This article is written by Ramanuj Mukherjee, CEO, iPleaders with inputs from Shreyangshi Gupta, final year student from NUJS.
Real estate used to be India’s most exciting sector till recently, and employed maximum number of people. The rise of large real estate companies, from DLF to Emaar, Rustomji and Lodha, there are tons of success stories from real estate sectors. A whole generation of Indians started to think of real estate as the ticket to riches! Even when the US real estate market tumbled down following the subprime crisis, Indian real estate market had stayed put. Also, the real estate prices are very high in India, because Indians are ready to spend everything they have on this one asset.
However, in the last few years things have drastically changed. Real estate market has been really badly hit, first by plunging demand as price and costs soared, and then by demonetization and introduction of RERA which completely changed the rules of real estate business in India. Also, many realtors going bankrupt and not being able to deliver projects caused consumer confidence in the sector to tank.
However, RERA is consumer friendly and has restored faith of common people in the real estate market to an extent. As a result, RERA is considered to be good for the industry in the long run. While there are large inventories of residential as well as commercial property lying unsold in cities like Mumbai, Pune, Noida, Gurgaon and Bangalore, where demand used to the highest even few years back, it appears that the next wave of growth is coming from tier 2 and tier 3 cities, where real estate market is less organized, but volume is very large and so can be margins.
Whatever may happen, one thing is certain, the real estate industry is here to stay. While profitability and growth is hit at the moment, it is likely to bounce back as private investment returns to the sector and prices are rationalized over time.
While many lawyers do not see this sector as attractive as say banking, technology or media, it is certainly a sector which relies heavily on lawyers and employ a whole lot of them. In real estate, it is not possible to move a single step with inputs from lawyers. This is a sector that really needs and values high quality lawyers. And growth, even if late, is going to come in the next cycle.
If you are interested in becoming a real estate lawyer, especially as in-house counsel, keep in mind that there is tremendous scope as independent lawyer serving real estate clients, especially in litigation. There is a lot of contract drafting, regulatory and license work as well, which you can very well do as an independent lawyer working on retainership for real estate clients. That is the standard model for most smaller builders for hiring lawyers, and it is lucrative practice.
Only very large real estate companies tend to create their in-house legal teams. Smaller ones rely on lawyers on retainers.
Different kind of real estate companies and difference in work environment for lawyers
Family run real estate companies
Many of India’s large and successful real estate companies are family driven, or there is a promoter who is the founder and has firm control over the company. These firms have a distinctly different organizational culture, marked by centralized control and top-down decision making. Such companies do not always hire lawyers, and when they do, corporate governance norms may be very different than what you would expect. This is extremely common in real estate sector.
Here the lawyers are expected to keep legal costs low, and that often being the sole objective of hiring in-house lawyers in the first place. Do not expect to see a large legal team in such a company. They will have usually one or two lawyers supported by many outside counsels.
In these companies, a lawyer will be expected to be a versatile generalist as these are very unlikely to hire specialist lawyers.
The general perception amongst real estate lawyers is that these companies are great as clients when you are a law firm or independent lawyers, but the not best employers for in-house counsels.
However, these jobs are fairly easy to come by. If you want a break, to get started, to get a flavour of the industry and cannot make it into other places, this companies are a great place to start from for the purpose of learning, though you may not get a great boss to hand hold you.
MNCs and startups
There are only very few MNCs in the real estate space in India but those that exist are usually the best place to work for. There are also a lot of real estate startups that have been emerging in the last few years, and they are also indeed excellent employers with an interesting bouquet of work. These are also better structured workplaces with more perks and checks and balances rather than founder centric work environment.
These are more likely to have large legal teams, secretarial and corporate governance departments. They are also more likely to pay a better salary, as per comments of several lawyers having experience in the Indian real estate sector. You are also likely to find a good mentor who will teach you the nuts and bolts of this sector.
What kind of lawyers do real estate companies hire? Do they need specialists or generalists?
Common sense says that lawyers in real estate sector must be conversant with laws related to real estate. However, in reality, they need to know the whole gamut of business laws just like any other business, while a special knowledge of real estate law being required as additional criteria for the job.
