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Real Estate & Construction

According to a report published in the Economic Times, a leading financial daily in India , FDI inflows in the Housing and Real Estate sector between 2005 and August 2007 was up to INR 5812 crores (INR 58.12 bn). Fox Mandal is proud to have been instrumental in well over 30% of deals involved with these inflows on behalf of the Foreign Investor.

Real Estate Market in India

The real estate sector in India is witnessing a wide spectrum of changes, that slowly but surely is expected to make India, a preferred destination for real estate activity. Investing in real estate has always attracted investors all over, private or institutional. The policy of allowing foreign direct investment (“FDI”) in real estate sector (the investment would be in integrated townships which would include housing, commercial premises, hotels and resorts, while the urban infrastructure would comprise roads and bridges, mass rapid transit, systems and manufacture of building materials) has helped improve the image of investing in the real estate sector in India.

Foreign Direct Investment in Real Estate

Real estate sector had until recently been an area, which the Government of India had been reluctant to open up for foreign investment. Indian laws prohibited FDI in real estate business whereby foreigners were not allowed to make investment in any company, firm or proprietary concern or in any entity which was engaged in the business of real estate and construction of farm houses. Such prohibition also extended to the use of borrowed funds from the non-residents as the residents in India could not use the said funds in real estate business or construction of houses.

Under the Foreign Exchange Management Act, 1999 (“Act”) read with the relevant regulations thereof, real estate business means buying and selling of real estate or trading in transferable development rights excluding the development of townships, construction or residential/commercial premises, roads or bridges from the meaning of real estate sector. Transferable development rights means certificates issued in respect of category of land acquired for public purpose either by Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole.

The decision to liberalize the FDI norms in the construction sector is perhaps the most significant economic policy decisions taken by the Government of India. In the past, only Non-Resident Indians (“NRI”) and Persons of Indian Origin (“PIO”) were permitted to invest in the housing and the real estate sectors. Foreign investors other than NRI were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner.

Further, 100% FDI under the automatic route is allowed by recent government guidelines, being Press Note 2 of 2005, in townships, built up infrastructure, housing and construction-development projects which would include but not to be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure subject to the conditions stated hereunder:

  • Development of a minimum land area of 10 hectares in serviced housing plots, and a minimum built-up area of 50,000 square meters in case of construction-development projects and any one of the two conditions have to be fulfilled in case of a combination project.
  • Fulfill the minimum capitalization norm of USD 10 million for a wholly owned subsidiary and USD 5 Million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the wholly owned subsidiary or joint venture.
  • At least 50% of the integrated project has to be completed within a period of five years from the date of obtaining all statutory clearances. The foreign investors are not permitted to sell undeveloped plots. Undeveloped plots mean plots where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. The investors are required to provide the infrastructure and obtain the completion certificate from the concerned local body/service agency before disposing of serviced housing plots.
  • Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the Foreign Investment and Promotion Board.
  • All applicable local and state laws and approvals as may be required for construction and building, land use, etc.

The Department of Industrial Policy and Promotion (“DIPP”) has, however, clarified vide Press Note 2 of 2006 that the above specifications mentioned in Press Note 2 of 2005 would not be applicable for the hotel, tourism and hospitality sectors as 100% FDI under the automatic route has already been permitted in these sectors. The Central Government/DIPP has also clarified that the establishment of hotels and tourism continue to be governed by Press Note 4 of 2001 and hospitals continue to be governed by Press Note 2 of 2000 series. Further, the Central Government has also clarified that with respect to the Special Economic Zones, being separately regulated under the Special Economic Zones Act, 2005, the above Press Note 2 of 2005 would not apply.

On 26th June 2006, SEBI has cleared the pathway for Real Estate Mutual Funds to invest in the following areas::

  • Directly in real estate properties within India.
  • Mortgage (housing lease) backed securities.
  • Equity shares/bonds/debentures of listed/unlisted companies which deal in properties and also undertake property development.
  • Other securities.

As a boost to the liberalization process, the Securities and Exchange Board of India (“SEBI”) has also permitted foreign venture capital investment in real estate in 2005. This was after the Central Government further relaxed the rules regarding FDI in real estate, as noted above. It would be pertinent to note that Real Estate Investment Trust is not permitted to operate in India by SEBI. However, trusts if registered with SEBI as Venture Capital Fund (VCF) or as Foreign Venture Capital Investor (FVCI) are allowed to invest in India subject to restrictions imposed under SEBI Regulations and FDI caps.

