The Real Estate Ezine
                                                             (May-August 2013)

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Significant Developments:

AFFORDABLE HOUSING POLICY 2013

The town and country planning development of the Haryana State Government on 19th August, 2013, has approved the Affordable Housing Policy 2013. The policy has been framed to provide apartments with pre-defined “sizes”, available at “pre-defined rates” and the completion of the projects licensed under the policy has to be completed within a period 4 years from the date of date of obtaining government plans or grant of environmental clearance. The licenses once obtained can be renewed shall not be renewed for a period of 4 years once granted. The maximum allotment rate on per sq. ft. carpet area basis is Rs. 4,000/- per sq. ft. for Gurgaon, Faridabad, Panchkula, Pinjore-Kalka, whereas for other high and medium potential towns carpet area is Rs. 3600/- per sq. ft. and for low potential towns it is Rs. 3000/- per sq. ft.  As per the policy the license for the project can only be attained in notified residential sectors of various cities under the Haryana State Government. In any residential sector not more than 5% of the net planned area under residential zone can be allowed for projects under this policy. However, if a residential sector has an area of less than 100 acres, one such project shall be allowed on 5 acres. In order to ensure that such projects are well distributed over the Development Plan area, the maximum net planned area that can be permitted under this policy in any residential sector shall be restricted to 10 acres.

No. PF-27/48921 dated 19th August 2013

 

MCD APPROVES PROPERTY TAX SETTLEMENT SCHEME 2013-2014 FOR NORTH DELHI

The Municipal Corporation of Delhi on 16th August, 2013 approved the property tax settlement scheme 2013-2014. The scheme aims to provide benefits to owners, tax payers and defaulters who are within the jurisdiction of the North Delhi. The scheme shall come into effect from the 19th August, 2013 and can be availed till 30th November, 2013. The scheme will be made application for those owners, tax payers and defaulters whose property tax is either due or outstanding and who have made complete payment of property tax within the time period required under the law. There will full or part waiver of interest on the payment of dues under the scheme.

Notice No.: TAX/A&C/ HQ/Policy/2013/571 d

 

NO ILLEGAL & UNAUTHORISED CONSTRUCTION UPON THE FLOOD PLAIN ZONE OF YAMUNA/ HINDAN

The National Green Tribunal, Principal Bench, New Delhi vide an Application No. 89/ 2013 dated 20.05.2013 directed all Government Authorities to control that no illegal and unauthorized construction is raised upon the Flood Plain Zone of river Yamuna/ Hindan. It was directed accordingly that wherever unauthorized and illegal construction has been raised, steps shall be taken to demolish the same in accordance with the law. Any Authority has been forbidden to permit or approve any construction plan or site plan for raising construction upon this Flood Plain Zone.

http://noidaauthorityonline.com/03_june_2013_demolition.pdf

 

In the Pipeline:

REAL ESTATE (ESTATE AND REGULATION) BILL, 2013 INTRODUCED IN RAJYA SABHA

After being passed by the union cabinet on 4th June, 2013, the Real Estate Bill on 14th August, 2013 was introduced before the Rajya Sabha. The real estate bill will apply to only residential real estate. However in case of residential estate it shall not apply where the area of land proposed to be developed does not exceed 1000 square meters or the number of apartments proposed to be developed do not exceed 12, inclusive of all phases, or area or number of apartments as provided in notification by the central Government. The bill will bring in the much needed transparency in real estate dealings  by providing for  registration of real estate projects and real estate agents with the Real Estate Regulatory Authority; functions and duties of promoters and agents; rights and duties of allottees etc., The Bill once enacted will lead to establishment of Real Estate Regulatory Authority and  Real Estate Appellate Tribunal  in every State for registration of all real estate projects and for speedier dispute resolution.  Stringent penalties have been sought to be imposed on habitual offenders.

