New Legislation to regulate mediators and property dealers

The Haryana Regulation of Property Dealers and Consultants Bill, 2008, presented by Revenue Minister, Savitri Jindal, was passed with some minor amendments on suggestions given by the legislators.

In the first-of-its-kind law in the country, the Haryana Assembly passed this bill aimed to regulate the functioning of mediators/property dealers/agents so that the people availing their services are not harassed. The law aims to put in place a proper system and procedure for compulsory registration of property dealers/ agents.

After enforcement of this Act, no property dealer or his representative, partner or any employee without obtaining a licence shall enter into transaction of sale, purchase, exchange, letting or taking on lease between the buyer and seller, lessor or lessee, landlord and tenant, including collection of rent in respect of immovable property.

“No other government or Vidhan Sabha has brought such a law anywhere else in the country though some countries/places including Victoria in Australia have such a law,” state Parliamentary Affairs Minister Randeep Singh Surjewala informed the House.

Anyone who contravenes any provision under the Act shall be punishable for a term which may extend up to six months and fined up to Rs 50,000 on first conviction and from Rs 1-1.50 lakh in the event of second and subsequent conviction.

The Assembly also passed the Indian Stamp (Haryana Amendment) Bill, 2008, which provides reduction of stamp duty from six per cent to five per cent on conveyance and sale deeds.

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Glossary of Property Loan terms

Loan

A loan is a credit facility provided by the lender to the borrower. Some banks call this a ‘demand’ loan, which means it can be called back at any time. Some others call it a term loan. Loans can be in the single name of the borrower or in the joint names of the beneficiaries. In the case of joint loans, all the parties are equally liable for repayment. Legally, the lender can demand repayment from either one or all of the borrowers, singly or together.

Document

While the term can mean the title deeds, loan document means the agreement detailing all terms and conditions.

Margin

It is the contribution of the borrower/s towards the cost of the project. It may also mean down payment in the case of purchase of a house or flat.

EMI

Equated Monthly Instalment is the amount the borrower has to pay every month towards repayment of principal and interest.

Period of loan

It is the number of years for which the loan is sanctioned, which can go up to 25-30 years in the case of a housing loan.

Interest

It is the percentage of interest chargeable on the loan, worked out on an annual basis.

Fixed rate loan

It is the interest fixed at a particular percentage for the entire period of the loan. Fixed does not mean that the rate will remain the same always, it will be subject to changes in the rate fixed by the central bank from time to time or the Prime Lending Rate (PLR) of the lender, with changes from time to time.

Floating rate loan

It means that the rate will change according to forward and backward movement of interest rates as a result of changes in cost of funds, policy changes etc. This is advantageous to the borrower, especially when the interest rates move downwards.

Equitable mortgage

It is created by deposit of title deeds charging the security to the lender, instead of a registered mortgage created on appropriate stamp paper and registered with the Sub-Registrar.

Reset

Reset clause included in the loan agreement is meant to give the banker the right to change the rate of interest, may be once or twice during the pendency of the loan.

Processing charge

It is the fee payable to the bank for examination of the papers and completion of documentation before releasing the loan applied for.

Inspection charges

This is the fee recovered by the bank for conducting periodical visits to verify the security charged to the loan, which invariably includes the house constructed or purchased. This can be the transport charges or ‘bata’ paid to the inspecting official.

Foreclosure

It means advance repayment of the loan, before the expiry of the period for which the loan is sanctioned.

Accelerated repayment

When a borrower repays more than the EMI fixed, it is called accelerated repayment. The intention is to clear the loan earlier than originally stipulated or to neutralise the effect of rise in interest rate, whereby the burden of repayment is reduced in terms of period or quantum.

Commitment charge

The bank normally sets apart funds equivalent to the loan sanctioned without using it for other lending. When the loan is not utilised, the bank insists on compensating it by paying a certain commission, which is called commitment charge.

Take over

When the lending bank takes over an outstanding loan with another bank or a private lender, it is called take over of the existing liability.

Compound interest

When interest debited to the account is not paid, it is automatically added to the principal and further interest is charged, which is called ‘compound interest.’

Overdue

A loan or instalment is overdue when it is not repaid on the due date.

N.P.A

A non-performing asset is a loan wherein the interest or principal is not paid within the stipulated time.

Call up

When the overdue loan is demanded to be repaid in full, the action is termed ‘call up.’

