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reit in india

The REIT in India – Policies, EITs, and InvITs

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The Policies of REIT in India

One benefit that is cropping out of the Real Estate Investment Trusts (REIT in India) and the Infrastructure Investment Trusts (InvITs) is the fact that it can be expected to positively fuel not only real estate growth but also multi-sector economic growth in India.

Such a claim gains traction as the real estate sector can be viably considered as the engine of growth for India/. With its high potential to effectively raise up significant capital for the future, one can state that investments in this sector will be crucial for the economy’s growth that is still recuperating from the effects of the pandemic.

This year’s budget too had laid emphasis on the fact that India’s infrastructure will be used to raise the growth prospects of the economy. Thus, for the same infrastructure- a growth-oriented budget was released. In fact, the government has also been making use of the monetization of assets to curb the budget deficit, thus, assets are proving to be a boon in India’s growth story.

how to start reit in indiaGiven the aforementioned importance of infrastructure development in India, EITs and InvITs come into the picture. According to the reports the real estate investment trusts and infrastructure investment trusts have effectively raised capital up to $9.7 billion.

Favorable policies

It is to be noted that REITs and InvITs are getting the boost due to favorable government policies and a long-term investment outlook of the government authorities. This favorably has enticed and induced many marquee investors including various other sovereign and pension funds for investing.

Another factor that is strongly contributing to increasing investments is that the investors are receiving higher returns and are benefiting from receiving regular cash distributions.

On one hand, stable and increased yield are keeping the investors interested, on the other, they are also relishing the opportunity of expanding their asset base.
as aforementioned, the government had quite enthusiastically had announced the initiation of the National Infrastructure Pipeline.

india reit

It is to be noted that such infrastructure funding is estimated to require a funding requirement of over a whopping $1.4 trillion by 2025. But given the early trends of the performance of REITs and InvITs in India, the picture looks quite satisfactory and encouraging.

This is mainly due to the fact that reports have shown the combined market cap of the three listed REITs in India to be humongous over $7 billion and over $10 billion. Thus, one could say that the infrastructure market is showing encouraging prospects for growth.

The high utility of EITs and InvITs

Given the high encouraging market indicators, EITs and InvITs have a huge potential to effectively and positively attract private investments in the infrastructure. Such investments can be attracted through the mitigation of various challenges that investors face in the real estate market.

Such challenges that need to be mitigated are long-term capital requirements, funding requirements, corporate governance issues, optimal leverage, etc.

Thus, if such discrepancies are mitigated, InvITs are highly expected to play a crucial and key role in the monetization of existing projects. One can expect humungous [potential in sectors like renewable energy, digital infrastructure, roads and highways, conventional power, airports, etc.

what is reit in indiaAs aforementioned, as the InvITS and REITs will play a significant role in effectively funding the Government’s infrastructure plans, in addition to helping in meeting the asset monetization plans of the government it will also strategically help in meeting the capitalization requirements of banks.

SEBI’s infrastructure

It is to be noted that SEBI is the main regulator of the REITs and InvITs. Under SEBI these are governed under SEBI’s Infrastructure Investment Trusts Regulations, 2014 and SEBI Real Estate Investment Trusts Regulations, 2014.

under this legal framework, InvITs can be either publicly listed or privately listed but REITs are strictly required to be publicly listed. It is to be noted that investors face many discrepancies under the system due to the intricacies and adherence to the legal framework.

Under the SEBI’s framework, asset acquisition or business combination are seen to be complex and investors face difficulties inappropriate accounting for distributions.

Thus, one can state that the accounting work of REIT and InvITs is complex due to various, multiple legal entities being involved in the process. On top of it, one can also witness the show and interplay of various regulations having an effect on the investors. Thus, more transparency and ease of conducting such business is the need of the hour.

This will allow the investors to have a relevant structure in place early and will also be beneficial in evaluating the relevant tax, which is the prerequisite need of the investors. Transparency and ease in conducting the aforementioned activities will help and allow sponsors to emphatically make the most of the increasingly popular route to funding.

given the recent trends of the government’s stance and work in the sector, one can state that government authorities including other regulators and SEBI have played a tremendous role in playing a proactive role in popularizing and promoting these investment trusts.

