BUSINESS LAWS PROJECT REPORT ON

Issues relating to Housing Sector

SUBMITTED TO:
Prof. Jagdish Shettigar
Birla Institute of Management Technology
Plot No. 5, Knowledge Park II
Greater NOIDA, UP - 201306

SUBMITTED BY:
S.No.
1.
2.
3.
4.
5.

Name
Deepjyoti Nath
Dishant Gupta
Ishan Biswari
Jasmine Singh
Kaveri Saronwala

Roll Number
14DM068
14DM078
14DM096
14DM099
14DM111

Email address
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]

DATE: 14 FEBRUARY 2015

ACKNOWLEDGEMENT
Completion of a project and writing of the report is a satisfying and pleasing part of the
opportunity, for those who contributed towards it. While doing my project we were guided in
a way that not only showed us the right direction but also helped us to grow more rational in
our thinking and approach.
This project has been more of teamwork and its successful completion would have been
impossible without sincere cooperation of all those we have been associated with it. I feel
highly indebted to them.
I owe enormous intellectual debt towards my teacher and mentor Prof. Jagdish Shettigar
whose suggestions and guidance was invaluable and helped us throughout our project.
Last but not the least we would like to thank all those persons and organizations who have
helped us directly or indirectly in the successful completion of this study.

TABLE OF CONTENTS
S. No.

Content

Pg No.

1.

Introduction to Housing Sector

2.

Structure and Laws of Housing in India

3.

The Real Estate (Regulation and Development) Bill, 2013

12

4.

Penalties

15

5.

Housing Scams

16

6.

References

20

Real Estate in India: An Introduction

The Indian real estate sector is one of the most globally recognised sectors. In the country, it
is the second largest employer after agriculture and is slated to grow at 30 per cent over the
next decade. It 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.
According to a study by ICRA, 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
the near future, as a survey by an industry body has revealed a 35 per cent surge in the
number of enquiries with property dealers. Bengaluru is expected to be the most favoured
property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi
and Dehradun.
Private equity (PE) funding has picked up in the last one year due to attractive valuations.
Furthermore, with the Government of India introducing newer policies helpful to real estate,
this sector has garnered sufficient growth in recent times.
Market Size
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$ 23,874.1 million in the period April 2000-September 2014.
The Indian real estate market size is expected to touch US$ 180 billion by 2020. The housing
sector alone contributes 5-6 per cent to the country's gross domestic product (GDP). Also, in
the period FY08-20, 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.
According to a study by Knight Frank, Mumbai is the best city in India for commercial real
estate investment, with returns of 12-19 per cent likely in the next five years, followed by
Bengaluru and Delhi-National Capital Region (NCR). Also, Delhi-NCR was the biggest office
market in India with 110 million sq ft, out of which 88 million sq ft were occupied. Sectors
such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office
space in recent times.
Investments

The Indian real estate sector has witnessed high growth in recent times with the rise in
demand for office as well as residential spaces. Some of the major investments in this sector
are as follows:
Assotech Realty has tied up with Lemon Tree Hotels to manage and operate its
serviced residences. The first project, 210 apartments under the branding of Sandal
Suites, will be launched in Noida in 2015. The companies will launch 8-10 similar
projects in a phased manner over the next seven years with an investment of Rs 800900 crore (US$ 129.37-145.57 million) approximately.

Blackstone Group LP is all set to become the largest owner of commercial office real
estate in India after a three-year acquisition drive in which it spent US$ 900 million to
buy prime assets. Blackstone has acquired 29 million sq ft of office space in cities such
as Bengaluru, Pune, Mumbai, and Noida on the outskirts of New Delhi.

L&T Infra Finance Private Equity (PE) plans to raise Rs 3,750 crore (US$ 606.54 million)
in an overseas and a domestic fund, and launch a real estate fund.

IDFC Alternatives Ltd has sold two of its real estate investments to PE firm Blackstone
Group LP. The assets - a special economic zone (SEZ) in Pune and an information
technology (IT) park in Noida - were sold for a combined enterprise value of Rs 1,100
crore (US$ 177.92 million).

Goldman Sachs plans to invest Rs 1,200 crore (US$ 194.1 million) to build a new
campus in Bengaluru that can accommodate 9,000 people. The new campus is being
developed in collaboration with Kalyani Developers on the Sarjapur Outer Ring Road,
Bengaluru.

