MODULE V : REGULATORY

MECHANISM

- PAYAL SETH
REGULATORY MECHANISM UNDER THE LAE
ESPECIALLY UNDER REAL ESTATE LAW:

• Regulatory mechanisms under the law, especially in the

context of real estate, refer to the rules, regulations, and
government oversight that govern the buying, selling,
development, and use of properties. These mechanisms are
put in place to ensure fair and transparent practices, protect
the rights of buyers and sellers, and promote the proper
functioning of the real estate market. Here are some key
regulatory mechanisms commonly found in the real estate
industry:
 1. ZONING AND LAND USE REGULATIONS
• Zoning laws dictate how land can be used within specific areas.
Different zones are designated for residential, commercial, industrial,
or agricultural purposes. These regulations help control the
development and ensure that certain areas are preserved for specific
uses.
• In India, zoning and land use regulations are primarily governed by
the Town and Country Planning Act enacted by individual states. For
instance, the Maharashtra Regional and Town Planning Act, 1966,
regulates land use and zoning in the state of Maharashtra. Under this
act, different zones are designated for residential, commercial,
industrial, and agricultural purposes.
 2. BUILDING CODES AND CONSTRUCTION
STANDARDS
• Building codes set forth minimum standards for the design,
construction, and safety of buildings and structures. They aim
to ensure that new constructions are safe and comply with
environmental, health, and safety standards.
• The National Building Code (NBC) of India provides
guidelines for construction and safety standards across the
country. The NBC is not a statutory code but serves as a model
code. However, many states adopt it or refer to it while framing
their building codes. For example, the Kerala Building Rules,
based on the NBC guidelines, govern construction standards in
Kerala.
 3. ENVIRONMENTAL REGULATIONS
• Real estate projects often have to adhere to environmental
regulations to minimize their impact on the environment. This
may include considerations for wetlands, endangered species,
pollution control, and waste management.
• The Environment (Protection) Act, 1986, is a key legislation in
India that empowers the central government to take measures to
protect and improve the environment. Additionally, the Coastal
Regulation Zone (CRZ) Notification, issued under the
Environment Protection Act, regulates development activities
along the coastlines to protect coastal ecosystems.
 4. CONSUMER PROTECTION LAWS
• These laws are designed to safeguard the interests of consumers
in real estate transactions. They require full disclosure of
property conditions, potential hazards, and other relevant
information to buyers.
• The Real Estate (Regulation and Development) Act, 2016
(RERA), is a significant legislation in India that aims to protect
the interests of homebuyers and promote fair practices in the
real estate sector. RERA mandates that developers register their
projects with the respective state Real Estate Regulatory
Authority (RERA) and provide comprehensive information to
buyers about the project.
 5. TITLE AND DEED REGULATIONS
• Title and deed regulations ensure that property ownership is
legally transferred from the seller to the buyer. They also
provide a public record of ownership and any existing liens or
encumbrances on the property.
• Property title and deed regulations are governed by various
state-specific laws in India. For instance, the Transfer of
Property Act, 1882, sets out the general principles of property
transfer, while the Registration Act, 1908, mandates the
registration of certain types of documents to make them legally
valid and enforceable.
 6. RENT CONTROL AND TENANCY LAWS
• Some jurisdictions implement rent control laws to limit the
amount landlords can increase rent. Tenancy laws govern the
relationship between landlords and tenants and outline the
rights and responsibilities of each party.
• Rent control and tenancy laws in India vary from state to state.
For example, in Delhi, the Delhi Rent Control Act, 1958,
regulates rent control and provides certain protections to
tenants. Similarly, the Maharashtra Rent Control Act, 1999,
governs tenancy matters in the state of Maharashtra.
 7. FAIR HOUSING LAWS
• These laws prohibit discrimination in the sale, rental, or
financing of housing based on factors such as race, color,
religion, sex, national origin, disability, or familial status.
• The Equal Remuneration Act, 1976, prohibits discrimination on
the basis of gender in matters of employment and remuneration,
including housing. Additionally, the Scheduled Castes and the
Scheduled Tribes (Prevention of Atrocities) Act, 1989, prevents
discrimination and atrocities against scheduled castes and
scheduled tribes, including in housing matters.
8. REAL ESTATE LICENSING AND REGULATION
• Real estate agents and brokers typically need to be licensed to
practice legally. Licensing requirements vary by jurisdiction
and often involve passing exams and completing continuing
education courses.
• Real estate licensing and regulations in India are governed by
state-specific laws. For instance, Maharashtra has its
Maharashtra Real Estate Regulatory Authority (MahaRERA),
established under the Real Estate (Regulation and
Development) Act, to regulate real estate projects and protect
the interests of buyers.
 9. PROPERTY TAXATION
• Governments levy property taxes on real estate owners based
on the assessed value of the property. The revenue generated
from property taxes is used to fund public services and
infrastructure.
• Property taxation in India is primarily governed by local
municipal laws. For example, the Municipal Corporation Act of
Delhi sets forth property tax assessment and collection
procedures in the National Capital Territory of Delhi.
10. MORTGAGE AND FINANCING REGULATIONS
• Laws govern mortgage lending practices to protect borrowers
from predatory lending and ensure fair and transparent loan
terms.
• The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act),
empowers banks and financial institutions to enforce security
interests in case of loan default. Additionally, the Transfer of
Property Act, 1882, governs mortgage and transfer of property
rights.
• These regulatory mechanisms play a crucial role in maintaining
a stable and orderly real estate market, protecting the rights of
all parties involved, and promoting the overall well-being of
communities. Keep in mind that these regulations can vary
significantly from one country or region to another.
 REGULATORY MECHANISM UNDER REAL
ESTATE LAWS WITH REFERENCE WITH
BANKRUPTCY LAWS