This has been mainly done through effectively and emphatically promoting and popularizing the investment trusts. Such a claim can be corroborated by the fact that SEBI had recently reduced the minimum subscription size and trading lot for REITs and INVITs.

This will help in emphatically boosting bolster liquidity of instruments further in the future. Thus, for long-term growth and success, that needs to be achieved and are crucial for India, consistency is required in financial reporting and better transparency is needed to seep into the system.

 


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watertight

Where There is a Will, There is No Other Way – Drafting Watertight Wills

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Drafting Watertight Wills

Watertight Wills: One can measure laws’ commitment to justice and equality by understanding the impact of historically disempowered groups such as women, children, low-income or poor families, from a bare perusal of the laws of intestacy, watertight will, contest, and construction of trusts to name a few. Will play a quintessential role in the protection of loved ones after one’s demise, and laws provide the necessary support thereafter. 

A Will is a “legal declaration of the intention of a testator with respect to the distribution of their assets upon their death.” Hence, it is the sole ground on which the distribution of property takes place. However, a written Will cannot be held as a gospel of truth, therefore can be contested in its capacity.

The provision of modification of a Will at any given point makes the document a complex and tricky one, nevertheless in the absence of a blatant lie or explicit medical evidence proving the incompetence of the testator, contesting of the Will can be onerous. On the flip side, if a person dies without leaving a Will (i.e. intestate), this triggers rules under the laws of intestate succession under which the deceased’s properties pass to relations specified under the laws. However, these default rules will not apply with respect to the property bequeathed under a valid Will.

However, an ambiguous Will means drawing a line in the sand against their validity. Thus, it is imperative to draft a watertight Will that ensures it is uncontested, valid in the eyes of law, and therefore, people suffering an ailment, having a property under dispute, or being involved in a matrimonial dispute, are recommended to draft the Will pursuant to their wishes.

Additionally, it is paramount that details of movable and immovable properties are mentioned in minute detail without any ambiguity which shall also include the value and extent of the property, the name of all the individuals who shall inherit the said property with the monetary benefit arising from the same. 

Moreover, to circumvent disputes, in case any non-member of the family is made the beneficiary, it is prudent that the reason for the same is mentioned in the Will.  More importantly, registration of the Will though not mandatory is advisable as it gives authenticity to the document whereby it is difficult to challenge the same.  Furthermore, a quintessential watertight Will would also include a name of an executor who shall be responsible for dividing the property and the same could be smoothly carried out if the Will is executed and sealed before the Magistrate or the public notary.

The executor is further required to file a probate petition in the court of law to establish their said right as an executor. Another fundamental requirement for making a Will is to affix the signature of the testator in the presence of credible witnesses, as a result of which the intention of the testator is crystal clear. 

Most Wills smoothly sail through the process; however, the testator’s signature is susceptible to be challenged on the grounds of the testator’s unsound mind, the undue influence exercised by interested parties, or the disposition is apparent to be unnatural which raise suspicion towards the free will of the testator.

Therefore, Wills can be beneficial to the descendant family, one that is free from ambiguity and includes the exact details of the assets, names of beneficiaries, and the extent of the benefits along with a declaration to the effect that the Will is the last Will which is free from any coercion or fraud as affixed by the testator in the presence of credible witnesses would help to uphold the legitimacy of the document thereby making it watertight in a true sense.  

 


Tags: water tight, watertightness, construction trusts, construction contest, watertight, construction will

women rights on ancestral property

Women Rights on Ancestral Property– Fractional Justice Or Not?

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Women Rights on Ancestral Property

Property rights lie at the juncture of our cultural ethos, economy, and the law. They are collectively shaped by societal transgression, development, and legal considerations. Though the Hindu Succession Act 2005 served as watershed legislation on many counts to adduce women’s rights, it failed to redeem itself from the clutches of gender orthodoxy. Simply put, the Hindu Succession Act 2005 emerged as a classic case of “fractional justice”. For instance, the husband was bestowed with a veto power with regard to all aspects of women’s property, therefore, evidently, the right of widows and divorced women were practically non-existent.

