Commercial real estate in India: overview (State of Maharashtra)

A Q&A guide to corporate real estate law in Maharashtra, India.

The Q&A gives a high level overview of the corporate real estate market; real estate investment structures, including REITs; title; tenure; sale of real estate; liability; due diligence; warranties; real estate tax, including VAT and stamp duty/transfer tax; climate change targets; restrictions on foreign ownership; real estate finance; commercial leases; and planning law.

To compare answers across multiple jurisdictions, visit the Corporate Real Estate Country Q&A tool.

This Q&A is part of the global guide to corporate real estate law. For a full list of jurisdictional Q&As visit

Vivek A. Vashi, Partner, Bharucha & Partners

The corporate real estate market

1. What have been the main trends in the real estate market in your jurisdiction over the last 12 months? What have been the most significant deals?

There has been a significant drop in residential sales and new projects across India in the past few years. In particular, sales in India's commercial hub Mumbai have been on the lower end.

The absorption rate (that is, the rate at which homes are sold in a real estate market) improved only moderately in the second half of 2015, and developers, recognising the lower-than-anticipated increase in sales, pushed back or turned to selective projects. These factors led to an improvement in the overall demand-supply equilibrium, thereby marginally lowering the unsold inventory levels. It is likely that, in the near future, the market will show further signs of recovery.

However, India has also seen significant progress in the real estate sector, most notable in the:

  • Enactment of the regulations governing real estate investment trusts.

  • Approval of the Real Estate (Regulation and Development) Bill 2013.

  • Introduction of reforms in land acquisition and resettlement.

  • Relaxation of foreign direct investment norms in the construction sector.

  • "Make in India" campaign which is an initiative of the Government of India to encourage multinational and domestic companies to manufacture their goods in India.

These reforms aim to establish a more steady real estate market in 2015.


Real estate investment

2. What structures do investors typically use for real estate investment in your jurisdiction and what are the main advantages and disadvantages of each (for example, flexibility and tax transparency)?

Typically, the parties enter into joint ventures for a specific project or on a long-term basis.

Joint ventures (JVs)

JV by direct investment through procuring equity in a company holding real estate. The roles, terms and conditions of the parties are defined in the shareholders' or JV agreement. The main advantage of these JVs is the capital infusion by the share purchasing entity and the division of risk. However, they often face disagreement in the management of the JV, the inability to change with the dynamics of the real estate market and other common issues.

JV between land owner and an investor or developer through a development agreement. This JV takes the form of a partnership between two entities or individuals. All terms and conditions between the parties are agreed before the work commences to avoid ambiguity or disputes at a later stage. This JV enables risk sharing and makes it easier to raise finance for the project. One of the main concerns of these JVs is the capital gains tax liability which may have to be borne by the land owner. However, this tax is only an issue if the land in question is a capital asset of the owner (rather than stock in trade) and the development amounts to transfer of the property in favour of the investor or developer.

Real estate investment trusts (REITS)

REITs are still quite new in India as the Securities and Exchange Board of India enacted regulations governing them in late 2014. For further information on REITs, see Question 29.

3. What are the main sources of finance and types of investors for real estate investment in your jurisdiction? Does your government encourage overseas investment into real estate in your jurisdiction, for example through real estate investment legislation?

Conventional sources of finance, such as bank and private lending, are still the main sources of real estate investment financing. However, since the introduction of the 2005 Foreign Direct Investment policy in real estate, the sector has come up with more structured sources of financing, including private equity funds, non-banking financial companies, domestic equity financing and real estate investment trusts (see Question 29). The government regulates overseas investments through the 2005 regime, which it permits and encourages.

Some of the types of investors for real estate in India are:

  • Individual.

  • High net worth companies.

  • Multi-national Companies.

  • Financial Institutions.

  • Listed Companies.

  • Larger conglomerates.


Restrictions on foreign ownership or occupation

4. Are there restrictions on foreign ownership or occupation of real estate (including foreign ownership of shares in companies holding real estate)? Are there restrictions on foreign guarantees or security for ownership or occupation and on lending for the purchase of real estate?

The Foreign Exchange Management Act 1999 (FEMA) sets out restrictions on who can own or occupy real estate. Except for resident citizens, only non-resident Indian and persons of Indian origin can purchase immovable property in India (excluding agricultural lands, plantation property and farm houses). Therefore, a foreign national of non-Indian origin resident cannot inherit from a person who was resident in India. However, he can acquire or transfer immovable property in India, on lease, for a period not exceeding five years, without obtaining any permission of or reporting to the Reserve Bank of India (RBI).

A foreign national who is a "person resident in India" within the meaning of FEMA can purchase immovable property in India so long as he obtains the relevant approval from and fulfils the requirements of any prescribed authorities, such as the State Government. For example, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan require prior approval of the RBI. If proof of residential status is required by any authority, the onus for establishing residency will be on the individual seeking to purchase the property. 