In addition to their knowledge, the candidates previous work experience – in terms of their drafting experience, the number of deals they might have closed, the nature, profile and quality of said deals, the transaction based advise they have been involved with, experience in dispute resolution, etc. – become important parameters for companies looking to hire in-house counsels.
Previous knowledge of working at a real estate law firm, or extensive property litigation experience is always appreciated. However, contract drafting, compliance and dispute resolution remain most important fundamental skills and if you can demonstrate that you have experience in these things, even without any specific real estate experience, you would be a very desired candidate.
Real estates companies mostly hire generalist lawyers. However, specialist litigation lawyers may have to be hired some times, if a certain kind of work increases in volume so much that it makes sense to hire someone in-house rather than pay to external lawyers.
For example, if a real estate company is acquiring another company, or investing in a startup that may have some strategic relevance to its business, it will just go to a law firm, and certainly will not hire an in house deal lawyer for the same. However, what if it has a plan to invest a kitty of 100 crores to invest in startups over the next 2 years? It may as well hire a in-house investment specialist team in that case.
This holds true for financing transactions also. Real estate companies are frequently entering into raising loans, leveraging the properties and projects they own. However, if they are raising such loans very frequently, it may make economical sense to hire in-house lawyers to do that work rather than go to outside counsels.
To understand this, let us look at what are the common tasks in-house legal teams in real estate sector tend to handle.
What are the most important and common tasks of in-house counsel in real estate companies?
An in-house lawyer advises his or her client company on various property related matters, and land or property related disputes. Litigation, arbitration and negotiations involving properties, disputed lands and development rights in different jurisdictions is typical at large real estate law firms.
From title search to due diligence on a company that may be acquired for the properties it own, there is a lot of work in this category. Apart from obtaining title search certificates.reports, they also need to ensure that property taxes are paid or up to date, as well as ensure the lack of pending mortgages and litigation on the property.
They also need to know zoning laws, and whether obtaining necessary government clearances will be possible. An understanding of which defects are to be settled for and which ones are deal breakers is a critical skill here.
Consumer disputes involving builders is very common. Every consumer court is overflowing with consumer disputes against builders who may fail to cater to various requirements under a builder-buyer contract, or other service expectations. Majorly, disputes are over delay in giving possession of property.
While consumer disputes are often filed in different jurisdictions making it impossible to bunch them and hand over to one or two lawyers to look after, in some cases that is indeed possible. Builders may not employ these lawyers full time, but prefer to hire on a retainership and pay on a per case basis. In some cases though, it may be cheaper to just hire a lawyer full time to handle these cases depending on volume and how concentrated hey are within 2-3 adjacent districts which is often the case with such disputes.
Drafting and reviewing contracts
A major part of the work of a real estate lawyer is to draft and review legal documents. They need to know how to draft MOUs, lease and sub-lease agreements, leave and license agreements, mortgage, hypothecation deeds, sales and purchase agreements, among others.
Of course they need to draft many other common business agreements such as employment agreement, consultancy agreements, vendor agreements, marketing agreements, terms and conditions for their website or any other services etc.
As a young lawyer, you can expect a lot of work on your plate to be contract drafting, right after regulatory and permit related work.
Realtors enter into a large number of vendor relationships. They need accurate service and timely delivery of quality products to finish their work on time failing which now they need to pay huge fines under RERA. As a result of this, the importance of vendor agreements and the need to enforce them strictly has skyrocketed. Earlier, builders did not bother to even enter into any contracts with vendors. Now, that is changing fast. Builders are quickly learning the importance of vendor contracts and enforcing them in the changing world of RERA. As a result, the number of litigations, arbitrations etc involving builders and their various vendors is steadily going up and will continue to increase.
Licenses and permissions
One of the things that builders really really struggle with is permissions and licenses. Building permits are incredibly hard to get. For example, to start building a large residential or commercial project in Delhi or Gurgaon, one has to get over 50 clearances, permissions, approvals, no objection certificates etc! How crazy is that?
