Policies & Regulations of Maharashtra State
That affects the Real-Estate decisions
Located on the western coast of India, Maharashtra is India’s third largest state in terms of area and second largest in terms of population after Uttar Pradesh. It is bordered by the states of Gujarat, Madhya Pradesh, Chhattisgarh, Andhra Pradesh, Karnataka, Goa and the union territory of Dadra and Nagar Haveli. Mumbai, India’s largest city is the capital of Maharashtra and the financial capital of the country.
Maharashtra is among the few states in India whose GDP is predominantly contributed by the industries and services sector, with nearly 89% of the state’s GDP in 2004-2005 being contributed(1) by these sectors. The key industries of the state include food products, beverage, tobacco, cotton, textiles, paper and printing, petroleum, coal, chemicals, pharmaceuticals, metal products, (2)electrical machinery and apparatus, transport equipment, etc.
Over the last decade, Maharashtra has witnessed a sharp rise in the level of literacy. The decade of (3)1991 to 2001 saw a rise in the literacy levels from 64.9% to 76.9%. This period also witnessed a 3.01% Compounded Annual Growth Rate (“CAGR”) in terms of urbanisation. The percentage of urban population(4) rose from 38.69% in 1991 to 42.43% in 2001.
Maharashtra is also one of the highest recipients of foreign direct investment (FDI) in India. The total FDI inflow during the period January 2000 to July 2006 for Maharashtra, Dadra & Nagar Haveli, and Daman & Diu was 23,718.14crores which constituted 22.16% of the total FDI inflows in India(5).
Regulatory Environment Relating to Purchase of Land
The purchase of land in the region of Greater Mumbai is mainly governed by the following key regulations, namely:
1.Maharashtra Agricultural Lands (Ceiling on Holdings), Act 1961;
2.Bombay Tenancy and the Agricultural Lands Act, 1948; and
3.Urban Land (Ceiling and Regulation) Act, 1976.
The various legislations inter alia, provide for imposition of a ceiling on both ownership and possession of land. The ceiling is applied on a graded basis, according to further sub-classification of the land. The restrictions imposed are vast and depend upon various criteria being the type of land, the geographical location, etc.
The restrictions on acquisition of land in specified areas depend upon the location of the land, the type of land, the existing use, the proposed use after acquisition and local policy governing the area. There are separate legislations/ policies relating to type of land and development of land located in the coastal areas, no-development zones, agricultural land, etc.
1. Maharashtra Agricultural Lands (Ceiling on Holdings), Act 1961(“MALCHA”)
The MALCHA places prohibition on holding land in excess of specified ceiling and restriction. The ceiling area for each class of land in the districts and talukas are provided in First Schedule of the MALCHA. The MALCHA specifies certain types of lands which are exempted from the (6) provisions of this Act, for e.g., lands held by an industrial undertaking for a bona fide industrial or non-agricultural use.
2.Bombay Tenancy and the Agricultural Lands Act, 1948 (“BTALA”)
Chapter V of the BTALA provide for restrictions on holding agricultural land in Mumbai area of state of Maharashtra.
3. Urban Land (Ceiling and Regulation) Act, 1976 (“ULCRA”)
Processes for obtaining approval for conversion of land in Greater Mumbai: a. Procedure for conversion of land from agricultural to commercial purposes:
The BTALA provides that no sale, gift, exchange, lease or mortgage of agricultural land in favour of a non-agriculturalist shall be valid unless the prior permission of the collector is obtained for (7) such purposes. However, transfer to non-agriculturist can be made for bona fide industrial use without the permission of the collector subject to the location of the land and other terms and (8) conditions as provided there under. A similar provision is made under the Maharashtra Land Revenue Code, 1966 (“MLRC”) which provides that it is mandatory to obtain the permission of the collector, if it is intended that the use of (9) the land be converted from agricultural to commercial use. The permission to convert the use of agricultural land to non-agricultural purpose or to change the use of land from one non-agricultural purpose to another non-agricultural purpose may be granted by the collector after consulting with the planning authority or any other authority as the state government may direct and subject to other terms and conditions of the laws in force for the time being.
