Karnataka Real estate policies

REAL ESTATE REGULATIONS & POLICIES
KARNATAKA

CONTENTS:
Introduction
• Regulatory Environment Relating to Purchase of Land:

I. Karnataka Land Reforms Act, 1961 (“KLRA”)
II. The Karnataka Town and Country Planning Act, 1961 (“KTCPA”)

• Processes for Obtaining Approval for Conversion of Land in Karnataka
I. conversion of land from agricultural to commercial purposes
II. conversion of land from non-commercial to commercial purposes

• Statutory Fees and Other Costs involved in Obtaining Approval for Conversion

• Development of Commercial/ Residential Projects in Karnataka:


• Relevant Policies:
a) SEZ Policy
b) Industrial Policy 2006-11 (“Industrial Policy”)
c) IT Policy
d) Karnataka Tourism Policy 2002-2007
e) Relevant Taxes and Duties
f) Other information

INTRODUCTION:
Situated in the southern part of India, the state of Karnataka spreads over the Deccan Plateau. From
a basically agricultural economy, Karnataka has evolved into an industrial one. It has today about
978 large and medium scale industrial units with a total investment exceeding INR 1,56,545 crores
1 employing more than 4 lakh people . The capital Bangalore today has become an industrial
metropolis. As an electronic city, it has already spread over 300 acres and has become a nerve
2 center of activity. Out of the 430 major software companies, 87 companies are based in Bangalore .
The key industrial activities in the state includes IT and ITeS, telecom equipments, electronics and
electricals, engineering, aeronautics, minerals, machine tools, watch-making, ceramics, leather
3 products and food processing .

Regulatory Environment Relating to Purchase of Land:

The purchase of land in the state of Karnataka is mainly governed by 2 key regulations, namely :
• Karnataka Land Reforms Act, 1961; and
• KarnatakaTown and Country Planning Act, 1961.
A broad overview of the above mentioned legislations vis-à-vis development of housing /
commercial projects is outlined below.

Karnataka Land Reforms Act, 1961 (“KLRA”)

The ownership and holding of land for agricultural purposes within the state of Karnataka is regulated by the KLRA. The KLRA also contains detailed provisions governing tenancies on such land.Under the provisions of KLRA, no person other than a person cultivating the land personally shall be entitled to hold agricultural land . Further, holding of agricultural land by companies, etc is allowable only if the same has been specifically approved under the provisions of KLRA . Further, under KLRA, a person having an assured annual income of INR 2,00,000 or more from sources other than agricultural land, shall not be entitled to acquire further agricultural land .
Under KLRA, ceiling on land holdings are prescribed depending upon the classification of the land
as irrigated, semi-irrigated, dry, etc. The KLRA restricts the maximum extent of agricultural land that could be owned or possessed by any person to 54 acres. The extent of restriction of land holding reduces depending on the fertility of the land, for eg, for Grade-A irrigated lands, the ceiling would be 13 acres .
The KLRA exempts certain lands and certain persons from the applicability of some of the provisions of the Act. For eg, plantation lands are exempted from the applicability of inter-alia, provisions governing land ceilings, and consequently companies can own plantation lands in the 13 state of Karnataka, without any ceiling .
In addition to the restrictions prescribed under the KLRA, certain specific regulations, such as the
Jamma Tenure Land Holdings in the district of Coorg, are applicable to certain parts of the state, which places restrictions on the ability to buy or sell land in such parts.






The Karnataka Town and Country Planning Act, 1961 (“KTCPA”)

The KTCPA regulates the planned growth of land use and provides for the development and execution of town planning schemes in the state. Under the KTCPA, the state government is empowered to notify an area as a local planning area and also appoint a planning authority for such an area. For eg, the Bangalore Metropolitan Region Development Authority (“BMRDA”) is the planning authority for the Bangalore Metropolitan Region (“BMR”), comprising Bangalore urban district, Bangalore rural district and Malur taluk of Kolar district. Similarly, the Bangalore International Airport Area Planning Authority (“BIAAPA”) is the planning authority for the area of the proposed new airport at Devanahalli, Bangalore and its environs.
The planning authority for each area is required to prepare a Comprehensive Development Plan
(“CDP”) or an Outline Development Plan (“ODP”) indicating the manner in which the development and improvement of the entire planning area is to be carried out and regulated . The CDP/ ODP provide zoning of land use for residential, commercial, industrial, agricultural, recreational, educational and other purposes. The CDP or ODP also provides for the reservation of certain type of land for the purposes of the central and state governments, planning authority or public utility undertakings and also for the designation of certain areas as areas of special control, which are subject to certain regulations on building line, height of the building, FAR, architectural features, etc .
Every land use, change in land use and development in the area covered by the CDP or ODP, would
need to be in accordance with the provisions of the KTCPA and the CDP or ODP. These developments can be carried out only with a written permission of the planning authority, which is contained in a commencement certificate issued in the form prescribed under the KTCPA.