It was, at best, a half-hearted measure to improve the position of women. It retained the Mitakshara coparcenary whose membership was confined only to males. Sons would not only get a share of their father’s property but also their own interest as coparceners in the joint family property. Daughters would only get an equal share in the paternal property. This was the main point of contention that called for legal reform in 2005.

India is yet to have a Uniform Civil Code, as a result of which the current laws pertaining to the rights of widows and divorced women are largely governed by the Hindu Succession Act, 2005 and the Indian Succession Act, 1925. The law relating to widows and divorced women’s rights in the ancestral property of the husband is intact to the point that the share in the ancestral property that belongs to the husband shall be equally bequeathed upon the widow and her children in the event of the husband’s demise.

Likewise, in the case of a divorced woman, she is entitled to the same share that she would have been entitled to had she been married to him.  However, the law provides for the right to be conferred upon a widow and a divorced woman only in case it is inherited from the husband, which means that she is not made the co-owner but merely holds the right of inheritance.

Remarkably, Uttarakhand Government set a precedent for other states to follow by upholding the status of a wife as a co-owner instead of just holding inheritance rights. However, the right of a co-owner ceases to exist if a woman remarries.

However, suppression of women’s rights persists despite the above-mentioned ordinance as it is only passed in Uttarakhand and the women in the rest of the country are currently governed by the laws which impede upon their rights as an owner of the husband’s property as their rights in the said property is limited to the share allotted which can be exercised only upon inheritance.

Thus, there is a dire need to look at the laws governing properties through a gender-neutral perspective which would empower women of the country who have been oppressed over the years and have been disavowed of their rights. The same can be overcome by involving women in the law-making process that affects them and making small changes in the law for instance replacing the word ’wife’ with a spouse could go a long way in creating an inclusive law.

Additionally, women in the rural areas farm on ancestral property while their husbands migrate to cities for a better standard of living, but women are prohibited from availing of a loan without the husband’s consent. Thus, beholding women as co-owners is a pragmatic move that enables them to invoke their rights in the said property. 

Hence, despite having numerous women-friendly laws, the persistence of stereotypes and conservative attitudes have a major impact on the advancement of women’s rights which is not only depriving them of the same status as the other gender but also making it tiresome for them to survive in a male-dominated environment.

A radical change in the existing culture pertaining to gender and justice is imperative. Therefore, it is undeniable that providing co-ownership rights to women on the husband’s property is not only the right thing to do but is the way forward to eradicate poverty, hunger, and violence. At the same time, it will give women a better footing to stand on to claim their rights in such ancestral properties.

In hindsight, though women’s property rights have emerged as a contested terrain wherein lived ideas of tradition and modernity have been revisited and dissected frequently in the public sphere, the recent judgments and ordinances come off as a breath of fresh air as opposed to the biased laws that continue to be in force even today.

Property being the fulcrum for patriarchal bargains and negotiations within the private and public domains for women, it empowers women in exclusive ways — allows them to make choices about livelihood, provides security against poverty, and advocates autonomy. So it is rightly said, “Women’s rights are human rights” – be it for property or otherwise!

 


Tags: women rights on property, property rights for women, women’s land and property rights, women’s land ownership rights, supreme court ruling on women’s property rights, women’s rights in ancestral property, women rights on ancestral property, ladies property rights, women’s right to inherit property

due diligence in real estate transactions

Real Estate Risk Evolution: Adapt Through Corporate Governance

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Real Estate Risk Evolution

The significant risk lies ahead on the real estate front on account of the unprecedented global impact of the Covid-19 pandemic. The influence of Covid-19 has been swift and the stay-at-home-policy has stagnated real estate and other economic activities. 

From a property perspective in the real estate sector, transferring risk through insurance is not sufficient. Effective Corporate Governance is something that should play a prominent role in establishing its most potent foundations in the real estate sector. The need for the development of corporate governance becomes essential when risk managers present a broader perspective for the introduction of enterprise risk management to drive resilience for the long-term stability in the real estate market.

