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Real Estate

Who’ll blink first in India’s crypto standoff?

By Economy, Others No Comments

RBI, the Central Bank of India has been in a cold war with the Indian crypto industry. It can be best described as antagonistic and aversive. Being concerned with India’s ability to absorb financial shocks, RBI has time and again tried to unfurl the disadvantages of using cryptocurrencies, however, the industry construed RBIs reaction as hyperbolic! India, among other nations, has been particularly belligerent towards cryptocurrency, so much so, that it had constituted a high-level intermediate committee to report on various issues pertaining to cryptocurrency. The committee had subsequently in 2019, recommended a blanket ban on private cryptocurrencies in India hurling many crypto investors on the wrong side of the law.
The belligerent attitude of Indian authorities towards digital currency has led to banks emphatically distancing themselves from the crypto community, apparently egged on by the RBI. Working along the same lines as the government, in May, the HDFC Bank had sent a rather threatening email to their customers, warning them against virtual currency transactions. It is to be noted that the email had cited an RBI circular that was published on April 6, 2018. The circular had reportedly instructed all of the businesses it regulates to cease any involvement with cryptocurrencies. Additionally, such a stringent activity was also conducted by the State Bank of India. Similarly, several large banks, namely ICICI Bank, the country’s largest private lender too stopped providing services to crypto exchanges. It is to be noted that due to the government’s stringent stand on the contentious matter, several cryptocurrency exchanges have reported difficulties with bank deposits and transfers.

Investors’ Woes 

As it can be anticipated, the banks’ nefarious emails had prompted an uproar among their customers and crypto investors, with many taking to social media to express their discontent. But why are investors raging with anger? Fear of missing out on high, unpalpable profits that crypto trading offers them. According to a research report by Bloomberg, the technical outlook for Bitcoin remains strong with the price of the cryptocurrency all set to surge around 600% to hit the $400,000 level in 2021.
The government’s repugnant attitude throws a question that in contrast to the Indian government are all authorities in India wary of the digital currency? Apparently, not. Recently, the RBI’s circular was struck down by the Supreme Court. The Court contended in its March 2020 ruling that the RBI had failed to provide sufficient proof, and to detail instances of losses arising from crypto transactions, that might merit such a drastic measure as its de facto ban on banks’ involvement with cryptos. Therefore, it can be rightly stated, that to some extent, pressure is being built on the authorities to at least lift its temporary ban on crypto services.

Crypto Endorsers

It is no news that Elon Musk has been an ardent endorser of the cryptocurrency. Where many might presume him to be the crypto guru, many can’t help garb their aversion towards him due to his cryptocurrency manipulation charades that onsets great volatility in the market. It is to be noted, it is due to this very reason, Indian authorities are so averse to the idea of cryptocurrency. The digital currency granting anonymity to criminals for nefarious crimes is considered a safe haven for digital criminals. But more importantly, it is the inefficiency or the inability to track the real perpetrator of the crime that is the sole reason for India debunking the crypto supremacy. Interesting enough, loss of revenue is also a big challenge that the government faces. As it is known, the crypto market is unregulated, thus it is often quite arduous or rather impossible to track payments and hence to generate revenue through transactions.
Additionally, cryptocurrency being a highly volatile market, which might not be running rationally poses a big risk of a financial bubble that is doomed to burst. As it is known, during the pandemic, when consumer and investor confidence was at an all-time low, the crypto market was booming, rather skyrocketing.
In contrast to individuals, various cities like Miami have also tried to pursue cryptocurrency by conducting state-wise crypto fares in order to court crypto investors to the town. With El Salvador becoming the first country in the world to grant legal tender to the contentious digital currency, pressure to flip the coin in favour of crypto is rising. But with irrational behaviour associated with the market and various comments like “Crypto isn’t the real economy” by Elon Musk and not-so endorsing statements by the former US President Donald Trump, who at best, considers Crypto a farce, both the sides of crypto, at the current moment, are evenly balanced.
While countries like South Korea are implementing a legislative framework to regulate Cryptocurrencies and Crypto exchanges, India, on the flip side, is considering imposing an effective ban on “private” digital assets and digital currencies. Further, the Indian government has indicated to table The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 which will effectively ban “private‟ Cryptocurrencies and introduce its own digital currency called Central Bank Digital Currency. Although India’s stance of regulating cryptocurrencies through state-backed CBDCs regulated by the RBI is worrisome, it doesn’t come as a surprise. Going forward, it is imperative to have a dialogue on stakeholder concerns or risk getting smeared in the litigation quicksand thereby leaving crypto traders in dire straits, resulting in uneasiness in the sector which is destined to accelerate to greater heights in India.
The Achilles’ heel in RBI’s approach is the delusion towards the fact that it is possible to ban cryptocurrencies whereas looking at all the other nations’, it is wise to regulate it and mitigate systemic risks vis-à-vis a blanket, yet ineffective ban. A bill regarding banning cryptocurrencies is still in parliament which if approved, will suffice the RBI’s objective however, it will be interesting to see who wins this battle of the contentious crypto war.      