Snapdeal has entered into a strategic partnership with Tata Value Homes to sell the
latter's apartments on its e-commerce platform, which marks the first time that an ecommerce company has tied up with a real estate venture.

Government Initiatives
'Under the Sardar Patel Urban Housing Mission, 30 million houses will be built by 2022, mostly
for the economically weaker sections and low-income groups, through public-privatepartnership, interest subsidy and increased flow of resources to housing sector', according to
Mr M Venkaiah Naidu, Union Minister of Housing and Urban Poverty Alleviation.
The Government of India along with the governments of the respective states have taken
several initiatives to encourage the development in the sector. Some of them are as follows:
The Securities and Exchange Board of India (SEBI) has notified final regulations that
will govern real estate investment trusts (REITs) and infrastructure investment trusts
(InvITs). This move will enable easier access to funds for cash-strapped developers and
create a new investment avenue for institutions and high net worth individuals, and
eventually ordinary investors.
The Telangana Real Estate Developers' Association (Treda) plans to host the Fifth
Treda Property Show 2014 at Hitex Centre, Hyderabad. The show will be open to a mix
of the populace, including prospective property purchasers, investors, architects and
others.
The State Government of Kerala has decided to make the process of securing permits
from local bodies for construction of houses smoother, as it plans to make the process
online with the launch of a software called 'Sanketham'. This will ensure a more
standardised procedure, more transparency, and less corruption and bribery.
The Government of India has proposed to release the Real Estate (Development and
Regulation) Bill which aims to protect consumer interest and introduce
standardisation in business practices and transactions in the sector. The bill will also
enable domestic and foreign investment flow into the sector.

Road Ahead
As the Indian economy grows, the real estate sector keeps benefiting. With the increase in
foreign tourist arrivals (FTA) every year, there is demand for real estate in the tourism and
hospitality sector. Also, with the entry of major private players in the education sector, the
major cities, that is Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are
likely to account for 70 per cent of total demand for real estate in the education sector.
Demand for improved healthcare facilities is also expected to provide a boost to the
construction sector in the country.
Exchange Rate Used: INR 1 = US$ 0.016 as on November 27, 2014

References:Ministry of Finance, Press Information Bureau (PIB), Media Reports and

Publications, Department of Industrial Policy and Promotion (DIPP), CREDAI.

Structure of Housing Industry

State of the
Industry

Institutional
Framework

Central

-MHUPA

- Govt
Housing
Finance
bodies

Major Acts and

Regulations

State

Ex- HUDA,
DDA

Central

State

-Ownership
of Land for
Development

-Rent Control
Acts

-Nature of
development

-Urban
Development
Acts

-Operations
of
developers

-Agricultural
Development
laws

Policy
Framework

Central

State

-NUHHP

Examples
of states

-JNNURM
-FDI

Real estate laws in India

Indias largest landscape and huge land area covering distance area of 3,287,263 km 2 has
always attracted large scale real estate development and the economic boon, the rise of
disposal income, rise of nuclear families and the rise of tier II and III cities and towns have
paved the way for further growth in the real estate industry. A recent survey from leading
magazine has declared India has a next popular destination of real estate development. These
circumstances coupled with the opening up of real estate market to FDI or Foreign Direct
Investment in 2005 had led to an increasingly growing interest of the investor in the real
estate market. However the investor is often faced with the serious issue of lack of clarity on
the practices that are prevalent in this highly unorganized sector.
Laws and policies of a country at the same time play a significant role in shaping the actions
of the investors or wish to invest in the real estate market and this article is aimed to describe
and give a crystal clear view of the norms, practices and policies that govern the real estate
sector and which thereby can help an Indian investor or a foreign investor who wish to invest
in India.

