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Will the New Real Estate Bill reshape Real Estate in India?

How new real estate bill could re-shape the realty ecosystem?

The new real estate regulation bill, approved by the cabinet last month, will make significant interventions in the builder-buyer relationship, tilting the balance of power in favour of the latter.


Project Registration

When the Real Estate (Regulation and Development) Bill 2013 comes into effect, all projects will have to be registered with a real estate regulatory authority.

Promoters will have to disclose details about the project (name, type, plans, partnership companies, names of persons involved with construction etc). Will have to specify what kind of area is for sale (based on standardised markers).

All brokers and agents will have to be registered with the regulator before they can practise. Builder will have to provide a list of agents who will represent each project.

Once the project is registered, all details will have to be put on the website and updated every quarter. This includes disclosing the extent of project completion.

Take informed decisions

A) Buyers can take informed decisions. Today, it's impossible to compare properties because square footage, amenities, floor-space index consumed and even delivery schedules are different for different builders.

B) Which standards to follow? "The Bureau of Indian Standards has laid down standards for the construction industry, and clearly defined things like carpet area, plinth area or how to calculate the difference between the balcony and room area,and  if the bill brings in a new set of definitions, it will create a conflict."

C) Having access to the relevant information will help de-risk lending. At the moment, buying a house is like groping in the dark, he adds. Even with the most trusted builder, you don't know what you will get. This kind of transparency will boost buyer confidence.

All-Round Clearances

Builders will not be able to sell — or advertise — a project till it receives the requisite approvals. These range from land titles and amenities, to provisions for water, electricity and sanitation. This means pre-launch sales are out.

Brokers will be barred from trying to sell an unregistered project, or one that has not received the necessary approvals.

The regulatory authority will get 15 days — after receiving an application for registration from a promoter — to either clear it, or reject it. Reasons for rejection will have to be put down in writing. If the regulator fails to do either of these, the project will be considered as registered.

Right now, the bill appears to only hold the developer responsible, Developers will be penalised for delays, but what about the delays created by government departments in providing clearance for projects? If there is a delay in giving approvals, the government official should also be made accountable for it.

Approvals in phases

Approvals come in phases, and never all at one go. If a developer has to wait to launch a project only after all the approvals are in, this would only mean further delays in handing over the house.

There should be an automated registration process so that there is no human interface, and therefore no chance of corruption.
Smaller builders will be hit harder. After putting down money for all the clearances at one shot, they may not have much left over to start construction right away - especially since pre-launch sales are discouraged. "This will only mean delays in launching projects and escalated costs.

Funds From Buyers

Builders have to open a separate bank account for every project and set aside 70 % (or less, as designated by the local authority) of buyers' money, to be channeled only into the construction of that property. While builders are okay with setting aside a certain amount in a separate account, they feel fixing a sum is unrealistic, since the land-to construction-cost ratios vary from place to place.

Completion Schedule

As per the proposed Regulatory Bill, Builders will now have to give homes on time. In case of delay, buyers are entitled to full refund of their investment, with interest at a pre-determined rate. Builders will face penalties and jail term for sale based on misrepresentation of facts, for failure to update details about project and so on.

The Bill has provision of Jail term for the builder, But in case of builders who have multiple projects going, this means an inordinate delay for all of them." Who is going to make sure the projects are completed while the builder is in jail? So why can’t there be financial penalty instead of Jail so that his other projects do not suffer. This kind of approach is already taken by SEBI and IT department.


Disclaimer: The above content is searched from internet, leading new papers and research etc.

Taxes on property purchase in Maharashtra

Property Buyers, do you really know how much you pay to the government apart from what you pay to the developers while buying a property?

The real estate industry is one of the most heavily taxed industries in the country. The taxes, both, those paid directly by the home buyer while buying a property, as well as those paid by the developer during construction, constitute nearly 35 to 40 per cent of the cost of the property. Let us examine the various taxes a property buyer has to pay while buying a property. 

STAMP DUTY 

In order to give legal status to the property purchase transaction, one has to pay stamp duty on the sale agreement. Under Section 3 of The Indian Stamp Act, stamp duty is payable on instruments by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. The instruments (sale agreement) which are not properly stamped, are not admissible as evidence in court of law. 

Generally, stamp duty is to be paid on or before the date of registration of the agreement. Delay in payment of stamp duty would attract a penalty of two per cent per month, subject to the maximum of 200 per cent of the proper stamp duty amount. In Maharashtra, stamp duty is payable at five per cent on the agreement value or the stamp duty ready reckoner rate, whichever is higher. 

REGISTRATION 

Registration is the process of recording the contents of a document with a registering officer. The documents are registered for the purpose of conservation of evidence, assurance of title, publicity of documents and prevention of fraud. Under Section 41(1) of the Maharashtra Ownership Flats Act, 1963, the agreement with respect to flats to be sold by the owner/promoter/developer to the flat purchaser requires, compulsorily, to be registered under the Registration Act. If not registered, it cannot be produced as evidence in a court of law. The registration fee varies from state to state and in Maharashtra, it is one per cent of the agreement value but subject to a maximum limit of Rs 30,000. 

