IMPACT OF THE IMPLEMENTATION OF REGULATION BILL IN REAL ESTATE

We hear a lot of 'janhit mein jaari' advertisements nowadays that try to explain the latest reforms regarding land acquisiton. But its not in public interest, if not understandable. So here is a gist of the Land Acquisition, Rehabilitation and Resettlement Bill introduced by the Parliament in the monsoon session. 

NEED FOR REFORM 

The old Land Acquisition Act, 1894 had some of the following shortcomings and so it was time to abandon the same.

• Forced Acquisitions: No attention was paid to the effect of the acquisition on the land owners once the buyers decided to acquire the land.
• No safeguards: No real appeal mechanism existed to stop the process of acquisition.
• The Act remained silent on the resettlement and rehabilitation of the displaced.
• Urgency Clause: Every transaction constituted urgency on part of the buyer which at times resulted in the dispossession of land and dissatisfaction of token money.
• Low rates of compensation and scant regard for the welfare of the common man.

LAND ACQUISITION, REHABILITATION AND RESETTLEMENT BILL 

The previous Act as we saw was ignorant towards the landowners and so a need to compensate the land owners in lieu of their lands acquired for industrialisation and urbanisation arose. The new Bill includes 3 main parameters:

• Applicable to 50 acres of urban land and 100 acres of rural land.
• Consideration is twice the market value for urban land acquisition and 4 times for rural land transactions.
• Private acquirers need 80% consent of land owners whereas public-private partnerships need 70% for the same.

Considering the above points on part of the land owners, their side of the grass is surely green. The new Bill makes an effort to rule out the problems of unwarranted claims and issues of inadequate compensations. 

SHORTCOMINGS

• These new reforms, on the whole remain biased as the buyers and end users have a heavy cost to pay.
• All the above parameters increase the total project cost as the time to have the consent and to acquire the land too stretches. This results in a cascading effect on project costs being charged from buyers in large township projects.
• Most developers invest in smaller pieces of land due to the arbitrary unit used to fix the token i.e., twice the price for urban lands and 4 times for rural deals. 

BAN ON INTERNATIONAL INVESTMENT

In anticipation of tighter liquidity conditions globally, foreign institutional investors (FIIs) withdrew money from the Indian debt and equity markets. As a result, the rupee depreciated against the dollar. In order to stem its fall, the RBI in August framed rules designed to preserve the country's foreign exchange reserves. Besides reducing the amount that Indians could remit abroad annually from $2,00,000 to $75,000, the central bank also imposed a ban on investment in international real estate.

SEBI ALLOWS PREFERENTIAL CLAUSES IN SHARE PURCHASE PACTS

THE DECISION

SEBI has provided more flexibility to entities entering into Merger & Acquisition (M&A) deals, allowing them to include Preferential Clauses like "right of first refusal, tag-along and drag-along' in their Share Purchase Agreements.

The regulator rescinded a March 1, 2000, notification that did not allow put and call option arrangements or recognize the right of first refusal. The right of refusal gives one of the parties to a transaction the first option to buy out its partner when the latter wants to exit at a later stage. Similarly, tag-along and drag-along clauses allow a partner to join another party in cases like further acquisition or sell his holdings.

However, the regulator has allowed these facilities subject to various conditions which include the seller should hold the ownership of the securities for at least a one-year period from the date of the contract, the pricing of the securities should be as per all the extant laws, and finally, the contract can be settled only after actual delivery of the securities.

The Market Watchdog noted that the changes would not affect any contract which has been entered into prior to the date of this notification.

THE EFFECT

The decision will provide a fillip to M&A deals and give the partners easier exit options.

The changes will also protect the interests of foreign investors, particularly private equity players who generally insist on the inclusion such clauses in the deals.

UNDERSTANDING THE JARGON

Put Option: Under this option, an investor has the right to sell his/her shares back to the company or to its promoter at a price that has been fixed before.

Call Option: Under this option, an investor has the right to buy shares held by the company or promoter at a pre-determined price.

Right of first refusal: Right of first refusal, is the right of a Person (Investor) or Company to purchase something before the offering is made available to others. If an Investor plans to exit the Company, it is obliged to give the Promoters or existing Shareholders, an opportunity to buy the Shares before selling the same to a third party.

Tag-along rights: This gives a minority shareholder the right to sell his/her shares of a company on similar terms as those of the majority shareholders.

Drag-along rights: This gives the majority shareholders a right to force minority shareholders to come together to off-load their shares on similar terms during the sale of a company.

NEWS WRAP - OCTOBER 08, 2013

• Maruti Suzuki is exploring an ambitious plan to build its own family of Diesel Engines.

• Mutual funds pull out Rs. 2800 crore in September.

• Market Regulator SEBI has dropped charges against Suzlon Energy's former Non-executive Independent Director, Pradip Kumar Khaitan.

