CHAPTER-1

Introduction

The real estate sector is one of the most globally recognized sectors. In India, real estate is the
second largest employer after agriculture and is slated to grow at 30 per cent over the next
decade. The real estate sector comprises four sub sectors - housing, retail, hospitality, and
commercial. The growth of this sector is well complemented by the growth of the corporate
environment and the demand for office space as well as urban and semi-urban accommodations.
The construction industry ranks third among the 14 major sectors in terms of direct, indirect and
induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in both
the short term and the long term. Bengaluru is expected to be the most favoured property
investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and
Dehradun.
India's rank in the Global House Price Index has jumped 13* spots to reach the ninth position
among 55 international markets, on the back of increasing prices in mainstream residential
sector.
Market Size
The Indian real estate market is expected to touch US$ 180 billion by 2020. Housing sector is
expected to contribute around 11 per cent to India’s GDP by 2020. In the period FY2008-2020,
the market size of this sector is expected to increase at a Compound Annual Growth Rate
(CAGR) of 11.2 per cent. Retail, hospitality and commercial real estate are also growing
significantly, providing the much-needed infrastructure for India's growing needs.
Private equity and debt investments in India's real estate sector grew 12 per cent year-on-year to
US$ 4.18 billion across 79 transactions in 2017. In 2017, M&A deals worth US$ 3.26 billion
were made in India’s real estate sector. Private equity investments in Indian retail assets
increased 15 per cent in CY 2017 to reach US$ 800 million. India is expected to witness an
upward rise in the number of real estate deals in 2018, on the back of policy changes that have
made the market more transparent.
Sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for
office space in recent times. The office space absorption in 2017 across the top eight cities
amounted to 18 million square feet (msf) as of September 2017. Private equity inflows in office
and IT/ITES real estate have grown 150 per cent between 2014 and 2017 backed by a strong
attraction towards office sector. In 2017, new retail space of 6.4 million has finished and supply
of around 20 mn sq ft is expected in 2019.
Investments/Developments
The Indian real estate sector has witnessed high growth in recent times with the rise in demand
for office as well as residential spaces. Private equity investments in real estate are estimated to
grow to US$ 100 billion by 2026 with tier 1 and 2 cities being the prime beneficiaries. India
stood third in the US Green Building Council's (USGBC) ranking of the top 10 countries for
Leadership in Energy and Environmental Design (LEED) certified buildings, with over 752
LEED-certified projects across 20.28 million gross square meters of space. According to data
released by Department of Industrial Policy and Promotion (DIPP), the construction
development sector in India has received Foreign Direct Investment (FDI) equity inflows to the
tune of US$ 24.67 billion in the period April 2000-December 2017.
Some of the major investments in this sector are as follows:

 In February 2018, DLF bought 11.76 acres of land for Rs 15 billion (US$ 231.7 million)
for its expansion in Gurugram, Haryana.
 In February 2018, Japanese conglomerate Sumitomo Corporation announced its US$ 2
billion partnership with Krishna Group to develop real estate projects in the country.
 KKR India Asset Finance Pvt Ltd has invested over US$ 500 million in residential real
estate projects in India in 2017, taking its total investments in real estate projects in India
to US$ 1 billion.
Government Initiatives
The Government of India along with the governments of the respective states has taken several
initiatives to encourage the development in the sector. The Smart City Project, where there is a
plan to build 100 smart cities, is a prime opportunity for the real estate companies. Below are
some of the other major Government Initiatives:

 In February 2018, creation of National Urban Housing Fund was approved with an outlay
of Rs 60,000 crore (US$ 9.27 billion).
 Under the Pradhan Mantri Awas Yojana (PMAY) Urban 1,427,486 houses have been
sanctioned in 2017-18. In March 2018, construction of additional 3,21,567 affordable
houses was sanctioned under the scheme.

Road Ahead
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate
Investment Trust (REIT) platform which will help in allowing all kinds of investors to invest in
the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion (US$ 19.65
billion) in the Indian market over the years. Responding to an increasingly well-informed
consumer base and, bearing in mind the aspect of globalisation, Indian real estate developers
have shifted gears and accepted fresh challenges. The most marked change has been the shift
from family owned businesses to that of professionally managed ones. Real estate developers, in
meeting the growing need for managing multiple projects across cities, are also investing in
centralised processes to source material and organise manpower and hiring qualified
professionals in areas like project management, architecture and engineering.
The growing flow of FDI into Indian real estate is encouraging increased transparency.
Developers, in order to attract funding, have revamped their accounting and management
systems to meet due diligence standards.
DATA CENTRES AND REAL ESTATE
In the dynamic world of business, companies and institutes are continuously looking for cutting
down cost and managing risk. One such cost is the costs incurred to store and manage data!
During the inception of Information Technology, data was stored at a company level in a basic
server. However, with the increasing amount of data, the demand for data storage and its
management increased, which consequently led to the increased cost and complexity of servers.
Now, businesses these days are looking to cut down these cost and transfer the data risk to data
service providers that maintain “data centres”. These data centres carry comprehensive functions
pertaining to the data. Owing to their increasing demand, these data centres provide lucrative
opportunities to investors looking for exuberant returns. Also, many data centre structure
products such as Data Centre REITs are traded publicly across various markets across the globe.
A data centre is a coherent integration of technology and real estate. Traditionally, businesses
used to store data to perform nominal support function in form of basic servers. However, due to
rapid generation of data and complexity in storage, the organic demand for storage and
consequently for managed servers has been increasing at a considerable rate. Accordingly, these
managed servers led to the advancement of data centre as a business model and investment
opportunity for investors with moderate to high risk appetite. Data centre market size in India
Source: Internet and Mobile Association of India 2015 USD 2.2 b Data centre services are used
by every company! However, the extent of their usage differs and it generally differs on the basis
of size and business operation. Data centres are divided into captive and hosting models. Captive
models are data centres specifically designed to meet the needs of a business or enterprise, not
shared with other eternal organizations. On the other hand, the hosting or third party data centre
provides shared services of data management to various organizations. Data centre services are
imperative for companies that are looking for cutting down their operating cost, streamlining
their operations, looking to expand with constrained IT infrastructure budget and ultimately for
companies that want to focus their efforts and investment in primary business area. For investors,
the current market with low interest rate is suitable, as the data centre asset cycle appears to have
just started, paving way for considerable investment, development and opportunities in it. Data
centre market size in India Source: Internet and Mobile Association of India 2015 billion
Landlord model Investor or developer provides basic facilities such as space and/or power.
Tenants set-up their own servers, facilities and staff as per their requirements. Risk of
technological obsolescence and operations is with the tenants. Co-location model
Investor/developer provides additional facilities eg. engineering services, basic infrastructure
facilities, network services, power and backup, etc. Tenants pay the rent and set-up their own
servers. The operational risk is with the developer and technological obsolescence is shared
between developer and tenant. Managed hosting model Here, the developers or investors provide
holistic data centre services to the tenants. Tenant pays a premium on the rent to the developer or
investor for carrying the risk of operations and technological obsolescence.