In the event of the collector granting permission for conversion of use of land on certain conditions, any breach of conditions on which the conversion of use of land is permitted, may make the land inter alia liable to be forfeited under BTALA or MLRC, as applicable.
Some of the conditions for conversion of use of land that could be prescribed by the collector are as follows:
>Land shall not be used for any other purpose than the purpose for which permission is granted;
>Permission shall be subject to the code and rules of MLRC;
>Applicant shall commence the non-agricultural use applied for within one year from the date of the order made by the collector, failing which permission granted will be deemed as lapsed;
>Applicant shall be liable to pay altered assessment charges as applicable; and
>Where permission is granted for construction of a structure to be used for any non-agricultural purpose, such structure shall be constructed in accordance with the plan approved by the planning authority or the village panchayat or subject to such rules as prescribed under the code.
b. Procedures for conversion of land from non-commercial use to commercial use:
Any application for change in use of land from non-commercial use to commercial use has to be made to the planning authority (municipal corporation or municipal council, within whose area that land is situated or to the collector if the land is not comprised within the municipal corporation or municipal council as provided under the Maharashtra Regional and Town Planning Act, 1888 (“MRTP”) (10) or to the collector as provided under MLRC, as may be applicable.
Permission for conversion of land shall not be granted otherwise than in conformity with the provisions of the draft or final regional plan/ development plan of the area. In the event a person intends to execute a special township project on any land; an application may be made to the state government. The planning authority may grant permission, subject to general or specific conditions as it may impose, with prior approval of the state government. The planning authority shall be guided by the building bye-laws and development control rules. The permission (commencement certificate) granted by the planning authority shall contain all conditions, subject to which approval is given. The planning authority is the local authority i.e. the Bombay Municipal Corporation (“BMC”) or any other authority as the case may be.
Regulations applicable to assignment of development rights from a land owner to a real estate developer:
The regulations regarding transfer of development rights from a development agreement executed between owner of the land and developer, vary depending upon the manner of construction and use of land, for ex., whether it is residential, commercial, industrial, etc, and whether the land is owned by the state or is it privately owned. Hence, the regulations applicable will be The Indian Contract Act, 1872 and The Transfer of Property Act, 1882. If use of land is for residential purposes, the manner of construction, ie whether the association to be formed shall be a co-operative society or a condominium or an association of persons would also determine which Act/regulation would be applicable. However, in general, a real estate developer would have to obtain various approvals and permissions from the municipal body and other authorities, obtain approval in respect of its plan, appoint licensed surveyors, architects, structural engineers, etc, and abide by the rules, regulations and provisions of the particular legislation as may be applicable.
Development of commercial / residential/ Cineplex projects in Greater Mumbai: There is no uniform state policy for allotment of land to private developers, however, provisions relating to lands not owned by others would be governed by MLRC and rules framed there under. The Revenue Department and the Department of Industries of the state government typically deals with allotment of land to private developers. In certain cases, the state government has allotted certain portions of self-owned land to various corporations established by the state, such as, Maharashtra Housing and Area Development Authority (“MHADA”), City and Industrial Development Corporation (“CIDCO”), and Maharashtra Industrial Development Corporation (“MIDC”).
Each of these bodies have been constituted by the state for different reasons, for eg, MHADA has been established by the government to provide mass housing to the poor at affordable rates and to consolidate the law relating to housing, repairing and reconstruction of dangerous buildings. Also, each corporation has its own internal procedures and guidelines relating to allotment of land. Hence, the policy of the state with respect to allotting land parcels to private developers for development of residential, commercial or Cineplexes would vary according to location of the land, existing use of the land, purpose for which land is sought to be developed, etc. The state government also regularly issues notices, policies, and circulars as may be required for each of these corporations established by it.
The general trend of state policy is that allotment of land has to be approved by the state government and usually, land is allotted on a tender basis. However, some corporations like CIDCO and MHADA may also allot land on a first come basis.
The procedure for allotment of land would vary depending on the location of land, the purpose for which the land is required, the owner of the land, etc. Also, the state usually invites tenders from public prior to allotment of land. The same may not always be true for corporations since corporations may be guided by their own internal procedural policies.