Among various other threats to the real estate sector which include property technology usage, environmental risks occupy the top prominent position in terms of likelihood of occurrence. This claim can be corroborated according to various data which have provided detestable statistics of property loss due to environmental concerns. The most famous of all is the Mangkhut in 2018. Additionally, it is to be noted that odious environmental concerns not only pose grave likelihood risks but also hold a prominent position among the exhaustive list of most impacting elements.

According to reports, it has been found that effective loss control measures and risk surveys can help reduce both the frequency and intensity of losses. Consequently, risk surveys and control measures can also positively affect values. As a basic rule of risk management, it is to be noted that an effective strategy to mitigate losses lies in a quick, effective loss mitigation move that saves the day.

As they say, time is of the essence and it perfectly fits in the strategy of effective risk management techniques. On the contrary, a failure to take swift, effective action will result in higher costs, more ridiculously expensive insurance premiums reduced income, etc. through detestable business interruption. Nor will it just hit the business in terms of monetary value but also in terms of weaker tenant demand which will ultimately translate itself into lower capital values.

What has been described above is a long-term solution to the real estate odious problem. It is to be noted that alternate short-term solution includes insurance solution. Why is insurance a short-term solution? Because it must be renewed each year.

The real driver: Tenant Experience

Due to the very fundamental, rudimentary requirement and nature of the real estate market, it can be effectively discerned that tenant experience largely drives the market. And as per basic principles of Corporate Governance to measure and mitigate risk, the focus of your real estate investment should emphatically focus on the physical and operational aspects of improving the tenant experience. As we know better the physical ambiance, the better the tenant experience. Other ways to effectively boost tenet experience are by improving wellbeing, business continuity, and resilience.

Risks that should not be condoned

According to the responses recorded to the GRPS, many viewed societal risks as presenting the most odious dangers over the coming 2–3 years. This is due to a very pertinent fact: the Pandemic. Given the virulent nature of the pandemic, people are now effectively ranking infectious diseases and the subsequent livelihood crises as the most dangerous threats.

Given the aforementioned risks and dangers, Real Estate tenants are emphatically reviewing their occupancy footprint. It is to be noted that it is not always reviewed to downsize, but with greater scrutiny and awareness of risk factors. Here it is to be noted that property owners can maintain their tenant footprint by conscious investing in response to changing occupier preferences. Additionally, future-proofing of assets can also go a long way as it offers security and resilience in the long run.

Property technology: boon or curse?

Given that our lives have turned virtual due to physical constraints imposed by the pandemic, the online mode has evaded our lives big time. With everything turning to online mode, people have been made more susceptible to cybercrimes and felonies that are on the increase daily. Additionally, given the success in the Real Estate sector, it has become more reliant on technology. But why is technology in the real estate sector so important? Due to a very unadorned reason of the need for robust cybersecurity strategies that is critical for everyday operations.

Also, the robust, exclusive use of technology in the real estate sector has led to the shaping of the retail fabric of major cities as large online retailers have assumed an enhanced role. For the Real Estate sector, the usage of proptech has become a threat due to its increased and continued rollout of physical infrastructure, building operations, and occupier activity. An effective strategy to counter such mishappenings is that implementing data protection should be a priority throughout enterprises. This strategy should be coupled with tighter and more effective, competent cybersecurity laws in the country.

Therefore, in conclusion, good corporate governance will help enable the real estate business to identify and measure risk which will effectively drive demand. Thus, Real Estate owners and occupiers can indeed make informed decisions regarding possible risk transfer according to individual risk profiles. Therefore, in a statement, it can be summarized that effective Corporate Governance provides for better stewardship and risk management for Real Estate owners throughout their tenant experience and real estate development.

Fears in relation to income streams, such as rental incomes, and mortgage payments, which are already being affected negatively in the short term may worsen in the long term due to economic recession. Therefore, good governance forms its basis in 2 scenarios, namely: the economic recovery scenario and the use of legal context to mitigate pandemic associated risks across the sector.

