India: Environment v/s Real Estate

 

 THANKS TO Abhishek Sharma and Amit Wadhwani

 

 

India: Environment v/s Real Estate

Last Updated: 7 October 2016

Article by Abhishek Sharma and Amit Wadhwani

INTRODUCTION

One of the continuing struggles of the 21st century has been to attain a harmonious construct in achieving economic development, in a way which does not threaten or cause environmental degradation. In the wake of various environmental disasters witnessed in the past few decades, there has been a growing consensus to ensure that all real estate projects be developed in accordance with prescribed safety standards and consistent with environmental compliances and do not lead to any environmental hazard, specifically with respect to those projects which are constructed in close proximity to natural resources such as forest, wildlife, coastal zones and other eco-sensitive areas.
The Stockholm Conference in 1972 was the first global initiative concerning environment and sustainable development, which recognised principles of ecological management, and issued an Action Plan with 109 recommendations. To incorporate the decisions made at the Stockholm Conference of 1972, the Government of India, by Constitution 42nd Amendment Act, 1976 made an express provision for the protection and promotion of the environment, and introduced Articles 48-A and 51-A (g) in the Directive Principles of State Policy and the Fundamental Duties respectively. Article 48-A of the Indian Constitution states that "the State shall endeavour to protect and improve the environment and to safeguard the forest and wildlife of the country". Article 51-A (g) of the Constitution of India states that "It shall be the duty of every citizen of India to protect and improve the natural environment including forests, lakes, rivers and wildlife and to have compassion for living creatures".

KEY LEGISLATIONS

The key environmental legislations concerning real estate development are as follows:

• Wildlife (Protection) Act, 1972 (Wildlife Act)
• Water (Prevention and Control of Pollution) Act, 1974
• Air (Prevention and Control of Pollution) Act, 1981
• Forest (Conservation) Act, 1980 (Forest Act)
• Environment (Protection) Act, 1986
• Hazardous Waste (Management and Handing) Rules, 1989
• Coastal Regulation Zone Notification, 2011

REGULATORY AUTHORITIES

The following are the regulatory authorities concerned with real estate development in India:

• The Ministry of Environment & Forests (MOEF)
• Central and State Pollution Control Board
• National Green Tribunal (NGT)
• Coastal Regulation Zone Management Authority
• Forest Settlement Officer
• National Board of Wild Life (NBWF)

MOEF is the apex administrative body responsible for the regulation, planning, promotion and coordination of environmental and forestry plans in India.

ENVIRONMENT (PROTECTION) ACT

The Parliament of India, in the wake of the Bhopal gas tragedy in 1984 at the Union Carbide India Limited pesticide plant in Bhopal, enacted the Environment (Protection) Act of 1986 (EPA) under Article 253 of the Constitution.
The primary objectives of the EPA are:

• Creation of an authority or authorities with adequate powers for preservation and protection of environment;
• Regulation of discharge of environmental pollutants and handling of hazardous substance; and
• Speedy response in the event of accidents threatening environment and punishment to those who endanger human and wild life environment, safety and health.

Environment Impact Assessment Notifications:

Under the provisions of EPA, the Central Government has regularly released Environment Impact Assessment Notification (Notification), the first of which was issued by MOEF on 27 January 1994 (1994 Notification) which, inter alia, stated that, no new project, or the expansion or modernization of any existing project listed in Schedule-I, shall be undertaken unless it has been accorded with an environmental clearance (EC) by the Central Government. This notification did not contain any entry for construction projects and therefore EC was not required to be obtained for the same.
By virtue of Notification dated 7 July 2004 (2004 Amendment Notification) for amending certain provisions of the 1994 Notification, any construction project for more than 1,000 persons or discharging sewage of more than 50,000 litres per day or with investment of Rs 5,00,00,000 or more, would require prior EC.
Thereafter, MOEF issued a fresh Notification dated 14 September 2006 (2006 Notification) which superseded the 1994 Notification. The 2006 Notification prescribed definitive thresholds for obtaining prior EC for construction projects. In case a project is falling under Category 'A' of the schedule to 2006 Notification, then the project proponent is required to obtain prior EC from the Central Government (i.e. MOEF) and in case a project is falling Category 'B' of the schedule to 2006 Notification, then the project proponent is required to obtain prior EC from the State Government (i.e. State Environment Impact Assessment Authority (SEIAA)).
As per the 2006 Notification, in case where the built up area of a construction project is more than 20,000 square meters but less than 1,50,000 square meters, then the project will fall under Category 'B' and the project proponent is required to obtain a prior EC from SEIAA, and if the built up area of a construction project is more than 1,50,000 square meters, then the project will fall under Category 'A' and the project proponent is required to obtain a prior EC from MOEF.
The 2006 Notification also lays down a General Condition (GC) which states that any project or activity specified in Category 'B' will be treated as Category A and permission of MOEF would be required, if located in whole or in part within 10 km from the boundary of (i) Protected Areas notified under the Wild Life Act, (ii) Critically Polluted areas as notified by the Central Pollution Control Board, (iii) Notified Eco-sensitive areas, and (iv) inter-State boundaries and international boundaries.
By virtue of a subsequent Notification dated 22 December 2014 (2014 Notification), following amendments were made to the 2006 Notification:

• Construction projects comprising of industrial shed, schools, colleges, hostels for educational purpose, will not be required to obtain an EC subject to their compliance with sustainable environmental management, solid and liquid waste management, rain water harvesting, and they may use recycled material such as fly ash bricks; and
• The GC mentioned above will not apply. This means, construction projects located within 10 km from the boundary of the areas mentioned above, will not be treated as Category 'A' project and would not be required to approach MOEF for prior EC.

Also, the MOEF has by its Office Memorandum dated 27 June 2011, decided that construction projects which have obtained Green Building Rating shall get priority and be listed for consideration for EC, out of turn, as compared to other cases.

Post Facto EC:

MOEF issued an Office Memorandum dated 16 November 2010 (OM of 2010) for consideration of proposals involving violation of the EPA and the 2006 Notification. MOEF issued another Office Memorandum dated 12 December 2012 (OM of 2012), superseding the OM of 2010 which was further amended by the Office Memorandum dated 27 June 2013 (OM of 2013).
OM of 2012 and OM of 2013 (OM's), in effect provided for a mechanism for grant of post facto EC in relation to such projects which had commenced substantial construction of the project and had made significate investment in the project without obtaining prior EC as mandated under the 2006 Notification. Based on these OM's various projects which had carried out construction without obtaining prior EC had applied to MOEF for grant of post facto EC for their respective projects.    

NGT on Post Facto EC:

However, the OM of 2012 and OM of 2013 (OM's) were subsequently challenged before NGT on the grounds that:

• The OM's are contrary to and in contradiction with the provisions of the EPA and 2006 Notification;
• The 2006 Notification mandatorily required developers to obtain prior EC before commencing construction work while these OM's state exactly to the contrary, thus, encouraging people to flout the law in force on the one hand and cause environmental damage and degradation on the other; and
• The very purpose of obtaining prior EC is to conduct an environmental impact assessment before a project is granted clearance in order to ensure that no development takes place without sufficient assessment of the risks and damages that would be caused to the environment due to the project's construction and development.

The NGT has by its Order dated 7 July 2015 held that the said OM's are ultra vires the provisions of EPA and 2006 Notification and MOEF and SEIAA are prohibited from giving effect to these OM's in any manner whatsoever. Also, the concerned project proponents were directed to deposit an amount of 5% of their project value by way of compensation for restoration and restitution of the environment and ecology as well as towards their liability arising from impacts of the illegal and unauthorized constructions carried out by them without obtaining prior EC. NGT has also formed a Committee to scrutinize the impact of the projects of the concerned project proponents on the ecology and environment and to submit their report to NGT in order to enable NGT to grant post facto EC's to the concerned project proponents subject to payment of 5% of their project value.
In fact, one of the developer concerned with the NGT Order dated 7 July 2015, has paid the compensation of 5% of the project value and accordingly the project has been granted EC by SEIAA Tamil Nadu which has been confirmed by NGT by its Order dated 22 April 2016.

