LEGISLATIVE ISSUES - MANJU FOUNDATIONS

LEGISLATIVE ISSUES

7.6.11 Much of the over 100 laws governing
various aspects of real estate dates back to the 19th
century. Despite the plethora of laws, the situation
appears to be far from satisfactory and major
amendments to existing laws are required to make
them relevant to modern day requirements. The
Central laws governing real estate include:
Indian Contract Act, 1872

7.6.12 This legislation specifies when a party can
be said to have the capacity to contract. A contract
pertaining to realty can be entered into, among
others, by an individual (who is not a minor or of
unsound mind), partners of a firm, a corporate body,
a trust, a sole corporation, the manager of an
undivided family, and a foreigner. All the
requirements of a valid contract, i.e. consideration,
intention to contract and validity under the law of
the land must be satisfied.
Transfer of Property Act, 1882
7.6.13 This lays down the general principles of
realty, like part-performance and has provisions for
dealing with property through sale, exchange,
mortgage, lease, lien and gift. A person acquiring
immovable property or any share/interest in it is
presumed to have notice of the title of any other person
who was in actual possession of such property.
Registration Act, 1908

7.6.14 The purpose of this Act is the conservation
of evidence, assurances, title, publication of
documents and prevention of fraud. It details the
formalities for registering an instrument. Instruments
which it is mandatory to register include:
(a) Instruments of gift of immovable property;
(b) other non-testamentary instruments which
purport or operate to create, declare,
assign, limit or extinguish, whether in
present or in future, any right, title or
interest, whether vested or contingent, to
or in immovable property;
(c) non-testamentary instruments which
acknowledge the receipt or payment of
any consideration on account of
instruments in (2) above.
(d) leases of immovable property from year
to year, or for any term exceeding one
year, or reserving a yearly rent

7.6.15 Sales, mortgages (other than by way of
deposit of title deeds) and exchanges of immovable
property are required to be registered by virtue of
the Transfer of Property Act. Evidently, therefore,
all the above documents have to be in writing.
Section 17 of the Act provides for optional registration.
An unregistered document will not affect
the property comprised in it, nor be received as
evidence of any transaction affecting such property
(except as evidence of a contract in a suit for specific
performance or as evidence of part-performance
under the Transfer of Property Act or as collateral),
unless it has been registered. Thus the doctrine of
part performance dealt with under Section 53 A of
the Transfer of Property Act and the provision of
Section 49 of the Registration Act (which provide
that an unregistered document cannot be
admissible as evidence in a court of law except as
secondary evidence under the Indian Evidence Act)
together protect the buyer in possession of an
unregistered sale deed and cannot be dispossessed.
The net effect has been that a large number
of property transactions have been accomplished
without proper registration. Further other instruments
such as Agreement to Sell, General Power
of Attorney and Will have been indiscriminately used
to effect change of ownership.
Special Relief Act, 1963

7.6.16 This Act is only to enforce individual civil
rights. A person dispossessed of immovable property without his consent (other than in due
course of law) can recover possession by a suit
filed within six months from the date of dispossession.
Unless the contrary is proved, in a suit for
specific performance of a contract, the Court shall
presume that a contract to transfer immovable
property is one in which monetary compensation
for its non-performance would not afford adequate
relief. The Court could also grant a permanent/
mandatory injunction preventing the breach of such
contract and award damages.
Urban Land (Ceiling And Regulation) Act
(ULCRA), 1976

7.6.17 This legislation fixed a ceiling on the
vacant urban land that a ‘person’ in urban agglomerations
can acquire and hold. A person is defined
to include an individual, a family, a firm, a company,
or an association or body of individuals, whether
incorporated or not. This ceiling limit ranges from
500-2,000 square metres (sq. m). Excess vacant
land is either to be surrendered to the Competent
Authority appointed under the Act for a small
compensation, or to be developed by its holder only
for specified purposes. The Act provides for
appropriate documents to show that the provisions
of this Act are not attracted or should be produced
to the Registering officer before registering
instruments compulsorily registrable under the
Registration Act.
7.6.18 The objective of acquiring the excess
vacant land could not be achieved because of
intrinsic deficiencies in the legislation itself. The
provisions under Sections 19, 20 and 21 of the Act
have together proved counter-productive to the
objectives of the legislation. So far, only 19,020
hectares could be taken possession of by State
Governments and Union Territories and the remaining
land was locked up in various litigations2 . This
has only helped push up land prices to
unconscionable levels and practically brought the
housing industry to a stop.