Suit filed account

When an account is overdue and called up, the next step is to file a suit in a civil court or when the necessary application is filed before the Debt Recovery Tribunal, it is called suit filed account.

The above may not be exhaustive and there can be some more terms/nomenclatures in use depending on the procedure and practice followed by different lending institutions.

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Common Violations in Chennai and its Suburbs Plot Layouts

 The rules and violations regarding buildings are quite well known and the buyers take precaution before they buy an apartment. However, the same cannot be said about plots. Buyers are seldom aware of the rules that govern the plot lay outs and are often misled by false claims regarding layout approval .

The common violations in layouts are in the area of road widths and open space reservation. For example, the layout and subdivision regulations prescribe that streets intended to serve more than 20 plots should be about 30 feet wide while those which serve up to 10 plots should be 16 feet wide.

There are two ways by which this rule is often bypassed and approvals are got at the local level. The seller first makes a lay out plan for 10 plots and provides only 16 feet road. He applies for approval and gets the permission. After that, while selling, each plot is further divided into two and the number of plots is increased to 20 without increasing the width of the road. Gullible buyers without knowing this buy a plot in a layout that is in complete violation of rules.

In another case, a promoter constructed a four storeyed building in a large plot providing a set back of 50 feet in the front. Those who bought the flats were happy to see the large open space . However, their happiness was short-lived. Soon after the plots were sold, the promoters divided the open space into two plots leaving a passage of 16 feet in the middle.

Part approvals

Another common form of violation is to seek part approvals of the layout. Approval for layouts in a large extent of land will not be obtained in full. First, the land would be divided into two large parcels. The first parcel in front will be divided into say 12 plots. For this a 20 feet road is enough. After obtaining the approval, the rear side of the land will be apportioned into another 12 parts and approval will be obtained at the local panchayat with just a 20 feet road instead of 30 feet road . Those who buy these plots would have actually got an unauthorised layout while the documents shown by the seller would be otherwise.

Recently, a group of buyers, mostly NRIs, on the OMR were in for a rude shock. Many bought plots in a layout that appeared clean and clear of any violations. After buying the plots when they decided to develop the plot by pooling all their land parcels, they realised the promoter did not leave the mandated 10 per cent of the area as open space. Now they have been asked to pay a large sum running into many lakhs in order to get the approvals. Even developers keen on joint ventures are rethinking because of this.

The Chennai Metropolitan Development Authority (CMDA) has just began to look at building violations, but plot layouts continue to go unnoticed. The situation of plot development beyond the CMDA limits and within the Directorate of Town and Country Planning limits is worst .

There has not been any concerted effort from the authorities to look at layout violations. No caution list and no information are readily available for buyers to consult. It will be too late when they realise that the layouts do not have sufficient road widths and open space need when the city grows and meets the suburbs.

( Courtesy : The Hindu )

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Continuation of Repatriation of Sale proceeds in India (Part-2)

This is the continuation to the previous article on repatriation of sale proceeds outside India which you may find in this blog.

RBI has issued Circular No.62 dated January 31, 2004, according to which remittances up to USD 1 million per calendar year can be repatriated out of balances held by NRIs/PIO and Foreign Nationals in NRO accounts/sale proceeds of assets, on fulfilling certain criteria (given in the annexure of the said Circular) and on production of the following documents:

an undertaking; and

a certificate by the person making remittance as stipulated in A.P.(DIR Series) Circular No.27 dated September 28, 2002 read with A.P.(DIR Series) Circular No.56 dated November 26, 2002.

Category of persons who are eligible for repatriation

Foreign national who has:

— retired from an employment in India; or

— inherited the assets from a person who was a resident in India; or

— A widow resident outside India and has inherited assets of her deceased husband who was an Indian Citizen, resident in India.

— Foreign nationals who are citizens of Nepal or Bhutan or a Person of Indian Origin (PIO) are not eligible for repatriation.

— NRI/PIO who acquired the assets in question, out of rupee resources when he was in India or by way of legacy/inheritance from a person who was a resident in India.

Funds/assets eligible for repatriation

* sale proceeds of immovable property

* assets acquired by way of Inheritance/legacy

* any other asset held in India, in accordance with the provisions of the Act or Rules or Regulations made there under (as defined at Regulation 2(v) of Notification No.FEMA 13/2000-RB dated May 3, 2000).