Revival in home sales: Affordable housing & middle-class buyers hold the key

By Real Estate No Comments

The overall gloom cast over the real estate industry on account of the COVID-19 pandemic has brought to light several unconventional methods to keep the dreams of homebuyers alive as developers strive to stay afloat. In fact, the pandemic has proven to give the necessary impetus and stimulus for people to invest.
India’s real estate market can be regarded as the second-highest employment generator in the country after agriculture. By 2025, this number is expected to rise, and the sector is predicted to account for 13% of the Indian economy. It could become a major wealth creator in the forthcoming decades, with the boom in the housing requirements; provided that all required reforms are executed in a timely manner. Since the COVID-19 pandemic struck in March last year, just like several other industries, the construction sector was also badly hit by the nationwide lockdown. The unavailability of workers due to the migrant exodus, and disruption in the supply chain of materials all over the world, there resulted in many delayed projects and extended delivery dates. The plans of buyers to purchase homes was also postponed, fueled by this and by income contraction due to the pandemic.

However, the relaxation of the lockdown in the Second Quarter of FY21, resumption of economic activities, return of the migrant workers, and economic stimulus packages, gave the much-coveted push on its way towards recovery in 2021.
Currently, there exist numerous signs of recovery of the sector which could revive the industry at a slow but steady pace in the future. At the outset, with the unprecedented amount of time spent indoors for the sake of life safety, a multitude of alternatives have opened up for activities that would have normally been done offline i.e., online classes, professional and informal events, etc. It is apparent that for a considerable amount of time, especially with the second wave of COVID, our lives are going to revolve around our houses for a considerable amount of time.
This paradigm shift has increased the importance of having real estate as an asset in one’s investment portfolio and has heightened the sense of security that owning a home brings. The ‘Work from Home’ culture has strongly contributed to this phenomenon as well. With home offices being the common trend, this phenomenon is predicted to pave the way to the ‘Work from anywhere’ trend. This holds especially true for cities and technology hubs across the country, such as Mumbai, Delhi, Pune, Bangalore, Hyderabad, etc.
From the legislative standpoint, with homebuyers gaining more and more confidence in the real estate facilitation and recovery mechanisms such as RERA, Insolvency and Bankruptcy Code, etc. the erstwhile issues surrounding possession and delivery and enforcement of the lack thereof, while still subsisting, doesn’t plague the potential investment in the avenues. Moreover, with the tax exemptions and caps being put in force by the Central government to lure investors into owning part of leisurely properties, i.e. fractional ownership incentives, is also an indicator of the dynamic nature of the real estate sector, with alternatives in force to ensure that sector in question does not succumb to market collapses.
In addition to this, government incentives are offered under the Zero GST scheme, i.e. nil-GST provisioning for pending and underway construction projects so as to not hamper the foundation of real estate projects. The Zero-GST scheme puts on a decent show of faith of the government and RBI in the potential of the real estate sector to yield handsomely in the upcoming years, therefore considering it essential to provide such a boost as it requires. The erstwhile moratorium put in force by the RBI to protect personal loans has also gone a long way in securing their positions as credit-worthy loan-payers. The much sought after relief has enabled the average taxpayers to be able to secure a position, amid the economic collapse, to be able to pay such mortgages, loans. etc. off, in a fashion that doesn’t render them crippled financially.
These incentives put forward by the government are nothing short of unwavering dedication towards the revival of the real estate sector and its allied avenues. While these ventures might affect the central and state coffers in the short run, the economists and jurists of renown claim these incentives to be of the utmost urgency and prudence in order for the Indian economy to function as a whole again. Therefore, it goes without saying that affordable housing and middle-class buyers hold the key for the revival of a sector losing its sheen due to tot the pandemic. Given the correct legal framework and taxation incentives, the recent boom should be further encouraged to revive the sector in view of the prevailing ‘Work from Home’ and ‘Work-action culture to gauge the much-needed buoyancy in the market. 

Understanding Copyright Law in Real Estate

By Real Estate No Comments

Intellectual Property Law can be best described as a safeguard for the creations of one’s intellect. It aids the interests of the innovators and creators by providing them with the rights and safeguards over their creations and preventing their appropriation and misuse by other individuals. Many diverse rights can be included within the ambit of IP rights, such as literary, artistic and scientific works; performances of performing artists, phonograms and broadcasts; inventions in all fields of human endeavour; scientific discoveries; industrial designs; trademarks, service marks, and commercial names and designations; protection against unfair competition; and “all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields”. Popular examples of intellectual properties include logos, copyrights, trademarks, patents, trade secrets and so on.

This article will attempt to focus on the importance and essence of Copyright Law in Real Estate, and the measures that may prove to be useful in protecting the requisite intellectual property. This article also aims to evaluate the safeguards that can be taken to protect such intellectual property, both in Indian and American law.