A foreign company that has set up a branch office in India can acquire any immovable property which is necessary for carrying out the business, as per FEMA Regulations 2000. Foreign companies, which have merely established a liaison office in India, can only acquire property through a lease of no more than five years.

The Foreign Direct Investment policy in real estate permits foreign ownership of shares in Indian companies holding real estate, subject to its satisfying the requirements outlined in the FEMA Regulations and the Consolidated FDI Policy.


Title to real estate

5. What constitutes real estate in your jurisdiction? Is land and any buildings on it (owned by the same entity) registered together in the same title, or do they have separate titles set out in different registers?

Real estate consists of land and any buildings, and structures on the land. Real estate transactions concern any purchase, sale, lease or development of land, residential and non-residential buildings.

Although the land and the buildings constructed on it belong to the same entity, they hold their respective individual titles and are capable of being dealt with separately.

6. How is title to real estate evidenced? What is the name of the public register of title and the authorities responsible for managing it? Is electronic access and electronic conveyancing available?

Title to real estate is usually evidenced by:

  • Documents of transfer of the property, made in conformity with the various laws of India, such as the Transfer of Property Act 1882, the relevant Stamp Act and the Indian Registration Act 1908.

  • Entries in the Register evidencing title in the land (see below).

  • Revenue records of the government authorities (for example, and extract from the land register that includes complete information about a property such as the Property Card, 7/12 extract in Maharashtra).

  • Proof of payment of taxes and other sums due to the land revenue authorities.

There is a single public register for both land and buildings which is maintained in hard copy and electronic form (Register). The Register comprises various indexes containing entries pertaining to the registration of different types of documents. While electronic conveyancing is presently not available, electronic access of documents registered in or after 2002 is generally available across most states.

In each district or sub-district of a state in India an Inspector General of Registration, and Sub-Registrar of Assurances is appointed to manage the Register.

7. What are the main information and documents registered in the public register of title? Can confidential information or documents be protected from disclosure in the public register of title?

The main information and documents registered in the public register are the:

  • Name and any other details of the transferor and transferee.

  • Details of the property.

  • Monetary consideration involved in the transaction.

  • Date of execution and registration.

  • Stamp duty paid.

The general public has access to all of the documents registered in the public register, which cannot be kept confidential. This does not apply to registered wills, which remain confidential.

8. Is there a state guarantee of title? Is the authority that manages the public register liable to pay compensation for any errors it makes in relation to title registration? Is title insurance available and is it commonly used?

There is no state guarantee of title in India. The Registrar's offices in a few states issue what is known as an "encumbrance certificate". The certificate discloses the encumbrance status of a property for a particular period of time. It is an extract from the public register maintained by the concerned sub-registrar's office, based on the documents registered with it. The certificate will not capture any unregistered documents.

There is no prescribed procedure for conducting a title search. The lawyers conduct the search in accordance with the nature of the property and requirements of the buyer. Generally, the process includes reviewing:

  • Current and antecedent title documents.

  • Land revenue records.

  • Records maintained by the Registrar for a period of 12 to 30 years.

The Registration Act makes it an offence punishable with imprisonment, fine or both for a registering officer to endorse, copy, translate or register any document in a manner which he knows or believes to be incorrect, with the intention to cause harm. The Act, however, also provides that an officer is not liable for any suit, claim or demand if he has acted in good faith.

The concept of title insurance has not yet been introduced in India. In most transactions, however, buyers seek a separate indemnity along with a title certificate from the seller.

9. How can real estate be held (that is, what types of tenure and other main ownership rights exist over land)?

Any individual, partnership, company, trust, etc. can hold real estate by means of:

  • Freehold ownership.

  • Lease. The Transfer of Property Act 1882 governs leases. A lease is a transfer of a right to enjoy property, by the lessor in favour of the lessee. Unless there is a contract or a local usage to the contrary, a lessee can assign, sub-lease, mortgage, or part with his interest in the property. Leases can extend to as far as 999 years. A lessee enjoys far more privileges and rights in the property than a mere licensee.

  • Licence (leave). The Indian Easements Act 1882 and various state rent control statutes (for example, Rent Act) govern licences. A licence is a permission granted merely for the purpose of using and occupying a property in a certain way and on certain terms, while the possession and control of the property remains with the owner. It does not create any interest in the property in favour of the licensee.

  • Tenancy. A tenant is a type of protected occupant under the Rent Act. A tenant pays nominal rent and can be evicted only on the limited grounds outlined in the relevant Rent Acts.


Sale of real estate

Preliminary agreements

10. What types of preliminary agreements are typically used in the sale of real estate? Are they legally binding?

Generally, any sale of real estate is preceded by a memorandum of understanding or an agreement to sell. Prior to execution of such agreements, the buyer conducts a preliminary enquiry into the title of the property or premises, with the assistance of the seller. After the enquiry, the parties agree on the:

  • Consideration.

  • Mode of payment.

  • Any other special terms, which may need to be fulfilled by the parties before executing the conveyance.