Purpose of remittance

This facility is made available only if the repatriation is made for bonafide purpose. 

General conditions to be satisfied for repatriation of assets

* Documentary evidence in support of the acquisition of the funds/assets proposed to be remitted.

* Undertaking and Certification relating to tax compliance.

Specific conditions related to repatriation of sale proceeds of immovable property

* Lock-in-period with respect to immovable property acquired out of rupee funds.

* Repatriation of sale proceeds is available subject to the condition that the property should have been held for a minimum period of 10 years.

If such property is sold after being held for less than 10 years, remittance can be made, if the sale proceeds have been held by the NRI / PIO for the balance period in NRO Account (Savings/ Term Deposits) or in any other eligible security, provided such investment is traced to the sale proceeds of the immovable property.

There is no lock-in-period with respect to immovable property acquired by way of;

** Inheritance/legacy

** Foreign currency funds (through inward remittance or by debit to FCNR/NRE accounts.

Remittance Procedure

Where the remittance is to be made in more than one instalment, the remittances of all instalments should be remitted through the same authorised dealer.

The remittance facility is available even if the NRI/PIO/Foreign National is not maintaining any NRO account. However, the remittance should be routed through banking channel only, subject to tax compliance.

Thus RBI's permission to repatriate up to USD 1 million per calendar year is not required only if the above mentioned criteria are satisfied by the individuals. Persons not fulfilling the above conditions should get RBI's permission to repatriate sale proceeds outside India.

Readers will note that the conditions are as important as the exemption itself.

Common pitfalls are :

• Foreign nationals acquiring assets by inheritance from a person not residing in India.
• NRI acquiring assets by inheritance from a person not residing in India.
• NRI acquiring the property from USD account.
• Non-compliance with tax regulations.
• Lock-in-period for immovable property not being adhered to.
• Account in which balance is lying.

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Can a TamilNadu Housing Board (TNHB) owner claim compensation?

This has been a question that is hardly discussed in some real-estate blogs, however we find it absolutely necessary to throw some light on this issue from the legal point of view.

The State of TamilNadu has the rights to aquire lands based on the proposal of the TamilNadu Housing Board (TNHB) for implementing various housing schemes. After the aquisition proceedings are over, possesion of the lands are handed over to the Board and the lands plotted out and sold to the various individuals as per the scheme.

There are two modes of sale for TNHB plots and they are :

1.   An outright purchase or sale.  

2.   By execution of lease cum sale agreement, wherein the buyers are entitled to make the sale consideration in instalments. 

The Board passes an order of provisional allotment determining the value of the plot alloted. There are instances when, after the provisional allotment of plots, the compensation for land aquisition is disputed. In such cases, What is the status of the TNHB plot owner? Will he/she protected from such disputes and can he/she impleaded in the case in order to protect hir/her interests?

In a particular case ((2006) 4 MLJ 558 (Mad)), the land owners whose lands were aquired were not satisfied with the quantum of compensation. They had approached the Land Aquisition Officer and subsequently reached the District & Sessions Judge (Fast Track Court). An application was filed at the instance of the board to implead itself as a necessary party, which was allowed.

The TamilNadu Housing Board Residents` Welfare Association filed a petition to implead the Association as a party in the said suit. The Court rejected the application on the ground that the petitioner is not a necessary party and the beneficiary viz., the TamilNadu Housing Board is already added as a Party. Aggrieved by the said order, a revision petition was filed by the Association in the High Court.

A combined reading of the various provisions of the Land aqusition act would indicate that a "person interested" in the land could be even an owner or occupier, who is entitled to receive the compensation. The court held that the Association is undoubtedly a person interested as contemplated by the provisions of the Land Aquisition Act.

This view accords with the principles of equity, justice and good conscience. How can it be said that a person for whose benefit the land is aquired and who is to pay the compensation is not a person interested eventhough its stake may be extremely vital? For instance, the land aqusition proceedings may be held to be invalid and thus a person concerned is completely deprived of the benefit, which is given to him.

Similarly, if such a person is not heard by the Collector or the Court, he may have to pay a very heavy compensation. In case he is allowed to appear before a court, he could have satisfied it that the compensation was far too heavy having regard to the nature and extent of the land. Such a person is vitally interested both in the title to the property as also in the compensation to be paid. The Court held that the TNHB flat owners Association is undoubtedly a person interested as contemplated by the provisions of the Act.

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