REAL ESTATE:

This industry is constrained by archaic laws as well as government policies both at the central
and state levels. There are more than 100 laws governing different aspects of this sector and
most of these are dating back to the 19th century. E.g. the Land Acquisition Act 1894, Indian
Contract Act 1872, Transfer of Property Act 1882, Registration Act 1908, the Indian Evidence
Act 1872, etc. The states still exercise control through a variety of laws such as Rent Control
Act and Urban Land Ceiling and Regulation Act. In 1992 the Central Government proposed a
model rent control legislation but only a few states have introduced the model act. Some
reforms have started happening in these acts due to the JNNURM projects since the Central
Government had made it a condition for release of funds under the JNNURM. However in
some states Stamp Duties is as high as 14 15% and in some these cases it is applicable in
subsequent transactions triggering large scale tax evasions and benami transactions and
money laundering. Processes for obtaining approvals to start construction are very
cumbersome which includes obtaining the Environmental Impact Assessment Notification
from the offices of the Ministry of Environment and Forests (MoEF). This has led to huge
corruptions and almost no transparency.
Real estate is anything in relation to land, buildings which can either be residential or
commercial or may include any housing units, commercial office spaces, schools, shopping
complexes, etc. Real Estate development means anything in relation to construction or
development of land or buildings and includes residential complexes, commercial centers,
malls, shopping complexes etc.
Real estate is always in relation to an immovable property. Immovable property has been
defined under The Property Act and with the help from the general clauses act 1897, the
definition of immovable property can be summarized as immovable property is not a
movable property and includes land or benefits arising out of land, things attached to earth
or permanently fastened to anything attached to earth means rooted in the earth or
embedded in the earth like walls or buildings.
The norms, Laws, policies governing Real estate:
The Central Acts, the local municipal laws of each state and union territory and the recently
issued consolidated FDI Policy 2010 are some of the norms that govern the various
transactions and practices in the real estate. Sale, lease, mortgage, license are some of the
transactions that are governed by the above mentioned laws and policies.
The laws and policies shall be accordingly described along with the transactions that come
into play when investor ventures into real estate domain.
The investor who wishes to invest in a land, building that is investor wants to buy land or
wants to sell, mortgage, let on lease etc, any immovable property as mentioned is required
to first foremost know whether he is competent to enter any of the above mentioned
transactions.

The investor is first required to check whether he is competent to contract because the first basis of
investment is being competent to contract.

The contract act governs the section 11 which states that a person is required to be:

A major i.e. above 18 years of age.

Of sound mind i.e. not insane.
Not prohibited under the law of country to contract.

A resident and a citizen of India are not prohibited to invest or buy an immovable property
in India. A non-resident is however prohibited to buy any immovable property in India. A nonresident is though allowed to enter into a lease agreement in relation to an immovable
property for the purpose of residence in India for a period of not more than 5 years. This is
governed by FEMA and subsequent notifications issued by the same.
The lease agreement has to be executed in accordance to the provision of the Transfer
Property Act i.e. Section 105 that states that lease is an agreement to transfer only an interest
to enjoy the immovable property for a certain period of time for a fixed period and for a
consideration.
A non-resident cannot acquire any immovable property but can invest in Indian entity that is
involved in the real estate development by virtue of the recent issued consolidated FDI policy
by the RBI. The non-resident is permitted to invest in an Indian entity through the automatic
route as mentioned in the policy whereby the said investor is not required to seek any prior
approval for the for the said proposal from the RBI or The Department of Industrial policy
and Promotion (DIPP), Ministry of Commerce. The investor is however after the inward
remittance or issue of shares is required to inform about the same within 30days to RBI.
The investor secondly is required to get title check of the immovable property or know the
conditions upon which the investment can be made with respect to the land or immovable
property.

The registration act, 1908 mandates that all written document that are creating interest or
transferring interest in immovable property for a consideration of a value more than 100
Rupees is a mandatorily required to be registered in the land Registry. These documents or
deeds are basically deeds that are indicating the title to the immovable property in the name
of investor or transferee in the present case with the Registry.
A foreign investor can invest in real estate in India by virtue of the FDI policy but subject to
some conditions. The foreign investor can invest 100 percent FDI in townships, Housing, built
up Infrastructure and construction development projects which shall include but shall not be
restricted to schools, housing, commercial premises, theatres, etc. regional level
infrastructure like roads, bridges. However, these investments are subject to the following
conditions:

A minimum of 10 hectares that is 25 acres of land shall be required to be developed

in case of service housing plots.
Construction development projects shall be characterized with a minimum built up
are of 50,000 sq. meters.
The foreign investor is required to provide 10million US dollars as a minimum
capitalization that is 10million US dollars as minimum paid up capital in case of wholly
owned subsidiaries owned by the foreign companies and provide a minimum of
5million US dollars in case of joint venture with an Indian Partner.
In case of combination of both, either of the baove mentioned are required to be
satisfied.
The funds are required to bring in within 6 months of commencement of business in
India.
50% of the project should have been developed within 5 years from the date of
obtaining all statuary clearances.
The investor must provide this infrastructure and obtain the completion certificate
from the concerned local body agency before being allowed to dispose of the serviced
housing plots.
The project shall conform to the norms and standards, including land use
requirements and provision of community amenities and common facilities as laid
down in the applicable building control regulation, rules and regulation of the State
Govt/ Municipal/ local body concerned.
A foreign investor is not subjected to above mentioned conditions in case he is
investing in construction and development of hotels, hospitals or investing in SEZs.
However, the investor is subjected to SEZs Act and is required to comply with
requirements while undertaking constructing and developing activity in SEZ.

The third requirement is execution of the agreement of sale or lease by the investor:

The transaction that the investor or the person dealing with real estate wish to affect that
may be sale or lease or mortgage is governed by the transfer of property act. The
transaction can be affected by written document that may either be transferring an
interest or transfer the whole interest that is property in whole to the transferee.
Transferee is the person in whose favour the interest is created and transferor is the
person who transferring the interest.
By virtue of the contract act and section 10 in this regard, the agreement to enforce as a
contract is required to be:

Between the parties who are competent to contract as mentioned.

There is meeting of mind that is both parties are aware of the contents of the
agreement and agree on the same.

10

There has to be valuable consideration that is consideration should be of

reasonable value.

Fourth requirement after execution of the document:

Stamp duty is required to be paid on all above mentioned documents and these
documents as mentioned are required to be registered with the registrar of land registry.
Stamp duty is governed by the stamp act and local prevalent rates of stamp duty imposed
by the states are paid accordingly on the documents. Some states have double stamp
incidence whereby first stamp duty is paid for the transaction of acquiring land and other
for development of it. These written documents effecting the transaction are required
to be registered with the Registrar of Land registry. As mentioned above any document
that is transferring an interest in immovable for a consideration of value above 100
rupees is required to be compulsorily registered.
The abovementioned document is required to be registered with registrar by virtue of
the registration act 1908. Non- registration of document does not affect the transaction
of sale or lease or mortgage that is effected by the instrument but is important as only
registered documents are admitted in the court.
The registration act prohibits a non-registered document that is transferring or conveying
title from being admitted as evidence in court. This registered document in fact acts as a
notice to all people that property has been conveyed to the person in whose name it is
registered and is notice of the transaction and thus it is advocated to register such a
document is preferred over a unregistered document in case in future if any challenges
comes against the transaction.
There are some regulations and norms that an investor is generally required to follow:

An investor who is constructing buildings or developing plots of land is required

to get necessary approval from the concerned authorities for embarking on
constructing the same.
The investors in case of construction of building are required to be keeping in
mind the local laws and bye laws governing the construction activity. The investor
is generally required to generally lay down construction in accordance to local
laws in connection to building plan, master plan, and zonal plans and is required
to see that construction is not harming any historical monuments or ceiling of
building in accordance to master plan.
Other clearances like fire safety, sewage lay out and permission for operation of
industrial unit are required to be taken from the local authorities.
The activity of constructing building etc. employs large scale labor and an investor
is required to comply with the various labor laws passed for the welfare of the
labor. The minimum wages act prescribes minimum wages to be given to the
labor employed in these construction activities and other labor laws providing for
safety, insurance and other guidelines.
11

The Real Estate (Regulation and Development) Bill, 2013

After much delay and deliberation The Real Estate Regulation and Development Bill,
2013 ["Bill"] has been approved by the Union Cabinet on June 4, 2013, though this bill is yet
to be approved by Parliament i.e. lok sabha or the lower house of the parliament and the
Rajya Sabha or the upper house of the parliament The bill will be notified as a statute once it
receives the assent of the President of India for its implementation across all States and Union
Territories in the country.
The passing of this Bill is best stated as a delayed step of the Indian government towards
regulation of real estate sector. This Bill aimed to create a Real Estate Regulatory Authority
and an Appellate Tribunal that will act as a watchdog for the housing sector, primarily towards
protecting consumer interests while creating an alternative redress mechanism for any
disputes that may arise.
This bill also aims to provide a uniform regulatory environment in the real estate sector which
is laced with black money, corruption, red tapism, land mafias and corruption. The core
objective of this Bill are twofold i.e. to ensure sale of immovable properties in an efficient and
transparent manner and to protect the interest of consumers in the real estate sector.
Applicability of the bill
The proposed Bill has limited its applicability to residential real estate only i.e. housing and
any other independent use ancillary to housing. The Bill defines