Apart from those conditions, such agreements usually contain:

  • Provisions for making out a marketable title.

  • Inspection of title documents.

  • Restrictive or protective clauses.

  • Provisions addressing defaults by either the seller or the buyer.

Such agreements are legally binding and are enforceable in court in the event of breach by either party.


Sale contract

11. Briefly outline the typical main provisions of a corporate real estate sale contract and main real estate provisions of a typical share purchase agreement.

Sales contract

The key provisions in a sale contract are:

  • Recitals (tracing the title and commercial negotiations in relation to the property).

  • Description of the property.

  • Conveyance clause (the clause must clearly provide that the seller sells, transfers and conveys and the buyer acquires the property).

  • Consideration, along with mode of payment of the consideration.

  • Delivery of possession.

  • Seller's warranties, including making out a marketable title to the property.

  • Stamp duty and registration.

Other provisions may be included, depending on the facts of each transaction.

Share purchase agreement

In share purchases, acquiring shareholders often have the same rights to the real property of the company as existing shareholders. As the company owns the property, however, the shareholders do not have any direct rights of ownership to the property.

The key provisions are similar to those in a standard share purchase agreement in relation to title to the shares.


Due diligence

12. What real estate due diligence is typically carried out before an acquisition and what key areas does it cover? Which documents are typically reviewed? Which specialist advisers are usually involved and which reports do they typically produce?

The main objective of real estate due diligence is to ensure that the property is:

  • Marketable.

  • Free from all encumbrances.

  • Not subject to any litigation or unpaid taxes.

There is no prescribed procedure for conducting a title due diligence. Lawyers conduct the process in accordance with the nature of the property and requirements of the buyer, and examine certain documents to investigate title (see Question 8).

Due diligence usually comprises of the following:

  • Examining and analysing the current and antecedent title documents, including review of originals.

  • Conducting searches of:

    • the land revenue records in the office of the revenue authorities;

    • records maintained by the Sub-Registrar of Assurances; and

    • court records to verify that there is no pending or threatened litigation affecting the property.

  • If the seller is a company, investigating with the Registrar of Companies (RoC) to establish whether there are any court judgments or winding up proceedings against the company (see Question 6).

  • Making a public notice to investigate the title and invite any claims.

  • Checking whether there are any outstanding taxes or sums due.

  • Where required, issuing a title certificate (issued by the solicitor investigating the property).

Typically, the company conducting the search generates a report of the search conducted in the office of the Sub-Registrar of Assurances. If the seller is a company, it must also provide the buyer with a report of the RoC search.


Sellers' warranties

13. What real estate warranties are typically given by a seller to a buyer in the sale of corporate real estate and what areas do they cover? What are the main limitations on warranties, for example are they typically qualified by disclosure?

A seller in a typical sale must provide warranties to the effect that:

  • The title to the property is marketable.

  • There are no encumbrances on the title.

  • All taxes and sums due have been paid.

  • There is no pending or threatened litigation which will affect the property or the seller's title.

  • There are no restrictions against the seller which can affect the transfer, occupation and use of the property by the buyer.

The warranties are usually unqualified and absolute unless there are certain issues affecting the property and the proposed title of the buyer. For instance, if a mortgage exists at the time of the sale, the warranty in relation to the encumbrances will be qualified to the extent of the mortgage.



14. Does a seller have any statutory or other liability to the buyer in a disposal of real estate?

A seller's liability to the buyer in a real estate sale usually stems from the contract agreed between the parties.

In addition, the following statutory duties on the seller apply, provided that there is no provision to the contrary in the terms of the contract between the parties (section 55, Transfer of Property Act 1882):

  • Disclose to the buyer any material defect in the property or the seller's title of which the buyer is not and could not have been reasonably expected to be aware.

  • Produce all title documents in his possession for the buyer to examine.

  • Answer to the best of his ability all relevant questions in relation to the property and the title.

  • On being paid the agreed consideration, execute a property conveyance in favour of the buyer.

  • From the date of the contract of sale to the date of the delivery of the property, take good care of the property and the title documents.

  • Give, on being required to do so, possession of the property to the buyer.

  • Pay all public charges and rent up until the date of sale.

  • Discharge all encumbrances and any interest payable on those, unless the property is sold subject to an encumbrance.

15. Briefly outline the environmental legislation and potential liability for a buyer in a purchase of real estate. Is it common to carry out environmental surveys and searches and to obtain environmental insurance? How is environmental liability typically dealt with in the sale contract?

Environmental legislation

The environmental legislation in India has evolved substantially over the past four decades. The following are the primary sources of environmental legislation:

  • The Environment (Protection) Act 1986.

  • The Water (Prevention and Control of Pollution) Act 1974.

  • The Water (Prevention and Control of Pollution) Cess Act 1977.

  • The Air (Prevention and Control of Pollution) Act 1981.

  • The Forest (Conservation) Act 1980.

  • The Wildlife Protection Act 1972.