• These regulatory mechanisms play a crucial role in

maintaining a stable and orderly real estate market,
protecting the rights of all parties involved, and promoting
the overall well-being of communities. Keep in mind that
these regulations can vary significantly from one country or
region to another.
 1. BANKRUPTCY'S IMPACT ON REAL ESTATE
TRANSACTIONS
• Bankruptcy laws provide relief to individuals or businesses
facing financial distress by allowing them to reorganize debts
(Chapter 11 bankruptcy) or liquidate assets to repay creditors
(Chapter 7 bankruptcy). When a debtor files for bankruptcy, an
"automatic stay" is triggered, which halts most collection
actions, including foreclosure proceedings. This automatic stay
is crucial for protecting the debtor's real estate assets during the
bankruptcy process.
 2. REAL ESTATE TRANSACTIONS DURING
BANKRUPTCY
• During bankruptcy proceedings, real estate transactions
involving the debtor's property may require court approval.
This is particularly true in Chapter 11 bankruptcies, where the
debtor may seek to sell or lease real estate assets to generate
funds to repay creditors. The bankruptcy court oversees these
transactions to ensure they are fair and in the best interest of all
parties involved.
 3. REAL ESTATE AS ASSETS IN BANKRUPTCY
• Real estate owned by a debtor is considered an asset in
bankruptcy. The value of the real estate can impact the outcome
of the bankruptcy case. In Chapter 7 bankruptcy, non-exempt
real estate may be sold to pay off creditors. In Chapter 13
bankruptcy, the value of non-exempt real estate can influence
the repayment plan that the debtor proposes to the court.
 4. PRIORITY OF REAL ESTATE CLAIMS
• Bankruptcy laws establish a priority system for creditors'
claims. Secured creditors, such as mortgage holders, typically
have a higher priority in receiving repayment from the proceeds
of the real estate sale in bankruptcy. Unsecured creditors may
receive lower or no repayment depending on the available
funds.
 5. AVOIDANCE ACTIONS
• Bankruptcy laws allow the trustee or debtor-in-possession to
avoid certain transactions that occurred before bankruptcy, such
as preferential transfers or fraudulent conveyances. In real
estate, this could include selling property at below-market
prices to insiders before filing for bankruptcy. The trustee can
reverse such transactions to benefit the bankruptcy estate.
 6. DISCHARGE OF REAL ESTATE DEBTS
• Bankruptcy may lead to the discharge of certain real estate
debts, particularly unsecured debts like credit card debts or
personal loans secured by the debtor's property. However,
mortgage and other secured debts may survive bankruptcy
unless the debtor surrenders the property or modifies the loan
through the bankruptcy process.
 7. BANKRUPTCY AND REAL ESTATE
DEVELOPERS
• Real estate developers facing financial difficulties may seek
relief under bankruptcy laws. Chapter 11 bankruptcy allows
developers to reorganize their debts, negotiate with creditors,
and continue operating their projects. This provides an
opportunity for the developer to complete existing projects and
potentially return to profitability.
• Overall, the intersection between real estate laws and
bankruptcy laws is crucial in addressing financial distress in the
real estate industry and protecting the interests of all
stakeholders involved, including debtors, creditors, and
investors. The specific application of these laws may vary
depending on the jurisdiction and the complexity of the real
estate transactions involved.