TYPES OF DATA CENTRES

Types of Data Centre These sub-classes are designed for investors with varying risk exposure.
Investors who are conservative about data centres may opt for landlord model, while investors
with considerable risk appetite may opt for co-location and managed hosting model. As per the
current market dynamics, demand for co-location model is on the rise. According to a report by
US based research firm Orbis Research, the Global Data Center Colocation Market size was of
value $29.83 billion in 2016. It is projected to reach a value of $76.37 billion till 2022.
Technological advances in big data, artificial intelligence, internet of things and digitalization
through government’s digital India campaign is likely to generate enormous data centre traffic in
coming years. Hence, data centre becomes imperative in capturing these data. Businesses are
trying to transfer the capital expenditure of business to operating expenditure. Hence, marking
the importance and demand of third party data centre service provider. Data Centre REITs have
multi-fold advantages for investors and developers. In terms of return, the data centre REITs in
USA have given a whopping 28.43% return in 2016. Business organisations these days are
moving towards cloud computing. Cloud computing has impacted the location of data centre
making it irrelevant. This can lead to the demand for data centres in Tier 2, Tier 3 and peripheral
areas of the city, where the land cost is low.

KEY DEMAND DRIVERS

US REIT market is one of the most established markets across the globe and hence, its approach
is followed by several countries in defining their REIT models. Though, the US REIT
performance trends cannot be exemplified for the entire world, it can give a fair idea of returns
with respect to various real estate asset classes.
PERFORMANCE OF DATA CENTRE REIT IN US VS. OTHER US REITS

Performance of data centre REIT in US vs. Other asset class Source - National Association of
Real Estate Investment Trusts RISKS OF DATA CENTRE ASSET CLASS Development of
data centre is capital-intensive and complex, as the infrastructure investment for data centres is
substantial. Also, experience and knowledge required for designing a data centre is significant.
The time required to break-even or get positive cash flow are generally high. Data centre being a
real estate is illiquid in nature. Hence, making it difficult to sell off or price during certain times.
One of the major risks of data centres are technological obsolescence. With evolving technology,
facilities at the data centres may become obsolete and the high cost associated with their
development might go down the drain. Furthermore, space required for data centre will reduce as
and when the speed of technology is more than the speed of data generation. Operational costs of
data centres are also high, as proper HVAC system requires continuous maintenance and
electricity. Increasing importance of cloud computing may result in the irrelevance of data centre
‘location’. Hence, making data centre non-location specific. Disasters and cyber crimes are
continuous threats impending on data centre management.

KEY INVESTMENT GUIDELINES

Design and architecture of a data centre is critical for the sustainability and success of data
centre. Robust design of a data centre i s more likely to attract tenant as well as investor s .
Investors look at the potential growth of the asset, while committing an investment. Data centre
should have an expansion opportunity in place. The expansion can be in terms of space for
incorporating more tenants , up-gradation of existing facilities and innovation of IT
infrastructure. Reinvestment should be made in the form of these expansions to enhance the
quality of the asset. Data centre’ s operating expense i s a function of it s location. Apart from the
continuous supply of electricity , the cost of electricity , tax incentive, cost associated with
skilled and unskilled labors are location specific factor s that impact the profitability of a data
centre. The quality of asset as well as the exi s ting tenant should be looked upon for the
marketability of the data centre. The time period of the existing lease with tenants is also
essential. Fundamental analysis of the macro-economic factor s pertaining to the demand of data
should be diligently done to rationalize the decision of investment in data centre.
CONCLUSION!

