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Legal Issues in Construction

Industry
By Sameer Rastogi, Managing Partner, INDIA JURIS

Sameer Rastogi, Managing Partner, INDIA

JURIS

Headquartered in New Delhi, INDIA JURIS is a full service

International Law Firm with immense expertise in Business,
Corporate, Litigation, and Arbitration & Intellectual Property
Laws.

Construction Industry

Construction Industry in India may be primarily classified into

three segments Infrastructure, Industrial & Real Estate. The
Construction sector has seen growth in the recent year more
specifically in the regime of the NDA government. The
Infrastructure sector comprises of roads, highways, residential
buildings, commercial complexes, airports, SEZs and IT parks.
The Real Estate sector in India is comprised of four sub
sectors- housing, retail, hospitality and commercial.
Challenges in the construction sector mainly arise during
resolution of various ambiguities that arise from the role of
stakeholders in construction projects. Major issue in the
construction sector is the risk involved in the construction
project for which the solution is that SWOT analysis strategy
should be implemented which is crucial for identifying critical
success factors for identifying strength, weaknesses and
effective warding off of threats.

The major laws that govern the Construction industry in India

are: Building and Other Construction Workers (Regulation of
Employment and Condition of Service) Act, 1996 which is
intended to provide welfare measures to workmen, National
Building Code, 2005 which enlists the general guidelines to be
followed for regulating building construction activities across
the country. It serves as a model code for adoption by all
agencies whether Public Works department, other
governmental construction departments, local bodies or
private construction agencies. The Code mainly comprises of
administrative regulations, developmental rules for control,
and general building requirements.

Various infrastructure programs like the National Highway

Development Program (NHDP) and PMGSY/ Bharat Nirman
Program have been instrumental in the average growth rate in
the construction sector at average rate of 7.3 percent during
FY08-FY12. Further initiatives such as Swatch Bharat Mission
has been launched which is an initiative to provide India with
cleaner infrastructure. Various changes have been initiated in
India’s FDI policy with respect to construction sector where
requirements for minimum area and capitalization has been
waived which in turn allows foreign investors to invest in small
projects through FDI route. The growth rate in the second
quarter of the fiscal year of 2016 through data released from
Central Statistics Office projected a growth rate of 7.6 percent
in 2015-16 which is an increase from 7.3 percent which was
posted in the quarter end of December. According to RBI such
a growth is welcomed as India is seen as economy which
promotes stability because of steady disinflation, a moderate
current account deficit and a pledge to fiscal correctness.

Real Estate Industry

India at present is witnessing manifold changes to the Real

Estate Sector in India. Earlier the Real Estate sector lacked a
single nodal agency for the administration and the control of
the real estate sector including registration of real estate
projects and real estate agents.

Recently the Real Estate (Regulation and Development) Act,

2016 received presidential assent on 25th March, 2016 and is

came into force on May 1, 2016. The Real Estate Act is
instituted with the objective of establishing the Real Estate
Regulatory Authority which is a nodal agency which is given
the task of regulating the real estate sector regarding the
registration of real estate projects and registration of real
estate agents. A salient feature of the act is that 70 percent of
the money which has been realized from the customers of the
real estate project is required to be deposited in an Escrow
account which is required to be opened in a scheduled
purpose solely to be used for construction purpose. Another
significant change brought about by the Act is the creation of
Real Estate Appellate tribunals which is required to be formed
within one year.

Roads and Highways industry

Infrastructure output during the fiscal year March, 2016 rose

to a cap of 6.4 percent which is a sharp increase from the
-1.30 percent which was recorded in November of 2015.
According to Finance Minister Arun Jaitely the best mode of
increasing public investment was the development of roads
sector, alongside railway and ports. An enormous Rs 97,000
has been allocated to the roads sector in the fiscal year 2016-
17. It is also noted that the Government of India has approved
the plan for construction of 1000 km of expressways under the
National Highways Development Project which is supposed to
cost around Rs 16,680 Crore.

Power and Electricity Industry

The electricity generation in the country during the current

fiscal year has seen a growth amounting to 4.4 percent by
addition of 3030 MW of grid-connected power generation
through renewable sources of energy such as solar and wind.

Challenges put forward by NGT in Construction Sector

The National Green Tribunal established under the National

Green Tribunal Act 2010 is a government body solely for
disposal of cases relating to environment protection and
conservation of forest and other natural resources including
enforcing of legal rights relating to environment. The NGT in
the past few years has proved to be a serious threat to the
construction sector where it has issued notice for cessation of
various construction projects on the grounds of non-
compliance with MoEF guidelines, 2010 on Manual on norms
and standards for environment clearance of large
construction projects which include putting of scaffolding
around area of construction and providing of masks to
construction members. One of the major reasons that NGT
gave for issuing orders of cessation is the widespread
emission of dust including dust components resulting from
construction activities.

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