India: Applicability Of The Real Estate (Regulation And Development) Act, 2016 To Industrial Premises

Last Updated: 17 October 2017
Article by Manisha Paranjape

The long title of Real Estate (Regulation and Development) Act, 2016 ("RERA") states that RERA has been promulgated to ensure transparency in sale of plots, apartments and buildings and in real estate projects. Real estate projects have in turn been defined as development of plots/apartments/buildings for the purpose of sale.


Apartment has been defined as a block, chamber, dwelling unit, flat, office, showroom, shop,godown, premises, suit, tenement, unit or by any other name, means a separate and selfcontained part of any immovable property, including one or more rooms or enclosed spaces, 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 any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation,profession or trade, or for any other type of use ancillary to the purpose specified.

Building includes any structure or erection or part of a structure or erection which is intended to be used for residential, commercial or for the purpose of any business, occupation, profession or trade, or for any other related purposes.



The existing Maharashtra Ownership of Flats Act, 1963 ("MOFA") initially only regarded premises used or intended to be used for residence, office,show-room, shop, godown as a flat. By an amendment in 1986 the words "or for carrying on any industry or business" were introduced. Thus, premises used for industrial purposes are covered by the purview of MOFA in view of the specific amendment made to the definition of "flat".


Act, 1983 ("Haryana Act") clearly provides that the provisions of the Haryana Act shall apply to every apartment lawfully constructed for residential purposes, integrated commercial complexes, flatted factories, Information Technology Industrial Units, Cyber Park and Cyber City. Further apartment has been defined as premises to be used for residence, office or for practicing any profession or for carrying on any occupation, trade, business or manufacturing or other uses relating to Information Technology or for such other type of independent use. We thus note that the applicability to premises being used for manufacturing, or as factories has been specifically included in the Act.


Act, 1983 ("Haryana Act") clearly provides that the provisions of the Haryana Act shall apply to every apartment lawfully constructed for residential purposes, integrated commercial complexes, flatted factories, Information Technology Industrial Units, Cyber Park and Cyber City. Further apartment has been defined as premises to be used for residence, office or for practicing any profession or for carrying on any occupation, trade, business or manufacturing or other uses relating to Information Technology or for such other type of independent use. We thus note that the applicability to premises being used for manufacturing, or as factories has been specifically included in the Act.


The Punjab Apartment Ownership Act, 1995 ("Punjab Act") also specifically includes industry along with the words business, occupation, profession, or trade as the purposes for which premises can be used to fall within the definition of "apartment". In view of this, industrial premises would be covered under the Punjab Act as an apartment.


The West Bengal Apartment Ownership Act, 1972 ("West Bengal Act") and the Karnataka Apartment Ownership Act, 1972 as brought into force specify that the respective acts apply to properties being used or proposed to be used mainly for residential purposes. The West Bengal Act was later amended to include commercial units within its scope. Thus, it is clear from the above, that various state legislatures specifically included the words "industry" or at least "manufacturing" in the definitions of "apartment"/"flat" where the intention was to extend the ambit of the statute to industrial premises also.


The Real Estate (Regulation and Development) Bill, 2013 ("Bill") as introduced in the Rajya Sabha extended only to premises used for residential and allied purposes. Thereafter the Bill was referred to the Standing Committee for its report by the Lok Sabha.

The Ministry of Finance in its deposition before the Standing Committee pointed out that commercial structures and industrial estates are also constructed in the development of real estate and that banks provide funding to all types of projects. In their opinion, it would be more appropriate to have an all-encompassing definition for "building" which would include residential, commercial, and industrial projects.

The Standing Committee taking cognizance of the views of the Ministry of Finance, strongly recommended that the definition of "building"should include residential, commercial, and industrial projects.

The Union Cabinet approved official amendments to the Bill and in line with the previously mentioned recommendation, both "apartment" and "building" were noted to be amended to explicitly include property used for industry as well as for commercial use in addition to residential use.

The Bill and the aforesaid amendments were referred to the Select Committee for its recommendations. In the Real Estate (Regulation and Development) Bill, 2016 ("The Real Estate Bill, 2016") reported by the Select Committee, while the definitions of apartment and building were amended to include properties used for commercial purposes as well as for carrying on business, occupation, profession of trade, the word "industry" which was included in the notice of amendments approved by the Cabinet was specifically omitted from both definitions.

The Real Estate Bill, 2016 as passed by both Houses of Parliament contains the definitions of apartment and building exactly as recommended by the Select Committee.

Courts have often been called upon to construe what sort of activities would be covered under the words "business, occupation, profession or trade". However, in the present case, the word "industry" has been considered and thereafter omitted after it was inserted by an amendment to the bill. So also, as seen above generally in all the existing laws relating to real estate, the words "industry" or "manufacturing" have been specifically introduced in addition to "business, occupation, profession or trade" where industrial premises have been sought to be brought under the ambit of that act.

It is thus clear that industrial premises are not covered under the definition of either apartment or building and are therefore excluded from the purview of RERA as passed by Parliament. APPLICABILITY OF RERA TO CERTAIN INDUSTRIAL PREMISES IN KARNATAKA

Despite RERA not being intended to be applicable to industrial premises, certain ground realities may also be considered, which make this distinction less clear cut.

Bangalore is home to a burgeoning number of large commercial spaces, office parks, and SEZs, which have blocks of corporate offices, malls, restaurants etc. These projects are generally of mixed land usage, providing space for residential as well as commercial usage, and are also targets of the IT industry for office space.

In the Bangalore Metropolitan Area, the Bangalore Development Authority has as part of the Master Plan delineated zoning regulations to ensure systematic and regulated growth of the city. The Zoning of Land Use And Regulations, 2007 ("Regulations")has classified land use zones into commercial, residential, industrial, public and semi-public,traffic and transportation, public utilities, park and open space, agricultural land, and unclassified. Each category has further sub-categories which delineate permissible land use in such sub-category.

Buildings falling under commercial use unquestionably come under the ambit of RERA. Typical examples include retail & hardware shops, eateries, warehouses, financial institutions, entertainment and amusement centres etc. Permitted land use in the commercial category also includes commercial and corporate offices.

While industrial buildings do not come under the ambit of the RERA, Information Technology, Bio Technology and Business Process Outsourcing have been classified under the Regulations as included in the "I-3" Industrial Uses category, i.e., light industrial. In a commercial zone, the Regulations permit I-3 category usage as the main land use. That means that even in a commercial zone, you can have an office engaged in IT or BPO services.

Projects developed solely with the purpose of developing office spaces for IT or BPO offices could be argued as not falling under the purview of RERA. However, that seems to be a bit of a stretch as those offices are not very different from commercial spaces otherwise being used. Moreover, a large number of commercial spaces in Bangalore are generally developed as projects for mixed commercial usage, and clear distinctions are not drawn between spaces for general corporate offices and IT offices.

Hence, if the development/building plan is sanctioned by the planning authorities as a commercial development then the project has to be registered under RERA irrespective of whether certain portions are used for IT and BPO offices.

Of course, if there was genuine industrial activity, which could be undertaken in any such development, as in the textile or diamond industry, then one may be able to argue that the provisions of RERA do not apply to such development.

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