Restrictions imposed disallowing land use for purpose other than that for which originally settled:
Under the Development Control Regulations for Greater Mumbai 1991 (“DC Regulations”), the state government has imposed restrictions on development of land which is set apart for specific purposes only, for eg, land has been demarcated as agricultural, residential, commercial, no development zone, land for tourism, land situated in coastal areas, etc. However, the various state legislations usually have a proviso wherein conversion of land is permitted subject to terms and conditions enumerated in the respective legislations.
Also, there are certain plots of land which have been reserved for certain purposes and cannot be put to any other use, for eg, land reserved for slum rehabilitation, SEZs, etc. These lands have been reserved for specific purposes and legislation governing the same usually does not permit conversion of such lands.
Regulatory environment relating to development of property:
MRTP is the primary legislation which governs and regulates land use and development of property in Maharashtra. Each municipal corporation in Maharashtra enacts its respective municipal corporation Act and development control regulations to further regulate the development of land falling within its jurisdiction. Consequently, the provisions of legislation regarding land development would primarily depend on the geographical location of the land and authority within whose jurisdiction specific land falls. The development of land in Greater Mumbai is mainly governed by the DC Regulations, framed under MRTP. The other development control regulations framed by various municipal corporations within Maharashtra will primarily be similar to the DC Regulations.
The DC Regulations have specified detailed guidelines in relation to development, redevelopment, construction, reconstruction, mode of construction, design of the building, different uses, change of user, Floor Space Indices (“FSIs”), and for all other matters incidental thereto(11) for development of immovable properties situated within the territorial jurisdiction of Municipal Corporation of Greater Mumbai (“MCGM”).
All land in Greater Mumbai is earmarked for specific uses. The usage and manner of development of land, as provided in the DC Regulations, demarcates the 4 corners within which the developer can undertake his development activities.
The FSI in relation to any property is the development potential of that property. To illustrate, when it is said that the developer is entitled to develop a particular property, in substance, it means that the developer is entitled to utilise the FSI available in relation to that property. Further, the FSI available in relation to a property is a key factor in determining the property’s valuation.
The DC Regulations(12) define the term FSI as follows:
FSI means the quotient of the ratio of the combined gross floor area of all floors, excepting areas specifically exempted under the DC Regulations, to the total area of the plot. No uniform FSI has been specified for carrying on development activities within the territorial jurisdiction of Greater Mumbai. The development potential for every individual property varies depending upon the property’s location and permitted use.
Regulations applicable for town planning for commercial/residential development:
In Mumbai, the town planning and development regulations are provided under the MRTP, read with the DC Regulations. Under MRTP, the planning authority shall within a specified time conduct a survey, prepare an existing land-use map and prepare a draft development plan for the area within its jurisdiction in accordance with the regional plan. The development plan indicates the manner of regulation of land use allocation and development. This development plan, after being sanctioned by the state government, forms the blue print for development of the land covered in it.
The DC Regulations provide for certain exemptions ie the circumstances when existing non-conforming uses are permitted to continue. Further, the allotment and development of land for residential or commercial purposes are also governed by various specific legislations being:
• The Maharashtra Housing and Development Act, 1976 (”MHADAA”);
• The Metropolitan Regional Development Act, 1974 (“MRDAA”); and
• The Maharashtra Industrial Development Corporation Act, 1961 (“MIDCA”)
Special planning authority is appointed pursuant to these legislations and MRTP for specified purpose as stated therein. Depending upon the area where the land is located and the type of development activity to be undertaken, the appropriate legislation can be identified which would govern such development activity.
RELEVANT STATE POLICIES
The state has drafted a SEZ policy with the intention of developing exports, whereby many concessions are proposed to be given for development of SEZ zones, including land benefits and fiscal benefits. Further, a single window approval is envisaged for applying for the various approvals and NOCs required. The draft policy is yet to be enacted.
IT Park Policy:
The state has an IT and ITeS policy for development of IT parks and has prescribed various incentives included as below:
• Software industry will be allowed in residential, industrial and commercial zones;
• Software industry will be included as one of the permissible users in the “No Development Zone”;
• 100% additional FSI for software technology parks set up by public bodies on payment of premium amounting to 25% of the market value;
• No MPCB clearance required for software units; and
• No stamp duty on property transactions within designated software/ info tech parks as well as on instruments of software companies such as lease documents, issue of shares, etc. Registration charges not to exceed INR 1,000.