Copyright primarily relates to literary and artistic creations, such as books, music, paintings and sculptures, films and technology-based works, such as computer programs and electronic databases. The expression copyright refers to the act of copying an original work which, in respect of literary and artistic creations, may be done only by the author or with the author’s permission. “Authors’ rights” refers to the creator of an artistic work, thus emphasising that authors have certain specific rights in their creations that only they can exercise such as the right to prevent distorted reproductions of the work. Such rights are often referred to as moral rights and can be observed across legal systems. 

Other rights, such as the right to make copies among many other such rights, can be exercised by third parties with the author’s permission, for example, by a publisher who obtains a license to this effect from the author. It is possible for authors and creators to create, have rights in and exploit a work very similar to the creation of another author or creator without infringing copyright, as long as the work of another author or creator was not copied.

Indian Copyright Law, on the other hand, is governed by the (Indian) Copyright Act, 1957. The Indian law is at parity with the international standards contained in TRIPS, and pursuant to the amendments in 1999, 2002 and 2012, fully reflects the Berne Convention for Protection of Literary and Artistic Works, 1886 and the Universal Copyrights Convention.

Under the Act, the term “work” primarily includes an original artistic work which could comprise of a painting, a sculpture, a drawing (including a diagram, a map, a chart or plan), an engraving, a photograph, a work of architecture or artistic craftsmanship, dramatic work, literary work (including computer programmes, tables, compilations and computer databases), musical work (including music as well as graphical notations), sound recording and cinematographic film. The Act was also amended to bring the law in line with recent developments in the information technology (IT) industry, be it satellite broadcasting or digital technology. Provisions were also made to enhance the performer’s rights, in line with the Rome Convention.

The importance of copyright law in this ever-evolving digital world becomes more and more imperative, especially with the popularity and easy access to the internet. In the real estate industry, such copyright issues can often be observed in connection with listing photographs. Listing photographs can be generally defined as the photographs of the property that are presented to potential buyers so that they could make an informed choice. This becomes more pertinent when taking into account online listings, or organisations that might send across such images online to potential buyers.

Improper use of such photographs can create copyright infringement liability for agents, brokerages, and other people involved; and implementing copyright risk-management strategies may help real estate professionals avoid liability. It’s crucial for real estate professionals to know and fully understand the rights they own in listing photographs, and should strive to own their listing photographs. When ownership is not possible, an effort must be made by real estate professionals to gather other legal safeguards and rights involving the photographs, and how they permit others to use the same.

Signing agreements that govern the use of such photographs, along with certain limitations and restrictions, can be one way of safeguarding one’s rights. The real estate professionals should make sure that they review such agreements, audit the photographs to ensure that compliance with the agreement, decide on how such photographs are to be used and maintain records of all such photography agreements they enter into.

In the US Legal system, Compliance with the Digital Millennium Copyright Act of 1998 (DMCA) will help real estate professionals avoid liability when infringing content appears through an IDX (Internet Data Exchange) feed. Under federal copyright law, online service providers are protected from liability for copyright infringement when those online service providers comply with certain procedural requirements. One such exemption is for website owners who allow third parties to post user-generated content, for example, a brokerage website that includes an IDX feed of third-party listings.

In India, photographs are protected under copyright law as artistic work (as was discussed earlier) under Section 2(c) of the Copyright Act. The essential element in photography, and similarly in all other artistic works, requires that the photograph must be an original work where some degree of skill and effort must have been expended on it. As per section 25 of the Copyright Act, photographs are provided copyright protection for a period of 60 years from the date of publication, that from the day it came into existence. Such safeguards can be utilised by real estate professionals when trying to safeguard their listing photographs, provided that the photographs are clicked by their own selves. Even if this is not the case, an agreement concerning its proper usage and rights can always be utilised. 

Lastly, the role of copyright law in real estate can be essential and provides a lot of scope for future research. With the increasing digitization and flouting of copyright norms in the online sphere, such concerns will be better heard and resolved with stricter copyright laws, and even strict implementation. In the end, it is in the best interest of real estate professionals to be aware of the rights that they possess in relation to their intellectual property, and take appropriate safeguards in accordance with the law.

Can NRIs save the Indian real estate industry?

By Real Estate No Comments

India’s real estate market can be regarded as the second-highest employment generator in the country after agriculture. Of late, the industry has been sluggish with more than a dozen measures needed to help real estate developers stay afloat. The overall despair cast over the real estate industry on the pretext of the COVID-19 pandemic has brought to light several unconventional methods to keep the dreams of homebuyers alive as developers tiptoe their way towards recovery.

