REAL ESTATE RULES & POLICIES - UTTAR PRADESH

-P.Purnachandar

“Operation of commercial, industrial and/or residential real estate. This is much akin to the role of management in any business.”

Policies of real estate in UTTAR PRADESH

Uttar Pradesh is 1 the most populous state in the country accounting for 16.4% of the country’s population and fourth largest state in geographical area covering 9.0 % of the country’s geographical area,encompassing 2,94,411 sq km and comprising of 83 districts, 901 development blocks and 2 1,12,804 inhabited villages .

The density of population in the state is 473 people per sq km as 3 against 274 for the country .

In the year 2004-05, Uttar Pradesh’s GDP at constant prices (1993-94) was INR

1,27,560 crores (USD 28,346 million), which makes it one of the largest among states in

India in terms of size of the 4 economy .

Further, the per capita income of the state at constant prices (1993-94) for the year

2004-05 was INR 7,133 (USD 159)

GDP of Uttar Pradesh is predominantly based on service industry and agriculture.

However, recent growth in the industrial sector is visible with the various industrial

areas and SEZs being set up in Uttar Pradesh.

The increase in urbanisation has had an impact on the demographic composition of the

state.Foreign investments in Uttar Pradesh are significantly low as compared to total FDI

inflows in the country. Official statistics show FDI inflows of INR 15.27 crores (USD 3.3 million

approx) in Uttar Pradesh and Uttarakhand during the period 2000 to 2006 .

Regulatory Environment Relating to Purchase of Land:

The purchase of land is by two key regulations:

Uttar Pradesh Imposition of Ceiling on Land Holding Act, 1960; and

Uttar Pradesh Urban Planning and Development Act, 1973.

Uttar Pradesh Imposition of Ceiling on Land Holding Act, 1960 (the “UPICLHA”):

The ownership and holding of land for agricultural purposes within the state of

Uttar Pradesh is regulated by UPICLHA.

Under UPICLHA, companies, individuals, other entities are permitted to 10 hold

land for agricultural purposes up to a maximum of 7.3 Ha (18.18 acres) .Land in possession by, inter alia, any local authority, a corporation, a government company, a university, an educational institution, etc, are exempted from the above ceiling limit. Further, prescribed authority has the power to exempt any land held in excess of the ceiling limit for the purpose of residential accommodation, the declared land for “industrial purposes” under Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, cremation ground or graveyard, gardening of tea or coffee or rubber plantation, land held before January 24, 1971 for the purposes of stud

farm to the extent of prescribed limit, land held by public religious or charitabletrust, endowment, wakf or institution for the use of the beneficiaries wholly or partly or members of the family, and the land held by a goshala registered under the Uttar Pradesh Goshala Act, 1964 up to the extent of prescribed limit is exempted from the Act.

The use and development of land for commercial/ residential purposes is regulated by Uttar Pradesh Urban Planning and Development Act, 1973.

Uttar Pradesh Urban Planning and Development Act, 1973 (“UPUPDA”):

The UPUPDA provide regulations and procedure for development of residential colonies

and commercial complexes.

Under UPUPDA, the state government may declare an area to be a development area if

in its 12 opinion such area requires to be developed according to plan . The state

government may also by 13 notification in Gazette, constitute an authority to be called the development authority for any development area.

Subsequent to preparation of development plan/ master plan, zonal development plans

(“ZDP”) 15 are prepared by the development authority for each zone identified in the master

plan. The ZDPs contains a site plan and use plan for development of the zone and provides

information with respect to the approximate locations and extent of land uses proposed in the zone public buildings and other public works and utilities, roads, housing, recreation,

business, markets schools,16 hospitals, public and private open spaces and other

categories of public and private uses . The17 ZDPs may also provide other information which is

relevant for the development of the land .

Process for obtaining approval for development of land in development area:

Any person may use land comprised within a development area for development and no development can be undertaken in an area which is not identified as a development area by the relevant authority.

• Person intending to develop land comprised within a development area is required to obtain registration with the relevant development authority within the applicable category of developer.• Further, the permission from the vice-chairman is also required to be obtained for undertaking the development.,with a written application to be filed along with other documents as prescribed in the bye-laws. The development of the land shall be in accordance with the approved plan.

• After completion of development, the developer shall send a notice in writing to the development authority for issuance of the Completion Certificate. The development authority shall grant the Completion Certificate or intimate the developer of refusal to grant the Completion Certificate within 3 months of the receipt of the aforesaid notice. If no such action is taken by the development authority within 3 months then the Completion Certificate is deemed to be granted to the 42 developer .

Stamp Duty and Registration Charges on Land

100 percent exemption from payment of stamp duty on:

• New small-scale units in 24 districts of Poorvanchal and 7 districts of Bundelkhand.
• Infrastructure projects.
• IT/BT and food processing units and call centers.
• Service sector projects such as multi facility hospitals with specified facilities andhaving at least 100 beds; super specialty hospitals with specified facilities among others.
• Facility of registration of all industrial projects at concessional rate of Rs. 2 per thousand subject to a maximum of US$ 108.485 .