With the complexity in IT infrastructure, businesses are shifting their IT operations to cloud
services, leading to the emergence of Infrastructure-as-a-Service (IaaS) and other cloud models.
These outsourcing services will demand data centre. However, the development of data centre is
time consuming and sometimes cumbersome, so only specialized players with the knowledge
and investment power combined will be venturing into data centres. India is yet to list its first
REIT, but data centre REITs can provide return and risk characteristics of data centre to retail
investors. Owing to the aforementioned demand and risk factors, data centre is expected to grow
as an asset in India and worldwide.
GST AND REALITY

Goods and service tax, in short GST, is the new taxation system adopted by the government of
India. GST is has been introduced with an objective of upgrading the indirect tax system in India.
Brought in force on 1st of July 2017, GST will be a combination of all the taxes that were levied
by the centre, state and local bodies under the bygone regime. As of July 2017 all UTs and states,
except Jammu and Kashmir have passed their respective SGST acts.

The previous indirect tax regime was considerably complex because of lack of standardization.
Though central taxes were uniform, there were significant variations in state level taxes.
Variations existed in the taxation rates, list of applicable taxes, exemption criteria etc. As a
result, doing business between two states led to a lot of confusion and paved way for
malpractices such as arbitrage. Furthermore, the previous system was subjected to cascading of
taxes i.e. taxes were levied repetitively at each stage of production until being sold to the end
consumer. Though tax credit existed in form of CENVAT the benefits were negligible due to is
complexity and limited scope. In view of this, the Indian Government introduced GST which
will have standard rates throughout the country. The idea of implementing GST in India was first
put forward in 2007. As per the original stance, the bill was proposed to be introduced in April
2010. However, it took seven years for GST law to finally become a reality.

Some quick facts

 GST is a dual tax i.e. it will be shared between the state and the centre government. Generally,
levy will be divided equally among the two authorities. For example, in case of tax of 18 per cent
on a product or service, 9 per cent will go to centre as CGST and the remaining 9 per cent will go
to state as SGST

.  GST Act consists of:

State GST (SGST)/(UTGST): the component which will be levied by the state government or
union territories.

Central GST (CGST): the component that will be levied by the central government.
 Integrated GST (IGST): the component that that will be levied in case of interstate trade

 The entire bouquet of goods and services are categorized into four tax slabs: 5%, 12%, 18%
and 28% to make the system simpler.

 In case of interstate trade IGST will be levied by the central government.

 GST has a well-defined structure for input tax credit (ITC). ITC allows deduction of amount
already paid as input tax from the output tax. ITC generated from CGST can be adjusted only
with CGST or IGST. Likewise, SGST can be adjusted only with SGST and IGST

.  Furthermore, as per the anti-profiteering measure of the GST act, it will also be mandatory for
the supplier to pass on the benefit to the consumer. To ensure this, the Anti-Profiteering
Authority will be well equipped to monitor, identify and penalize the violators.

 GST will be a destination based tax system. In other words, GST will be levied in the state
where the goods or services are consumed. This is in contrast to the previous regime where the
tax was levied in the state where the good or service originated.

 GST features a more comprehensive reverse charge mechanism (RCM) which unlike the
previous regime also covers goods. Basically, RCM penalizes any receiving entity which does
business with non-compliant suppliers by making them . The realty angle Real estate such as
apartments, office spaces, shops fall under the category: Construction of a complex, building,
civil structure or a part thereof, intended for sale to a buyer, wholly or partly. However, ready to
move properties, i.e. properties which have received occupation certificate, have been exempted
from paying GST. Initially the GST for the category was set at 12 per cent with provision to
allow full input tax credits. However, in a revised order the government has updated the rate to
18 per cent. The revised order also allows exemption of land value, not exceeding one-third of
the total property value, for calculating the GST. Hence, straight away GST will be applicable
only on two-third of the property value making the effective rate 12 per cent. As GST will not be
applicable on properties that have received O.C. developers will not be able to claim ITC on such
properties and thus they will pass the burden of input taxes on the consumers. However, it will
be too early to say the kind of effect this will have on the final price of the property. Rental
income, from residential property has been completely exempted from GST. In case a property is
rented out for commercial purpose, income over Rs 20 lakh will attract GST of 18 per cent.
During the previous regime, cost of property included multitudes of taxes incurred on inputs
such as steels, cement, labour, transportation etc. Taxes on most of the construction material
varied between 12 to 14 per cent. Owning to the limitations of CENVAT credit system, the
developer had to incur most of the input taxes. These were subsequently passed on to the buyers.
However, this component was not visible to the customer as it formed a part of the basic cost of
property. The only visible amount by the way of taxes were Service tax and VAT charged during
the purchase stage. The concept of ITC will eliminate the invisible cost additions thereby
bringing down the final price of property. It will not be feasible to compare pre and post GST
rates directly. For illustrative purpose only Implications Overall GST is expected to bring long
term advantages to the Indian economy.

Some of the key advantages include:

 Provision of Input Tax Credit is expected to bring down property prices as it will eliminate
cascading of input taxes. However, it is early to understand the exact effect of GST on prices.

 Strong anti-profiteering measure will ensure that the benefits of ITC are always passed on to
the consumers.

 GST will bring transparency in the taxation process. This will boost the trust levels of home
buyers

.  A sound and efficient taxation system will improve confidence among Private Equity players
and attract more and more foreign investment

.  GST is supported by a strong online platform. This has ensured that every-thing is accounted
for in a timely manner.

Draw backs:

 GST will impose comparatively higher compliance burden on businesses. This may cause a
marginal increase in operational expenditures. However, in the long run the advantages of GST
will level this out.
 The timing of GST has coincided with RERA which too involves significant procedural
upgrades and paper work. With the introduction of GST the realty businesses will have to go
through two major policy transitions at the same time. As a result, the market is expected to slow
down a bit in the short term.