The greatest benefit of relaxation of FDI norms in the real estate sector is that the sector has become more organized. The other important benefits are increase of professionalism, creation of healthy and competitive market environment for both domestic and foreign players, and bringing in of superior technology.

FM REAL ESTATE PRACTICE GROUP

The firm has a Real Estate and Infrastructure Practice group that has substantial real estate capabilities and comprises of dedicated team of lawyers including Senior Partners, Partners, Senior Associates and Associates functioning out of all the offices mentioned above. The Real Estate and Infrastructure Practice group caters to and addresses emerging real estate issues and concerns. Our practice covers advising both domestic and international clients according to their business needs.

Practice Areas

Apart from catering to client needs on the traditional sale and purchase transactions, the firm has multi faceted areas of practice but not limiting to apart from mainly focusing on the following:

1.      Entry Level Strategy Planning
Entry Level Legal Approach and Legal Structuring of Foreign Direct Investment for Individual Foreign Investors, Foreign Companies, Wholly owned Subsidiaries, Foreign Institutional Investors and Non-Resident Indians.

2.      Location Analysis, Site and Title Search
Legal Assistance for finalizing most favourable / preferred location and other allied searches including vetting of documents and verification of title.

3.      Due Diligence
Carrying out thorough and exhaustive client specific and also client specified (in particular instances) Due Diligence and similar like exercises before advising clients.

4.      Legal Risk Matrix and Appraisals
Working and mapping of Legal Risk Matrix and Appraisals through experts for Real Estate Transactions, Urban Development Initiatives and Infrastructure Projects.

5.      Finance and Re-financing and Insurance
Legal Assistance for arranging Project Finance and also for arranging Re-Finance on existing project finance models and Project Insurance.

6.      Infrastructure Contract Bidding Management
Legal Assistance to meet up with legal compliance for Infrastructure Contract Bidding.

7.      Auctioning/Bidding
Legal Assistance for Auctioning, Bidding and contesting for deals.

8.      Represent the Client and Liaison with Government Departments and Officials
Handling and Liaison for securing various clearances with various Government Entities (and guiding the client through Red-Tapes).

9.      Space Acquisition/Disposition and Renegotiations
Acquiring space on behalf / for the client acting as Attorneys-at-Law, similarly Disposing and Negotiating and if necessary Re-Negotiating for deals.

10.    Tendering
Assisting with Legal Compliance for Tender Process and Procuring / Inviting Tenders as well as contesting for Tenders on behalf of the client.

11.    Benchmarking of Real Estate Transactions
Benchmarking Legal Stages in Real Estate Transactions from Greenfield Stage to Closing-Off Stage.

12.    Tax Structuring and Planning
Legal Assistance in structuring Taxation Strategy for Real Estate Projects (Income-Tax, Service-Tax, VAT, etc.) and Tax Planning for the same.

13.    Transactional Compliance
Legal Assistance in Mandatory Procedural Compliance for various transactions.

14.    Public-Private Partnerships
Legal Structuring and Assistance in Public-Private Partnerships and Infrastructure Projects.

15.    Green Field and Brown Field Projects
Legal Counselling for Green Field and Brown Field Projects and related Environment Issues.

16.    Joint Ventures and Joint Developments
Legal Structuring and Counselling for Domestic as well as Cross-Border Joint Ventures and Joint Development Agreements.

17.    Lease Administration
Lease and Lease related Legal Assistance and Administration.

18.    Project Construction and Development
Legal Assistance in relation to Construction and Development of projects and related contracts.

19.    Facility/Built-to-Suit Campus Development
Legal Assistance in relation to bringing up and developing Facility/Built-to-Suit Campus.

20.    Pre/Post Purchase/Sale Compliance and Documentation
Complete legal procedural advice for regular Pre/Post Purchase/Sale and all relevant documentation including, Issuance of Letter-of-Intent, Public Notice, Agreement-to-Sale, Sale Deed etc.

