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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 14^th 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 8^th 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 31^st 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.

Rectifying the Parallel Regime of RERA & WB-HIRA

16 August, 2022
Prerona Sil
Sudarsana Daw

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:

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.
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”.
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.
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.