The real estate had been lamenting in recent years in India. The startling demonetization followed by the introduction of the GST regime, the RERA Act and followed by the NBFC crisis collectively propelled real estate players to their lowest ebb. Adding fuel to fire was the COVID-19 pandemic where real estate giants faced massive unavailability of workers due to the migrant exodus, and disruption in the supply chain of materials, thus resulting in numerous deferred projects and delayed delivery dates. The income contraction among masses muted the demand, whereas a massive liquidity and labour crunch impacted the supply side of the industry. 

However, the government introduced a series of measures including the moratorium on equated monthly instalments, restructuring of loans of real estate companies at the project level, setting up of Swamih fund – rescue capital for affordable and mid-income housing projects, etc. While these relaxations may not have addressed issues at the grassroots level, but this backdrop turned out to be favourable for the Non-Resident Indians (NRI). 

During the pandemic, NRI’s turned towards India in large numbers on the look for real estate for the purpose of working from home and also for investment/s. The ‘Work from Home’ culture strongly contributed to this phenomenon and with home offices gaining traction, the ‘Work from anywhere’ phenomenon was leveraged upon by thousands of NRIs. 

Despite the sluggish economy, the confidence in the real estate facilitation and recovery mechanisms such as RERA, Insolvency and Bankruptcy Code, etc. has played a major role in enticing NRIs to the distressed yet well-regulated industry.  In fact, real estate transactions falling under the purview of the Foreign Exchange Management Act (FEMA) have been further simplified to attract foreign investment. Further, in absence of a cap on the number of properties an NRI can purchase, they can easily cash in on their investment in property by renting, leasing, selling, etc. As a result, NRIs are investing in multiple properties and getting high returns on investment through rental income, leasing income, short-term and long-term capital gains.

However, despite the potential downside NRIs traditionally preferred investing in the residential real estate segment owing to a good return on investment, reasonable capital appreciation and low rupee value. They are one of the crucial growth drivers and the overall community accounts for a sizeable part of Indian real estate demand. Therefore, it goes without saying that NRI money helps increase the purchasing power of people in India, which in turn stimulates the market and pushes demand and supply upward. 

This development is likely to have a two-fold effect wherein both NRIs and real estate players may benefit from the trend and eventually become a part of the growth story of their own country, however, a pressing question is whether the Indian market will be levelled to the extent that the NRI’s will be able to resale their properties? Irrespective of what the future holds, real estate cannot solely rely upon NRIs to pull them out of the COVID-induced doldrums but can definitely be treated as one of the first steps towards growth and revival.

Scrapping of the IP Appellate Board

By Real Estate No Comments

Tribunals, at least in theory, are known to provide technical expertise, ease of the procedure and speedy disposal of cases. Moreover, Tribunals are supposed to alleviate the burden on the Indian judiciary and expedite justice. However, these objectives seem easier to conceive in theory than in practice. 

The Intellectual Property Appellate Board (IPAB) was established in 2003 under the Trade Marks Act, 1999 with the intention of speedy disposal of cases in alignment with the above objectives. To affect this intent, it also established a timeline of 3 months to file an appeal, with the duration starting from the date the order was passed by the Registrar of Trade Marks. However, contrary to the intent behind its establishment, a significant delay persisted in the adjudication of such disputes with an estimated backlog of 2,626 trademark cases, 617 patent cases, 691 copyright cases and 1 geographical indication case, as last seen on April 2020.

In one case, Novartis v. Controller General of Patents, the delay in adjudicating matters related to Patents was as much as 5 years. There has been a considerable lag in the appointment of a chairperson as well, a responsibility vested with the Government. In fact, in its entire existence, a total of 1,130 days the tribunal has been forced to function without a Chairperson.

In view of the existing plight, the Central Government abolished the Intellectual Property Appellate Board (IPAB) through an Ordinance which aims to eradicate tribunals set up under a plethora of subsisting legislation such as the Copyright Act 1957, the Customs Act 1962, and the Patents Act 1970, to name a few. The most instant consequence that would be observed of such scrapping, would be seen on the public exchequer due to the reduced costs spent on infrastructure. 

When seen from the point of view of the litigants, the same would result in the reduction of legal costs, since IPAB functioned as a step of the hierarchy, pursuant to which its orders could be challenged in the High Courts through Writ Petitions. However, there is no denying that matters of intellectual property are complex and expertise oriented and take much more time than normal other civil or criminal matters. Thus, abolishing a series of tribunals under the Ordinance would invariably defeat the purpose of expeditious disposal of cases in the interest of justice. Another by-product of delayed proceedings is higher litigation costs to be incurred by litigants. 

The abolishment of IP Tribunals, at a time when India’s data protection regime is at a nascent stage while technological innovations are sky-rocketing, could spell disaster in these pandemic times. Among other industries, the pharmaceutical industry is likely to bear the brunt of such abolishment especially in times where each second, each milliliter of vaccine could save an additional life. Therefore, it appears that blanket abolition of diverse tribunals smacks of arbitrariness and blatant absence of application of mind.

