A Special Rapporteur of the United Nations Human Rights Commission has listed the many defeats of human rights with the growing preference of real estate as a subject of Investment. The Report observed that investment in Real Estate for non-self-habitation is catalytic to the growing gap between the rich and the poor. Real Estate Investment has risen on account of the practice of American Banks in 1980 first selling subprime mortgages and eventually debts to investors vide Real Estate Investment Trusts (REITs).
While one cannot deny human rights and affordable housing with adequate living standards, neither is it right to curtail commerce to an oppressive extent. The need for regulation arises in the area of balance, in light of the common ground whereby the housing is affordable, evictions and displacements are bare minimal and commerce is free.
REIT is an innovation resultant from what smaller investors found unjust that investment in real estate vehicles was absolutely and exclusively available to accredited investors, however, the accreditation requirements have eventually been eased, in the American as well as Indian norms permitting smaller investors an opportunity to invest in real estate.
The Collateralized Mortgage Obligations (“CMO”) were common in the United States of America and it refers to when the Bank from where, say, a poor man with a big family look a loan and so did several others with better financial capacity, the bank did not care too much about the mortgaged property, because it only initiated the mortgage and sold it to interested Investor leaving it to be the eventual investor’s responsibility, the poor man obviously would have been unable to pay back the loan, the U.S. government instead of rescuing the poor man and his family came to the rescue of banks and end-investors and arranged private equity settlements.
The Report focuses on the rights of the poor, an aspect often neglected while addressing investor rights and obligations. There is a need to strike a balance by for e.g. passing on a part of sale proceeds to rehabilitate evicted poor families. Investors, while investing, do so with an aim to maximize their profits and thus Regulation of real estate funding is a necessity. Profit and maximization in REIT would be right, but so is the right to affordable accommodation a significant right of every individual, it is the welfare state which is vested with the duty to protect both these interests. In India, this becomes all the more important taking into consideration the economic disparity, with a large section of its citizens residing in slums and non-habitable housing.
The Author holds the view in support of the report, that foreclosure should be given the absolute last preference and there should be an established manner of dealing with unpaid mortgages. Foreclosure would become all the more important where it relates to persons who own no other property. Courts should apply equity principles while dealing with such matters, which is not the absolute practice in contemporary.
In my opinion, the perception of people at present with the high number of persons investing in real estate with expectations of returns on the same at a future rate makes real estate a market in its own and a volatile one, in its own.
In conclusion, there is a requirement of balancing regulations, India has taken steps forward in this regard by launching housing schemes such as Pradhan Mantri Awas Yojana and the Atal Mission for Rejuvenation and Urban Transformation, however there is a significantly higher need for legal arrangements requiring that additional houses be built while constructing a building and allocation of the same to the homeless as was envisioned by a sub-scheme of Jawaharlal Nehru National Urban Renewal Mission. Through these missions, the urban poor has received some relief, but a considerable number of Indians continue to live in deplorable conditions Imposition of luxury taxes can be imposed for foreign investors in the real estate, a further utilization of the same for the provision of basic and affordable housing to the poor. There is without any doubt, a necessity of instituting basic housing facilities in the emerging and developing economies such as India, and human right issues should be considered by it while entering into treaties and legislating in this regard.