  • The Public Liability Insurance Act 1991.

  • The National Environment Tribunal Act 1995.

  • The National Environment Appellate Authority Act 1997.

In addition:

  • India has a number of national policies for environment management.

  • The Indian Constitution also contains specific provisions on environmental protection.

Potential liability

There is no specific provision in environmental law which provides protection to a genuine buyer of land or structure. However, the Transfer of Property Act 1882 imposes a liability on the seller to disclose any material defect in the property, unless there is a provision to the contrary in the sale deed. In India the concept of "polluter pays" is well established by the courts. The owner who caused the damage to the environment is liable for rectification. Therefore, the buyer does not automatically take on the environmental liability for any failure of the seller to comply with the applicable environmental law. However, if the seller makes the buyer aware of the liabilities prior to the sale and the buyer agrees to assume those, the seller cannot be held liable.

Sale contract

The sale deed generally provides the necessary provisions relating to environmental law compliance as well as to any undertakings and indemnities.

Environmental clearance and insurance

Generally, to carry out any form of property development, environmental clearance by the Ministry of Environment and Forest is mandatory under the Environment Protection Act. Parties must also obtain clearance from the relevant coastal regulatory zoning authorities.

Environmental insurance in India is still evolving; however the Public Liability Insurance Act makes it compulsory for business owners dealing in hazardous substances to take out public liability insurance to compensate any potential victims. General insurance companies also offer environmental insurance.

16. Can an owner or occupier inherit liability for other matters relating to the real estate even if they occurred before it bought or occupied it? Can a seller or occupier retain any other liability relating to the real estate after it has disposed of it?

Unless explicitly agreed, an owner does not inherit any liability incurred prior to the purchase. A seller will assume all liabilities incurred prior to the date of sale, even if those exist after the sale has been completed.

The next owner or occupier may become liable to pay any income tax payable by the seller at or after the date of the sale (section 281, Income Tax Act 1969).


Completion arrangements

17. What are the typical arrangements and main documents required for completion of the sale? When does title transfer and what are the formal legal requirements to execute the sale documents, transfer the real estate and register the change of title? Is notarisation required?

The main document required for completion of any real estate sale is a deed. The deed might be referred to as a:

  • Conveyance deed.

  • Sale deed.

  • Deed of transfer.

  • Deed of indenture.

In certain transactions, prior to the sale deed, if the completion of the sale is subject to certain conditions or is due to take effect after a considerable period of time, parties may first execute a memorandum of understanding or an agreement to sell. The general title transfer procedure is as follows:

  • The deed is stamped in accordance with the Stamp Act and then executed by the parties.

  • The deed is then registered at the office of the Sub-Registrar of Assurances in the presence of both parties and two witnesses.

  • On such registration, the title is transferred and the change of title is recorded by the Sub-Registrar's office.

  • Post registration, the buyer informs the necessary authorities (electric, municipal, and so on) of the change in ownership.

Since the sale deed is registered, there is no requirement for notarisation.


Real estate tax

18. Is stamp duty/transfer tax (or equivalent) payable on the purchase of real estate? Who pays, what are the rates and are there any exemptions? Does it apply to the transfer of shares in a company holding real estate and at what rate?

The information below only applies to the State of Maharashtra.

Stamp duty

Stamp duty is payable in accordance with the Stamp Act. The buyer must pay stamp duty at 5% of the consideration or the market value of the premises, whichever is higher. Stamp duty is sometimes subject to depreciation, the calculation of which depends on several circumstances (for example, the year of construction of the property, age of structure, and so on).

Transfers of shares in a company holding real estate will also be subject to stamp duty at 0.25% of the value of shares being sold.

Transfer tax

Under the Tax Act, transfer tax is levied on the transfer of any asset, including sale of real estate and shares holding real estate. The seller must pay transfer tax on the consideration. Transfer tax must be paid in the form of capital gains tax and is divided into long term and short term capital gains tax, the formula for the calculation of which is set out in the Tax Act.

Section 10 of the Tax Act also provides a list of incomes which are exempt from tax. Further, the Tax Act also provides that an exemption can be claimed from capital gains tax by reinvesting the capital gain into specified assets.

Tax deductible at source (TDS)

The buyer must deduct TDS at 1% of the consideration paid for the acquisition of land (excluding agricultural land) if the consideration exceeds INR5 million. TDS must be paid to the tax department in the seller's name.

19. Are any methods commonly used to mitigate real estate tax liability on acquisitions of large real estate portfolios? What is the general approach of the tax authorities in your jurisdiction to such schemes?

It is impossible for the buyer to mitigate his liability to pay taxes in the form of tax deductible at source (TDS), service tax and VAT (see Questions 18 and 20).

Stamp duty may sometimes be reduced as it may be subject to depreciation, depending on factors such as year of construction of the premises, age of the structure, and so on.

It is compulsory to pay registration fees to the tax authorities. Those vary in accordance with the value of the transaction. The maximum amount payable is INR30,000.