What’s next? Experts suggest an IP bench in the High Courts. However, it remains no hidden fact that the stounding level of pressure the High Courts face due to the backlog of many pending cases, and such a shift without requisite guidelines to fast track these matters, seems like a shaky foundation to begin on. Further, due to the transfer of power, while it is certain that there may be differences in opinions on various IP issues, it is only hoped that the same does not create furthermore confusion and administrative issues.

However, since ‘technical expertise’ had been the foundation and intent behind establishing the IPAB, how the High Courts deal with such matters involving such precise technical expertise still remains in the dark. Thus in view of the above changes, the onus will be transferred to the shoulders of the High Court to outperform the IPAB’s “marvellous record” of reversing unreasonable decisions and provide justice to litigants in infringement suits, patent claims and other IP disputes which are likely to gain further traction with the rise in IP-conscious companies.

India headed towards K-shaped recovery as inequalities grow: What this means for borrowers and lenders?

By Economy, Real Estate No Comments

No country escapes. Only China is forecast to show positive economic growth, and that is a meagre 1%. Although the International Monetary Fund (IMF) foresees a considerable rebound in 2021, the extent of the depressionary forces pressed by the pandemic remains uncorroborated and hence not comparable to any economic crises of the past.
In an economy that struggles to battle with huge unemployment and stressed asset abundances every year, the pandemic seems harshly unkind as the recovery charts start to form not a ‘v’ but a ‘k-shaped’ recovery chart. The Economic Survey 2021, predicted a ‘v-shaped recovery and projects the real economy to grow at 11% in 2021-22. The estimates match closely to the one given by IMF, with the latter predicting 11.5% in its global outlook report. If the same is achieved, the real GDP shall reach the pre-pandemic level of 2019-20.
Across the globe, various patterns of recovery are anticipated such as V-shaped, U shaped, W shaped, L shaped and even K shaped if upper-income groups recover fast, however, low-income groups continue to lose ground. Further, it may be that all of these patterns will be observed in different countries, for the profile over time depends on the social and sanitary policies implemented to stop the spread of the virus and the nature of the economic stimulus.
However, a closer look at the GDP numbers points to a ‘k-shaped’ recovery. A ‘k-shaped’ recovery chart essentially means that different sectors of the economy shall grow and revive at different paces, thereby forming distinct staggers in the process of being mapped. While the richer households and businesses are witnessing their incomes and profits grow at a faster pace, income and consumption are plummeting to the bottom. These differences are visible in employment and consumption statistics as well.
Such a stark split in the recovery of different sectors essentially translates to a dismembered recovery pace, wherein a handful of the sectors see an upward rise whereas the other handful observes a downward trajectory, indicating the ailing sector in an economy that might need investment, restructuring or other such incentives for their upheaval. More often than not, the rather well equipped and modernized players observe the upward trend on the chart, whereas the non-adaptive, orthodox players observe the boorish one. 

Lender-Borrower Dynamics 

The Indian scenario recounts economists as considering the rebound of the Indian economy being in tandem with the aforementioned phase of recovery, as the pandemic has rendered the already gaping inequalities in the Indian forefront as a vastly dilapidated social dynamic. This forecast further hurts the chances of the quarterly growth agendas massively as the second wave of the virus also threatens to loom large over the heads of the jurists and economists.
Such a staggering growth chart would quite obviously lead to a ballooning of the fiscal debt, and the said monetary incentives and policies would fail to correct the deviations kept in mind should they not be adapted to the problem at hand, thereby suggesting an even slower recovery chart, as compared to a ‘v-shaped’ form of recovery that indicates a faster and all-round revival of the economy.
The highlights from the address by Duvvuri Subbarao feature certain key points with regards to the opinion stated above, these key points entail  RBI’s pledge to buy 1 trillion rupees worth (about $14 billion) of sovereign notes through the G-Sec Acquisition Program in the upcoming quarter, supporting overall growth, ensuring price stability in the economy, financial stability of earning households, yield curve management and lastly protecting savers in India who are grappling with non-yielding deposits, moreover,  the RBI needs a separate instrument for each objective.
At the outset, the privatization of state-run banks may be a step in the right decision. Instead of utilizing scarce budgetary resources to recapitalize government-controlled lenders, it would be advisable to employ that money in an arena where it will be more productive. It is an indisputable fact that banks and NBFCs have written off over 2 trillion in the past two years. From the lender’s perspective, the RBI moratorium provided momentary relief to borrowers, but the consequences of such stalling of the economy remain in an uncharted zone. Adding fuel to fire is the rise in bad loans as the moratorium has come to an end. These bad loans are likely to snowball in the coming quarters and propel banking institutions and NBFC-lenders to take a cautious approach just when credit is most needed to keep the economy going.
From the borrower’s perspective, the numerous schemes and relaxations accorded by the government have been formulated to push the demand side up but the key lies at the grassroots level. Therefore, though government policies and relaxations revolve around customer’s interests and well-being at the core, the well-being of banks and NBFCs themselves remains precarious in a demand-mute and liquidity-dry market therefore raising concerns about smooth policy implementation. Especially in light of the cautious lending approach, smaller traders, MSMEs and individual borrowers thereby hurling them in an abyss of stagnancy, litigation and perhaps more debt and thus being severely hit.
It goes without saying that the pandemic has given rise to an urgent need to lessen the negative economic consequences, safeguard the vulnerable population of the society and pave the way for sustainable recovery. However, it is an admitted fact that the inability of low- and middle-income countries to invest in robust immunization programs could result in “a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty and growing inequality” as rightly pointed out by Treasury Secretary Janet Yellen. Therefore, the subsisting inequalities and vulnerabilities that characterize the present growth path, coupled with the structural and institutional changes that are needed in India and the world should be adequately addressed to witness positive growth in the post-COVID era.