Value Added Tax (VAT) 

Some states also levy VAT on under-construction property. Currently, in Maharashtra, VAT at one per cent of the agreement value is payable at the time of registration of the sale agreement. However, VAT is not payable in case of purchase of a property from the developer, after the construction is completed and completion certificate is received. There has been a lot of criticism and controversies regarding the decision of the state government to levy VAT on under-construction property. The main argument against the levy of VAT is that if the construction of property cannot be considered as goods (on which VAT is payable) and stamp duty is already payable on property transactions, then why VAT. 

SERVICE TAX (ST)

Service tax is another controversial tax levied by the central government on under construction property. The current rate of service tax is 12 per cent. Education cess and secondary and higher education cess is calculated on top of the service tax rate, which takes the effective service tax rate to 12.36 per cent. 

The calculation of service tax is quite complex. The cost of the property includes the cost of the land and cost of the construction. Service tax is payable only on the construction component and not on the value of the land. Since in most cases, it is difficult to ascertain the cost of land and construction cost separately, the government has come up with the abatement scheme. Under this, abatement (relief) is given for 75 per cent of the value of the property, and service tax is levied only on the balance 25 per cent. This effectively brings the service tax rate down to 3.09 per cent. However, this abatement is not available in case of preferred location charges, floor rise charges, internal and external development charge (like infrastructure development charges), club house charge, etc., in which case service tax at flat rate 12.36 per cent is payable. It is to be noted that in the union budget 2013, it was proposed to reduce this abatement from 75 to 70 per cent, in case of flats having a carpet area of more than 2,000 sq ft or where the property value is Rs one crore or above. Hence, in such cases, service tax of 3.71 per cent would be levied. Service tax is payable as and when the installment payment towards the purchase of property is made to the developer. Like VAT, service tax is not payable, in case the property is purchased from the developer after the construction is completed and the completion certificate is received. A home buyer has to pay nearly 10 per cent of the value of the property, as taxes to the government. There are indirect taxes, like excise, VAT, service tax, etc., on materials and other inputs and services used in construction, which constitute between 25-35 per cent of the cost of the property. Though, these taxes are paid by the developer, they are built into the cost and passed on to the buyer. There is a dire need to rationalize the taxes, particularly on the purchase of residential properties, to make housing more affordable. 

Local Body Tax (LBT) in Corporation areas in Pune

Additional 1% of the agreement value is to be paid as LBT on registration of your agreement, which is the new form of indirect octroi to be paid to the PMC and PCMC.

So the overall tax comes to around 11% of the agreement value which is paid to the government which is ridiculously very high.

For knowing more about the real estate please call me on 9823116000/9158400500 or wrote to me on hitendra2309@gmail.com

Source: TOI and internet.

1 and 2 BHK becoming dearer in west Pune

Hey guys, I am posting after a long time, I will write about a very general topic today.

I came across many readers and buyers asking me to find properties in the west region of Pune for 1 BHK for sub 30 lacs budget and 2 BHK in sub 50 lacs budget, and that to in locations lile Baner along side the NH-4 bangalore highway, Wakad,  Balewadi, Pashan, with new Projects or resale in ready possessions recently completed projects only. Frankly speaking there are very few propejcts which have the matching properties as mentioned above and mostly cost somewhere around 35-40 lacs for 1 BHK and 60-75 lacs for 2 BHK apartments. But the answer is also a YES as there are Developers who have projects offering apartments in these ranges but they are not reputed ones or developing for the first time. But then the risk factor comes in play like will he complete the project or not, quality, etc.

Now with the price for apartments in these locations is from 4800 to 5500 per sqft it is difficult to have choice of apartments in budget apartments.

Now people ask whether the price rise will be creeping up and up for ever or what. The answer is absolute YES as there will always be a demand for houses and the properties will always be finding the required buyers, altough there may be a correction in the coming future but it wont affect the buying spree. As you do not know when is the correction going to come because it does not give you any warning like in case of a Natural calamity or weather changes etc. Some people wait for this to happen and then buy but these guys have lot of patience.

So to sum up there are apartments available in sub 30 lacs for 1 BHK and sub 50 lacs for 2 BHK but the locations are different and farther away. So these buyers should shift their priorities in the newer areas like Punawale, Kiwale, Talegaon, Dehu road, Wadgaon Maval, Kanhe, Sus, Maan, Ghotawade, Pirangut, Urawade, Farther end of Paud road etc.

Advice for those who want to buy Real Estate now, Today is the best day and there is nothing like "Got Late". It is like a running train and you need to catch it at your nearest station.

Please get in touch with me for any query and sale transaction.

Regards

Hitendra Choudhary

9823116000 or 9158400500

hitendra2309@gmail.com

Undri- The next Property Destination of Pune

Undri has always been a logical residential property destination in Pune, but for many years it lacked the required infrastructure. However, as NIBM Road became increasingly saturated, Undri started to come into focus. The revival of demand from the city's manufacturing and IT sectors helped to encourage developers to concentrate more on this area. Locations like Undri are ideal for offering residential options to these segments and at the same de-congesting the main city. The area, which is also temptingly close to Pune Camp, is now developing rapidly, and it is becoming a hotspot for residential property investment.