• India, South Africa plan to settle bilateral trade in local currencies, aimed at reducing dependence on the dollar and countering exchange rate volatility.

• Tata Sons hopeful of getting nod for Airline JV with Singapore Airlines.

• Godrej Consumer products buys 30% stake in a Salon firm.

• BSE to unveil its new Trading platform ' BOLT PLUS ' and also launch Trading currency and Interest Rate derivatives segments.

Source: Economic Times

NEWS WRAP - OCTOBER 07, 2013

• Tata's to operate Taj Mansingh for three-six months after Lease ends.

• Axis Bank grooms future leaders for key positions.

• Premium Apparel menswear Blacberrys looking to enter International Markets.

• Foreign Portfolio Invetor (FPIs) to get registration within 10 days; stake capped at 10%.

• Twitter Look-Alike 'Tweeter' surged 685% before trading was halted; due to confusion with the microblogging service 'Twitter'.

Source: Economic Times

NEWS WRAP - OCTOBER 05, 2013

• Income Tax department to slap fresh Rs 1000 crore tax notices on Nokia.

• Jet falls after Supreme Court agrees to hear PIL against Jet - Ethihad deal.

• Adobe Hacked, 2.9 Million user's data stolen.

• The Indian Industry expressed its discomfort to Minister of Corporate Affairs Sachin Pilot about Auditor Policy.

Source: Economic Times

NEWS WRAP - OCTOBER 04, 2013

• US based Private Equity firm TPG in talks to acquire stake in Manappuram Finance.

• Lalu Prasad sent to jail for 5 years in Fodder Scam and loses Lok Sabha Seat.

• Over 30 distressed power projects on block, big Companies uninterested.

• US Burger chain Johnny Rockets to start two Restaurants in NCR.

• TCS sign up as title sponsor for New York city  Marathon.

• Star, ESPN  bag BCCI  for sponsorship right for 2013 - 2014 Season.

• Essar Energy to sell 50% stake in Kenya Petroleum Refineries.

• Diamond Merchants face income tax raid after hosting Narendra Modi.

• Auto Care - 2013, organised by the Confederation of Indian Industry kicked off in Ahmedabad.

Source: Economic Times

NEWS WRAP - OCTOBER 03, 2013

• Essar's Ruias selling Bungalow in the Jor Bagh area of Central Delhi and is expecting Rs. 170 crore for the House brought for under Rs. 50 lakhs, 20 years ago.

• Suzuki Motorcycle ties up with Salman Khan's BeingHuman foundation.

• Tesco has signed an agreement with China Resources Enterprise Ltd. to create Retail Joint Venture in China.

• Public Intrest Litigation (PIL) against  HUL, P&G, J&J and Colgate Palmolive for use of 'Improper Sealing Methods'.

• Gitanjali Gems slips over 3% as Promoters reject Board's 30% Dividend plan. 

• Star Designer Marc Jacobs says  farewell to Louis Vuitton.

Source: Economic Times

NEWS WRAP - OCTOBER 02, 2013

• CBI filed  a case against former Telecom Minister Dayanidhi Maran in the 'telephone exchange scam'.

• Medicines to get lot Cheaper under new Drug Price Policy.

• Sequoia Capital buys minority stake in Vini Cosmetics for Rs.110 cr.

• State Bank of India runs out of Dollars for swap as Demand Booms.

• Private equity fund Trinity Capital has sold its stake in an SEZ project in Gurgaon at a loss about Rs. 200 cr. to the Project Developer.

Source: Economic Times

NEWS WRAP - OCTOBER 01, 2013

• Economic Offences Wing (EOW) of the Mumbai Police raid Jignesh Shah's Office and Residence.

• ISI Kolkata student bags $ 100,000 offer from Google.

• Apple ends Coca - Cola's 13year run to become world's Most Valuable Brand.

• Indian Law Firms are Increasingly competing in the Golbal arena for Cross - Border deals and are now setting up Offices Abroad.

• Reserve Bank of India will infuse Rs. 10,000 cr. by purchasing Government Securities to ease liquidity in the Market.

• Insurance Regulator and Development Authority (IRDA) is likely to give Companies time to align products in the Individual Category.

• Planning Commission Finalised draft of Bill that seek to set up a Tribunal to resolve disputes arising in Public -  Private  Partnership (PPP)  Projects.

Source: Economic Times

NEWS WRAP - SEPTEMBER 30, 2013

• SFIO probe calls Rs 1,700 crore Tata - Unitech deal in 2007 Dubious and Disguised.

• Bids for Highway project wroth Rs 17,000 cr. to be awarded by October, 2013.

• China launches a new Free Trade Zone in Shanghai to start wave of reform.

• Auditor Grant Thornton refuses opinion on NRE Coke OZ Arm Accounts of the year, citing doubts over Company's ability to survive.

Source: Economic Times