MIDC has an industrial policy for development of industrial parks and has prescribed various incentives included as follows:
• Stamp duty exemptions;
• Exemption from non-agricultural assessment charges;
• Emphasis and special benefits for cluster based development by reserving some areas within its areas for specific industries and their ancillaries;
• Emphasis on co-operative industrial estates, such estates shall be granted FSI as is applicable to MIDC areas;
• Common Application Form (“CAF”) for all aspects relating to development;
• Permission to purchase agricultural land exceeding 10 Ha for bona fide industrial purpose; and
• Exemption under section 20 of the ULCRA;
RELEVANT TAXES & DUTIES The state regulations relating to payment of various local taxes and levies would depend upon the location and use of property in question. Governing laws for imposition of municipal taxes and cesses, village panchayat taxes, land revenue, and agricultural taxes would primarily include the following: MLRC, The Bombay Village Panchayats Act, 1958, the municipal laws of a corporation/ council for its jurisdiction, for eg, The Mumbai Municipal Corporation Act, 1888 for Mumbai city and the rules framed under the respective Acts.
The authority which is authorised to collect the taxes/ levies would be either the collector or the commissioner of the corporation/ council or any other authority constituted for collection of revenue by the pertinent Act. The different taxes, such as property taxes are charged at the rateable value of the property which is assessed on several factors such as purpose of land, whether it is put to agricultural use or industry or commerce, area of land, location of land and is subject to periodic review.
The state government does offer various incentives/ rebates and relief for certain kinds of properties for developers taking certain initiatives for specified lands or putting the land to use for some public purpose, eg SEZs, hospitals, IT parks, etc. The rebate and relief would hence differ, accordingly.
Provisions governing stamp duty and registration fees are found under the Bombay Stamp Act, 1958 (“BSA”) and the Registration Act, 1908 respectively. Article 25 of the BSA deals with the purchase and sale of land, Article 36 deals with lease of the land and Article 36A deals with leave and license agreements. In case of purchase or sale of apartments, there is no change in the stamp duty payable in case of apartments falling under Maharashtra Co-operative Housing Society's Act, 1960 or under Maharashtra Ownership Flat and Regulation of Promotion and Construction Field Management and Transfer Act, 1993 or provisions of the Maharashtra Apartment Ownership Act, 1980 and is based on the value of the apartment.
In case of authority of powers to a promoter/ developer for construction on, development of or sale/transfer of any immoveable property, Article 5 (g-a) is attracted. Article 36 deals with stamp duty payable on lease of land and varies as per location of property and not as per usage of property. Stamp duty payable on leave and license agreements, depend upon both, location and usage of property. Article 25 deals with stamp duty payable on purchase and sale of property which is based on location of the property and not on the usage. In case of registration fees, the same varies from instrument to instrument and does not exceed INR 30,000.
There is no specific category on stamp duty for cineplex projects. However, stamp duty will be attracted on the basis of instruments for the projects.
Incentives offered by state:
The centre and various state governments come up with various policies with incentives and exemptions prescribed therein for development of specified sectors. The policies, incentives and exemptions vary depending on the sector proposed to be developed. For eg; Maharashtra currently has IT and ITeS policy prescribing various incentives and exemptions for development of IT sector by constructing IT parks. Further, the development criteria required to be followed by the developer will also be prescribed in the respective policies.
The state government comes up with various schemes from time to time for development of rural areas. The incentives depend on type of development and area proposed to be developed. Further, if development is concerning MHADA or CIDCO or for slum area, then the respective authorities and legislations provide for incentives therein including concessions relating to land. Furthermore, the central government vide Income tax Act and other applicable legislations have granted certain tax exemptions for development of industries and cineplex in the rural areas.
1. Central Statistical organisation report
5. Dept. Of Industrial Policy & Promotion
6. Section 47 of MALCHA
7. Section 63 of BTALA
8. Section 63(1A) of BTALA
9. Section 12 of MLRC
10. Section 44 of MRTP
11. Regulation 3 of the DC Regulations lists down the areas of applicability
12. Regulation 2(3)(42) of the DC Regulations
13. Section 344 of the MMCA