 GST awareness has not been handled well. The image of GST has been hampered because of
negative publicity. Home buyers are confused as to what they can expect out of GST. Strong
measures are required to be taken in this direction.
Environmental laws: What home buyers should know

One of the major concerns of the 21st century that has been most discussed and debated upon
across various global forums has to be the environment and impact of development on the same.
Exponential rate of development has led to increased stress on the environment and the same has
been reflecting on the development agenda of most governments. Every nation has been
promoting sustainable growth and development and India is no different. Even though the Indian
government had various rules and regulations at central, state and local levels in order to
safeguard the environment from the severe impact of development, the genuine implementation
of the same is still a concern. One of the major areas where the development activities are taking
a toll on the environment is the real estate sector. Though the impact caused by real estate is not
as severe as compared to sectors like mining, manufacturing or power generation, it definitely is
not negligible. Owing to its relatively low profile among the other pollution causing industries,
the real estate sector, especially residential development was usually not given much attention
while evaluating the environmental impact
However, the exponential growth in population has increasingly led to large parcels of land
being used for development activities. It is becoming increasingly difficult to overlook the
impact of real estate on the environment. Multiple incidents in the recent past have now
compelled authorities to sit up and take notice of the residential projects and how these impact
the environment. There is a growing consensus to align and construct all residential projects
according to the set environmental compliances. This is even more critical for projects that are
being built in the proximity of any natural resources like forests, water bodies, wildlife
sanctuaries, coastal zones etc. Another area of concern regarding these projects is got to do with
the lack of awareness among the buyers of these residential projects. Many a times, buyers are
caught unawares when the project they invested in gets stalled mid-way for lack of essential
environmental approvals. This happens as buyers do not undergo the due diligence that is
required to figure out if the project has any loopholes. Thus, it is clear that there exists a gap
between the government’s intent and the actual execution of environmental laws in the real estate
sector. This report does a deep dive into the different real estate environmental legislations in
India and how consumers can be more aware about the same.
Lake Encroachment in Bengaluru

Apart from shrinking areas the existing lakes are also suffering from high levels of pollution as a
result of inflow of untreated sewage and industrial effluents from surrounding residential and
industrial zones. The pollution has rendered a major proportion of the city’s lake-water unfit for
drinking. As a result of pollution ,Varthur Lake and Bellandur lakes-two of the largest lakes of
the city-are experiencing high levels of frothing. Several experts attribute the frothing along with
high concentrations of hydrocarbons as a key reason being the regular fires which occur over the
surface of these lakes. How will it impact home buyers? As per the NGT’s(National Green
Tribunal) May 2016 order the BBMP has increased the buffer zone for development activities
from 30 meters to 75 meters from the lake boundary. The order also mentions a buffer of 50
meters from the primary Rajkaluves (major channels), 35 meters from secondary and 25 meters
from the tertiary Rajkaluves. Pertaining to this order, the BBMP is not allowed to give clearances
to any construction with in the said buffer zone henceforth. This has severely affected the
projects which had recently applied for clearances. Furthermore, the upcoming Bengluru
Masterplan 2031 is expected to incorporate the new development zones as per the NGT order.
Though the order may exclude existing projects located inside the buffer zone or the projects
which have already got clearances the direct impact on property values cannot be ruled out.
Being a no development zones BBMP will be restricted in creating or upgrading public
infrastructures in these buffer zones. This will severely affect the livability of these residential
zones. Moreover, it will also be difficult for the home buyers to plan out redevelopment of their
homes. The lake side homes which were once sold at premium prices are now facing a risk of
indefinite future. Apart from financial implications the, the residents also face other risks such as
risk to heath as a result of proximity to high chemical deposit zone and risk of floods. One of the
most well-known cases of conflict between real estate and the environmental laws has been the
encroachment of Lakes and Rajkaluves (water channels) in Bengaluru. Before going to the case
first let us get some background knowledge about the geography. Apart from being the Garden
City of India, Bengaluru can also be regarded as the city of Lakes, owing to presence of
numerous lakes in and around its limits. Until 1960s, it was believed that, the city had over 250
lakes interlinked with water channels called Rajkaluves. These water channels ensured proper
balance of water during drought and flood conditions. The history of most these lakes and water
channels dates back to the times of Kempegowda-The founder of Benglauru city. Ever since
their establishment the lakes of Bengaluru have played an important role in the making the city
prosperous. Apart from ensuring adequate water availability, the lakes also had good presence of
fresh water fish which supported the dietary requirements of the natives. The lake have always
been an integral part of the city’s culture and an important backbone of the region’s rich bio
diversity. When it began However, the rapid urbanization of Bengaluru during the final decades
of the 20th century led to a large scale encroachment of these crucial water bodies by residential
as well as commercial establishments. Owing to lack of stringent lake protection policies, the
earlier BBMP (Bruhat Bengaluru Mahanagara Palike) master plan itself allowed for setting up
organized residential and commercial zones over the areas which were originally occupied by
Lakes and Rajklauves. Apart from organized development, the lakes also lost a major portions of
its beds and catchment areas to rapidly growing slums. Aftermath Today, Bengaluru has
permanently lost many of its Rajkaluves which in turn has negatively impacted the water level
balancing mechanism of the lakes, which is further depleting the area under lakes. As per
government statistics the number of lakes in the city has reduced from around 260, recorded in
1960, to mere 81 of which only 34 are recognized as live. To put it in other way, the total area
covered by lakes in the city is reduced to less than half of the original levels over the course of 5
decades.
Apart from shrinking areas the existing lakes are also suffering from high levels of pollution as a
result of inflow of untreated sewage and industrial effluents from surrounding residential and
industrial zones. The pollution has rendered a major proportion of the city’s lake-water unfit for
drinking. As a result of pollution ,Varthur Lake and Bellandur lakes-two of the largest lakes of
the city-are experiencing high levels of frothing. Several experts attribute the frothing along with
high concentrations of hydrocarbons as a key reason being the regular fires which occur over the
surface of these lakes. How will it impact home buyers? As per the NGT’s(National Green
Tribunal) May 2016 order the BBMP has increased the buffer zone for development activities
from 30 meters to 75 meters from the lake boundary. The order also mentions a buffer of 50
meters from the primary Rajkaluves (major channels), 35 meters from secondary and 25 meters
from the tertiary Rajkaluves. Pertaining to this order, the BBMP is not allowed to give clearances
to any construction with in the said buffer zone henceforth. This has severely affected the
projects which had recently applied for clearances. Furthermore, the upcoming Bengluru
Masterplan 2031 is expected to incorporate the new development zones as per the NGT order.
Though the order may exclude existing projects located inside the buffer zone or the projects
which have already got clearances the direct impact on property values cannot be ruled out.
Being a no development zones BBMP will be restricted in creating or upgrading public
infrastructures in these buffer zones. This will severely affect the livability of these residential
zones. Moreover, it will also be difficult for the home buyers to plan out redevelopment of their
homes. The lake side homes which were once sold at premium prices are now facing a risk of
indefinite future. Apart from financial implications the, the residents also face other risks such as
risk to heath as a result of proximity to high chemical deposit zone and risk of floods.