21.    Dispute Resolution and Litigation including Landlord/Tenant Proceedings
FM Litigation Practice Group handles, represents and advises client concerns in Litigation on case-to-case basis vis-à-vis Landlord/Tenant, Buyer/Seller, Lessor/Lessee matters and also Dispute Resolution Procedures for the same.

22.    Brokerage, Project Management, Project Consultant, Architectural and Interiors, etc. Service Provision and Construction Contractor Legal Management
Complete Legal Advice in matters for appointment of Broker, Project Manager, Architect, Interior Decorator, Certified Surveyor, Certified Valuer, Civil Contractor and other Contractors and Sub-Contractors for the entire/part transaction/deal/project.

23.    Legal Documentation and Closing-Off documents for all the above mentioned transactions and/or combination of transactions
Being a Solicitors Firm, FM is fully experienced and in capacity with a special Practice Group to take care of the documentation required for the various transactions, combination of transactions as may be required on case to case basis.

24.    Upcoming Trends in Real Estate Transactions
FM is continuously in touch with other real estate majors and is currently engaged and in position to render advice on emerging areas like Venture Capital Funds, Real Estate Mutual Funds, Real Estate Investment Trusts, Non-Performing Real Assets, Hedge Funds, Real Estate Securities, Mortgage and Debt Instruments, CMBS and other like upcoming trends in Real Estate Transactions in India.

