India: Does RERA Apply To Industrial Premises?

Last Updated: 30 May 2017
Article by Manisha Paranjape

The long title of Real Estate (Regulation and Development) Act, 2016 ("RERA") states that RERA has been promulgated to ensure transparency in sale of plots, apartments and buildings and in real estate projects. Real estate projects have in turn been defined as development of plots/apartments/buildings for the purpose of sale.

What is an apartment and building?

Premises used for residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade covered in definitions of "Apartment" and "Building" under RERA

Apartment has been defined as a block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified.

Building includes any structure or erection or part of a structure or erection which is intended to be used for residential, commercial or for the purpose of any business, occupation, profession or trade, or for any other related purposes

Position pre-RERA- Are industrial premises covered under existing laws relating to real estate? 

Maharashtra

Existing state laws like MOFA make specific reference to premises used for "industry" or "manufacturing" in definitions of flats and apartments. Others restrict it only to residential and/or commercial use.

The existing Maharashtra Ownership of Flats Act, 1963 ("MOFA") initially only regarded premises used or intended to be used for residence, office, show-room, shop, godown as a flat. By an amendment in 1986 the words "or for carrying on any industry or business" were introduced. Thus, premises used for industrial purposes are covered by the purview of MOFA in view of the specific amendment made to the definition of "flat".

Haryana

Section 2 of the Haryana Apartment Ownership Act, 1983 ("Haryana Act") clearly provides that the provisions of the Haryana Act shall apply to every apartment lawfully constructed for residential purposes, integrated commercial complexes, flatted factories, Information Technology Industrial Units, Cyber Park and Cyber City . Further apartment has been defined as premises to be used for residence, office or for practicing any profession or for carrying on any occupation, trade, business or manufacturing or other uses relating to Information Technology or for such other type of independent use. We thus note that the applicability to premises being used for manufacturing, or as factories has been specifically included in the Act.

Delhi

"Apartment" as defined in the Delhi Apartment Ownership Act, 1986 ("Delhi") means a part of any property, used for residence or office or for the practice of any profession, or for the carrying on of any occupation, trade, or business or for such other type of independent use as may be prescribed. It is pertinent to note that while the Statement of Objects and Reasons of the Delhi Act recognises that multi-storied residential buildings, integrated development of commercial institutional and industrial areas and flatted factories have resulted in a marked increase in the number of multi-storied buildings in Delhi, the Delhi Act has been made applicable only to multi-storied buildings constructed mainly for residential or commercial or such other purposes as may be prescribed. Thus while different types of development such as residential, commercial and industrial have been recognized, the Act has been made applicable only to buildings used for residential and commercial purposes. Thus the Delhi Act does not apply to industrial buildings unless specifically prescribed.

Punjab

The Punjab Apartment Ownership Act, 1995 ("Punjab Act") also specifically includes industry along with the words business, occupation, profession, or trade as the purposes for which premises can be used to fall within the definition of "apartment". In view of this, industrial premises would be covered under the Punjab Act as an apartment.

West Bengal and Karnataka

The West Bengal Apartment Ownership Act, 1972 ("West Bengal Act") and the Karnataka Apartment Ownership Act, 1972 as brought into force specify that the respective acts apply to properties being used or proposed to be used mainly for residential purposes. The West Bengal Act was later amended to include commercial units within its scope.

Thus, it is clear from the above, that various state legislatures specifically included the words "industry" or at least "manufacturing" in the definitions of "apartment"/" flat" where the intention was to extend the ambit of the statute to industrial premises also.

RERA as introduced and changes in the definitions of apartment and building

The Real Estate (Regulation and Development) Bill, 2013 ("Bill") as introduced in the Rajya Sabha extended only to premises used for residential and allied purposes. Thereafter the Bill was referred to the Standing Committee for its report by the Lok Sabha.

The Ministry of Finance in its deposition before the Standing Committee pointed out that commercial structures and industrial estates are also constructed in the development of real estate and that banks provide funding to all types of projects. In their opinion, it would be more appropriate to have an all-encompassing definition for "building" which would include residential, commercial, and industrial projects.

Standing Committee recommended that commercial and industrial projects should also  be included within the scope of RERA. Amendments thus made to the Bill to include property used for residential, industrial and commercial purposes in the definitions of "Apartment" and "Building"

The Standing Committee taking cognizance of the views of the Ministry of Finance, strongly recommended that the definition of "building" should include residential, commercial, and industrial projects.

The Union Cabinet approved official amendments to the Bill and in line with the previously mentioned recommendation, both "apartment" and "building" were noted to be amended to explicitly include property used for industry as well as for commercial use in addition to residential use.

The Bill and the aforesaid amendments were referred to the Select Committee for its recommendations. In the Real Estate (Regulation and Development) Bill, 2016 ("The Real Estate Bill, 2016") reported by the Select Committee, while the definitions of apartment and building were amended to include properties used for commercial purposes as well as for carrying on business, occupation, profession of trade, the word "industry" which was included in the notice of amendments approved by the Cabinet was specifically omitted from both definitions.

Select Committee retains "commercial" and "residential" but drops references to "industry" in the definitions of building and apartment.

The Real Estate Bill, 2016 as passed by both Houses of Parliament contains the definitions of apartment and building exactly as recommended by the Select Committee.

Parliament passes Real Estate Bill in line with Select Committee recommendations. Residential and commercial premises included. Industrial premises intentionally excluded.

Courts have often been called upon to construe what sort of activities would be covered under the words "business, occupation, profession or trade". However, in the present case, the word "industry" has been considered and thereafter omitted after it was inserted by an amendment to the bill. So also, as seen above generally in all the existing laws relating to real estate, the words "industry" or "manufacturing" have been specifically introduced in addition to "business, occupation, profession or trade" where industrial premises have been sought to be brought under the ambit of that act.

It is thus clear that industrial premises are not covered under the definition of either apartment or building and are therefore excluded from the purview of RERA as passed by Parliament.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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