7.6.19 This legislation was repealed by the
Centre in 1999. The Repeal Act, however, shall not
affect the vesting of the vacant land, which has
already been taken possession by the State Government or any person duly authorised by the
State Government in this regard under the
provisions of ULCRA. The repeal of the Act, it is
believed, has eliminated the large amount of
litigation and released huge chunks of land into the
market. However the repeal of the Act has not been
carried out in all states. Initially the repeal Act was
applicable in Haryana, Punjab and all the Union
Territories. Subsequently, it has been adopted by
the State Governments of Uttar Pradesh, Gujarat,
Karnataka, Madhya Pradesh and Rajasthan.
Andhra Pradesh, Assam, Bihar, Maharashtra,
Orissa and West Bengal have not adopted the
Repeal Act so far.
Land Acquisition Act, 1894

7.6.20 This Act authorises governments to
acquire land for public purposes such as planned
development, provisions for town or rural planning,
provision for residential purpose to the poor or
landless and for carrying out any education, housing
or health scheme of the Government. In its present
form, the Act hinders speedy acquisition of land at
reasonable prices, resulting in cost overruns.
The Indian Evidence Act, 1872

7.6.21 Under the Act, whenever the status of any
person as the owner of a piece of immovable
property of which he is shown to be in possession
is questioned, the burden of proving that he is not
the owner lies on the person who asserts that he is
not the owner.

State laws governing real estate

7.6.22 While each state has its own set of laws,
which govern planned development, rules for
construction and floor-area-ratio (FAR) or floorspace-
index (FSI) and formation of societies and
condominiums, two laws that exist in every state,
are the stamp duty and rent laws. Stamp Duty is
being covered in a later section.
Rent Control Act
7.6.23 Rent legislation in India has been in
existence for a very long time. Rent control by the government initially came as a temporary measure
to protect the exploitation of tenants by landlords
after the Second World War. However these rent
control acts became almost a permanent feature.
Rent legislation provides payment of fair rent to
landlords and protection of tenants against eviction.
Besides, it effectively allows the tenant to alienate
rented property. Tenants occupying properties since
1947 continue to pay rents fixed then, regardless
of inflation and the realty boom. Some of the
adverse impacts of the Rent Control Act are:
• Negative effect on investment in housing
for rental purposes.
• Withdrawal of existing housing stock from
the rental market.
• Accelerated deterioration of the physical
condition of the housing stock.
• Stagnation of municipal property tax
revenue, as it is based on the rent.
• Resultant deterioration in the provision of
civic services.
• Increase in litigation between landlords and
tenants.
7.6.24 The Rent Control Act, in fact, is the single
most important reason for the proliferation of slums
in India by creating a serious shortage of affordable
housing for the low income families. Low and
middle-income families typically live in rented
accommodation all over the world and the need for
such accommodation in our cities will only increase
as the economy modernises, labour mobility
increases and urbanisation takes place. It is,
therefore, necessary to increase the stock of rental
housing. Promotion of rental housing can have a
significant impact on the economy in many ways:
• It reduces shortage of housing for a large
section of the population who cannot afford
ownership.
• Housing construction being a labourintensive
activity, investment in housing
generates employment for both skilled and
unskilled labour. • Housing has backward and forward
linkages with many other industries.
• Rental housing helps in stabilising real
estate prices and checking speculation
and, thus, makes housing affordable for
the weaker sections.
• It helps check proliferation of slums.

7.6.25 In the absence of rent control, dilapidated
urban housing would be periodically pulled down
and replaced by modern apartment buildings and
other complexes leading to more rational use of
prime locations and also creating a continuous
process of urban renewal. This has not happened
in India because rent control combined with security
of tenure provides no incentive for house owners
to undertake renovation work. This explains the run
down appearance of many of our buildings in prime
locations, which gives Indian cities a much more
shabby appearance than their counterparts in other
developing countries. Repeal of the Rent Control
Act could unleash a construction boom as has
happened in many major cities all over the world.
This is not only necessary to meet the growing
unmet demand for housing but it would also have a
highly favourable effect on employment generation.

7.6.26 In 1992, the Central Government proposed
a model rent control legislation, which was
circulated to all states. The model Act proposed
modification of some of the existing provisions
regarding inheritance of tenancy and also defined
a rent level beyond which rent control could not
apply. A new Delhi Rent Control Act based on this
model law was passed in 1997 but it has not been
notified to date because of resistance from traders
who are sitting tenants. Only a few states have
introduced the model Act.