This was based on the guidelines by the Ministry of Environment and Forest wherein national
parks and wildlife sanctuaries were declared eco sensitive zones to an extent of 10 km. Here is a
chronological details of how the entire case unfolded. One of the most controversial cases
involving the real estate sector and the environment has to be the Okhla Bird Sanctuary case of
Delhi NCR. The project has jeopardized the dream of owning a home for over 70,000 home
buyers. So, what happened? To clearly understand what happened, it is essential to understand
what an ecosensitive zone (ESZ) is? ESZ are basically areas notified under the EPA
(Environment Protection Act). It was first proposed by the Ministry of Environment that ESZs
need to be created around protected areas (PAs) in 2002. It was decided that areas falling within
a radius of 10km from all PAs be declared as ESZ. However, following opposition from several
states, the Supreme Court challenged this. In 2006, the SC ordered that states would declare ESZ
on a case-to-case basis and industrial activities in such locations would be regulated and not
prohibited. In December 2006, the court asked MoEF to give a final opportunity to the states to
declare ESZs. It warned the states that if they did not submit ESZ proposals within the time
given by MoEF, it might declare an ESZ of 10 km around all PAs. It was also directed that
projects which had already got the environment clearance but were located within 10 km of PAs
will have to take approval from the National Board of Wildlife (NBWL). This order was
interpreted by the MoEF to mean that till the time site-specific ESZs were not notified in a
particular PA, all the projects falling within 10 km of the PA and seeking environment clearance
will need NBWL's approval. In February 2011, MoEF formulated guidelines for identifying
area-specific ESZs. As per the guidelines, mining and most polluting industries and change of
land use were prohibited in ESZs and other developmental activities were regulated. However,
few states followed this. In December 2012, while hearing a petition on the buffer zones of PAs
in Goa, the Supreme Court again directed MoEF to give the states a final chance for notifying
ESZs. June 2013 was the final deadline. Till June 30, 2013, out of the total 670 PAs that do not
have ESZs, the MoEF received proposals only for 360. Now, with such ambiguities existing, the
Okhla Bird Sanctuary case came to the fore in 2013. A group of environmentalist filed an appeal
to the NGT to stop construction within 10 km of the Okhla Bird Sanctuary. Okhla Bird
Sanctuary Case Case Study July 11, 2013 Case taken up by NGT August 14, 2013 NGT Instructs
the NOIDA authorities to identify builders who have projects within 10 km radius of the Okhla
Bird Sanctuary. It was also directed that if any construction work has been going on within the
10 km radius without proper EC or by flouting any norms of the same, it shall be immediately
stopped. September 17, 2013 The initial report submitted by NOIDA stated that there were 55
projects in the vicinity of the said area, out of which 6 were outside the 10 km radius. The
remaining 49 projects, the report claimed, have obtained the necessary clearance and, therefore,
there is no restriction on them from proceeding with the construction. However, the NGT
demanded for a detailed report and also ordered restraining construction without proper
clearance as it claimed that when the government has taken a policy decision to declare the 20
km zone as ecosensitive, it should stick by it. Thus, construction for the 49 projects was put on
hold. Case Study The environmentalists were clearly upset with this verdict. However,
considering that it was not the developers or buyers fault, this decision proved to be in the benefit
of most. However, this case compelled the Supreme Court to support the NGT’s stand mandating
builders to obtain all the necessary approvals for their projects before the commencement of the
construction work. October 28, 2013 In the detailed report submitted by the NOIDA authority, it
was stated that out of the 49 projects within 10 km radius, construction has not started for seven
as the layout and building plans were yet to be sanctioned by the authority. Fifteen of the projects
have received completion certificates and another 25 have received ECs. Remaining two projects
do not need an EC as they are 0.6 and 0.8 hectares respectively. However, NGT continued with
restriction on construction and also restricted issuing of completion certificate to developments
within 10 km radius of the sanctuary. This did not go down well with the builders who claimed
that the sanctuary had not notified eco-sensitive zone. In addition, they claimed that the SC in
2010-11 had allowed a green signal. The NGT hence asked the State government to send the
proposal relating to the eco-sensitive zone with respect to Okhla sanctuary to MoEF within four
weeks. MoEF was then to issue notification within a period of two weeks. Uttar Pradesh (UP)
government submitted a fresh proposal on the eco sensitive zone reducing it to of 100 metre
radius February, 2014 MoEF writes to UP government with queries on the eco sensitive zone
proposal March 18, 2014 NGT reiterates that no permission shall be granted for new
construction projects within 10 km radius of the Okhla sanctuary in Noida, until final orders are
passed by it. Projects which are half way through, or have been completed, also cannot get a
completion certificate until final orders are passed, NGT says. Directs the Secretary of MoEF to
decide on eco-sensitive zone for Okhla Sanctuary by discussing with concerned government
officials. April 3, 2014 The Wildlife Division of the MoEF sets up a three member committee to
undertake