Fractional ownership: The new realty for Indians

By Real Estate No Comments

The overall gloom cast over the real estate industry on account of the COVID-19 pandemic has brought to light several unconventional methods to keep the dreams of homebuyers alive while developers strive to stay afloat. In fact, the pandemic has proven to give the necessary impetus and stimulus for people to invest.
A growing number of Indians are acquiring slices of rent-yielding residential and commercial properties, owning parts of expensive property, in a way that is comparable to investing in stocks of a company. Fractional real estate, as the concept is known, allows investors to buy, say, 1% of a vacation home for a minimum amount and use and occupy it while earning rental income. What’s interesting is that weekend properties were neither essential nor urgent, but COVID-19 has changed this perception.
Such realty ownership concept has arisen predominantly from the Work-From-Home culture and subsequent work-vacation culture, attracting NRIs and the domestic demographics alike. Such a property acts as an asset, attracting a plethora of investors, becoming a potential Special Purpose Vehicle-related investment. Emerging as a completely new form of realty investment arena wherein the property in question not only attracts a variety of classes as investors but also ceases to act as an overly expensive property yielding no returns.
From the taxation standpoint, the fractional ownership of property opens such owners to a plethora of taxable liabilities, when comparing the yearly taxation related costs of such interests, prospective buyers or their counsel/advisors need to be sure of the usage arrangement, location, ownership size, basic amenities, and other items.
A unicorn investment refers to a startup avenue/venture, occupying less than $1 billion of the industry share. Considering the fact that this sort of timeshare arrangement is a novel arena of investment for the Indian masses, the value of such investment could possibly render the whole idea as a potential cash cow for the Real Estate developers adapting to such forms of investment. Especially with the pandemic having rendered the traditional and conventional real estate as an under-yielding area of investment in the markets currently, fractional ownership might just pave way for the steady boom in the real estate sector.
Whilst fractional ownership may appear to be an inexpensive mode of investment to potential investors, it comes with a plethora of pros and cons. Procedures involving the investment in such ventures could involve detailed due diligence and legal red-tapism, not paying attention to such procedures could end up providing stressed properties in the hands of lesser advised investors. Moreover, expenses considering maintenance of the property, management expenses, and any such costs could essentially tip the scales against the owners should they not be able to actually utilize the property within their arrangements.
Having said that, the benefits accruing out of part ownership of vacation properties, while might not account monumentally in financial terms, the leisurely advantages of utilizing such property allow the investors to change their workspace surroundings or in general, allows them to choose rather inexpensive modes of vacation. Furthermore, the ownership of real estate may act as potential towards the lower-class investors who may want to opt for lesser investments.
As has been numerously recounted above, fractional ownership could prove to be the gateway to a real estate investment boom the sector so gravely yearns for, however, the legal procedures involve might turn off a certain class of investors, moreover, a relatively newer arena of investment always ends up taking a lot more time in yielding the benefits, even if the time-value of money is rather unaccountable, since the property provides more leisurely than commercial benefits, however, the case may differ.
Timeshare investments, while popular in western investment culture, are considered to be a relatively nascent area of investment, particularly while fractional ownership is considered to be the gateway to the current unstable recession in the real estate market. However, given the correct legal framework and taxation incentives, the current status of such investment could be elevated to providing the work-vacation culture with the stability that the recent short-lived boom is testament to.

Real Estate Stakeholders face pressure due to the Second Wave of COVID 19

By Real Estate No Comments

Residents are once again subjected to partial lockdowns and a host of limitations with the second wave of COVID-19 sweeping the country. The real estate industry is facing the burden of this, as there has been an increase in the number of property deals that have been postponed. The housing market did show hints of resuscitation in the first
a quarter of 2021, but the rising trend has already come to a standstill.

Indeed, if the second wave continues to rage across the nation in the next quarters, house sales will
most certainly be curtailed, and property development plans will be abandoned or postponed.