Therefore, good corporate governance enables your business to identify and measure risk, which is also a step towards savvy financial planning. As risk transfer is generally viewed as a cost, in the form of insurance, retained risk can also be quantified in financial terms to be taken into consideration by Real Estate companies.

 


Tags: real estate evolution, corporate governance, good corporate governance, corporate governance system, corporate governance policy, evolution real estate, real estate risk management, real estate risk

lease rent

Lease and Rentals: Are These Operational Debts Under The IBC?

By Corporate Law, Real Estate No Comments

Lease Rent Debts Under The IBC

The pandemic spread like wildfire and pushed economies to an unprecedented standstill, placing a period on the rental incomes of landlords. To combat a spate of homelessness, the government announced a slew of measures to protect tenants. While some state governments attempted to pitch in for deficient rent payment by tenants, others prohibited landlords from evicting them on account of non-payment during the pandemic.

The message from the government was clear: during the lockdown, landlords should act responsibly towards their tenants. Aggressive enforcement of lease obligations was to be discouraged.

Given the changing dynamics between landlords and tenants, be it residential or commercial, both began to renegotiate the terms and conditions of their leases. As a result, legal treatment of rental dues was brought under the scanner during the pandemic. While a tenant cannot legally insist that their landlord offers a rent-free period or waives a rental or other payment, landlords may voluntarily offer tenants rent-free periods. These, however, were commercial, not legal, decisions.

Recently, homebuyers were brought under the purview of the Insolvency and Bankruptcy Code, 2016 (IBC), and because of the same so have – rental dues. Under the IBC framework, rental dues were neither recognized as financial nor as operational dues and consequently left tenants and landlords remediless under the Code. Given the ravaged state of the economy, this latest inclusion shall assure that IBC will be put to increased usage this year.

Given the intricacy of the situation, multiple views have been offered. The NCLT Delhi and NCLT Hyderabad have effectively or rather stringently held that lease rent dues are not included under operational debt. Whereas, NCLT Kolkata, NCLT Chennai, and NCLT Ahmedabad have taken a contrarian view and have maintained that such dues could qualify as operational debt.

In addition to this, a landlord can be counted as an operational creditor under the Code. A landlord can be counted as an operational creditor as he provides the lease that can be treated as equal to providing services to the corporate debtor.

Deciphering the intricate issue of rentals

To decipher the status of the rentals as operational debt, it is quite pertinent to first describe what its definition effectively states. It is to be noted that operational debt has been defined under Section 5(21) of the Code. The operational debt effectively covers the provision of goods, provision services, including employment, and debt effectively arising under any statute and payable to the government or local authority.

To answer the question, if the Bankruptcy Law Reforms Committee Report is scrutinized, it differentiates between a financial creditor and an operational creditor. It emphatically indicates the fact that the lessor, whom the entity rents out space is an operational creditor to whom the entity owes monthly rent on a three-year lease. Thus, here it can be noted that the BLRC’s recommendation treats lessors, also known as landlords, as operational creditors.

However, the NCLAT clearly clarified that the legislature has not completely adopted the BLRC report. Thus, it is to be noted that only the claims in respect of goods and services have been kept in the definition of operational creditor and operational debt. But why didn’t NCLAT give the BLC committee’s recommendation any heed? This is because NCLAT believes that the definition does not give scope to interpret rent dues as an operational debt.

Thus slashing hopes of rents being included in the wider definition of the IBC code, the NCLAT gave stricter interpretation to Section 5(21) of the Code. In an unadorned explanation, it means, that only when a claim by way of debt falls within one of the three categories mentioned in Section 5(21) will it be effectively categorized as an operational debt.

The hurdles

In addition to all the aforementioned reasons, it is to be noted that for a debt to qualify as operational debt, the debt must rise with a nexus of direct input to the direct output produced. Based on the very same argument, the NCLAT has taken a stringent stand against the rentals being included under operation debts. Additionally, a lease of immovable property cannot be considered as a supply of goods or rendering of any services. Thus, it cannot be considered operational debt.

Hence if the past judgments of NCLAT and various other benches of the NCALT are to be scrutinized, it highlights the diverse, multiple, and intricate views on the contentious subject matter. Given the intricacy of the issue and the NCALT’s stringent stand against a wider definition, the issue has now traveled up to the apex Court.