20. Is value added tax (VAT) (or equivalent) payable on the sale or purchase of real estate? Who pays? What are the rates? Are there any exemptions?

Under the Maharashtra Value Added Tax Act 2002, sales of "under-construction" flats in or after 2006 attract VAT. The buyer is liable to pay any VAT due. The rationale behind this is that any agreement between the builder or developer before the completion of the construction works amounts to a works contract, which is subject to VAT.

VAT is payable at 5% of the property price. In addition to VAT, the buyer is also liable to pay service tax at 3.71% of the property price of the "under construction" flat.

Such taxes do not apply to the sale of "ready to occupy" flats.

21. Are municipal taxes paid on the occupation of business premises? Are there any exemptions?

The municipal corporation of the relevant area levies property tax on any individual or entity owning or occupying premises.

Such property tax includes general tax, street tax, water tax, sewerage tax, tree cess, and so on. Various factors affect the calculation of property tax, including type of building, floor, area, relevant municipal ward, and so on.


Climate change issues

22. Are there targets or incentives to reduce greenhouse gas emissions from buildings in your jurisdiction? Is there legislation requiring buildings to meet certain minimum energy efficiency criteria?

Although there is no express legislation that requires buildings to meet a minimum criterion, there are certain policies and standards under the National Building Code 2005, which all buildings must comply with. Further, there are several ratings and programmes developed to encourage the green movement in India:

  • In 2001, the Indian Green Building Council (IGBC) was formed to enable a sustainable built environment for all and help India become one of the global leaders in "sustainable built environment" by 2025. IGBC is responsible for certifying the Leadership in Energy and Environmental Design (LEED) rating for buildings in India. Apart from LEED, IGBC has also launched various rating systems to suit different building types.

  • The Energy and Resources Institute has developed the Green Rating for Integrated Habitat Assessment, which was adopted as the national rating system for green buildings by the Government of India in 2007.

  • The International Finance Corporation (IFCA) and the Confederation of Real Estate Developers Association of India have partnered to promote green buildings in the country through IFCA's Excellence in Design for Greater Efficiencies (EDGE) certification. EDGE is a standard that focuses on energy and water efficiency in buildings.

  • The Indian Bureau of Energy Efficiency has developed the Energy Conservation Building Code. The Code sets energy efficiency standards for design and construction for buildings with a minimum conditioned area of 1000 square meters and a connected power demand of 500 kW or 600 kVA.

23. Are provisions relating to the energy efficiency of buildings commonly included in contracts for the sale of real estate or in leases (for example, green leases)?

Sale deeds and lease deeds do not normally include provisions concerning energy efficiency. However, there is an increasing awareness of the green building movement in India and nationwide attempts are being made to ensure the development of environmentally sustainable buildings.


Real estate finance

Secured lending involving real estate

24. Briefly outline the typical security package required by lenders in relation to real estate lending. How are the most common forms of security interest relating to real estate created and perfected (that is, made valid and enforceable)?

Lenders usually require the primary security to be real estate. Depending on the size of the loan, primary security may be land, buildings, premises, and so on. In project development financing, the land or structure being developed is mortgaged by itself.

In addition, lenders also require secondary security in the form of a:

  • Guarantee (either corporate or personal).

  • Provision of receivables on the sale or renting out of the completed construction or units.

  • Hypothecation of movables.

  • Pledge of shares in a company.

There are six types of mortgages which can be created in respect of immovable property (Transfer of Property Act 1882). The most common ones are:

  • English mortgage. The mortgagor binds himself to repay the borrowed money on a certain date and transfers the property absolutely to the mortgagee. The transfer is subject to the condition that the mortgagee will retransfer the property on repayment before the agreed date. The mortgage deed is a bilateral contract which must be stamped and registered.

  • Mortgage by deposit of title deeds. The mortgagor delivers the title documents of the property to the mortgagee with an intention to create a security on the property. The memorandum of deposit of title deeds must be stamped in accordance with the Stamp Act. In Maharashtra, under an April 2013 amendment to the Registration Act, registration of the deed is compulsory.

The Stamp Act governs the calculation of the stamp duty, which varies according to the amount of the loan.

The rates of stamp duty on a mortgage over immovable property vary depending on the nature of the mortgage.

25. What other real estate related measures do lenders typically take to protect themselves against default by the borrower?

The Loan Agreement contains the protective measures which the lenders undertake, the most common of which are

  • Conditions precedent to disbursement of loan to the borrower which include:

    • making out a marketable title to the security;

    • procurement of relevant approvals (if any);

    • a satisfactory credit report from a credit rating agency.

  • Financial covenants in relation to use of the funds, repayment structure, maintenance of proper accounts, maintenance of debt-equity ratio, security margin, and so on.

  • Other covenants, for example, regular submissions of account statements, income tax returns, credit rating reports, project reports, assurance that there is no diversion of the funds or change of control, and so on.