Experiences in Real Property

  • Advising Ascott International, Singapore in relation to its joint venture with Rattha Group, Chennai on construction, development, operations and management of apartment hotels.
  • Exide Industries Limited: Carried out due diligence and documentation for the acquisition of land for setting up of factory at Hosur, Tamilnadu.
  • India Thermit Corporation Limited: Carried out due diligence of industrial KIADB land and drafting and registration of Deed of Conveyance.
  • Radiant Industries Limited: Conducted due diligence of industrial KIADB land in Whitefield and Hosur, Tamil Nadu and drafting and registration of Deed of Conveyance.
  • Kewman Investment and Leasing Company Private Limited: Carried out due diligence of industrial KIADB land and drafting and registration of Deed of Conveyance.
  • Development Consultants Limited: Advising on acquisition of property and carrying out for due diligence of the property in Bangalore.
  • Zygo Flowers Limited: Advising on acquiring land for their plantation at Doddaballapur, Bangalore and carrying out due diligence of the property and all related documentation.
  • Christel House India Private Limited: Advising on setting up of charitable trust and carrying out due diligence of the property for setting up its activities.
  • Spice Telecom: Advising on setting up of cell sites, carrying out due diligence of the property, drafting and registration of number of Lease Deeds.
  • Primark India Private Ltd., Thomson Finance Group: Conducted due diligence of office premises, drafting and registration of Lease Deeds.
  • Pioneer International Limited, Australia: Conducted due diligence of immoveable property.
  • Salvation Army, UK: Carried out due diligence in respect of property at Coimbatore, Tamilnadu.
  • Bank of Nova Scotia: Carried out due diligence in respect of properties proposed to mortgage to the Bank.
  • Industrial Investment Development Bank of India Ltd.: Conducted title verification regarding mortgage.
  • Ingram Micro Inc., Singapore: Conducted due diligence of office premises and branch offices of Ingram Micro India Private Limited through out India.
  • Indian Renewable Energy Development Agency Limited: Carried out due diligence of the properties proposed to be mortgaged to IREDA (Karnataka & Andhra Pradesh).
  • NextSet Software India Pvt. Ltd.: Carrying out due diligence and lease documentation in respect of office space at Chennai, Tamilnadu.
  • Sykes Enterprise (India) Pvt. Ltd. (Sykes Realty, Inc.): Carried out due diligence and lease documentation of their India liaison office.
  • Sylvan Learning India Private Limited (Sylvan International BV): Conducted due diligence in respect of allotment of land by the Government of Andhra Pradesh Industrial Infrastructure Corporation Limited.
  • Ho Hup Construction Company India Pvt. Ltd: Carried out due Diligence in respect of allotment of land by the Government of Andhra Pradesh Industrial Infrastructure Corporation Limited.
  • Yuwa Partners, Attorney at Law, Japan: Advised their client Nikko Cordial Securities Company Ltd, Japan on queries relating to Indian Property Fund Project.
  • GMR Infrastructure Ltd.: Advised on bidding documentation, including Consortium Agreement, Lead Bidder Agreement etc. for the International Airport Project at Hyderabad.
  • Quarkcity: Advised a leading US Software company on its first ever Indian infrastructure project. The scope of advise included vetting of various documents relating to civil construction work including agreements with contractors, supply contracts, design and engineering contracts, construction management contract, etc.
  • Salim Group of Industries (Indonesia): Acted on behalf of the company and advised on the setting up of an integrated township in Kolkata,  including handling/drafting of numerous construction contracts on the client’s behalf such as acquisition of land for 390 acre integrated township near Kolkata.
  • Ascendas (Singapore): Advised on setting up IT parks and dealing in various construction contracts relating to matters of material supply, design and contractor agreements etc.
  • Raheja Builders: Advised a construction group in Bangalore.
  • Reuters: Negotiating and drafting various Agreements for establishing their set up in India.
  • Lloyds TSB, UK: Advised for their leased premises in Bangalore and Mumbai.
  • L&T Infocity: Advised in respect of their Information Technology Complex called “Cyber Pearl” at HITEC City, Hyderabad.
  • Dodsal Corporation Private Limited: Advised in setting up their Pizza Hut and KFC outlets in South India.
  • Hampson Industries: Advised in acquiring land for its campus.
  • KeppelLand, Singapore: Advised for developing township and work included performing due-diligence, JV agreements, acquisition of property, etc. in relation to property situated at Rajarhat, Kolkata.
  • Puravankara: Advised a leading builder in South India, for various residential and commercial land acquisition and development.
  • Mann+Hummel: Advised in acquisition of Karnataka Industrial Area Development Board land.
  • Advising Parsvnath Developers with respect to a real estate project, wherein Chandigarh Housing Board (“CHB”) has given development rights on 123.79 acres of land located in the Rajiv Gandhi Chandigarh Technology Park at Chandigarhfor the purposes of development of residential, commercial and other related infrastructure facilities as an integrated project. 
  • Advising Castle Rock Castle Rock IREGO I LP incorporated under the laws of Cayman Islands to subscribe for equity shares and/or preference shares or any other permissible mode of investment in a special purpose vehicle which are either a wholly owned subsidiary or a joint venture company for development of a Holiday Inn Hotel Project in various cities in India. The work comprised starting from drafting term sheet, due diligence of the project land, drafting and negotiating transaction documentation, doing all post closing formalities.
  • Advising Goldman Sachs (Asia) LLC, with respect to various construction contract for a real estate development project for their own BPO and other commercial space requirement in Mumbai.  
  • Citigroup:  Property Investor, Real Estate Specific Fund Advised Citigroup in several real estate transactions ranging from Hotel Project, Residential Project, SEZ Projects, IT Parks etc.  The investments were made in several cities across India namely Bombay, NCR, Pune, Bangalore, Chennai, Hyderabad, Chandigarh, Coimbatore etc.