As aforementioned, considering, the conflicting stands taken by various benches and courts, it has become imperative for the Supreme Court to consider the larger issue of such claims. The very claims that arise due to the use of the immovable property and other connected services. Thus, the Supreme Court has been burdened with the prominent task of finally putting to rest the question of rent arrears qualifying as operational debt.

Overall, the message from the authorities is clear that a fair and transparent discussion between landlords and tenants over rental payments during the coronavirus pandemic will enable collaboration and cooperation within the sector and help ensure that no one part of the chain shoulders the full burden of payment.

 


Tags: lease obligations, ibc code, ibc framework, lease rent, insolvency and bankruptcy code, ncalt, lease agreement, rental agreement

ipr bride and competition groom

The IPR Bride and Competition Groom

By Corporate Law, Real Estate No Comments

IPR Bride and Competition Groom

The laws on intellectual property rights (IPRs) and competition have evolved historically as two separate systems. The traditional role of competition law has been to promote efficiency in the market and thereby prevent market distortions whereas the role of IPR has been the promotion of innovations by granting protection and rights over inventions.

The general perception is that there is an inherent tension between IPR and competition law. Proof of this is the rise in the number of intellectual property-related competition cases in the recent past across jurisdictions. India too has had her share of litigations in the matter.

In an unprecedented situation, that the world finds itself in, not only have hardships been presented but a plethora of things to learn have been presented too. Being an unprecedented tragedy, it has made the world face a classic clash of utmost importance- the dichotomy between IPR rights and competition laws.

Given the virulent nature of the virus, which brought the world economy to its knees, the world’s leading pharma companies have been arduously racing forward at a feverish pace to find a vaccine for COVID-19. Pharma companies, given their successful discovery, at the moment, are relishing extravagant, lucrative profits with their IP rights. Thus this begs a pertinent question that is such kind of insane amounts of profits justified? Given the fact, that Pharma laboratories typically face very heavy odds since only one in dozens of experiments succeeds, it would be termed as being ignorant, in not supporting such profits or rather deserved remuneration.

With thousands of failed attempts, attempts are emphatically made to compensate the costs of all such failed trials on to the price of the one successful invention, here the covid vaccine. Additionally, to be able to earn profits throughout, patenting their intellectual property which makes it illegal for rivals to copy their process, comes across as the most viable solution.

Public policy dilemma

In granting such controversial rights, which might lead to mitigation of competition and perhaps even exploitation, governments emphatically face a public policy dilemma. This is because, in pursuit of high, sustained profits, pricing is usually kept high. The high cost of the product, in the current scenario– the vaccine, makes it unaffordable for low-income households which emphatically dims the potential and robustness of the covid fighting efforts.

Given the current scenario, the world is poorer than it was during-pandemic level. A study suggests that Indians are now poorer by 6.1%. In addition to this study, another study by Azim Premji University states that more than 235 million households’ incomes have slipped below the minimum income in India. Thus, if such facts are carefully deciphered, lower affordability leading to a lower probability of getting vaccinated amidst a detestable, soul-wrenching pandemic, can effectively be termed as exploitation.

Scrutinizing the other face of the coin, if such rights are not granted to the pharma companies, who consequently will not be able to ask for monopolistic pricing power through the protection of IPR, they will have no incentive to invest in development and research, which at the moment is the holy grail for the public and economics’ health.

The law of economics

As a simple law of economics, it is effectively stated that competitive markets maximize consumer, producer, and societal welfare. This is due to the mere fact that healthy competition ensures efficiency and innovation. It is due to this very reason that monopolies around the world are mitigated with conscious efforts. But a conundrum that government faces is that in addition to stringent competition laws, the government’s books of laws also contain IPR laws that create monopolies. In contrast to IPR laws, competition laws curb monopolies.

If scrutinized closely, it can be deciphered that there is an apparent tension between IPR and competition laws and that it is an interesting dichotomy, but a false one. In practical terms, IPR and competition law need to work in harmony. This is due to a very significant reason that IPR gives market power but competition law ensures that such market power is exercised within limits.