Processes for Obtaining Approval for Conversion of Land in Karnataka

Procedure for conversion of land from agricultural to commercial purposes :

Land conversion in the state of Karnataka is governed by the provisions of the Karnataka Land Revenue Act, 1964 (“LRA”). Under the provisions of the LRA, any person who wishes to divert agricultural land for any other purpose is required to make an application through the tahsildar to the jurisdictional deputy commissioner, or such authority to whom powers in this regard may be delegated.
All areas within the jurisdiction of a planning authority will be subject to zoning regulations pertaining to usage of land for residential, commercial and industrial purposes. The deputy commissioner would consider the application from the perspective whether the diversion is likely in accordance with law and in the interest of general public.
The standard conditions for the approval of conversion of agricultural land for residential commercial purposes inter alia require that the construction on converted land be carried out according to the plan sanctioned by the appropriate authorities that the land should be used only for the purpose for which it is converted; the specifications with regard to boundary margins should be complied with; the applications for electricity and water supply should be made to the relevant authorities in the prescribed application or form; and if any construction on the land is carried out for any purpose other than for which conversion has been sanctioned, the relevant authority has the power to demolish the structure without notice to the owners.
The process of granting or rejecting conversion is required to be completed within 45 days of receipt of the application. If the appropriate authority requires any further information in respect of the property, the applicant will be intimated within a week of receipt of the application. If conversion is to be granted, then the applicant has to be issued a notice to pay the ‘conversion fine’ (fee payable on conversion of land) within 15 days of the notice. After the payment of the conversion fine, the deputy commissioner or such other designated authority will issue the conversion order in the prescribed form.
The LRA also states that in the case where the deputy commissioner fails to inform the applicant of
the decision on the application for conversion within a period of 4 months from the date of receipt of the application, the permission applied for shall be deemed to have been granted.Granting of permission for conversion of agricultural land to non-agricultural land does not automatically entitle the occupant to utilise the land for non-agricultural purposes without obtaining sanctions or permissions from local authorities such as municipal corporations, town panchayat and pollution control board, etc. The occupant should apply to the local authoritiessubsequent to the conversion order and obtain all requisite approvals including plan sanctions, pollution clearances, etc, before commencing any construction activities on the land.

Procedure for Conversion of land from non-commercial use to commercial use:
Under the KTCPA, the planning authority would prepare the ODP and after receiving comments or objections from the public, the government of Karnataka would finalise the development plan . The finalised development plan is termed as the CDP. The KTCPA permits the planning authority to allow the change of land use with the prior approval of the state government .
If the planning authority fails to communicate its decision of granting or rejecting the application for change of land use within a period of 3 months from the date of application, permission for change of land use shall be deemed to have been granted, provided the proposed land use is in accordance with the CDP.
The documents to be submitted for any change in land use should include the plan of the land in respect of which the permission is requested, title documents, katha certificate, tax paid receipt and sanction plan of construction, if any, and all other forms and documents for change in land use as prescribed by the planning authority concerned .

Statutory Fees and Other Costs involved in Obtaining Approval for Conversion:

The requisite fee payable for land conversion is termed as a 'conversion fine', and its quantum is laid
down by the Karnataka Land Revenue Rules, 1966. The following are the details of conversion fees payable
Development of Commercial/ Residential Projects in Karnataka:

The CDP presently in force for the city of Bangalore and notified by the Bangalore Development Authority (“BDA”) has classified land use into the following zones :
• Residential;
• Commercial (retail and whole sale business);
• Industrial (light industries, medium industries and heavy industries);
• Public and semi public;
• Utilities and services;
• Parks and open spaces and playgrounds (including public recreational area);
• Transportation and communication; and
• Agricultural land, water sheet, etc (green belt ).

Permission to undertake development of property is granted by the jurisdictional planning authority (for eg, the BDA, in reference to the city of Bangalore), after taking into account compliance with the following:
• The minimum set-back/ open spaces required on all the sides of a building, depending on the
• use and the proposed height of the building;
• The maximum FAR, depending on the use and the intensity of development in the area;
• The maximum height of the building and the maximum number of floors in the building,
• depending upon the location; and
• Parking requirements based on the building use.