"real estate project" as the development of a building or a building consisting of

apartments, or converting an existing building or a part thereof into apartments, or
the development of a colony into plots or apartments, as the case may be, for the
purpose of selling all or some of the said apartments or plots or buildings and includes
the development works thereof
''apartment" whether called dwelling unit, flat, premises, suite, tenement, unit or by
any other name, means a separate and self-contained part of any immovable property
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 residential purposes, or for any other type of
independent use ancillary to the purpose specified and includes any covered garage,
whether or not adjacent to the building in which such apartment is located which has
been provided by the promoter for the use of the allotter for parking any vehicle, or
as the case may be, for the residence of any domestic help employed in such
apartment

12

Major Highlights of the Bill

The provisions of this Bill are applicable only to residential projects.

Prior approval before launch and advertisement- This bill contains provisions
restricting launch of projects or advertisements unless all approvals are received and
all the agents are not expected to facilitate the sale of immovable property which are
not registered with the Authority and to maintain books of accounts, records and
documents.
Mandatory deposit of fund- It makes mandatory upon the promoters to deposit 70
per cent or such lesser per cent as notified by the government to cover the
construction cost of the project of funds in a separate bank account to ensure timely
completion and prevent fund diversion.
Registration of real estate project and real estate agent - The bill also ensures
mandatory registration of real-estate projects and real-estate agents with the
Authority, except when the land proposed to be developed is less than 1000 square
meters. This provision is likely to provide another level of protection to buyers while
also preventing concerns regarding money laundering by the non-organised broker
community.
Disclosing of mandatory information - The real - estate agents / developers are now
required to disclose material information such as details of the promoters, project,
layout plan, plan of development works, land status, carpet area (as opposed to super
area) and number of the apartments booked, status of the statutory approvals and
disclosure of proforma agreements, names and addresses of the real estate agents,
contractors, architect, structural engineer etc on the Authority's website.
Restriction on taking advance - Prohibition on taking more than ten percent as
advance from the buyers without a written agreement and also the developers/
agents are required to refund to buyers the full amount in case of delay of projects.
Liability/ Penalty The Bill prescribed for Civil and criminal liability for the
contravention of various provisions of the Bill, such as, imprisonment up to three years
or a penalty up to ten per cent of the estimated cost of the real estate project for
projecting out misleading information in advertisements or prospectus
Real estate regulatory authority The Bill give the power to establish one or more
Real Estate Regulatory Authority in each State/UT, or one Authority for two or more
States/UT, by the Appropriate Government, specifying their functions, powers, and
responsibilities to exercise oversight of real estate transactions. The Bill shall also
appoint adjudicating officers to settle disputes between parties, and to impose
penalty and interest.

13

Real estate regulatory authority powers and functions

The Authority will act as a nodal agency to co-ordinate efforts regarding development
of the real estate sector and render necessary advice to the appropriate Government
to ensure the growth and promotion of a transparent, efficient and competitive real
estate sector.
The authority shall ensure compliance of the obligations cast upon the promoters and
the allotters and to cause an inquiry to be made into compliance of its orders or
directions made in exercise of its powers
To host and maintain a website of records of all real estate projects within its
jurisdiction as database, with all details as provided in the application for registration
under the Act, for projects, for which registration has either been granted or cancelled
as the case may be;
To make recommendations on protection of interest of the allotters, measures to
improve the processes and procedures for clearance and sanction of building plans
and development projects from the Competent Authority; and construction and
maintenance of structurally safe, environmentally sustainable, and low cost buildings,
apartments and properties and any other form of assistance or advocacy to promote
competition and efficiency in the real estate sector.
Regulatory Authority shall have the power to call for information, conduct
Investigations, and make inquiry in the affairs of promoters where it considers
expedient so to do it
Regulatory Authority has the power to Issue directions to promoters and allotters
from time to time and such directions are binding on all concerned.
Powers of the Regulatory Authority consequent upon lapse of or cancellation of
registration of the promoter to recommend to the Competent Authority to have the
remaining development works, carried out from the proceeds of the enforcement of
bank guarantee and recover charges incurred on the said development works due
from the promoter.
The Regulatory Authority shall have powers to regulate its own procedure and shall
be guided by the principles of natural justice and shall have all the powers as are
vested in a Civil Court under the Code of Civil Procedure,1908