Even during the initial lockdown, many construction workers abandoned their sites and
returned home by any measures imaginable due to the threat of being infected by the
virus, as well as a shortage of employment and inexpensive housing. It was terrible to
see about 70% of the migrant workers return to their hometowns in 2020. The real
estate business was blindsided since developers missed prior information and skills to
deal with the pandemic condition, and by the time individuals could start improvising
new methods, most migrant workers had already fled the cities. As a result, the
pandemic’s impact was particularly severe during the first wave.

In reality, due to the increase in instances in Maharashtra, the second curfew has
resulted in an outside exodus of construction personnel. Furthermore, the
worst-affected cities are Mumbai and Pune, in which the majority of real estate
construction is taking place. However, despite the overall number of active cases during
the second wave surpassed all prior statistics, the real estate scenario is not as severe
as the one in 2020, owing to the fact that no nationwide lockdown was implemented.

Furthermore, the situation is not as catastrophic as the year prior, so there is some
optimism. According to Knight Frank India, the residential housing market in India has
experienced a steady increase in both sales and launches in the first quarter of 2021.
This is a 44 percent increase over the same period the previous year. As a result,
despite the fact that the second wave is destructive, it has not impacted the property
market. As a result, even if the second wave is severe, it has not caught the real estate
industry entirely off guard, as people have learned from Lockdown 1.0.

Interestingly, just 15% of construction employees in Maharashtra have left the sites to
return home during the present lockdown. This is significantly lower than the figure for
2020, and it is not likely to rise since the authorities have supported and prepared
builders, due to a significant beneficial impact. Workers have recognized, based on their
previous experiences, that they are considerably better off in metropolitan than in their
homes and communities, where there are presently near to nil opportunities for
employment.

Builders that take preventive steps and other efforts to protect their workforce have set
the standard in the real estate industry. CREDAI (Confederation of Real Estate
Developers Association of India) has promised construction employees including not
only housing but also foodstuffs, medical support, and improved hygienic conditions.

Workers may also expect prompt medical treatment and site inspection maintenance.
CREDAI has also stated that it will deliver free vaccinations to nearly 2.5 million
construction employees on the job. As a result, testing employees for COVID—19
regularly on the job sites and providing medical segregation facilities has undoubtedly
increased the stakes involved in the real estate business.

As a result, despite the delayed pace of building due to the worrying number of covid-19
cases per day in Pune and Mumbai, the building is progressing. Ironically, this
development activity is being driven by genuine demand, as the epidemic has increased
awareness of the significance of housing. Building construction is still one of the state’s
leading employers of unskilled workers, and the demand to purchase a home has not
waned in these extraordinary times. Because two positives can only lead to another
positive, things are likely to return to normalcy as soon as the present lockdowns and
limitations are released.

A critical analysis of the Delhi Rent Control Act, 1958

By Real Estate No Comments

The motivation for the design of a rent control statute in the post-independence era was to protect economically disadvantaged parts of the community who couldn’t buy a property or qualify for loans due to bad credit scores. When demand for rental property exceeds supply and renters are abused by landlords, rent control measures are required.

As a corollary, the Rent Control Act of 1958 was enacted with the goal of protecting tenants’ rights, ensuring their safety, and limiting landlords’ ability to evict renters. The Act was written uniquely for each Indian state. The purpose of this essay is to examine and comprehend key parts of the Delhi Rent Control Act.

After years of trying to come up with the right law, Delhi finally established a comprehensive rent control law in 1958. The government imposed a rent restriction and established policies that favored renters, resulting in a general lack of interest among investors in purchasing real estate as a result of the DRC Act. The Delhi Rent Control Act is intended to serve two main purposes: protect the tenant from paying more than the standard rent and protect the tenant from unilateral eviction.

The Act has changed again in 1988, exempting properties with monthly rents above Rs. 3,500 from the Rent Control Law and allowing landlords to increase rent by 10% every three years. But, because the actual monthly rent at the time varied from the low double digits to barely Rs. 1000, and the legislation stipulated that assets would be subject to the DRC Act until the rent reached Rs. 3500, the realization of this rate failed to provide a significant profit for the landlords.

This amendment was guided by proposals to achieve a better mix between landlords and tenants and to reduce the inhibition of the Delhi Rent Control. However, the Act seeks to apply several other outdated regulations that do not allow landlords to revisit their rent. The relevance of the Act’s outdated requirements, as well as the law’s procedural legality, have been questioned on various occasions.

The DRC Act focuses on the mistreatment of tenants as well as the owners’ exorbitant rental charges, and the regulation of these activities, as well as rental management improvements, is a primary motive for the law. Rental management also gives property owners more financial stability since, because loans are limited, inhabitants want to stay in an estate for a long time. This ensures that property owners will not face vacancies next year, as the existing renters are expected to extend and renew their lease.

The main effect of the DRC Act is a reduction in housing standards since assets are not maintained regularly and landlords do not increase the quality of the facilities until the returns begin to dwindle. This law not only restricts the availability of legal rental homes but also eliminates applicants who force residents to establish informal or unrecorded agreements. The eviction of tenants is also a major issue that a landlord face which is very strictly monitored. 