KEY ENVIRONMETAL LEGISLATIONS IN REAL ESTATE

Key environment Laws related to Real Estate
• Environment (Protection) Act, 1986
• Coastal Regulation Zone Notification, 2011
• Forest (Conservation) Act, 1980 (Forest Act)
• Hazardous Waste (Management and Handing) Rules, 1989
• Water (Prevention and Control of Pollution) Act, 1974
• Air (Prevention and Control of Pollution) Act, 1981
• Wildlife (Protection) Act, 1972 (Wildlife Act)

Regulatory Authorities
• The Ministry of Environment & Forests (MOEF)
• National Green Tribunal (NGT)
• Coastal Regulation Zone Management Authority
• Central and State Pollution Control Board
• Forest Settlement Officer • National Board of Wild Life (NBWF)
In India, MOEF is the top administrative body that is responsible for the regulation, planning,
promotion and coordination of environmental and forestry plans in India. As far as real estate is
concerned, the MOEF and Environment Protection Act (EPA) govern the environmental laws for
the construction and building sector.

EIA (Environment Impact Assessment) is the process of assessing the likely impact on the
environment of a proposed project- be it a residential or commercial development or an
infrastructure project. It also takes into account the socio-economic and cultural impacts of the
project, both positive and adverse. Conducting an EIA enables one to predict the impact of the
project on the environment during the planning and design stage itself. Thus, it becomes easier to
find ways to reduce the adverse impact and come up with possible solutions that can be
presented to the final decision makers. By diligently adhering to the EIA norms both
environmental and economic benefits can be achieved. These include reduced cost and time of
project implementation and design, avoided treatment/clean-up costs and impacts of laws and
regulations.
1994 - Environment Impact Assessment Notifications

This is the first notification issued by MOEF on 27 January 1994 (1994 Notification). It stated
that: • No new project or the expansion or modernization of any existing project listed in
Schedule-I, would be undertaken unless and until it receives an environmental clearance (EC)
from the Central Government. • This notification did not contain any entry for construction
projects and therefore at that time EC was not required to be obtained for the same.

