Archaic laws governing real estate in India were among the most cited causes behind a recent slump in the property market. This is the reason why when the Central government recently passed the Real Estate (Regulation and Development) Act, 2016, many expected the new law to change the face of the real estate market. While it may take some time for the new law to show results, the positive sentiment has set things in motion.
A look at some of the rules that define the property market in India.
- According to the Real Estate (Regulation and Development) Act, 2016, if any defects are found in the construction within five years of possession by a home buyer, the developer would be liable to fix it without any charge. The developer will have to get the work done within 30 days, failing which he would be liable pay compensation.
- According to the Act, a home buyer, who fails to comply with the orders of the Real Estate Regulatory Authority, will have to pay a penalty for each day of the period of non-compliance. The penalty may "extend up to five per cent of the property cost".
- According to the Draft Model Tenancy Act 2015, a landlord cannot enter the premises without giving the tenant a written notice 24 hours. Landlords have to follow the same process if they want to carry out any renovation work.
- According to the Foreign Exchange Management Act (FEMA), foreign companies looking to set up branches in India are allowed to acquire real estate provided they make a declaration to the Reserve Bank of India (RBI) within 90 days of acquiring the property. For the repatriation of the proceeds obtained by selling the property, the company would need a prior approval of the central bank. However, companies from Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan have to take the RBI's prior approval.
- While there are no restrictions on non-resident Indians (NRIs) and persons of Indian origin (PIOs) buying residential and commercial real estate in India, they have to seek the RBI approval if they want to buy agricultural land or a farm house. It is only after a consultation with the Centre that the RBI would grant it approval for such a transaction. It is to be noted that the FEMA norms regulate NRI investments in India.