Press Information Bureau, Release ID: 98224,

RBI TO INTRODUCE COMMERCIAL REAL ESTATE- RESIDENTIAL HOUSING LOANS

The Reserve bank of India on 21st August, 2013 has proposed to provide loans to the residential housing projects under the Commercial Real Estate (CRE) Sector which in its opinion will exhibit lesser risk and volatility than the CRE Sector taken as a whole. In order to meet this purpose it has proposed to carve out a separate sub-sector called Commercial Real Estate – Residential Housing (CRE-RH) from the CRE Sector. CRE-RH would consist of loans to builders/developers for residential housing projects (except for captive consumption) under CRE segment. Such projects should ordinarily not include non-residential commercial real estate. However, integrated housing projects comprising of some commercial space (e.g. shopping complex, school, etc.) can also be classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case the FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10%, the project loans should be classified as CRE and not CRE-RH. The above-mentioned CRE-RH segment will attract a lower risk weight of 75% and lower standard asset provisioning of 0.75% as against 100% and 1.00%,respectively for the CRE segment.

RBI/2012-13/538 DBOD.BP.BC.No. 104/08.12.015/2012-13
                                                                 

Judgments:

Satyam Cineplexes Limited v. Patel Realty India Ltd. and Bellona Estate Developers Limited

In this case, the Petitioner is a company engaged in the business of managing, operating and running multiplex cinema halls under the name of style of "Satyam Cineplexes". Respondent no. 1 are engaged in the business of acquiring, developing and programme real estate assets and Respondent no. 2 is also a company engaged in the business of constructing and developing commercial complexes and malls. Petitioner contends that on 17th July, 2010 they entered into an MOU with Respondent No. 1 wherein Respondent No. 1 agreed to develop property and to lease 52000 sq. ft. area in the II floor of a building called "Mall of Bangalore" subject to certain terms. Under the MOU the petitioners have paid a sum of Rs. 15.00 lakhs as interest free security deposit. In furtherance of MOU several meetings were held, E-mails were exchanged and there came to be a concluded agreement to lease on 3rd August, 2012 and addendum to agreement to lease. This agreement to lease and addendum are accompanied by annexures. Respondent No. 1 instead of discharging their obligation under the agreement to lease and addendum got issued a notice on 7th September, 2012 refunding the security deposit of Rs. 15.00 lakhs on the ground that the terms of lease which was to be executed under the agreement to lease could not be finalized.

Petitioners contend that the clauses of MOU, Agreement to Lease and addendum provides for an arbitration clause for settlement of the disputes. The petitioners invoked the arbitration clause and got issued a lawyer's notice on 19th November, 2012 nominating an arbitrator on their side and requesting Respondent No. 1 to nominate the arbitrator on their behalf. The respondents instead of complying the demand made in the petitioners' lawyer's notice got issued a reply through their lawyers on 18th December, 2012 inter alia contending that there is no enforceable agreement and as such the question of referring the dispute to an arbitrator will not arise. Respondent No. 2 filed separate statement of objections inter alia contending that they are not parties to the MOU and as such there is no binding contract on them.

The court observed that neither under the MOU nor under the Agreement to Lease nor under the addendum to agreement to lease the possession of the leased premises was delivered to the petitioners. In the absence of delivery of possession of the leased premises these documents do not require registration.

The court reiterated that the "intention of the parties" is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. Therefore, the court decided that Respondent No. 2 is bound by the agreement to lease and addendum to agreement to lease. If the deficit stamp duty and penalty is paid then the defect with reference to deficit stamp duty is cured and the Court may treat the document as duly stamped. The Petitioners undertook to pay duty and penalty on the Agreement to Lease and Addendum to Lease. Thus the defect in relation to stamp duty and penalty being cured, the Court nominated an arbitrator of the respondents.

In the High Court of Karnataka at Bangalore, C.M.P. No. 13/2013, dated 24.07.2013

Mr. Rajiv Kumar Chauhan v. M/S BPTP Ltd.

Mr. Rajiv Kumar Chauhan (“Informant”) booked a residential unit in a project called “Park Elite Floors, Parkland, Faridabad” being developed by M/s BPTP Ltd. (“Opposite Party”) or (“OP”) in Faridabad. The informant alleged several malpractices on the part of OP and alleged that OP abused its dominant position in the market of residential flats in the area of Faridabad. The informant prayed the Commission to initiate investigation on the abusive conduct of OP in the relevant market. Dealing with Section 4 of the Competition Act, 2002, the facts and circumstances of the matter suggests that the relevant market in the present case is the market of ‘development and sale of residential apartments in Faridabad’. The informant  alleged that the opposite party, being a dominant player in the relevant market, abused its dominant position by unilaterally changing terms of the agreement, increasing super built up area, illegitimately demanding cost escalation charges, delaying possession etc.