PRESENT REAL ESTATE SCENARIO IN UTTAR PRADESH

Upcoming Integrated Townships in the State

There are a number of townships coming up in the state, being developed by some of

the leading real estate developers.They are coming up in Agra, Doondahera, Lucknow,

Ghaziabad, Greater Noida and Ghazipur.

Procedure for obtaining approvals for development of integrated township:

Any person may register with the authorities as a developer for the purpose of

undertaking development of an integrated township. The fee for registration of the developer would be between INR 1,00,000 to INR 10,00,000 .

On obtaining the registration, the developer is required to apply for license for development. The license fee is approximately INR 400 per acre. However, before issue of the license, the developer should occupy 25% of the total land area which is proposed to be developed.

The developer is required to obtain a minimum of 60 % of the total land Area on its own. A detailed project report shall be submitted to the government after acquisition of the prescribed 60 % of the total land.For the purposes of acquiring the balance land, the developer may seek assistance of the government.

Industrial and Service Sector Investment Policy – 2004

Top priority has been accorded to development of infrastructure,The state is keen to promote the participation of the private sector in the industrial and economic growth through this policy.

It has created an attractive environment for NRIs to invest in the state. Procedures and

systems would be modifi ed, so as to facilitate easy inward investment.

Fiscal Incentives- Service Sector

Exemption from acquisition charges if land for the project is acquired by the Government.

Exemption from entry tax on plant and machinery used for the establishment of project.

Exemption from electricity duty for 10 years from the date of establishment.

Exemption from development charges and malba charges levied by the development authority/local authority.

Exemption from house-tax, water and sewage tax and all other taxes/charges levied by the development authority/local authority for five years from the date of establishment.

Biotech Policy – 2004

The state aspires to utilise modern tools of biotechnology and attain prosperity for farmers, generate employment, ensure food for all, good health and clean environment.The mission is to develop a knowledge-based economy, assure benefi t of biotechnology to all sections and promote entrepreneurship in biotechnology-based industries.

Investment incentives under the biotech policy (2004)

Single window facility and constitution of biotechnology development board.

Relaxation of taxes on Biotechnology based products,Relaxation on land for establishment of biotechnological units.

Biotechnological units shall be exempted for entry tax for fifteen years, onCapital goods including captive generation sets.

Captive generation sets installed by biotechnological units shall be exempted of electricity tax for 10 years.

Relaxation in stamp duty and registration fee,Relaxation in zonal regulations.

Projects where an investment of US$10.8484 million or more will be made either in expansion of existing units or in setting up a new unit, also such units which employ more than 250 people will be declared as mega projects. Such projects will be given relaxation under special package.

Provision of cluster development fund /venture capital.

Establishment of Biotech parks at NOIDA and Lucknow.

IT Policy – 2004:

• The state is determined to facilitate and create an investor friendly environment by providing the requisite infrastructure for IT companies. Initiatives to this end include a budget for IT activities, IT pool fund for e-governance, IT Cities, IT Parks, NIC infrastructure and promoting hardware industries.

• IT servicesand IT Enabled Services have vast employment generation potential; hence the state government would provide infrastructure,marketing support and fi nancial assistance for setting up ofthese industries.

Wide Area Network:

• Under the IT Policy, the state shall establish backbone network UP WideArea Network (“UPNET”) for voice, data and video transmission and dissemination.

• The UPNET shall extend to all government departments, state secretariat, divisions, districts, tehsils and block head quarters. The UPNET will use the most cost effective technologies and resource consolidation using free bandwidth available from Optic Fiber Cables (“OFC”) laying operators. UPNET shall provide multi-user, multi-service facilityand shall strengthen the current National Information Centre (“NIC”) infrastructure and existing intranets.

IT Cities:

• Cities like Noida, Agra, Kanpur, Lucknow, Allahabad and Greater Noida are proposed to

be built into IT cities with special facilities for ITeS.

Intellectual Property Rights (“IPR”):

• The state shall aim to become a piracy free state and will actively support the central government initiative in this direction. The state shall promote Research & Development initiatives for the corporate houses and laboratories by providing them with the enforcement of IPR.

Promoting Hardware Industry:

• The state shall provide full support to IT and electronics hardware industry especially in the cities of Noida/ Greater Noida, Agra, Kanpur, Allahabad and Lucknow. All incentives provided to software and ITeS industry shall be made available to IT and electronics hardware industry.

IT Industry:

• The state government recognises the need to develop a strong bond of partnership between the government and the private sector for the proper and rapid development of IT in the state. For formulation and designing of incentives, there would be adequate representation from the IT industry.

Investment Incentives under the information technology policy (2004)

Preferential Allotment of Land: Preferential allotment of land will be made for IT industry

by NOIDA/Greater NOIDA, UPSIDC/Development Authorities in the state.

Exemption of Stamp Duty and Registration Fee: I.T units and call centres shall be given 100% exemption from payment of Stamp Duty and Registration fees.

