ROLE OF LEGAL & REGULATORY COMPLIANCES

The real estate sector involves numerous stakeholders, such as home buyers, vendors, and capital providers, who are greatly affected by any policy changes in this sector, due to the significant portion of their assets or net worth tied to it. Referring to the same, Anand Jagtiani, IRS ( Rtd.), Planner, Strategist, Versatile Tax Solutions, said “This lingering uncertainty of regulation changing at any time is also a concern for global investors looking to acquire assets and ensure they are protected. It is clear that steps are currently being taken toward addressing these issues but more needs to be done.”

Commenting on the need to reduce the timeframe for dispute resolutions in realty sector, Mudit Shah, Partner, CyrilAmarchand Mangaldas said, “I agree that the resolution timeframe must be minimized. The lacunae pertains to the legal system, including NCLT tribunals that need improvement for quicker case resolution. There is a suggestion to separate major projects and forming specialized benches for prompt rulings. Streamlining processes, limiting frivolous litigation, and harsher penalties can increase efficiency. The Supreme Court has observed that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place.”

Addressing the subject of the substantial inflow of foreign capital into India and its beneficial impact on the real estate industry, Deval Valia, Senior Director & Head, West India, Capital Markets & Investment Services, Colliers India stated, “We frequently discuss the influx of foreign capital into India and the advantages it brings to the real estate sector. I am confident that with the implementation of IBC, foreign investors will gain increased confidence in entering the Indian market. This is primarily because, upon arrival, they will consider the timeline for dispute resolution, which will undoubtedly assist them in making swifter decisions”.

Concerning the essential legal compliance for real estate developers to draw foreign investments and enhance transparency, Amit Goenka MD & CEO, Nisus Finance asserted, “In today's society, real estate businesses must adopt consumer-centric approach and ensure compliance with evolving regulations like RERA, IBC, and SARFAESI to attract investment. RERA plays a crucial role in compliance, but its implementation varies between states.”

STANDARDIZATION & ITS FEASABILITY

About the importance of standardizing sale agreements between buyers and sellers, Prashanth Sarkhedi, Director, Nila Spaces Ltd., said “Creating a standard framework for contracts is difficult due to the unique terms and conditions with respect to each project. However, it's essential for an authoritative body to develop fundamental guidelines that can be updated periodically based on complaints and resolutions”.

Agreeing with Prashanth Sarkhedi, Mudit Shah, stated “Standardizing real estate transaction norms is tough since there cannot be a one-size-fits-all approach. On the other hand, issues like one-sided contracts are prevalent. Addressing this issue, courts introduced legislation such as RERA, which sets baseline provisions while allowing customization. Some states have broadened RERA's principles for better customer protection. However, there's no clear distinction between residential and commercial projects in principle for now. Enhancing these principles is doable, but standardizing agreements remains a distant goal.”

Concurring with Mudit Shah, Deval Valia remarked “Indeed, implementing the appropriate principles contributes significantly to enhancing transparency within the system. The introduction of RERA initially caused apprehension among developers; however, it has since led to increased customer satisfaction due to the ready availability of information on the website.”

Amit Goenka added, “Maharashtra and Gujarat are frontrunners in RERA registrations. Without a RERA number, consumers will not engage. Compliance requires quarterly data upload, maintaining records, registering sales, listing legal cases, providing plans and approvals, and ensuring 70-30 compliances. Post-registration filings are often neglected. Authentic data is crucial for actual compliance, but auditing RERA data is a challenge due to the limited bandwidth and capabilities of the authorities. To effectively enforce compliance, it is important to enhance their authority, bandwidth, technology, and monitoring ability. This challenge remains prominent in many projects”.

Standardization and increased transparency will ultimately benefit developers in the long run, Anand Jagtiani, agreed. With reference to the Gift City he said, “As an ex-joint development commissioner at SEZ in Gift City, I can confirm its distinct operations. It's troubling to hear about investors and developers facing challenges. Gift City has an efficient single-window clearance system with advantages and effectiveness. Comprising the Gift City SEZ and IFSEC, many financial institutions reside here. The clearance process in Gift City is fast and transparent, taking around 15 days with a committee interview within a week. Operations can start within 45 days, enjoying tax benefits. Real estate developers are thus making a beeline to be part of this success story and is attracting reputed local and national developers.”

Backing Anand Jagtiani’s explanation, Prashanth Sarkhedi commented, “We recently applied for our GIFT city project and were impressed by the innovative, tax-focused approach and adherence to guidelines. It ensures compliance, quickly addresses complaints and guides developers on marketing and legal aspects. We are the first developers to obtain RERA 2.0 registration within 12 hours of plan approval. RERA 2.0 enhances compliance by using AI tools for automated checks, making it more stringent. Some developers may avoid it due to potential loopholes, but we believe RERA 2.0 offers better compliance and a stronger AI-driven system”.

Discussing the tax advantages for standard units in Gift SEZ, Anand Jagtiani stated, “Gujarat introduced the SEZ Act in 2004, with GIFT and IFSC being the Prime Minister's dream projects. Initial SEZ tax benefits have been reduced, leaving only 18% MAT and some exemptions. IFSC maintains its tax exemptions and a 9% MAT to compete with global financial hubs, expanding into diverse areas such as capital markets, aircraft leasing, and financial services. Efficient regulation is essential for successful implementation and avoiding negative consequences in the financial sector”.

Amit Goenka further said, “RERA's mediation cell, consisting of homebuyers, developers, and ex-judicial members, effectively resolves 80-90% of disputes arising from miscommunication. Despite fostering trust and potential for dispute resolution, the cell is not easily accessible or well-known, leading to forum shopping, misinformation, and increased legal fees. To improve usage and access, RERA must be promoted among the public, as demonstrated in Gujarat and Maharashtra's successful implementations”.

In response to Amit Goenka's remarks, Deval Valia articulated, “Projects that receive institutional funding are unarguably more strictly regulated compared to those lacking monetary support from financial institutions. As a result, a financier’s indirect involvement aids consumers in obtaining appropriate offerings. Also, there is a shift in the industry that till now perceived laws as an obstacle rather than an enabler. With legal procedures being revised to be the facilitator of business, there will be a growing trust and confidence in the real estate sector across homebuyers and investors.”

In conclusion, sharing his views on how the role of legal will change in the next three years in real estate, Mudit Shah replied, “In the next three years, technology will greatly impact the legal profession. Digitized land records and online access to revenue records will make title diligence more efficient. Gujarat's real estate market will experience financing modernization, increased professionalism, and new transaction modes such as REITs and InVITs. Lawyers must adapt and develop new skills to serve the changing market, leading to increased innovation in the coming years”.

THE GOVERNMENT PLANS TO DEVELOP A MODEL CONTRACT FOR REAL ESTATE TRANSACTIONS TO STANDARDIZE SALE AGREEMENTS, ALLOWING CONSUMERS TO MAKE INFORMED DECISIONS.

GUJARAT'S REAL ESTATE MARKET WILL EXPERIENCE FINANCING DEMOCRATIZATION, INCREASED PROFESSIONALISM, AND NEW TRANSACTION MODES SUCH AS REITS AND INVITS.