14

Penalties
1. Any promoter who fails to register in accordance with the provisions of the Real Estate
(Regulation and Development) Bill, 2013 shall be punishable with imprisonment for a
term which may extend to three years, or a penalty which may extend to ten per cent
of the estimated cost of the real estate project, or with both.

2. If any promoter contravenes any other provisions of this bill, other than that provided
above, or the Rules or Regulations made, he shall be liable to a penalty which may
extend to five percent of the estimated cost of the real estate project.

3. Any promoter who wilfully fails to comply with orders of the Authority shall be liable
to a minimum penalty of one lakh rupees for every day during which such default
continues, which may extend to five percent of the estimated cost of the real estate
project.

4. Any promoter who wilfully fails to comply with the orders of Appellate Tribunal shall
be punishable with imprisonment for a term which may extend to one year or with a
penalty which may extend to ten percent of the estimated cost of the real estate
project, or with both.

15

Housing Scams in India: A few examples:

1. The 2010 fake housing loan in India was uncovered by the Central Bureau of Investigation
(CBI) in India. CBI arrested eight top-ranking officials of public sector banks and financial
institutions, including the LIC Housing Finance CEO Ramchandran Nair, in connection with the
scam.
CBI investigations
CBI alleged that the officers of various public sector banks and financial institutions received
bribes from a private financial services company, which acted as a mediator for corporate
loans and other facilities from financial institutions. The bank officials sanctioned large-scale
corporate loans to realty developers, overriding mandatory conditions for such approvals
along with other irregularities.
The Central Bureau of investigation arrested number of high official from the several financial
institutes in India in connection with the housing scam in November 24, 2010. Smith (2010)
stated that findings are shocking where the head officers of several banks and financial
institutes are involved in corporate corruption. Precisely, the banks and financial officials
were from the public sectors including LIC, Bank of India, Central Bank of India and Punjab
National Bank. However, stated that since the matter was related to the erosion of funds from
the LIC housing and Finance Limited, event was named as the LIC housing and Finance
Scandal. Lamont (2010) cited that the officers from the high rank including the secretary of
LIC Investment, general managers, directors and deputy managers of banks were involved in
taking out the funds from LIC in appropriate and unethical way. Smith (2010) said that these
officials were acting as the middleman to provide the funds to the main parties and in return
they were having hefty amount of funds from the real investors, insurers and other
consumers. Smith (2010) regarded this as the distortion of the corporate governance system
where the business ethics were neglected to sustain the core business activities of the public
sector banking firm. Meanwhile, Economic Times stated that the officials were charged with
the exploiting of funds, looting, corrupting corporate loan process and manipulating and
overriding with the regulations of the LIC Housing and Finance Limited in regard to the
approvals and other rules and regulations. Nonetheless, The loans provided through this
manner were estimated to be worth of 85 Billion Dollars, comes as the biggest scandal in the
Housing Finance in Asia However, the stock price took a sharp dip soon after the event.
Apparently, LICHF had a good run till September 2010 when it reached Rs.299 and the growth
rate undoubtedly, received the appreciation by the investors and other shareholders. The
stock recorded no significant changes thereafter but the appearance of corporate scandal
shook the stock price chart and the price dip to Rupees 150 by the end of year 2010. At
present the stock price is stands at around rupees 190 and gaining its momentum over a
period of time but however, Lamont (2010) felt that the combination of factors that happened
in the last quarter of FY10 were accountable for the sharp decline in the LIC Housing and
Finance Share price. Reuters stated that LIC Housing and Finance is looking forward to raise
the capital to the tune of Rupees 25000 Crores in 2011-12 through debt. Eventually, the
technical experts believed that company is developing its core competencies and capabilities
and undoubtedly, investors would revive the stock price and current Market changes and
companys development will be seen through the price momentum. However, experts
16