Many projects simply fail to start and have to be eventually canned because of delay in construction permit. In reality, builders expect to grease the wheels of bureaucracy by paying some cash. It is often the lawyers, unfortunately, who are supposed to get these approvals, permissions and everything else in place for real estate projects to commence, continue work and complete. This means liaising with politicians, bureaucrats, municipal corporation, water and electricity providing agencies, city planning authorities, even obscure organizations like Archaeological Survey of India and nearby airport authority!
Indian government recently claimed that it takes about 60 days and 8 online procedures to get construction permit in Delhi. For real estate lawyers used to extreme delays and running from pillar to post year after year, this is a little hard to digest. Nonetheless, in the rest of the country the process continues to be quite hard. So hard, that lawyers are called in and paid a lot of money to make things work.
As brands become important, so do concepts, designs and names. IP registration in the real estate sector is one of the highest, and disputes are also not uncommon. Real estate sector spends a lot of money in marketing and branding, and hence is protective of trademarks and designs. Naturally, this is one thing in which in-house lawyers have an important role to play.
Compliance and miscellaneous
As the real estate sector is becoming more formalized, overtime the amount of compliance required has also drastically increased. A lot of the regular work of an in-house counsel in the real estate sector now involved compliances to various laws – from Real Estate Regulation Act to company law, labour law, FEMA and even various tax laws.
What are the laws that real estate in-house counsels need to know well?
In-house counsels require comprehensive knowledge of law as well as the business, so that they can provide critical advice to their various departments and internal clients, using their in depth knowledge and experience regarding various laws, rules, regulation, bye-laws, market practices and government policy.
So what are the laws you should read up before an interview at a real estate company?
Some key laws real estate lawyers are expected to know very well are –
- Real Estate (Regulation and Development) Act, 2016
- Transfer of Property Act, 1882
- Specific Relief Act, 1963
- Indian Contract Act, 1972
- Indian Registration Act, 1908
- Stamp Duty law
- Building and Other Construction Workers Act, 1996
- Civil Procedure Code, 1908
For specific states, there can be a bunch of state laws as well. Only 13 states in India have state specific laws, but almost all the most important markets for real estate have their own laws that you need to learn. Prominent example are:
- Maharashtra Regional and Town Planning Act, 1966
- Standardized Building Bye-laws
- Development Control Rules
- West Bengal Housing Industry Regulation Act, 2017
- Maharashtra Co-operative Societies Act, 1908
In addition to these, every in-house counsel must be well-versed with principles of drafting contracts, and various forms of agreements and thrust of government policy for the real estate sector. Moreover, the lawyers must also be aware of the different dispute resolution mechanisms, the statutory mandates, and the procedures of each forum.
Most importantly, if you want to be a real estate lawyer, you must learn the market practices and how to get work done despite a hostile bureaucracy and corrupt politicians creating blockade in the way of your business.
What are the biggest challenges one would face as in-house real estate lawyer?
An in-house real estate lawyer is an employee of the company that appoints him or her. This means that they do not have the authority to make decisions independently all the time; it mostly depends on commercial compulsions of the organisation, as well as the requirements of their clients.
In most cases, their role as counsels is merely supervisory. More often than not, they have to work with external agencies or lawyers for better results. Thus, they inevitably end up being legal managers, rather than legal experts, because as in-house counsels they are expected to know the intricacies of the company, and have to assist external parties in understanding the same, for efficient results. They also have to ensure that they outside counsel is actually delivering what is supposed to be delivered, and hence a hawkline observation becomes necessary.
Moreover, their domain knowledge or experience can become restricted to the type of project they usually handle. For example, an in-house lawyer whose company mostly deals with residential projects may not necessarily know the work related to building airports or power plants. In such a situation, they become deprived of varied exposure, as opposed to an external real estate lawyer, who gets more diversity in type of projects he or she handles.
If you are interested in a career in real estate law even after reading all these, then check out this one-of-a-kind 3 month long, practical, hands-on online course on real estate laws. The course does not only teach you sections and case laws like how you learn law in college, but teaches you how to handle the tasks described above. If interested, get in touch with LawSikho to get some free sample lessons.