Know your Property Acts before you act
Indian Contract Act,
1872
This legislation
specifies when a party can be said to have the capacity to contract. A contract
pertaining to realty can be entered into, among others, by an individual (who
is not a minor or of unsound mind), partners of a firm, a corporate body, a
trust, a sole corporation, the manager of an undivided family, and a foreigner.
All the requirements of a valid contract, i.e. consideration, intention to
contract and validity under the law of the land must be satisfied.
Transfer of Property
Act, 1882
This lays down the
general principles of realty, like part-performance and has provisions for
dealing with property through sale, exchange, mortgage, lease, lien and gift. A
person acquiring immovable property or any share/interest in it is presumed to
have notice of the title of any other person who was in actual possession of
such property.
Registration Act, 1908
The purpose of this Act
is the conservation of evidence, assurances, title, publication of documents
and prevention of fraud. It details the formalities for registering an
instrument. Instruments which it is mandatory to register include:
(a) Instruments of gift of immovable property;
(b) Other non-testamentary instruments which
purport or operate to create, declare, assign, limit or extinguish, whether in
present or in future, any right, title or interest, whether vested or
contingent, to or in immovable property;
(c) Non-testamentary instruments which
acknowledge the receipt or payment of any consideration on account of
instruments in (b) above.
(d) Leases of immovable property from year to
year, or for any term exceeding one year, or reserving a yearly rent
Sales, mortgages (other
than by way of deposit of title deeds) and exchanges of immovable property are
required to be registered by virtue of the Transfer of Property Act. Evidently,
therefore, all the above documents have to be in writing. Section 17 of the Act
provides for optional registration. An unregistered document will not affect
the property comprised in it, nor be received as evidence of any transaction
affecting such property (except as evidence of a contract in a suit for
specific performance or as evidence of part-performance under the Transfer of
Property Act or as collateral), unless it has been registered. Thus the
doctrine of part performance dealt with under Section 53 A of the Transfer of
Property Act and the provision of Section 49 of the Registration Act (which
provide that an unregistered document cannot be admissible as evidence in a court
of law except as secondary evidence under the Indian Evidence Act) together
protect the buyer in possession of an unregistered sale deed and cannot be
dispossessed. The net effect has been that a large number of property
transactions have been accomplished without proper registration. Further other
instruments such as Agreement to Sell, General Power of Attorney and Will have
been indiscriminately used to effect change of ownership.
Special Relief Act,
1963
This Act is only to
enforce individual civil rights. A person dispossessed of immovable property
without his consent (other than in due course of law) can recover possession by
a suit filed within six months from the date of dispossession. Unless the
contrary is proved, in a suit for specific performance of a contract, the Court
shall presume that a contract to transfer immovable property is one in which
monetary compensation for its non-performance would not afford adequate relief.
The Court could also grant a permanent/ mandatory injunction preventing the
breach of such contract and award damages.
Urban Land (Ceiling and
Regulation) Act (ULCRA), 1976
This legislation fixed a
ceiling on the vacant urban land that a ‘person’ in urban agglomerations can
acquire and hold. A person is defined to include an individual, a family, a
firm, a company, or an association or body of individuals, whether incorporated
or not. This ceiling limit ranges from 500-2,000 square metres (sq. m). Excess
vacant land is either to be surrendered to the Competent Authority appointed
under the Act for a small compensation, or to be developed by its holder only
for specified purposes. The Act provides for appropriate documents to show that
the provisions of this Act are not attracted or should be produced to the
Registering officer before registering instruments compulsorily registrable
under the Registration Act.
The objective of
acquiring the excess vacant land could not be achieved because of intrinsic
deficiencies in the legislation itself. The provisions under Sections 19, 20 and
21 of the Act have together proved counter-productive to the objectives of the
legislation. So far, only 19,020 hectares could be taken possession of by State
Governments and Union Territories and the remaining land was locked up in
various litigations2. This has only helped push up land prices to
unconscionable levels and practically brought the housing industry to a stop.
This legislation was
repealed by the Centre in 1999. The Repeal Act, however, shall not affect the
vesting of the vacant land, which has already been taken possession by the
State
Government or any person
duly authorised by the State Government in this regard under the provisions of
ULCRA. The repeal of the Act, it is believed, has eliminated the large amount
of litigation and released huge chunks of land into the market. However the
repeal of the Act has not been carried out in all states. Initially the repeal
Act was applicable in Haryana, Punjab and all the Union Territories.
Subsequently, it has been adopted by the State Governments of Uttar Pradesh,
Gujarat, Karnataka, Madhya Pradesh and Rajasthan. Andhra Pradesh, Assam, Bihar,
Maharashtra, Orissa and West Bengal have not adopted the Repeal Act so far.
Land Acquisition Act,
1894
This Act authorises
governments to acquire land for public purposes such as planned development,
provisions for town or rural planning, provision for residential purpose to the
poor or landless and for carrying out any education, housing or health scheme
of the Government. In its present form, the Act hinders speedy acquisition of
land at reasonable prices, resulting in cost overruns.
The Indian Evidence
Act, 1872
Under the Act, whenever
the status of any person as the owner of a piece of immovable property of which
he is shown to be in possession is questioned, the burden of proving that he is
not the owner lies on the person who asserts that he is not the owner.
State laws governing
real estate
While each state has its
own set of laws, which govern planned development, rules for construction and floor-area-ratio
(FAR) or floor-space-index (FSI) and formation of societies and condominiums,
two laws that exist in every state, are the stamp duty and rent laws. Stamp
Duty is being covered in a later section.
Rent Control Act
Rent legislation in
India has been in existence for a very long time. Rent control by the
government initially came as a temporary measure to protect the exploitation of
tenants by landlords after the Second World War. However these rent control
acts became almost a permanent feature. Rent legislation provides payment of
fair rent to landlords and protection of tenants against eviction. Besides, it
effectively allows the tenant to alienate rented property. Tenants occupying
properties since 1947 continue to pay rents fixed then, regardless of inflation
and the realty boom. Some of the adverse impacts of the Rent Control Act are:
(1) Negative effect on investment in housing for
rental purposes
(2) Withdrawal of existing housing stock from the
rental market
(3) Accelerated deterioration of the physical
condition of the housing stock
(4) Stagnation of municipal property tax revenue, as
it is based on the rent
(5) Resultant deterioration in the provision of
civic services
(6) Increase in litigation between landlords and
tenants.
The Rent Control Act, in
fact, is the single most important reason for the proliferation of slums in
India by creating a serious shortage of affordable housing for the low income
families. Low and middle-income families typically live in rented accommodation
all over the world and the need for such accommodation in our cities will only
increase as the economy modernises, labour mobility increases and urbanisation
takes place. It is, therefore, necessary to increase the stock of rental
housing. Promotion of rental housing can have a significant impact on the
economy in many ways:
(i) It reduces shortage of housing for a large
section of the population who cannot afford ownership.
(ii) Housing construction being a labour- intensive
activity, investment in housing generates employment for both skilled and
unskilled labour.
(iii) Housing has backward and forward linkages with many other
industries.
(iv) Rental housing helps in stabilising real estate prices and
checking speculation and, thus, makes housing affordable for the weaker
sections.
(v) It helps check proliferation of slums.
Source : CREDAI