  • Restrictions on the borrower to prevent dilution of the value of the secured asset, winding up, mergers, and so on.

  • Provision of security and guarantee (see Question 24).

  • Recourse for lenders in the event of any default of the covenants in the loan agreement.

26. Can lenders incur environmental liability? What measures do lenders typically take to manage potential environmental liability?

Under Indian law, lenders do not assume environmental liability. If a project is susceptible to environmental risks, it is open to the lender to impose condition precedents on the borrower obliging him to procure the necessary environmental permits, to submit reports and carry out necessary audits to minimise the risk.

27. Briefly outline the main remedies for lenders in relation to the secured real estate if the borrower defaults on the loan. What is the effect of the borrower's insolvency on the lender's remedies?

In the event of a default by the borrower, the lender can:

  • Institute legal proceedings against the mortgagor, either for foreclosure or sale of the property or repayment of the mortgage money, depending on the type of mortgage.

  • Initiate the sale of the mortgaged property without the intervention of the court to recover the loan amount. The Transfer of Property Act 1882 imposes some restrictions on this power. Only English mortgages enable mortgagees to enforce security without a judicial process (see Question 24). The mortgagee in any other mortgages must go through the court system.

A lender has 12 years from the time when the mortgaged money becomes due to institute a claim for the sale of a mortgaged property. Unless sale without the judicial process is available, sale is a cumbersome and time consuming way for lenders to obtain relief. Because of this, the government established the Debt Recovery Tribunal to enable lenders to take action against defaulting borrowers without recourse to the courts.

28. Briefly outline key additional issues for lenders in relation to construction and development projects.

It is important for lenders to ensure that:

  • The borrower maintains security cover at all times.

  • The lender has appropriate step-in rights in the event of the borrower's inability to complete the project.

  • No change in control takes place until the borrower repays the loan.

  • Security provided is valid and enforceable.

  • The borrower creates and maintains accounts by the borrower.

The loan agreement will address these issues in almost all cases.


Other real estate financing techniques

29. Are other real estate finance techniques commonly used in your jurisdiction? For example, real estate securitisation and sale and leasebacks.

Apart from banks and other financial institutions, the buyer or developer can obtain funds through the following:

  • Pre-launch funding: a developer raises interest free capital from investors by pre-launching their project before officially putting it on the market.

  • Real estate securitisation: for the past few years, banks and other financial institutions have been developing and employing this method.

  • Private lending or non-banking financial institution lending.

  • Private equity funds.

  • Real estate investment trust (REIT): REIT is an investment trust that owns and manages a pool of commercial properties, mortgages and other real estate assets. Under a REIT, investors can purchase the beneficial interest in various "units" that the ownership of real estate has been split into. The value of a REIT unit is a fraction of the value of the properties owned by the REIT. REITs are publicly quoted and traded. 


Real estate leases

Negotiation and execution of leases

30. Are contractual lease provisions regulated or freely negotiable? Which legislation applies?

The Transfer of Property Act 1882 (TOPA) governs lease provisions. While contractual lease provisions are freely negotiable between private parties, they are usually in accordance with the provisions of TOPA. Lease contracts with government entities acting as lessors are usually more constrained and are based on standard terms with limited room for negotiation.

31. What are the formal legal requirements to execute a lease? Does the lease have to be executed by certain parties or as a deed? How do the formalities differ for a company, partnership and for individuals?

There are two classes of leases:

  • Yearly leases. Yearly leases are for a term exceeding one year. The lessee pays the rent on a yearly basis. The lessor must execute and register the lease deed as per the Transfer of Property Act 1882 and the relevant stamp duty acts.

  • Other leases. All other leases can be made either by a registered lease or by oral agreement accompanied by delivery of possession.

These formalities are the same for a company, partnership and individual. There are, however, certain registration requirements laid down by the Sub-Registrar, which are specific to a company, partnership or individual. For example, a company which is party to a lease must pass a board resolution, which is a formality which an individual does not need to observe.


Rent payments

32. How are rent levels usually reviewed and are there restrictions on this? Is stamp duty and VAT (or equivalent) payable on rent? Is a rent security deposit required and does it have to be managed in a certain way?

Rent levels are usually reviewed on the basis of a ready reckoner (a type of stamp duty calculator) and the market value of the property at the relevant time. There are no legal provisions imposing any restrictions.

Stamp duty is payable on the lease deed under the Stamp Act and is calculated taking into consideration the duration of lease, security deposit, and so on (see Question 18). There is no VAT payable on the rent payment.

There is no legal requirement for a rent security deposit. This is subject to contract between the parties and is not required by law. If the security deposit does form a part of the lease, the lessor must keep it in an interest free account and refund it at the end of the lease term. The refund is subject to the terms on which the parties to the lease agreed.


Length of term and security of occupation

33. Is there a typical length of lease term and are there restrictions on it? Do tenants of business premises have security of occupation or rights to renew the lease at the end of the contractual lease term?

