Mixed fortunes

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Differing real estate trends emblematic of India?

A recent bidding war for an office building in the heart of Mumbai’s business district, the Bandra Kurla Complex, that had earlier drawn lukewarm interest, points to the fact that not all real estate is in the doldrums. While the market for residential property continues its slump, with many thousands of square feet lying vacant, or worse, still unbuilt across India, it’s boom time for commercial real estate, where savvy investors within and outside India are chasing premium office space.

All of this is happening alongside increasing signs of a slowdown in the economy. Fortunes certainly appear to be varied, and investors recognize this. Is this further evidence of the fragmentation within the economy, such that boom and bust coexist within sectors but also across sectors and regions? What will this mean for the long-term growth and health of the economy and society as a whole?

estateThis issue’s Cover story is an in-depth interview with Gautam Chatterjee, the head of the Maharashtra Real Estate Regulatory Authority, which, having registered more than 21,000 projects – nearly four times more than any other state – is at the forefront of implementing the Real Estate (Regulation and Development) Act, 2016.

Discussing the role of the regulator and the challenges faced, Chatterjee says the fact that there are at least two other laws, including the Insolvency and Bankruptcy Code, 2016, that potentially deal with stressed projects “is not proving to be very healthy”.

The regulator deals with problems in the real estate sector such as declining trust among homebuyers, unsold inventory, and projects that are stuck. Yet as some homebuyers choose the National Company Law Tribunal to solve disputes with developers, it will take some time before the Real Estate Regulatory Authority can come into its own.

In Watch your step we turn the spotlight on private equity investment with a special focus on issues of conflict of interest that often prove to be the difference between the success and failure of an investment. Regulators across the globe use prescriptions in the form of codes and regulations spanning general laws, special securities laws and other governance requirements to deal with conflicts of interest, but it is vital to recognize that the potential for conflicts is very high in the business of private equity. Our coverage includes instances of conflicts across different stages and through the life cycle of a private equity investment.

In this issue’s Whats the deal? we look at the Indian government’s plans to put the country on the global institutional arbitration map with the passing of The New Delhi International Arbitration Centre Act, 2019, and The Arbitration and Conciliation (Amendment) Act, 2019. The former lays the ground for the New Delhi International Arbitration Centre, which it is hoped will compete with other established international arbitration hubs in the region.

Yet questions abound regarding both the efficacy of the law governing it and the arbitration regime. Case in point is the Arbitration Council of India appointments, which are to be controlled by the government – an issue that is met with scepticism among arbitration practitioners, who believe “under-regulation” is key to making India an international arbitration success story.

In A legal legacy we provide insights from the man who has steadied the legal tiller at the Asian Development Bank (ADB) over the past seven years. Chris Stephens, general counsel, is moving on to a similar role at the International Finance Corporation. India has been prominent on his radar as the ADB aims to support the government’s goal of faster, more inclusive and more sustainable growth.

The legal work associated with its projects in sectors including transport has presented a formidable workload, but Stephens’ philosophy on these challenges inevitably resides with the strength of his team. As he sees it, “the greater challenge is to hire and retain a legal team comprising men and women motivated and dedicated to the challenge of constantly acquiring skills and experience, and to delivering high-quality legal services in a timely and practical manner”.

Sage wisdom that will no doubt resound within the Indian legal market, which, as this issue’s Intelligence report finds, faces considerable challenges from both a slowing economy and growing competition from the big accountancy firms. Many would agree with Priti Suri, the managing partner of PSA Legal, who says accounting firms are overstepping their territory. “The practice of law has to be consistent with the Advocates Act,” she says. “If the Advocates Act needs to be revamped, then that action should [take place] before they are allowed to engage in the ‘practice of law’.”

Our annual report on the state of the Indian legal market finds that managing partners of law firms are also concerned about the growing independence of in-house counsel and their ability to handle greater amounts of complex legal work.

This issue includes a tribute to Shamnad Basheer, a towering figure of the Indian legal ecosystem, whose recent demise devastated his many friends and admirers. He had been an editorial board member of India Business Law Journal since the first issue in June 2007 and we mourn his passing.