Real Estate - July - August 2013

Real Estate - July - August 2013

1. High Court Judgements

1.   Sajid Ullah v. State of Uttar Pradesh, Allahabad High Court, decided on July 12, 2013

Facts:

A public interest litigation was filed on May, 2013 seeking seeking removal of illegal encroachments on certain parcels of land shown as lake (jheel) in the revenue records. About 8 to 10 years earlier approximately 600 persons belonging to a particular community had constructed houses illegally over the land in question. The Nagar Ayukt, Nagar Nigam, Ghaziabad, attempted to get the land freed from encroachments in past and also filed criminal cases against six persons in Thana Sahibabad. However, no action was taken in the matter.

Order:

The Court ordered a high level probe into illegal construction of 600 houses on the said land. The court also asked principal secretary of the state revenue department to complete the probe within two months and to identify the guilty officials who did not take any action to clear the encroachment.

2.    Ram Pal Singh and other v. State of Uttar Pradesh, Allahabad High Court decided on June 07, 2013

Facts:

The case was filed against the action of NOIDA Development Authority in demolishing construction on a plot without notice or opportunity of hearing. The demolition had rendered the petitioners roofless. A writ of mandamus was prayed requiring the respondents to permit the petitioners to raise the construction as they were standing earlier.

Order:

The court, taking note of illegal demolition of the building by the NOIDA Development Authority directed the Uttar Pradesh government to hold an enquiry against the manner in which demolition of the construction happened. The court further directed that if the enquiry results into a conclusion that such demolition has taken place in contradiction to the statutory provisions, then the responsibility of such action should be pin pointed against the officials. The court also ordered that the amount of compensation payable will be realised from personal assets of the guilty officials.

2. Policies

1. Affordable Housing Policy, 2013

The Haryana Government has approved the Affordable Housing Policy, 2013 to make housing affordable in the urban centres of Haryana. The projects under the said policy will be allowed only in the residential zone of the notified Development Plans of various towns/ cities in the state of Haryana. According to the policy, the apartments will be low cost in order to ensure affordability for the lower-income strata. As per the said policy, the maximum allotment rate for the apartment units approved under such projects would be Rs. 4,000 per square feet of carpet area in the development plans of Gurgaon, Fairdabad, Panchkula and Pinjore-Kalka, Rs. 3,600 per square feet in the development plans of other high and medium potential towns and Rs 3,000 per square feet in the remaining low potential towns. Any person, which includes his/her spouse or his/her dependent children, who do not own any flat/plot in any HUDA developed colony/ sector or any licenced colony in any of the Urban Areas in Haryana, Chandigarh, NCT Delhi and the other NCR towns will be eligible to apply for an apartment approved under this policy. Only one application will be made by an applicant. Any successful applicant under this policy will not be eligible for allotment of any other flat under this policy elsewhere. An affidavit to this effect would be required to be submitted by all such applicants.

2. Property Tax Settlement Scheme 2013-14

The North Delhi Municipal Corporation has approved the Property Tax Settlement Scheme, 2013-14 (“Scheme”) to benefit the property owners/taxpayers/defaulters within its jurisdiction. The Scheme has commenced with effect from August 19, 2013 and will be valid till November 30, 2013.

The scheme would benefit to all the cases of non-payers and part-payers of tax under the Rateable Value Method (for the Financial Year 2003-04 and earlier), both ex-parte assessments and assessments on merit and nonpayers and part-payers of tax and non-filers and irregular filers of returns of Property Tax under the Unit Area Method (from the Financial Year 2004-05 and after but excluding current FY 2013-14). The Scheme will be available only to the extent of amount outstanding and to those who make complete payment of Property Tax under the Scheme within the stipulated time. The Scheme would provide full immunity from penalty imposed / imposable on full payment of property tax dues. Under the Scheme any assess/ taxpayer who might have applied under the earlier schemes will be required to file a fresh application to avail the benefits of the Scheme. The full or part waiver of interest will be on the full payment of dues under the Scheme within the time stipulated as under:

Amount of waiver of interest	Ex-Parte RV Assessment cases	RV Assessment on merit cases	UAM Cases
00% waiver  of interest	If paid within 15 days of the demand raised	If paid within 30 days of the  beginning of  Scheme	If paid within 30 days of the beginning of Scheme
75% waiver of interest	If paid after 15 but within 30 days of the demand raised	If paid after 30 days but within 60 days of the  beginning of Scheme	If paid after 30 but within 60 days of  the beginning of Scheme
50% waiver of interest	If paid after 30 but within 45 days of the demand raised	If dues paid after 60 but within 90 days of the beginning of Scheme	If paid after 60 but within 90 days of the beginning of Scheme
25% waiver of interest	If paid after 45 but within 60 days of the demand raised	If dues paid after 90 days of the beginning of Scheme but within period  the of Scheme	If paid after 90 days of the beginning of Scheme but within period  the of Scheme
No waiver of interest	If not paid within 60 days of the demand raised	If not paid within the period of the scheme	If not paid within the period of the Scheme

3. Circular

1.      Sale Through GPA

Government of NCT of Delhi vide its Circular dated July 22, 2013 clarified that a registered property owner (holding registered and valid deed of transfer like sale deed, gift deed, partition deed relinquishment deed etc.) is competent to execute a general/special power of attorney. Such power of attorney can be issued in favor of, owner’s relative or any person of his trust, to manage the property or to execute any further deed of transfer, for example conveyance, gift etc. on behalf of the registered owner.

The Circular further states that an immovable property can be legally and lawfully transferred, only through a registered deed like gift, conveyance etc. Mere execution of general/special power of attorney or Will does not convey any title in the immoveable property. Therefore, execution of general/special power of attorney or Will is not a valid mode of transfer of immovable property. Further, as per the Circular, a lease can be validly transferred only through a registered assignment of lease.

The Circular has been issued pursuant to the Delhi High Court order dated April 30, 2013 in the case of Pace Developers and Promoters Private Limited v. Government of NCT; 199(2013)DLT347, setting aside Delhi Government’s Circular dated April 27, 2012 (“2012 Circular”). Giving reference to the case of Suraj Lamp & Industries (P) Ltd. v. State of Haryana; (2012) 1 SCC 656, Delhi Government vide its 2012 Circular, had issued directives to all the Registrars and Sub-Registrars not to register any conveyance, which is based on a general power of attorney.

Delhi High Court setting aside the 2012 Circular observed that the Supreme Court in Suraj Lamp case did not hold that a conveyance cannot be registered by taking recourse to a general power of attorney. Rather, the Supreme Court opined that as long as the transaction is genuine, the power of attorney will have to be registered by the Sub-Registrar.

Further, the Supreme Court in Suraj Lamp case made specific reference to the transaction, where a person may enter into a development agreement with a land developer or builder for development of a parcel of land or for construction of apartments in a building, and held that for this purpose a power of attorney empowering the developer to execute sale agreements, can be executed.

4. News

1.      DDA approves new land-pooling policy

The Delhi Development Authority (DDA) on July 26, 2013 approved its new ‘land pooling’ policy that promises to radically change the way land is acquired and developed in the Capital. The policy titled ‘policy on public-private-partnership in land assembly and development in Delhi’, will allow the entry of the private players in the sector. The policy will allow consolidation of the private land by its owners through pooling and surrendering it to the DDA. As per the policy, the DDA will take the land from these private players, develop it and then give a chunk of it back to them. Instead of compensation, they would get back 40-60 per cent of land after development of infrastructure by DDA, which they can keep for themselves or give to private developers. As per the policy, the developed land, which the owner will get back, will be required to be used as per the conditions laid down in the policy. The DDA approved the recommendation of the Board of Inquiry, which held hearings on June 22 and 23 suggesting that minimum land pooling size should in two categories, first with 20 hectares and above and, second between two and 20 hectares.

In the first category, 60 per cent of the pooled land would be used by DDA (53 per cent for residential purpose, five per cent for commercial and two per cent for public and semi-public use). For the second category, it would be 48 per cent (43 per cent for residential, three per cent for commercial and two per cent for public and semi-public use). The ground coverage has also been increased from 33 per cent to 40 per cent.

2. Noida property circle rates hiked up to 25%

The circle rates in Noida have been increased by 10 to 25 per cent with effect from August 1, 2013. Agriculture land rates too have been hiked by 5-8 per cent. On August 1, 2013 the AIG stamps and officiating Deputy Inspector General, stamps, confirmed the hike to PTI.

