Compliances in Real Estate Industry
Introduction
The Real Estate Industry in India has emerged as a significant contributor to the country’s economic growth. According to a report by the National Council of Applied Economic Research, the real estate sector is expected to contribute 13% to India’s GDP by 2025. The industry comprises of various stakeholders such as developers, contractors, brokers, investors, and customers.
Real Estate Industry includes all real estate and constructions attached to the land, such as buildings, houses, fences, wells, and landscaping. It basically comprises of four main sectors: Hospitality, Retail, Housing and Commercial.
According to the latest statistics, the market size of the Real Estate Sector has expected to increase as follows:
- From Rs.12,000 crore (US$1.72 billion) in 2019 to Rs. 65,000 crore (US$9.30 billion) in 2040, the real estate market will increase as expected.
- In India, the real estate market is anticipated to grow to US$ 1 trillion in size by 2030 from US$ 200 billion in 2021 and to account for 13% of GDP by 2025.
- Significant growth is also being seen in retail, hospitality, and commercial real estate, which is essential infrastructure for India’s expanding demands.
However, with the growth of the industry, there comes the need for statutory and regulatory compliances.
Compliance Challenge of Real Estate Companies
Noncompliance is a significant challenge faced by the Real Estate industry in India. The industry has been plagued with issues such as project delays, poor quality construction, and fraud. Noncompliance of statutory and regulatory norms has been one of the leading causes of these issues. Real estate companies have been penalized for noncompliance with regulations such as the Real Estate (Regulation and Development) Act, 2016 (RERA), Goods and Services Tax (GST), and Income Tax.
Real Estate companies face several challenges in complying with statutory and regulatory norms. One of the significant challenges is the complexity of regulations. The Real Estate sector is subject to various laws, such as RERA, GST, and Income Tax. These laws are constantly evolving, making it difficult for companies to keep track of changes and comply with them.
Another challenge is the lack of resources and expertise in compliance. Many Real Estate companies lack the necessary resources and expertise to comply with regulations adequately. They often rely on external consultants, which can be costly.
Industry Specific Compliances for Real Estate Industry
Real Estate Sector in India is governed by both Central and State laws in accordance with Article 246 of the Constitution of India.
Land is one of the most crucial subjects regulated under List-II of the Seventh Schedule to the Constitution of India. It legislated the “Transfer of Property” other than Agriculture land, Deeds registration which are enlisted in the Concurrent List or List-III of the Constitution of India. Thus, both the Central and State Government have the power to make legislations.
Some of the Acts and Regulations related to the Real Estate and Infrastructure development in India are as follows:
Transfer of Property Act, 1882: is a Central Act that provides the general regulation with respect to the Movable and Immovable property in terms of sale, exchange, transfer, lease, gift, property or in other forms.
India Easement Act, 1882: contains all the provisions related to easementary rights in India.
Registration Act, 1908: governs the registration of Real Estate Property and Infrastructure in India.
Stamp Duty Act, 1899: lays down the provisions relating to the payment of stamp duty and other requirement of Registration.
The Indian Contract Act, 1872: governs the contract in India which includes the consent, legal capacity, legal object, consideration, and other essential elements of the contract.
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013: governs the Private Properties acquired by the Government for the welfare of the public.
State Land Revenue Codes: The States are given the power to frame and implement their own State Revenue Codes which govern the laws relating to agriculture land-holding, land revenue, types of tenancy and other related matters thereto.
The Real Estate Regulation and Development Act, 2016 (RERA): governs the development, marketing and sale of the Real Estate projects protecting the interest of the consumers in the real estate sector.
Foreign Exchange Management Act, 1999 (FEMA) and Foreign Direct Investment Policy (FDI Policy): FEMA and other regulatory Act govern the purchase and sale of immovable property in India by foreign entities and for the person who is not resident of India.
In addition to these mandatory Acts, some of the other Municipal and State law, policies and customs include the urban development, slum rehabilitation, apartment ownership, rent control, building codes, Bye-laws, Special Economic Zones, Benami transactions, environment protection, land ceiling policies, land pooling policies, Real Estate Investment Projects and many other regulations. The objective is to protect the interest of the consumers of the Real Estate Industry.
Mandatory Registration and Licenses in Real Estate Industry
Key registration and licenses under the Real Estate Regulation and Development Act, 2016 (RERA):
- Sale Deed: indicates the title of the ownership of the person and it must be produced in the original document form to get a valid registration.
- Khata Extract: is a documentary proof that the property has a valid municipal title and it has been constructed in accordance with a proper plan.
- General Power of Attorney: is a document which authorizes the sale and purchase in the valid legal manner. It denotes that the authorized agent has the valid power to deal in the property.
- Copy of Building Plan: It is the duty of the buyer to get the construction plan approved by the Statutory Authority and confirm that the construction is legal and acceptable.
- No Objection Certificate: Minimum of 19 NOCs are required by the developer from various regulatory authorities for buying a housing project.
- Allotment Letter: is issued by the Housing Development Authority that clearly describes the particulars of the property including its location, amount and other related details.
- Possession Letter: This document is acquired by the buyer from the developer while taking possession of the property. It mentions the date on which the property has been granted to the buyer.
There are other certificates like Encumbrance Certificate, Occupancy Certificates, Completion Certificates, Property Tax Receipts, Payment Receipts and other documents that may be required to be exchanged between the buyer, developer and different Statutory authorities.
Conclusion:
Compliance with statutory and regulatory norms is crucial for Real Estate companies in India. Noncompliance can result in project delays, penalties, and loss of reputation. Real Estate companies must allocate resources and build expertise in compliance to ensure smooth operations and growth in the industry.
How Complinity can help
Complinity, India’s Leading Governance, Risk and Compliance (GRC) Software has helped several Real Estate companies set up state of the art compliance framework so that they can minimize their risks of non-compliance.
Complinity can help you with the following.
- Identification of compliance checklist of all central, state & Real Estate industry-specific laws for your organization
- Sharing real-time legal updates on various laws and compliances applicable to your organization
- Cloud based integrated dashboard that helps you track all GRC processes, compliances, tasks and controls like internal compliances, policies & procedures, ISO checklists, SOPs
- Automated alerts, triggers & email reminders so you never miss a compliance due-date
- Reports and certificates highlighting compliance performance for all your offices, branches & factories
- Centralized document repository with classification, expiry alerts & search capabilities