The parties to the lease deed agree its duration. It can range from one year to perpetuity. In the absence of such provisions, the Transfer of Property Act 1882 applies.

The lessee does not have any statutory right of renewal unless the parties have agreed to that effect in the lease deed.

As long as the lessee complies with the terms of the lease deed, he has security of occupation during the terms of the lease.



34. What restrictions typically apply to the disposal of the lease by the tenant? Can the tenant assign or sublet the lease with the landlord's consent? Can tenants share their premises with companies in the same group? What is the effect of a legal reorganisation or transfer/sale of the tenant on the lease and on a guarantee of the lease?

The lease deed contains the restrictions on disposal by the lessee. Unless the lease deed stipulates otherwise, the lessee can mortgage, assign or sublet his leasehold with or without the landlord's consent.

Sharing the premises with group companies is also subject to provisions of the lease deed.

In the event of transfer or sale of the lessee, the lease transfers to the purchasing entity. The lease deed might require the lessee to obtain the landlord's permission before effecting such a transfer or sale.

35. Does a landlord or tenant retain any liability under the lease after the lease is assigned?

An assignment will not affect a landlord's liability under the lease. The lessee's liability, however, will depend on the terms of the deed between the lessor, the lessee and the assignee.

In the absence of any terms relating to that effect, the lessee will retain his original liability.


Repair and insurance

36. Who is usually responsible for keeping the leased premises in good repair and for insuring the leased premises? Are there provisions for the ownership of lease improvements?

The lease deed outlines who is liable for insuring and repairing the premises. In the absence of any provision to this effect, the lessor will be responsible for those. If the lessor has failed to repair the premises, the lessee has the right to conduct the repairs himself and deduct from the rent any expenses he has incurred. There are no statutory provisions that govern liability for improvements to the leased premises. The parties are free to contractually agree any such provisions.


Landlord's remedies and termination

37. What remedies are available to a landlord for a breach of the lease by the tenant? On what grounds can the landlord usually terminate the lease and what restrictions and procedures apply? What is the effect of the tenant's insolvency under general contract terms and insolvency legislation?

The lease deed usually outlines the remedies available to a landlord for breach of the lease.

Such remedies usually include either or both of rescission or damages. However, in most cases, the lease deed stipulates that a lessor cannot seek remedial action before allowing the lessee a sufficient period of time to remedy the breach. The lessor has the right to institute legal proceedings if the lessee fails to:

  • Remedy the breach.

  • Pay any damages due.

  • Vacate the premises on termination.

Section 111 of Transfer of Property Act 1882 (TOPA) and the terms of the lease outline the grounds on which the landlord can terminate the lease. The grounds are usually specific to each deed and depend on the facts and circumstances of each individual case. Some grounds are:

  • The lease has expired.

  • The lessee has breached an express condition of the lease.

  • The lessee is declared insolvent.

The lease may provide for restrictions to the above grounds.

The lease sets out the procedure for termination. In the absence of any such provisions, section 111 of TOPA requires the landlord to provide notice to the lessee that he has exercised his right to terminate the lease.

38. Can the tenant withhold rent payments in certain circumstances, for example for serious damage to the leased premises? Can the tenant terminate the lease in certain circumstances?

A lessee does not have any statutory rights to withhold rent payment. The parties can, however, agree to include a provision to that effect in the lease deed.

Section 111 of Transfer of Property Act 1882 and the provisions of the lease itself govern the position on the parties' right to terminate.


Planning and development controls

39. In what circumstances can local or state authorities purchase business premises compulsorily? Is the purchase price market value?

There is no specific legislation that deals with a local or state authority's purchase of business premises. However, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 provides for compulsory acquisition of land for certain public purposes. In such circumstances, the government provides the affected parties with compensation, in accordance with the market value of the land, calculated as per the provisions of the Act.

40. What authorities regulate planning control and which legislation applies? Is there specific protection for special categories of buildings such as historic buildings?

Legislation in relation to planning control is specific to each state in India. In Maharashtra, the primary legislation is the Maharashtra Regional and Town Planning Act 1966 (MRTP). The MRTP lays down the fundamental laws and rules for development, which the planning authorities below incorporate and implement.

Separate legislation establishes and governs planning authorities. For example, Maharashtra Housing Area and Development Authority Act 1976 governs the Maharashtra Housing Area and Development Authority.

The authorities that regulate planning control are:

  • Maharashtra Housing Area and Development Authority.

  • Municipal corporations.

  • Slum Rehabilitation Authority.

  • Mumbai Metropolitan Regional Development Authority.

  • Nagpur Improvement Trust.

  • Special Planning Authority (constituted under the MRTP).

The Development Control Regulations 1991 and MRTP lay down special provisions for heritage buildings.

41. What planning consents are required for building works and the use of a building?

The main planning consents required for development of any building are:

  • Proof of ownership, leasehold or development rights over the land.

  • Building layout approval.

  • Intimation of disapproval, which comprises no objection from various authorities such as the Fire Department, Airport Authority, and so on.