The information available in public domain also does not suggest any material change in the real estate industry in the relevant market of ‘development and sale of residential apartments in Faridabad’ so as to change the prima facie view with regard to dominance of the OP. Presence of other builders of repute also shows prevalence of competition. It is not a case where OP could operate independent of competitive forces. Since OP, prima facie, does not appear to be in a dominant position in the relevant market, there seems to be no question of abuse of its dominant position within the meaning of the provisions of Section 4 of the Competition Act, 2002.

Case No. 33/2013, Order of Competition Commission of India, dated 31/07/2013

 

Prabhudas Damodar Kotecha and Ors. V. Manhabala Jeram Damodar and Anr.

Facts
Plaintiffs filed a suit under Section 41 of the PSCC Act before the Small Causes Court, Bombay against the Defendants for recovery and vacant possession of one bed room in Mumbai and also for other consequential reliefs. Plaintiffs submitted that the Defendants were in use and in occupation of the above premises as their guest-house and so far as hall and kitchen are concerned, family members of the Plaintiff and Defendants were using it as common amenities. The Plaintiffs also claim that they are in occupation of another bedroom in the suit flat and no monetary consideration was charged by them from the Defendants for exclusive use and occupation of one bed-room and joint use of the hall and kitchen as common amenities. Permission granted to the Defendants to use the premises was later revoked and since they did not vacate the suit flat and continued to hold possession wrongfully and illegally, suit was filed for eviction.

The Defendants questioned the jurisdiction of the Small Causes Court, Mumbai to entertain and try the suit contending that the license created by the Plaintiffs in favour of the Defendants was gratuitous, i.e. without consideration, hence the suit is not maintainable in that Court.

Legislative History – PSCC Act
The Presidency Small Causes Court Act came into force on 1st July, 1882. Under the PSCC Act, Small Causes Courts were established in Calcutta, Madras, Ahmedabad and Bombay and this Act was enacted to consolidate and amend the law relating to Courts of Small Causes established in the Presidency Towns. Small Causes Court was conferred with the jurisdiction to try all suits of a civil nature where value of the subject matter did not exceed Rs. 25,000/- (substituted for Rs. 10,000 by amendment in 1987). Small Causes Courts, at that time, were treated as a Civil Courts in the hierarchy of the Courts. Chapter VII of PSCC Act, contained Sections 41 to 46 conferring limited jurisdiction of recovery of possession of immoveable property on Small Causes Court giving summary remedy for recovery of possession of immoveable property of the prescribed value.

Issues
(i) Whether the expression "Licensee" used in Section 41(1) in Chapter VII of PSCC Act, not having been defined therein, would derive its meaning from the expression "licensee" as used in Sub-section (4A) of Section 5 of the Rent Act and/or whether the expression "licensee" used in Section 41(1) of PSCC Act is a term of wider import so as to mean and include a "gratuitous licensee" also.

(ii) Whether a suit by a "licensor" against a "gratuitous licensee" is tenable before the Presidency Small Cause Court under Section 41 of PSCC Act.
                    
A gratuitous licensee is an individual who is permitted, although not invited, to enter into another individual’s property and who provides no consideration in exchange for such permission.

Both the above mentioned questions were answered by the Full Bench in the affirmative. The expression 'licensee' in Section 41(1) of the PSCC Act would take a gratuitous licensee as well. The reason for such an interpretation is that the expression 'licensee' used in the PSCC Act does not derive its meaning from the expression 'licensee' as used in Sub-section (4A) of Section 5 of the Rent Act and that the expression "licensee" used in Section 41(1) is a term of wider import intended to bring in a gratuitous licensee as well.

In the Supreme Court of India, Civil Appeal Nos. 6726-6727 of 2013, dated 13.08.2013

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