3.    Amendments to Registration Act to help land owners

A proposal to modify India’s land registration law to make way for clear titles and help the government to fairly compensate owners, if their land was acquired for industrialization was tabled in the Rajya Sabha on August 8, 2013. The amendments to the Registration Act, 1908, mainly relate to ensuring transparency and digitization that will help establish clear land ownership. The Registration (Amendment) Bill, 2013, was cleared by the cabinet in June, 2013. The proposed amendments include registration of documents relating to the adoption of a daughter to ensure gender equity, opening of the miscellaneous register that contains details of all registered documents to public scrutiny and promotion of electronic registration of documents. Documents such as power of attorney, developers/promoters agreements and any other agreements relating to the sale or development of immovable property will need to be mandatorily registered, if the Bill is passed. This is being done with the intention of minimize cases of document forgery. Many of the changes proposed will also help in the award of compensation to land owners under the proposed Right to Fair Compensation and Transparency in Land Acquisition, Resettlement and Rehabilitation Bill, 2012, which is pending before Parliament.

4.   Haryana government issues new guidelines in property transactions

Haryana government has issued new guidelines to make property transactions more transparent. It is now mandatory to attach photographs of buyers and sellers of property with sale deeds. The photographs will be taken by a camera, which automatically indicates the date on which the photo was taken. 

This decision has been taken to supplement measures taken by the government to check undervaluation of property. All divisional commissioners and deputy commissioners in the state have been directed to comply with the new instructions. 

5.    Government may relax FDI norms for real estate sector to boost fund flows

The government is considering sweeping changes in the Foreign Direct Investment (FDI) norms for the real estate sector to boost fund flows to the cash-strapped sector as well as to bolster the battered Indian currency. The Urban Development Ministry has suggested that real estate firms with less than 50% foreign ownership be exempted from all current restrictions, including the minimum area norms for development of projects. Some of the proposed relaxations for such investments are reduction in the minimum land parcel size for plotted development to 5 acres (2 hectares) from 10 hectares now and permission to purchase farmland for FDI-funded firms. In case of construction-development projects, the present requirement of minimum built-up area of 50,000 square meters will come down to 25,000 square meters. The Urban Development Ministry's proposals have been sent to the Department of Industrial Policy and Promotion. The suggestions/ recommendations made should apply to the present and future investments, the ministry has stressed in its proposal. Besides reducing the minimum areas for plotted and construction development, the urban development ministry has suggested that the non-resident investors in a real estate company be freely allowed to sell their shares to another non-resident investor. The proposal, if accepted, would ease the liquidity problem for foreign investors as there is ambiguity at present on transfer of foreign investment made in this sector by one non-resident investor to another non-resident. "Foreign Exchange Management Act 1999, which allows transfer of shares between non-residents without any conditions, should be extended to the construction development sector. This would ensure greater investor confidence," reasoned the ministry. There should not be any need for obtaining additional completion certificate for housing plots from any local body's service agency either by the FDI investor or by the recipient Indian company as a pre-requisite for selling such plots". The Indian company having FDI should be considered on a par with other Indian-held construction development companies as the development is being undertaking by the Indian company only," the proposal states.

6.   Electronic Stamping facility introduced in Gautam Budhh Nagar

To ensure transparency in payment of registration fee in property transactions, electronic stamping (e-stamping) facility was introduced in Gautam Buddh Nagar district. From July 15, 2013 e-stamps were made available to the residents from certain bank branches. The facility has been introduced to cover applications of the denomination of Rs 10,000 and above. Stock Holding Corporation of India has been appointed as the Central Record Keeping Agency for computerised stamp duty administration system. In order to pay the stamp duty, one has to visit a designated bank or sub-registrar office, where upon payment he will be given a receipt having a unique identification number. The said receipt then needs to be submitted at the office of Stock Holding Corporation of India at Sector-18, Noida, which will issue the E-stamping certificate.

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Disclamer

This newsletter is being provided to the recipient solely for the purpose of his/her/its information. It is meant to be merely an informative summary and should not be treated as a substitute for considered legal advice. This update covers significant legal developments in the field of real estate in the states of Delhi, Uttar Pradesh and Haryana for the months of July, 2013 and August, 2013. If you wish to receive more information about any item in this newsletter, please feel free to contact:

Sarthak Advocates & Solicitors

A – 35, Sector – 2, NOIDA 201 301

T: +91 120 430 9050

E: knowledge@sarthaklaw.com