Uninterrupted Power: Continuous and uninterrupted power supply for IT industries.Exemption from power cuts without limit.

Captive Power Generation: Encouragement to captive power generation in IT locations.I.T Units with 5 KVA power requirement can be set up anywhere irrespective of master plan or land use classifications.

Incentives to Mega Investment Units: Information Technology and electronic units setup in the state with an investment of US$10.8484 million or more shall be classified as Mega Investment Units.

Special Financing Package will be developed by the State Financial Agencies to fulfill the unique needs of the IT sector. will also be provided to the IT sector.A Range of Trade Tax Concessions

Power Tariff: IT units in information technology parks and STPs will be charged thesame power tariff as the SSI.

Exemption from Pollution Control Provisions.

Policy for Food Processing Industry – 2004-09:

The Food Processing Policy aims at facilitating better returns to farmers and attracting

investment in this sector. The policy moots generating employment, promoting value

addition,minimising wastage of agri-products, providing appropriate links between the

agricultural and industrial sectors and marketing the products.

Power Policy – 2003-09

The Power Policy is structured with consumers as the focal point and aims at fulfi llment

of the overall need for universal access and for providing reliable, quality and affordable

power.

The policy contains lucrative tax benefi ts such as interest-free loans to investors and

stamp duty waiver on land purchased to set up industrial units.

It has provision for incentives for renovation work taken up in existing units and

also provides for the transfer/ sale of units that have a very low Plant Load Factor

(PLF), to private parties. The Power Policy has provisions for increasing the PLF by

creating additional power capacity, modernisation of power stations and improving the

transmission system.

UP SEZ New Policy – 2006

The government has introduced the SEZ policy to foster industrial and economic development and create a conducive environment for the development of SEZs.

Integrated areas with world-class infrastructure will be developed through establishment of SEZs, under provisions of this policy.

SEZs are expected to create new avenues for employment generation. They will encourage exports, domestic investments, FDI and facilitate transfer of modern technologies.

Provisions for the exemption of taxes and rationalisation/exemption of legal provisions related to labour, environment and electricity have been provided for in the policy.

Investment incentives to SEZ developer and units (2006)

SEZ developer and SEZ units shall be exempt from all kinds of taxes, cess or levies of the Government of Uttar Pradesh or taxes of any other local authority/agency for any transactions within the SEZ or any procurement of goods, supplies or services from the Domestic Tariff Area. Units in DTA would also be exempt from these on sales made by them to a SEZ unit or SEZ developer. These include UP trade tax, turnover tax, manditax, entry tax, development tax, local bodies tax, etc.SEZ developer and units would also be exempt from taxes levied by local bodies,as SEZs would be an industrial township under constitution of India and would beresponsible for providing services within the zone.

Developers, Co-developers of SEZs and units established/ to be established will get total exemption from the stamp duty & registration fee on first transaction but on implementation of amendments in the Indian stamp act -1899, as per third schedule of SEZ Act-2005, exemption will be applicable as provided therein.

Facility for treating sales from SEZ to DTA as "imports" is not being implemented at this stage because many of the other states are not having any such policy. However, this point is subject to revision.

Electricity duty and taxes shall be exempted on generated or purchased electricity for use in processing area of the SEZ for a period of 10 years from the date of production or start of service.

SEZ will have freedom of generation, transmission, and distribution of electricity within the SEZ subject to provision of Electricity Act 2003. Wherever the consent of U.P. State Regulatory Commission will be required, same shall be obtained.

Under the U.P. power policy, all admissible facilities shall be available to SEZ also.

Sugar Policy – 2004

Under the provisions of this policy, entrepreneurs are provided with a host of incentives and concessions to set up sugar mills in the state.

. Further, exemption from stamp duty and land registration fee,exemption and reimbursement of purchase tax on sugarcane,reimbursement of expenditure on transport of sugarcane andsugar are also provided.

Uttar Pradesh has traditionally been known as the “Sugar Bowl of India” (accounting for

40 per cent of the total production)and sugar is an important source of livelihood. .

Film Industry Policy – 1999

The Film Industry Policy is designed to provide a coherent framework for the growth of

the fi lm industry in UP.

It also aims to encourage addi tional capital investments so as to improve the economic

status of the people and to provide alternative avenues of employment.

The state will promote the creation of required infrastructure in the private and joint

sector. It shall further fi ll in critical gaps in the interim, till such infrastructure is available.

Mineral Policy

It aims to expedite investigation of new mineral deposits for development by adopting modem exploration techniques.

It aims to promote private investment and foreign capital investment in the mineral development process.

Hotel Policy – 2006

The state’s fi rst Hotel Policy contains major concessions for the industry as hotels are expected to come up primarily in Ghaziabad,NOIDA and Greater Noida, for which land would be provided at industrial rates.

The policy has been formulated especially in view of the Commonwealth Games 2010; about 30,000 rooms are required in the National Capital Region (NCR) for the games.

Relevant Taxes and Duties