It is no news, that necessity is the mother of invention and modern times need innovation. Such innovation has emphatically been the wellspring of human civilization. It is due to such innovation that conventional technologies have been upgraded to ease human life, it is due to this innovation that the industrial revolution has been transformed into the Digital Revolution, currently underway, that is significantly changing our lives in ways that we do not even fully comprehend.

It is to be noted that the central ideas that provide such incentives for innovation are the IPR laws and the competition law. In a much-unadorned explanation, the two laws apparently of conflicting regimes when joined in a harmonious marriage produce a symbiotic effect that drives insane progress and maximizes consumer welfare and producer’s efficiency.

It is to be noted that the two, in the economic world, cannot be separated. Why? Because IPR laws bring in innovation, inquisitiveness, and invention which is highly crucial for economic development and research domain. Similarly, competition laws bring inefficiency in the market with the efficient allocation of resources. In the world, both laws have their prime usage.

IPR laws, at the moment, are aiding the pharmaceutical sector and the competition law is aiming to dilute the power of e-commerce giants who are displaying rudimentary and advanced forms of corporate unethical and inefficient behavior.

But given the digital age we live in, are IPR and competition laws that have been written in the context of old technologies equipped to handle the new and complex issues posed by digital technologies? Given the scrutiny that various e-commerce giants like Apple, Amazon, Facebook, and Google face, it won’t be farther away from the truth to state, that crux of the laws is adaptive. In addition to the stringent scrutiny these tech giants face by western country legislatures and regulators, we witness this play out in India too in several instances.

In conclusion, it can be observed that the relationship between competition and IPR with its intricacies and ironies is here to stay. It is amply clear that these two streams of law are bound to converge and cannot be expected to stay as watertight compartments exclusive of each other. Thus, given the importance of both laws, the clash between the two is not only unwanted but also quite detestable. Therefore, harmonious marriage between the two is desirable and necessary.

 


Tags: competition groom, traditional role, ipr bride and competition groom, competition law, competition act

real estate stakeholders

The Consolidation Story in Mumbai Real Estate Hits a Roadblock

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Mumbai Real Estate Hits a Roadblock

The waiver of stamp duty by the government to mitigate the woes of the real estate sector might have somewhat helped the industry but it has somehow also given a sense of boost to the weaker players in the ruthless market. Competition works as a “cleansing” tool, which rids itself of the weaker younglings, but with the government’s support that cleansing might somewhat have stopped. Since 2016, several weaker and poorer hands have left the business but there are more than enough players who are exploring newer opportunities.

The aforementioned circumstances show an uncontested option that has never been viewed closely enough over the last few years – Consolidation in the Real Estate sector. The premise in favor of consolidation states that competition, profitability levels amidst greater regulatory scrutiny, and higher capital requirements weed out the weaker players in the market, thus, riding the sector of its unproductive thorns.

Due to the consolidation mechanism, only key and serious players survive in the business and hence the efficiency of the system is maintained. However, the pandemic exacerbated the woes of builders leading to a real estate consolidation roadblock.

Is the theme of major consolidation an exaggeration?

The data released by Liases Foras emphatically shows that the market share of the top 50 players in real estate has declined over the last three years. From commanding a significant 54% market share in the financial year 2019, it has now fallen to 49%. Meanwhile, on the other hand, the number of developers has risen from 2,598 to 2,728.

So this begs a pertinent question that is the theme of major consolidation an exaggeration? It would be a gross misjudgment to state that the consolidation within the industry is not wholly an exaggeration. But it is to be noted that forecasts on its scale and pace are wildly exaggerated. There could be various key reasons for this. First and foremost is the nature of the market.

Real estate in India is dominated by the markets in Delhi, NCR, and Mumbai. NCR and Mumbai Metropolitan Region (MMR) contribute 60% to Indian real estate. Within MMR, the most expensive and affluent market in Mumbai. Given its poshness and lavish lifestyle, demand for it is immensely high. But it is to be noted that due to the land constraints, it is primarily a redevelopment-led market.