2004 - Amendment Notification The first amendment of the Act came into effect on 7 July 2004
(2004 Amendment Notification). These modifications included: • Any construction project
meant for more than 1,000 persons or discharging sewage of more than 50,000 litres per day or
involving an investment of Rs 5,00,00,000 or more would require prior EC. • Thus, for the first
time construction projects were included under the ambit of the Act. 1994 - Environment Impact
Assessment Notifications EIA (Environment Impact Assessment) is the process of assessing the
likely impact on the environment of a proposed project- be it a residential or commercial
development or an infrastructure project. It also takes into account the socio-economic and
cultural impacts of the project, both positive and adverse. Conducting an EIA enables one to
predict the impact of the project on the environment during the planning and design stage itself.
Thus, it becomes easier to find ways to reduce the adverse impact and come up with possible
solutions that can be presented to the final decision makers. By diligently adhering to the EIA
norms both environmental and economic benefits can be achieved. These include reduced cost
and time of project implementation and design, avoided treatment/clean-up costs and impacts of
laws and regulations.
EIA-REAL ESTATE TIMELINE The MOEF issued a fresh Notification dated 14 September
2006 (2006 Notification) which superseded the 1994 Notification. The 2006 Notification
prescribeddefinitive thresholds for obtaining prior EC for construction projects.
• In case a project is falling under Category 'A' of the schedule to 2006 Notification, then the
project proponent is required to obtain prior EC from the Central Government (i.e. MOEF)
. • In case a project is falling under Category 'B' of the schedule to 2006 Notification, then the
project proponent is required to obtain prior EC from the State Government (i.e. State
Environment Impact Assessment Authority (SEIAA))
. • Category B will include projects where the built up area is more than 20,000 sq metres but
less than 1,50,000sq meters.
• Category A will include projects where the built up area is mora than 1,50,000sq meters
. • The 2006 Notification also lays down a General Condition (GC) which states that any project
or activity specified in Category 'B' will be treated as Category A and permission of MOEF
would be required, if located in whole or in part within 10 km from the boundary of (i) Protected
Areas notified under the Wild Life Act, (ii) Critically Polluted areas as notified by the Central
Pollution Control Board, (iii) Notified Eco-sensitive areas, and (iv) inter-State boundaries and
international boundaries. The MOEF issued a fresh Notification dated 14 September 2006 (2006
Notification) which superseded the 1994 Notification.
The 2006 Notification prescribeddefinitive thresholds for obtaining prior EC for construction
projects. 2014 - Amendment to the Notification The next amendment came into effect on 22
December 2014 (2014 Notification).
The following amendments were made to the 2006 Notification:
• Construction projects that include any industrial shed, schools, colleges, hostels for
educational purpose, will not be required to obtain an EC as long as they comply with
sustainable environmental management, solid and liquid waste management, rain water
harvesting, and they may use recycled material such as fly ash bricks
• The GC mentioned above will not apply. This means, construction projects located within 10
km from the boundary of the areas mentioned above, will not be treated as Category 'A' project
and would not be required to approach MOEF for prior EC 2006- Environment Impact
Assessment Notifications The final amendment came in December 2016. The amendments
included:
• Under the revised norms, environmental clearances would be given in an integrated manner. It
would be clubbed with the building permissions under the building by laws for projects having
an area of upto 20,000 to 150,000 sqmtr.
• Environmental clearance for projects having an area of 150,000 to 300,000 sqmtr would be
given by State level authorities after conducting the EIA
. • Projects with an area of more than 300,000 sqmtr would be dealt under the Central
Government. In other words, environmental clearance for Township projects
or Area development projects with an area of more than 300,000 sqmtr or 150 ha woud be given
by the Central authorities
. • Projects sized at less than 20,000 sqmtr would be subject to a self declaration. However,
buildings sized between 5,000 to 20,000 sqmtr would also follow environmental norms for
construction and maintenance phase
. • It has been proposed that Qualified Building Environment Auditors as empanelled by the
MoEFCC would assess and certify these building projects.
• It is mandatory to constitute an Environmental Cell in the local authorities to support appraisal,
compliance and monitoring of building projects and to provide environmental planning in this
area.
• This Environment Cell would be responsible for processing applications and presenting it in
the meeting of the Committee.
• The Committee will appraise the project and stipulate the environmental conditions to be
integrated in the building permission. After recommendations of the Committee, the building
permission and environmental clearance will be issued in an integrated format by the local
authority
. • Every five year the project proponent is required to submit the Performance Data and
Certificate of Continued Compliance for the environmental conditions parameters applicable
after completion of construction from Qualified Building Environment Auditors.There has to be
a special focus on the following parameters:-
• o Energy Use (including all energy sources o Energy generated on site from onsite Renewable
energy sources. o Water use and waste water generated, treated and reused on site. o Waste
Segregated and Treated on site. o Tree plantation and maintenance.
• The Environmental Cell is entitled to randomly check any of the completed projects for its
compliance status including the five year audit reort.
• The State Governments will enact the suitable law for imposing penalties for noncompliances
of the environmental conditions and parameters
• No Consent to Establish and Operate under the Water (Prevention and Control of Pollution)
Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981 will be required from the
State Pollution Control Boards for residential buildings of built up area up to 1,50,000 square
meters

No matter how many regulations and norms the government imposes on the real estate sector,
unless and until it is implemented properly and monitored regularly, there is no use of the same.
However, proper implementation also depends on the consumers. If there is a general sense in
the market that buyers are aware about the rules and regulation, developers would also be more
cautious about not violating any rules. So, how can home buyers be sure about if a project they
are interested in has all the required environmental approvals in place? These three simple steps
can help them to some extent: Ask the developer for building permissions: Once you have
narrowed down on a project of your choice, one must always ask the developer for the building
permissions.
Check thoroughly if he has taken all building permissions or not.
1 Check the Master Plan: After finalizing the project, always check the land usage of the site in
the master plan. You have to check if the site is marked as residential or not. If the site is not
marked as residential you can be rest assured that the land will get into some legal hassle sooner
or later.
2 Check for the Banks: If the project is being financed by a nationalised bank, you can be almost
100% sure of the authenticity of the project with respect to all the approvals that need to be taken
prior to commencing construction.
" Real estate in India has not yet received the industry status and to a large extent it is still
unorganised. The biggest problem haunting the real estate sector today is probably the
unwillingness to change or adapt to better and more effective means of working. Even today, the
sector is being run by age old rules and regulations. However, things have been gradually
changing since the last decade or so. This goes for environmental regulations as well. It is amply
clear from the above sections that the government has shown clear intentions towards making the
real estate sector more aligned towards the environment. Regulations have been modified at
regular intervals in order to promote sustainable development and also to evade the adverse
impact of construction activities on not only the environment but also on the people who depend
on them. Having said this, it is essential to understand that we do not yet have the ideal condition
one would hope to see as far as implementation of environmental laws in the real estate sector is
concerned. While regulations are in place, a proper mechanism to monitor the actual
implementation is required. Resolving ambiguities related to post-facto approvals, making
master plans fool proof or ensuring on-site implementation of all environmental regulations and
strict penalties for those not adhering to the same are some of the steps that needs to be taken. All
stake holders involved, whether it is the government bodies or the developer, need to come
together and work towards achieving an ecosystem that is favourable for the environment and in
turn for the people using it.