believed that the Housing and Finance Scandals by the top officials in LIC and other banking
institutes will always stand to harm the future potential of such companies but however, the
future and the endless opportunities lies in the hand of ultimate investors. Eventually, online
newspaper, Rediff quoted as saying that most of the brokers are taking up the stock of LICHF
after the scam as related to the current project being performed by the company. Namely,
IIFL, Aditya Birla, IL&FS are impressed by the current progress by the company and building
up the stock ay higher rate. However, Reuters stated that the Financial Budget introduced by
the Indian Planning Commission had slightly adverse effects on the stock of banking,
insurance, mortgages and other related sector in the industries. However, the company has
been quoted as saying that they would include the margin between 2.8 to 3% in relation to
the rising interest rates and their effects on the share price. However, In response the scam,
the Reserve Bank of India and other regulatory and financial bodies attempted to reform the
housing finance sector by making several supervision and security measures in this regard.
Eventually, the corporate scam destroyed the interest and confidence of investors and thus,
the monetary and regulatory authorities must execute their task in relation to safeguarding
the interests of investors. Apparently, Smith (2010) stated that the Central Bureau of
Investigation exposed the stock price dip to 18% of the prevailing market rate after the scam
and other banks who were involved saw a decline between 5 to 15% during the time. Hence,
it was anticipated that investors believed in the core values and companys relation with the
investors and the stock changes occur in the short span of time however, the stock is futuristic
for the long term.
CBI's Economic Offences Wing (EOW) raided offices of the public sector banks and LIC Housing
Finance in six cities (Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar), to recover
incriminating documents.
According to CBI, the companies to which the loans in question were given include:

Lavasa Corp., a unit of Hindustan Construction Co.

Oberoi Realty Ltd.
Ashapura Minechem Ltd.
Suzlon Energy Ltd.
DB Realty Ltd., a part of the Dynamix Balwas Group
Emaar MGF Land Ltd.
Mantri Realty
Kumar Developers Ltd.

The CBI EOW also suspected that the companies may have inflated their assets value and
balance sheets in order to make themselves eligible for the loans.
According to CBI, an employee of the financial services firm had expressed his willingness to
turn witness in the case.

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Reactions
Most firms, including BGR Energy and Oberoi Realty denied any role in the scam. [5]
The scam was discovered shortly after the 2010 Commonwealth Games corruption
controversy and the Adarsh Housing Society Mumbai scam. The investors were rattled as
news of the arrests broke in Mumbai. The share of the LIC Housing Finance, Central Bank of
India, Punjab National Bank, Bank of India as well as other banking and real-estate stock
declined.
The Union finance ministry initially claimed that the case was a bribery incident, and not a
large-scale scam. The CBI officials had indicated that the size of the scandal could be worth
over Rs 1,000 crore, but the finance ministry officials claimed that the magnitude of the
scandal was too insignificant to have an impact on the Indian financial sector.
The income-tax (IT) department decided to investigate the books of those involved in the
scam, after receiving primary reports from CBI. However, many political analysts believe
innocent bankers were implicated in this falsely created scam to defuse attention of the
common man against the much larger and serious scams done by the ruling Indian
government, notably of corrupt politicians like CWG minister Suresh Kalmadi and ex-telecom
minister A Raja.
2. Emaar Properties scam
The alleged scam started back in 2003 when Dubai-based real estate group Emaar Properties
merged with the government run Andhra Pradesh Industrial Infrastructure Corporation
(APIIC). Under the partnership clause, 75 percent of equity granted to Emaar Properties and
the rest percentage to the APIIC. The actual plan was to develop an ultra-luxury township
including villas, golf course and a hotel on 535 acres of land in Gachibowli. But in 2006,
another Dubai-based infrastructure company, MGF got involved in the partnership and due
to which the stake of APIIC reduced to 6.5 percent. However, during this time BP Acharya was
serving as the Managing Director of APIIC and allowed the revised terms rather than obtaining
clearance from government. CBI suspected that the new partnership helped Emaar-MGF to
gain excessive benefit of 2500 crore.
Many top-notch figures including politicians and celebrities had come under CBI scanner for
buying villas sold at 5000 per square yard, whereas the actual market value was no less than
60,000 per square yard. This had brought huge loss to the government, with NDTV inputs.