The mismatch between the rent payable and the available lodging is another flaw; also, renters are unable to make modifications, renovations, or withdrawals in the building without the approval of the owner. In addition, the rent control methods entail high administrative expenses and a complicated enforcement mechanism.

Due to the poor returns imposed by the DRC Act and the Pagdi scheme, landlords have no motivation to make any modifications to the house and to combat this scenario under this non-upgraded regulatory system, rentals have remained low while maintenance and operational costs have grown dramatically. As a result, the Delhi government allowed landlords of buildings to raise the rent, paid, by 25% in 2020 to fund restoration work, as long as the majority of them remained secure and met safety regulations.

There have been petitions filed in the High Courts of Maharashtra, Tamil Nadu, and Karnataka, requesting that such antiquated rent control legislation be repealed. If any of these appeals are successful, Delhi may be on the verge of passing a tenancy law that benefits both renters and landlords. To conclude, the Act’s major flaw is its stagnating property income, and implementing a new policy in lieu of the existing one would aid in raising investment and boosting the rental housing industry in the National Capital.

Significance of due diligence in real estate transactions

By Real Estate No Comments

The word caveat emptor is not well recognized among most real estate owners and wealthy benefactors; nonetheless, it is amongst the most important and crucial legal criteria governing land transfers all over the world. In Latin, it translates  “let the purchaser be informed,”. It emphasizes that the consumer is solely responsible for ascertaining the quality and suitability of what they’re purchasing. This is apparently the most important stage a client or funder would go through before negotiating a deal because it determines whether a property has the value it addresses. A property may appear to be perfect on the outside, but there may be factors why it should not be acquired at all or why it must be acquired for less than its listed price.

The expansion in land exchange esteems joined with the developing investment of the coordinated area in the land has brought about increased attention to the dangers implied and, thus, the requirement for guaranteeing that the dangers are recognized and limited in such exchanges. The rise in land exchange values, combined with growing investment in the integrated region in the land, has raised awareness of the risks involved and, as a result, the need to ensure that the risks are identified and minimized in such transactions.

Entrepreneurs will be preoccupied with finding better ways to progress open doors in a fast-increasing land commercial area. Veteran financial supporters in commercial real estate lay down every stone to reduce the possibility of post-exchange surprises. Given the breadth of the threats at hand, amateurs should use a comparable process and avoid rushing into an agreement. Obtaining property necessitates further due diligence to find critical facts that aren’t always immediately apparent or attainable in determining the value of a property or portfolio. Such hidden nuances can derail the economic rewards of an overall beneficial agreement, turning the transaction into a costly blunder.

The relevance of performing real estate investigative reporting stems from the continual variations in the advantages of the property. As an outcome, the risks have escalated, as has the potential impact on the agreement. Due to cleverness concentrated on land resources might now analyze the genuine adequacy of the genuine trade. As a result, it is critical for the placing organization to do an inquiry into the title, the legality of the projects being alluded to, the consents obtained, if any, encumbrances associated with the properties, and various other additional data that impacts the notion of the exchange.

Thereafter, a property due diligence would basically seek to discover the merchant or lessor’s entitlements, proprietary rights, expenses, house mortgages, acquisitions, and litigation, or any other constraints connected with the estate. Perseverance is important since it aids in the discovery of flaws in a project. A thorough study is required to determine whether or not a property has any defects. Evidently, the seller would not be prepared to reveal the flaws in his resource in order to sell it at a reasonable price.

It is also possible that the merchant is aware of the risks associated with the commodity and is seeking to sell it to an inexperienced financier. Purchasing a property without first understanding its physical and legal condition is extremely risky. A buyer may be exposed to the risk of extortion, a pending case on the property, or the inability to get title to the property. Furthermore, convincing due diligence would assist the buyer in making a better speculating decision. For example, due diligence may aid in identifying main damages that may be costly to repair, as well as unpaid charges, service bills, and other responsibilities that the merchant had failed to pay.

Given the foregoing, due diligence plays a significant role for an individual in any transaction involving land estate, whether it is for sale, purchase, rent, or house loan. Each such record or data concerning land property that impacts the character and transactions of such property must be tested and assessed. Unexperienced financial backers may jump in whereby the qualified consumers fear to go, eager to participate in what appears to be a sure bet with no risk. Without a doubt, the lack of rigorous due diligence by all financial supporters might be a ticking time bomb, especially given concerns about a surging property market

Hardly any economic supporter can risk the extravagant surprise that arises as a result of an exchange’s completion. Furthermore, prior to entering into any such property exchange, it is appropriate to determine and ensure that all chain deeds, title archives, impediment endorsement, protection plans, and official permissions are in accordance with the legal requirements. The proportion of due rigor varies with the value of the endeavor. The further money at stake, the more thorough the due diligence should be.

 

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