  • Non-agricultural permission (where applicable).

  • Environmental clearance from the Ministry of Environment and Forests.

  • Commencement certificate.

  • Building completion certificate.

  • Occupation certificate.

There are also several minor consents which are project-specific.

42. What are the main authorisation and consultation procedures in relation to planning consents?

Initial consents

The Planning authorities grant the initial planning consent (see Question 41). The relevant authority must provide its decision within a period of 60 days from date of receipt of the application or within 60 days from the date of receipt of a reply from the applicant in respect of any requisition made by the authority, whichever is later. In Maharashta, if the authority fails to give its decision within such period, the permission is deemed to have been granted on the date immediately following the date of expiry of the 60 days (section 45, Maharashtra Regional and Town Planning Act 1966 (MRTP)).

Third party rights and appeals

There are no statutes granting third parties the right to object.

Section 47 of MRTP provides a right of appeal to the state government against the decision of the planning authority within a period of 40 days from date of communication of the order.



43. Are there proposals to reform real estate law and are they likely to come into force and, if so, when?

The central and state legislature has put forth certain proposals in the past year to introduce reforms in housing and land acquisition, including:

  • The Maharashtra Housing (Regulation and Development) Act 2012 to replace the existing Maharashtra Ownership of Flats (Regulation of the Promotion, Construction, Sale, Management and Transfer) Act 1963, which currently regulates the sale of flats by developers and builders in Maharashtra. The new Act seeks to set up of a regulatory authority to deal with consumer and buyer grievances. The Act is only applicable in Maharashtra and has not come into force yet.

  • The Real Estate (Regulation and Development) Bill aims to provide protection to buyers against developers and builders at a central level and regulate the real estate sector. The central government is still considering the bill.

  • The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill 2015. The central government is still considering this recent bill.

  • The Maharashtra Stamp (Amendment) Act 2015 to amend the Stamp Act. A notable amendment is a new provision reducing the stamp duty on gifts from 2% of the value of the property to INR200 (if residential and agricultural property is gifted to a husband, wife, son, daughter, grandson and grand-daughter or wife of a deceased son).


Online resources

Department of Registration and Stamps


Description. Official website of the Department of Registration and Stamps. The website is maintained by the National Informatics Centre and the information provided is up-to-date.

Reserve Bank of India (RBI)


Description. Official website of the RBI and the information provided is up-to-date.

High Court of Judicature at Bombay


Description. Official website of the High Court. The site is maintained by the Computer Cell, Bombay High Court and is up-to-date.

Ministry of Environment and Forests

W (

Description. Official website of the Ministry, maintained by the Ministry. The information provided is up-to-date.

Indian Green Building Council

W (

Description. Official website maintained by the Ministry. The information provided is up-to-date.

Green Rating for Integrated Habitat Assessment (GRHIA)

W (

Description. Official website maintained by GRHIA. The information provided is up-to-date.

Municipal Corporation of Greater Mumbai


Description. Official website. The information provided is up-to-date.

Income Tax Department


Description. Official website. The information provided is up-to-date.

Contributor profiles

Vivek Vashi, Partner

Bharucha & Partners

T +91 22 2289 9300

Professional qualifications. Solicitor, High Court, Mumbai.

Areas of practice. Commercial, criminal, corporate, intellectual property and real estate related litigation; arbitration and conveyance; telecom; infrastructure; airport privatisation; slum rehabilitation; indirect taxes; bankruptcy protection; derivatives; employment laws and real estate transactions.

Non-professional qualifications. LL.B

Recent transactions

  • Advising and representing Sandeep Raheja to thwart proceedings in relation to the control and management of the K Raheja Constructions Group including disputes with the Estate of GL Raheja.
  • Advising and representing Enercon GmbH in transborder corporate, intellectual property related disputes in diverse Courts and Tribunals across India and UK valued at over US$5 billion.
  • Advising and representing Ferani Hotels in proceedings by and against Nusli Wadia for land at Malad in excess of 400 acres, valued at over US$2 billion in the Supreme Court of India and Bombay High Court.
  • Advising and representing Cellular Operators Association of India (COAI) to challenge the Maharashtra Cellular Regulations.
  • Advising and representing Godrej Group of Companies in diverse disputes relating to realty development, consumer matters, EPF claims, employee disputes, white collar crimes and so on.
  • Advising and representing Idea Cellular Ltd, one of India's largest telecom providers, in diverse proceedings including 2014 and 2015 spectrum auctions before the Supreme Court of India; indirect tax related litigations in the Bombay High Court and Supreme Court of India; spectrum allocation disputes, IPR disputes/claims.
  • Advising and representing JSW Ltd in relation to diverse disputes, including Al-Ghuriar LLC emanating from a challenge to an arbitral award.

Professional associations/memberships

  • Member of the Bar Council of Maharashtra and Goa.
  • Member of the Bombay Incorporated Law Society.
  • Advocate on Record, Supreme Court of India.

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