3. Cooperative group housing scheme Scam

In the Rangmahal cooperative group housing scheme (CGHS) scam of 4000 crore, 11 people
were reported to be allegedly involved in the corruption scam that included seven public
servants. The public servants who were found to be convicted include ex-Registrar
Cooperative Societies Narayan Diwakar-the key player of this scam, Jt Registrar Jasbeer Singh,
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Assistant Registrar (Audit) Jitender Sharma, Assistant Registrar Ramesh Chandra, Dealing
Assistant Rakesh Kumar and Inspector RCS Faiz Mohd and one P K Thirvani. Also, these people
were declared guilty of criminal conspiracy under the Indian Penal Code, cheating, forgery
and for under the Prevention of Corruption Act, reports PTI.
The Cooperative group housing scheme Scam started when the plot was fraudulently allotted
by the convicts for Rangmahal CGHS in Pitampura area of North West Delhi.
According to CBI, people who are involved in CGHS case, "on the basis of forged and false
documents" and "also successfully misrepresented the DDA and induced it to allot huge land
on subsidised rates to the society" reports Indian Express.

4. Karnataka Wakf Board Land Scam

Karnataka Wakf Board Land Scam is one among the named scandals in India. Karnataka Wakf
Board Land Scam involved the alleged misappropriation of 200, 000 crore in Indian property
funds and the scam is unearthed by Karnataka State Minorities Commissions report that
brought out in 2012.
Karnataka State Minorities Commissions chairman, Anwar Manippady submitted a report to
the Chief Minister of the state, D.V. Sadananda Gowda in March 2012, suspected that
Karnataka Wakf Board controlled land of 27,000 acres has been misappropriated or allocated
illicitly. Besides, the estimated value of the land is 2 lakh-crore.
The Muslim charitable trust, Karnataka Wakf Board, manages property that has originally
been donated for the poor to utilize. But, the report alleged that the Wakf Board has
permitted around 50 percent of its land to be misappropriated by board members and
politicians in involvement with the real estate mafia for a fraction of its actual market value.

5. Noida land scam:

Noida land scam is another multi-crore real estate fraud took place in India. In this scam, top
scientists of the Indian Council of Medical Research (ICMR) have transferred the government
land worth around 70 crore to the name of a private group to develop society flats by
spending just a small part of its actual market value.
Originally Noida land scam started way back in March 1992 when the tract of government
land was allotted to develop staff quarters for ICMR affiliated ICPO (Institute of Cytology and
Preventive Oncology) at sector 39. The ICPO spend around 2 crore to get possession of the
land but failed to develop the quarters till March 2006, due to which the penalty amounted
to almost 2.28 crore. And from this stage, it is to be believed that officials started using the
plot of land for different purpose.

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The plot of land that came under scanner spans over 2.5 acres which is around 9,712.62
square meters and the society building is located on Noidas prime location where the sector
32 Metro station and Noida City Centre is nearby.

6. Adarsh Housing Society scam

Adarsh Housing Society Scam is the biggest housing scams of Mumbai, the financial capital of
India. It is one of the multi-crore housing scam in India. This housing scam started way back
in the year 2002 when a request for the construction of housing complex was put forward to
the Chief Minister of Maharashtra. The request was to allot land for housing complex for the
welfare of serving and retired personnel of the Defence Services," in the city of
Mumbai. Surprisingly, over the period of ten years, top politicians, bureaucrats and military
officials have come under the scanner for violating several norms including land-use rules and
environmental laws and misusing the houses originally built for martyrs' widows and Kargil
heroes. In fact, these aforementioned figures have pounced on flats in this property at low
prices, which is located in South Mumbais Colaba area in prime defence land.
"The episode of Adarsh Co-operative Housing Society reveals how a group of select officials,
placed in key posts, could subvert rules and regulations in order to grab prime government
land- a public property- for personal benefit, according to the report of the Comptroller and
Auditor General of India to the President of India in 2011.

REFERENCES
1. Ministry of Finance, Press Information Bureau (PIB), Media Reports and Publications,
Department of Industrial Policy and Promotion (DIPP), CREDAI.
2. mhupa.gov.in
3. www.prsindia.org
4. http://www.hg.org/realest.html
5. www.siliconindia.com/realestate/
6. www.indianrealestateforum.com
7. www.propertyscam.in
8. http://articles.economictimes.indiatimes.com
9. http://www.indianexpress.com
10. http://www.thehindubusinessline.com

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