Thus, society redevelopment has small plot sizes which larger developers are likely to shun. While on the other hand slum rehabilitation redevelopment is too messy for key players to be enthusiastic over. Thus, it may come as a surprise to no one that over the last five years, the market share of the largest developer in Mumbai has ranged between a meager 3% – and 5%.

Secondly, talking about the affordability of houses, the Real Estate Regulatory Act has provided a much-needed boost for home buyer confidence. It has also emphatically led many lenders who have moderated their resistance to dealing only with a certain set of developers. Thus, an advantage to the home buyers is, small and mid-level credible builders are witnessing an easier acceptance into the formal lending market.

Thus many of these developers are getting access to the formal lending market, which earlier was denied to them as they were primarily dependent on only customer advances. With the adoption of RERA, the better players are seeing interest from lenders who have anyway been keen on diversifying their lending portfolios.

Another phenomenon that works here is that local players are offering more value for money. When a market moves from being investor-driven to end-user-driven, then all real estate is local. And players who know the intricacies of that market better are able to offer products at prices that are often a preference to the larger names.

Last but not the least, many developers throughout their years in business have learned one prominent lesson, that one should not bite more than they can chew. With taking on more than what one could fathom and being involved in numerous projects that often ensure a balance sheet saddled with high debt, most players in the last year have opted to deleverage and go slow on new projects.

This is a trend that will not end in a hurry. It also emphatically means that the market share gains will always be restricted, even if projects are undertaken in different frameworks.

As it is known that many ‘branded developers’ are primarily ‘famous surnames’ who offer a product of posh, similar quality to Tier 2 and Tier 3 builders, but it is usually done at a premium pricing. The only edge that these ‘branded developers’ hold over non-branded ones is that they provide near-certainty of at least delivering a project in the future that cannot be ensured by a non-branded developer.

But as more projects by lesser-known developers start getting delivered on account of greater regulatory scrutiny and compliance, it would be right to state that the ‘edge’ of larger players will diminish in value. While the market dynamics seem unfavorable for Mumbai’s listed developers who are banking on big market share gains, it certainly spells good news for home-buyers who will have a plethora of options to choose from.

 


Tags: real estate sector, real estate developers in mumbai, mumbai real estate, mumbai real estate market, bandra mumbai real estate, consolidation story in mumbai real estate

affordable housing and middle class home buyers

Revival in Home Sales: Affordable Housing & Middle Class Buyers Hold The Key

By Real Estate No Comments

Affordable Housing & Middle Class Buyers Hold The Key

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 were 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 for 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, don’t plague the potential investment in the avenues.

Moreover, 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, and loans. etc., in a fashion that doesn’t render them crippled financially.

These incentives put forward by the government are nothing short of unwavering dedication toward 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 to 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. 

 


Tags: Affordable housing, home sales, affordable housing apartments, affordable housing development, low income housing, middle class home buyers, affordable homes

understanding copyright law

Understanding Copyright Law in Real Estate

By Real Estate No Comments

Understanding Copyright Law in Real Estate

Intellectual Property Law can be best described as a safeguard for the creation 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 endeavor; 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 emphasizing 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 to 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 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 programs, 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 organizations 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 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 they came into existence. Such safeguards can be utilized 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 utilized. 

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.

 


Tags: intellectual property law, understanding copyright law, ip rights, copyright act, intellectual property protection, intellectual activity, intellectual property rights

real estate industry

Can NRIs Save The Indian Real Estate Industry?

By Real Estate One Comment

NRIs and The Indian Real Estate Industry

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.

Real estate had been lamented 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 the masses muted the demand, whereas a massive liquidity and labor crunch impacted the supply side of the industry. 

However, the government introduced a series of measures including the moratorium on equated monthly installments, restructuring of loans of real estate companies at the project level, and 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, this backdrop turned out to be favorable 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 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, and 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 leveled 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.

 


Tags: indian real estate industry analysis, indian real estate market, real estate industry, Can NRIs Save The Indian Real Estate Industry, real estate news india, real estate and construction, real estate growth in india

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