" IT IS TIME FOR HOME BUYERS TO REALIZE THAT SEWAGE TREATMENT PLANTS,
RAINWATER HARVESTING SYSTEMS ARE AS IMPORTANT AS SWIMMING POOLS
AND LUXURIOUS CLUB HOUSES"
 CHAPTER-2
REVIEW OF LITERATURE AND RESEARCH DESIGN

REVIEW OF LITERATURE

The real estate sector has become a major contributor of an economy’s growth. To understand
the significance of the sector and its implications there have been various research on real estate
industry both in India and abroad. The research are being conducted to gain more knowledge
about the various factors contributing to the growth of the industry and also to analyze the factors
which effect the decision of investment in the sector. I have tried to study few such research
papers to get a better idea about the current scenario of the real estate sector.

Graeme Newell and Rajeev Kamineni in their research paper assessed the risk-adjusted
performance and portfolio diversification benefits for the real estate markets (office, retail and
residential) of New Delhi and Mumbai. The real estate markets were found to under-perform the
stock market in India over 1998– 2005, with most markets improving their performance in more
recent years, although there was some loss of portfolio diversification benefits for office and
residential real estate with stocks. Deregulation of the capital markets and international
investment in India is also likely to have a significant impact on future FDI levels and the growth
of real estate funds for real estate investment in India. They also studied that offshoring in the
cities like Delhi and Mumbai has created huge demand for better infrastructure. This area of
offshoring has significant real estate investment issues; particularly concerning technology parks,
access to Grade A office space.

They have also concluded that deregulation of the Indian capital markets since 2004, and less
restrictive guidelines for foreign direct investment in real estate in India since February 2005
have seen significant improvements in the real estate investment environment in India for both
local and international players. This has taken on increased importance as India significantly
expands its economic growth to potentially be the world’s third largest economy by 2020, and
international real estate investors seek global investment opportunities; particularly in the
emerging Asian real estate markets. The expected development of REITs in India in the next few
years will also expand the real estate investment opportunities available in India.

Vandna Singh and Komal (2009) in their research paper found that as the GDP increases the
real estate prices also increases because there is a high degree of Positive correlation between the
real estate prices and GDP. The Real estate prices also increases with increase in the per capita
income as there is high degree of positive correlation between these two. The FDI into the
country affects the real estate FDI and real estate having a positive correlation leads to the boom
in this sector. Increase in FDI from 2006 to march 2007 is 10%. Earlier it was 16% and now in
2008 it is 25%.

The interest rate also affects the real estate prices because it affects the lending and borrowing by
the investors. In residential segment, availability of easy home finance and rising purchasing
power has driven the growth. Builders are launching high-end, life style residential products to
cater to the growing bunch of high net worth individuals.

They suggested that due to high prices the lower income group is not able to purchase the land,
so govt. should take measures to protect the lower income group. The investors should analyze
the type of land in which they are going to invest and the potential

Returns from it. Due to lot of investment avenues in real estate in India, fraud cases are also
increasing day by day like in Delhi deconstruction of buildings. Thus careful measures and laws
should be enacted to deal with these types of situations.
Natalija stated that Advantage India: Real estate is one of the fastest growing sectors in India.
Market analysis pegs returns from realty in India at an average of 14% annually with a
tremendous upsurge in commercial real estate on account of the Indian BPO boom. Lease rentals
have been picking up steadily and there is a gaping demand for quality infrastructure. A
significant demand is also likely to be generated as the outsourcing boom moves into the
manufacturing sector. Further, the housing sector has been growing at an average of 34%
annually, while the hospitality industry witnessed a growth of 10-15% last year.

Jim Berry stated that the highest and best use analysis is another component of property
investment analysis, especially in the case of vacant land or deteriorated property that needs to be
redeveloped. Highest and best use is defined as the most profitable use at which a site can be
developed. Thus, highest and best use analysis is usually carried out for land sites that are
acquired for development purposes. A site’s highest and best use will depend on a number of
factors including site physical characteristics, its location, make up and purchasing power of the
population in its area of influence, competitive projects in its area of influence, market conditions
and prospects at the time of analysis, and other factors. If the land site is zoned in an urban use,
the highest and best use analysis will focus on the feasibility and profitability of developing the
alternative allowable uses.

Bansal.A, Sirohi R and Jha Manish (2011) in their article explain that the real-estate sector has
playing a crucial role in SEZ (Special Economic Zone) and forming of township. As also, it
helps the town to become cities. They also explain the concept of “green” building, adopted by
the sector, testifying to a significant emphasis on sustainability consideration. They explain the
infrastructure development is just before parallel to the real estate developments. Their paper
presents a panoramic view of the operations of Indian real estate sector in various property
segments, the challenges faced by the sector and its prospects

Singh V and Komal (2009) explained in their article about the investment in India for property
or industry use. And also they divide this sector into three division, under 1st one they explained
the fundamental factor are affecting the real sector value like demand, supply, property,
restriction to use and site characteristics. Under the 2nd and 3rd one, they explained the causes
and constraints to the present real estate boom respectively in India. They also present the
suggestion and future prospects of real estate in the country

STATEMENT OF THE PROBLEM

Nowadays people need house, and land property to safeguard the future in a

long term perspective of investment for own uses and capital in the world. The

positive outlook of the Indian government is the key factor behind the sudden rise of

the Indian Real Estate Sector – the second largest employer after the agriculture in

India. The growth curve of Indian economy is at an all time high and contributing to

the upswing is the real estate sector in particular. Investments in Indian real estate

have been strongly taking up over other options for domestic as well as foreign

investors.

The real estate sector is major employment driver, being the second largest

employer next only to agriculture. This is because of the chain of backward and

forward linkages that the sector has with the housing and construction sector. About

250 ancillary industries such as cement, steel, brick, timber, building materials etc.,

are dependent on the real estate industry.