With regard to development in residential use zone, it has been specified that buildings or premises shall be permitted only for residential use such as dwellings, hostels, dharamsalas, places of public worship and schools offering general education course up to secondary education. Public libraries,post and telegraph offices, Karnataka Power Transmission Corporation Limited (“KPTCL”) counters, Bangalore Water Supply and Sewerage Board (“BWSSB”) counters, clubs, milk booths and neighborhood or convenience shops, doctors' clinics or consulting offices of advocates and other professionals would be allowed in the residential zone in public interest, provided the floor area occupied by such places does not exceed 20 sq mts.
With regard to development in commercial use (retail) zone, it has been specified that offices, residential buildings, shops and service establishments requiring power up to 10HP in major business areas and up to 5HP in neighborhood shops, nursing homes and residential buildings is permitted. With respect to commercial use (wholesale business) zone, all the establishments permitted in the case of business zone would be permitted with power requirements up to 20HP (except residential buildings).

The following approvals would need to be additionally obtained:
The Karnataka Apartment Ownership Act, 1972 (“KAOA”) primarily provides for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property . It also regulates the usage of the common areas and facilities in the building by each apartment owner and entitles each apartment owner to an undivided interest in such areas facilities .
Typically, in respect of the usage of common areas/ facilities, the owners of apartments form an
association and have the same registered under the Karnataka Societies Registration Act. The registered association has its own bye-laws to control and regulate the usage of the lands and property.

Relevant Policies:
SEZ Policy:
In order to facilitate the development of SEZs in Karnataka, the state government has put in place a
single window clearance mechanism. Projects with investments between INR 3 to 50 crores will be cleared by the State Level Single Window Clearance Committee (“SLSWCC”), chaired by the principal secretary, Department of Commerce and Industries, Government of Karnataka. If the investment is above INR 50 crores, it will be cleared by the State High Level Clearance Committee (“SHLCC”), chaired by the Chief Minister, Government of Karnataka. The applications to both, SLSWCC and SHLCC are required to be submitted through the Karnataka Udyog Mitra.


Industrial Policy 2006-11 (“Industrial Policy”):

The newly introduced policy seeks to strengthen the manufacturing industry in the state, increase Karnataka’s share in the national exports, create additional employment and provide for a diversified industrial base with strength in both old economy and new economy fields. Some of the key strategies adopted in the policy to promote the above objectives include:
• Encouragement of specialised industrial infrastructure for specific sectors and SEZs, through both the Karnataka Industrial Area Development Board (“KIADB”) as well as private sector promoters;
• The establishment of multi-product and product specific SEZs will be encouraged in all districts of the state except Bangalore Urban District (except if the proponent of SEZ comes forward to do so in his/ her own land or through a joint development agreement with land owners);
• Local amendments to the SEZ Act, 2005 and Rules, 2006 (Central Act) will be effected, providing for state level facilitation and incentives, labour law rationalisation, etc;
• Incentives and concessions for various categories of industries and locations; and Focused attention on sub-sectors/ areas where the state has core competency, ie aerospace, engineering, automobiles, pharmaceuticals, food processing, apparel and textiles, electronics, information technology, bio-technology

IT Policy:

• Karnataka was the first state to announce IT Policy in the year 1997. The state has recently introduced Mahithi, the Millennium IT Policy. Under this policy, various fiscal incentives are offered to IT industries. Zonal restrictions would not apply to IT companies that use power up to 5 KVA and hence, such companies can be established in residential, industrial or commercial areas.
• The procedure for seeking environment pollution clearances is simplified for software companies
that use captive Diesel Generator (“DG”) sets. The government has relaxed the FAR for all IT projects set up outside the limits of the municipal corporations in the state.
• A rebate of 15% on cost of land will be applicable to those companies that get land from the state agencies like Karnataka State Small Industries Development Corporation (“KSSIDC”), Karnataka
• Industrial Areas Development Board (“KIADB”) and Karnataka State Electronics Development Corporation Limited (“KEONICS”). For other companies, rebate of 15% on stamp duty is applicable. This rebate on stamp duty is also applicable to the existing IT companies expanding or modernising as well as creating additional employment.

Karnataka Tourism Policy 2002-2007:

The Government of Karnataka, in order to encourage private sector participation in the promotion of tourism and tourism-related activities, provides various concessions and incentives under the tourism policy. To obtain various incentives laid down in the policy, the projects have to be approved by the Department of Tourism, Government of Karnataka, on or after June 1, 2002 and on or before
May 31, 2007.
Commercial establishments open to public in Karnataka, and providing facilities/ services to tourists, such as hotels, tourist resorts, wayside facilities, amusement parks, houseboats, adventure/ recreation activity centre, heritage hotels, tourist village, dormitory etc, are eligible to seek approval for incentives from the Department of Tourism, Government of Karnataka.


Submitted by:
Divya Gnanasekaran