PROPOSED AMENDMENT

With a view to introduce an effective deterrent policy to ensure compliances with provisions of the EPA, the Central Government has on 7 October 2015 published a draft of the Environment Laws (Amendment) Bill, 2015 and the National Green Tribunal Act, 2010 (Draft Bill) for inviting objections and suggestions from any person interested. The Draft Bill, inter alia, proposes the formation of an adjudicatory authority to hold inquiries into violation of environmental laws, and provides for imposition of stricter penalties. It divides environmental violation into 3 categories, 'minor violation', 'non-substantial damage' and 'substantial damage' to the environment.
Depending upon the extent of substantial damage caused, penalty ranges from Rs 5,00,00,000 to Rs 20,00,00,000. Also, imprisonment for a term ranging from 7 (seven) years to life imprisonment has been prescribed in case of substantial damage. Penalties for minor violations and non-substantial damage ranges from Rs 1,000 to Rs 5,00,00,000.

COASTAL REGULATION ZONE

The MOEF had issued the Coastal Regulation Zone (CRZ) Notification in 1991 and subsequently in 2011 (2011 Notification) for providing comprehensive measures of protection for coastal stretches (upto 500 metres from the High Tide Line along the seafront and 100 metres from the High Tide Line along the tidal influenced water bodies) and regulating the activities undertaken in such CRZ.
Under the 2011 Notification, coastal areas have been classified as CRZ-I (ecological sensitive), CRZ-II (built-up area), CRZ-III (rural area) and CRZ-IV (water area). A pre-clearance from MOEF or from the jurisdictional Coastal Zone Regulation Authority in a State is required before undertaking construction or development activities in areas falling in the close vicinity or under the CRZ.

FOREST ACT

Under the relevant Forest Act, a prior approval from the Central Government is essential before setting up any industries (or for undertaking other non-forest activities) involving diversion of forest land. There is a blanket restriction on setting up industry or projects in areas which are in close vicinity of national parks, wildlife sanctuaries, or core areas of biosphere reserves, fragile eco-systems, etc. Besides forest lands, diversion of prime agricultural lands for non-forest purposes are also restricted.

WILDLIFE PROTECTION

The Wildlife Act provides for protection of specified species of flora and fauna, along with protected areas which are ecologically significant. The Act prohibits any industrial activity within these protected areas.
On 4 December 2006, the Hon'ble Supreme Court of India has in the case of Goa Foundation v/s Union of India held that, in case any project has been granted EC by MOEF and if such project is located within 10 km from the boundaries of a sanctuary and national park, then MOEF shall also refer the matter for recommendation of the Standing Committee of NBWL.
Subsequently, by an Office Memorandum dated 2 December 2009 (2009 OM) and Guidelines dated 19 August 2010 issued by MOEF, MOEF has further directed at any project requiring EC from MOEF and falling within 10 km from the boundary of a sanctuary or national park, will be placed before the Standing Committee of NBWL.
Further, MOEF has vide its Office Memorandums dated 30 March 2015 and 1 May 2015 clarified that development projects located within 10 km of a sanctuary and national park will be referred for recommendation of the Standing Committee of NBWL in accordance with the procedure prescribed in the 2009 OM.

CONCLUSION

As seen from above, the laws on environment protection has been evolved over the time. It can be observed that Government has taken pro-active measures by formulating various legislations and policies with an intent to not only promote sustainable development but at the same time also ensure that such development does not undermine critical resources and ecological functions or the well-being, lifestyle and livelihood of the people who depend on them.
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