  • Unitech Ltd, Salim Group and Universal Success Enterprise Ltd.: Legal assistance, advice and transaction agreement for development of roads, bridges, SEZ’s other Infrastructure and Township in West Bengal over 40,000 acres.
  • Unitech Ltd, Salim Group, Jurong Corporation and Universal Success.: Legal assistance and advice on acquisition of property for development of Logistics Hub of 108 acre land near Kolkata.
  • West Bengal Industrial Infrastructure Development Corporation (WBIIDC) - Advising WBIIDC in relation to the development of the Growth Centre on 197 acres of land at Bolpur including review of tender documents, drafting and finalization of Memorandum of Understanding between the Promoters and West Bengal Industrial Infrastructure Development Corporation.
  • DLF Ltd.: Advising DLF regarding contract with KMDA for development of 5000 acres of land at Dankuni in West Bengal for residential township and industrial areas.
  • Bengal Unitech Universal.: Advised regarding sale contracts and other issues in respect of 150 acres residential and industrial development in Rajarhat, Kolkata.
  • MLS Business Centers International Ltd. (UK): Advised on various real estate issues.
  • HSBC Electronic Data Processing Limited: Advised on marketable title of its leased properties at Vizag, Hyderabad and Kolkata for its BPO projects conducted personal searches in concerned offices of Municipal Corporation, Revenue Office, Urban Development Authority and Courts, drafted Lease Deeds and coordinated with registration deportments for registration.
  • Octagon: Assisted in conduct of Due Diligence proceedings of a group of Power Projects for the purpose of acquisition of the said projects.
  • Fosscar: Assisted in conduct Due Diligence of Godhavari Fertilizer and Chemicals Limited for the purpose of bidding for the project.
  • Pacific Hospitals Private Limited: Advised on marketable title of land allotted by the Government of Andhra Pradesh on conducting personal searches and verification of records.
  • Advising a company in relation to Delhi Metro Rail Project.
  • Advising a company in relation to Noida Toll Bridge Project.
  • Advising a large South East Asian Conglomerate in relation to Highway Projects in India.
  • Advising a large American Private Educational Institute to set up a private University in India.
  • Advising a Finance Company in relation to Roadway Project in Lucknow, Uttar Pradesh.
  • Advised Broadway Real Estate Partners, LLC in Various investment options on real estate in India.
  • Kaplan India Pvt. Ltd.: Advised and assisted in negotiations and drafting with respect to lease of its office premises
  • Bentley System, Inc.: Advised and assisted Bentley System, Inc. with respect to lease of office premises of its subsidiary in India.
  • Lok Group (Builders) Advised and vetted various lease agreements and license agreements etc.
  • Advised J P Morgan in setting up a joint venture for a residential project with Lodha Developers in Mumbai.
  • Advised M-Tech Developers Limited in relation to the agreements proposed to be entered with its clients.
  • Advised Hyundai Motors India Limited in relation to its proposed real estate development.
  • Advised Alpha Real Capital in relation to its proposed joint venture for developing an information technology park at Noida.
  • Advised Midas International Asset Management Ltd. in relation to its proposed joint venture for developing a commercial project in Gurgaon.
  • Advising SB Development Pte. Ltd. inrelation to its proposed joint venture for developing a special economic zone in Gujarat.
  • Advising Silver Ocean Properties inrelation to its proposed joint ventures for real estate development in India.
  • Advising Ayala International in its joint venture with Mahindra Group for developing a special economic zone in Chennai.
  • Advising Logix Parkfor its information technology parks in Noida, restructuring of its group companies and joint ventures.
  • The firm is currently advising Vornado with respect to a JV with one of the largest Indian industrial groups for setting up retail malls in India. The deal size is estimated to be in range of USD 1 bn.
  • Advised Ipreo in the consolidation of their land holdings for constructing a hotel resort in south Maharashtra
  • Apart from the above, the firm has advised the following clients for due diligence on the title of property situated in Chennai; attending before and liaisoning with different authorities, representing clients, advising on all legal angles of the property and the proposed deal, drafting, finalizing and registering Lease Deed and ancillary agreements.
  • Sony India Private Limited
  • Eliza Tinslay Group Plc. (UK)
  • The firm has also assisted the following clients in acquisition of land advised on marketable title after conducting property searches, drafting of Agreements, Sale Deeds, negotiating with authorities, and registration of such agreements, also rendered legal assistance for acquiring leased premises including conduct of property search, advice on marketable title, drafting and registration of Lease Documents.
  • Microsoft India (R&D) Private Limited
  • Ubs Service Centre (India) Private Limited
  • Computer Associates India Private Limited
  • Kanbay Software (India) Private Limited
  • Franklin Templeton International Services (India) Private Limited
  • EBC European Bearing Corporation
  • Sansara Hotels India Private Limited
  • Urbanedge Hotels Private Limited
  • DTZ
  • Further, the firm has assisted the following clients in their lease transaction in respect of their projects, office space, advised on marketable title of its leased premises, drafted Lease Documents and assisted in the registration of documents.
  • Verizon Data Services India Private Limited
  • Mentor Graphics India Limited
  • Cypress Semiconductor Technology India Private Limited
  • Sonata Software Private Limited
  • Commvault India Private Limited
  • Indigene Pharmaceuticals Private Limited
  • Weston Knowledge Systems Private Limited
  • Max Hyper Market India Private Limited
  • Greenfield Online Private Limited
  • Lafarge Boral Gypsum India Pvt. Ltd.
  • I-mate India.

Economic Times, New Delhi, dated December 6th 2007,

SEBI, PR – 166/2006 dated 26th June 2006.


 
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