RERA defines a garage as being ‘a place within a project having a roof and walls on three sides for parking any vehicle. It does not include uncovered parking spaces such as open parking areas. On the other hand, WB-HIRA has no such restrictions in defining garage or parking spaces and only mentions spaces as sanctioned by the competent authority.
  4. Compounding of Offences – If any person is found to have violated the RERA, they can be punished under the provision in the Code of Criminal Procedure, 1973 while WB-HIRA does not have provision for the compounding of offences.

Apart from the above, the subject of the provisions of the state enactment is identical, the content is identical. In essence and substance, WB-HIRA has enacted a parallel mechanism and parallel regime which the RERA already entails. In other words, the State legislature has enacted legislation on the same subject matter as the central enactment. Not only is the subject matter identical, but the statutory provisions of WB-HIRA are nearly identical to those of RERA.

WB-HIRA, since its enforcement in the State of West Bengal, would have been applied to building projects and implemented by the authorities constituted under the law in the state. In order to avoid uncertainty and disruption in respect of actions taken in the past, recourse to the jurisdiction of this Court under Article 142 was necessary. The Court, as such, exercised its extraordinary powers under Article 142 and gave effect to its judgment striking down the provisions of WB-HIRA prospective. The Court directed that the striking down of WB-HIRA will not affect the registrations, sanctions, and permissions previously granted under the legislation prior to the date of this judgment.

Down the Road

After the repeal of the WB-HIRA, the Government of West Bengal, Housing Department, by its Notification dated July 27, 2021, framed the West Bengal Real Estate (Regulation and Development) Rules, 2021, and the rules will come into force from the date of their publication in the Official Gazette. Thereafter, by another Notification dated July 29, 2021, the Government of West Bengal, Housing Department established an Authority known as the West Bengal Real Estate Regulatory Authority with immediate effect to exercise the powers conferred on it and to perform the functions assigned to it under the RERA throughout the State of West Bengal. With a further notification dated July 30, 2021, the Government of West Bengal, Housing Department, established an Appellate Tribunal known as the West Bengal Real Estate Appellate Tribunal with immediate effect. It is a sad plight that though the authorities have been established by several notifications dated July 29, 2021 and July 30, 2021, respectively, the positions of Chairperson, Members of the Regulatory Authority, Judicial Member, and Administrative Member of the Appellate Authority are still vacant. By a notice dated July 7, 2022, the Search Committee constituted under the West Bengal Real Estate (Regulation and Development) Rules, 2021, invited eligible and willing persons for the above-mentioned position.

A time-bound and proper implementation of the real estate regulatory law RERA in the state is required. Lack of implementation of RERA has left home buyers in the lurch as neither new complaints can be filed against builders nor existing complaints already filed before the erstwhile WB-HIRA can be continued and home buyers are being subjected to even more ruthless exploitation by builders since there is no mechanism in the state at present for redressal of home buyers’ grievances.

WB-HIRA is a “virtual replica” of the Central Law. A significant and even overwhelmingly large part of WB-HIRA overlaps with the provisions of RERA, but it does not complement the central law by fortifying the rights, obligations, and remedies.

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