INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Brijita Prakash, JSA
6.13 Restrictions on the Use of Real Estate The usage of a project/building is dependent on the zoning of the land and any conditions run - ning with the land. At times, land is allotted to a landlord for a determined purpose, such as bio - technology or IT-related uses, and the landlord would impose the same restrictions on the ten - ants. Non-compliance with the usage conditions could result in termination of the lease. 6.14 Tenant’s Ability to Alter and Improve Real Estate Generally, a tenant is only permitted to perform non-structural alterations at the premises. The landlord may also require the tenant to reinstate the premises to the condition prior to the altera - tion upon expiry/termination of the lease. Where a tenant takes land on long-term lease, the tenant would have the right to develop the land as they require, subject to applicable law. Upon expiry or termination of the lease, develop - ment on the land would revert to the landlord, at no cost or at an agreed cost. Under Indian law, the owner of the land and the owner of the building constructed thereon can be different people. Any gain on a transfer of development rights in a property is subject to tax as income of the landlord. The transfer of development rights to the tenant for develop - ing the land and for commercial exploitation is subject to GST in the hands of the tenant (under the “reverse charge mechanism” ). 6.15 Specific Regulations Laws relating to leases do not differentiate between residential, industrial, commercial or retail leases, but commercial treatment may dif - fer from market to market.
No asset class distinctions relating to leases have been introduced due to the COVID-19 pandemic. 6.16 Effect of the Tenant’s Insolvency It is market practice to include a termination event in the lease triggered by tenant’s insol - vency. However, where the tenant is under a corporate insolvency resolution process, upon admission of the insolvency application a mora - torium is declared with the effect of, inter alia, prohibiting the recovery of any property by an owner/lessor where such property is occupied by or in possession of the tenant under insol - vency. 6.17 Right to Occupy After Termination or Expiry of a Lease If contractually permitted, the tenant may con - tinue to occupy the premises as a monthly ten - ant after the expiry/termination of lease or if the landlord does not refund the IFRSD in time. In all other cases, the tenant would have to leave the premises on the date of the expiry/termina - tion of the lease, failing which the landlord can approach the court to evict the tenant, who will be a trespasser. The landlord can also claim mesne profits from the tenant for such unau - thorised occupation. 6.18 Right to Assign a Leasehold Interest Under TOPA, a lessee may transfer absolutely, or by way of mortgage/sublease, whole or part of their interest in the property, and any trans - feree of such interest or part may again transfer it, subject to the lessee not ceasing any of the liabilities attached to the lease and there being no contract to the contrary. For statutory ten - ants, state legislation (such as the Maharashtra Rent Control Act 1999) also prescribes transfer
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