Undri has the advantage of being well connected to various key localities in Pune via various local and interstate highways and expressways while retaining its serenity. It has dense green cover protected by Government regulations. Proximity to Wanowrie and NIBM gives ensures that residents in Undri have access to all necessities of daily living. It is an ideal residential real estate location, and one of the few in the more central part of Pune which still offer the city's laid-back natural charm at affordable rates.

Home buyers as well as investors are very enthusiastic about this location, which offers cost-effective housing options to employees from the close-by IT/ITeS companies. with the widening of the The Katraj-Kondhwa-Phursungi-Solapur highway, Undri's all-round connectivity is going to increase dramatically. Moreover, it will soon be completely included within the Pune Municipal Limits, which will boost infrastructure development even further.

REFORM ISSUE IN REAL ESTATE SECTOR

The Indian real estate market is still in its infancy, largely unorganized and dominated by a large number of small players, with very few corporate or large players having national presence. The Indian real estate market, as compared to the other more developed Asian and Western markets, is characterized by smaller size, lower availability of good quality space and higher prices.
However, the concept of real estate has recorded a major increase in the recent past due to the increase in the population and also due to the fact that majority of the people have started settling in the urban areas due to their employment opportunities and hence the need for these structures has increased abundantly. The consequent increase in the business opportunities and the migration of labour has increased the demand for commercial and housing space especially the rental housing development in the real estate sector is being influenced by the development in the retail, hospitality and entertainment (i.e., the development of hotels, resorts, cinema houses) industries, the economic services and the IT enabled services.
It is the major employment driver being the second largest employer next only to agriculture. This is due to the reason that the other industries like steel, cement, brick, timber and building material are linked to this sector. It is difficult to estimate the exact contribution of the real estate sector to the gross domestic product. The gross value added in the ownership of dwellings is equivalent to the gross rental of the residence dwelling less the cost of repairs and maintenance.
The Indian market is still in its infancy, unorganized and dominated by a large number of small players with a few corporate or large players having national presence. The Indian real estate market as compared to the other developed Asian countries is characterized by a smaller size, lower availability of good quality space and higher prices. The State- owned Development bodies and the Housing Boards leaving very little space for the others largely control the urban land.
The restrictive legislations and the lack of transparency in the transactions are the other main impediments to the growth of this sector. Limited investments from the organized sectors has also hindered in the growth of this sector. There do exist large amount of undeclared transactions mainly due to the high stamp duty rates and also stringent legislative Acts.
In order to enhance reform in Real Estate Sector the following points are to be taken into consideration:
1. Infrastructure Status to Housing: This will enable easier access to the low cost institutional funds and also allow the sector to tap long term funds.
2. Real Estate Mutual Funds: The government should consider setting up the Real Estate Mutual Fund/Investment Trusts to provide the much needed support to the cash starved housing sector. The Real Estate Mutual Fund/Investment Trusts would be an efficient mode for providing equity financing as against debt, which is currently the norm for financing real estate development in India.
3. Stamp Duty: In some states the stamp duty is as high as 14–15% of the value of a transaction. Astonishingly, in Indian context not only the stamp duty is high but the levy of duty is done at every subsequent stage of transaction, be it the initial transfer/purchase of the land or on further sale of the same land after development or any other succeeding transaction. Though the rate is stepped down to 6–8%, it will be ideal to get it down to 2–3% and make it uniform throughout the country.
If the above is not practically possible, then stamp duty is to be mechanized whereby a provision for concession or a system of credit for any subsequent transaction should be made which would avoid the cascading effect of stamp duty and reduce the cost of the property. This concept is already in existence in the other statutes viz., CENVAT, VAT, etc.
4. Public private partnership: There is a need to evolve a regulatory framework that encourages participation of the private sector in bringing technical and managerial expertise to formulate and deliver basic amenities like water, sanitation, transport and electricity.
5. Amendment of Laws: There is need for amendment of the laws involved in this sector to encourage growth.
6. Environmental Impact Assessment Notifications: The notification specifies that no construction activity can be taken up despite the approval of plans by the competent authority, till the environmental clearance has been sought. In cases where the approval of plans has already been granted the construction activities are allowed, though in the intervening period the builder/ developer should obtain the clearance.
Further in cases of proposed projects the environmental clearance in city development projects should be obtained by the states themselves or by the planning bodies and not by the individual to save time.
7. Taxation: Over a period of time the tax and the regulatory environment in the real estate sector have become very important. The construction industry is already subject to a number of taxes and is considered one of the most overburdened tax segments. The corporate involved in this segment is of the general opinion that there should not be further imposition of levy in any form in this particular sector. Any further tax burden on this sector would affect the growth and the development of the sector as a whole.
a) Service Tax: The service tax in relation to construction of residential house complexes having more than 12 houses has been imposed. However, no rationale has been provided for the exclusion of services in relation to construction of residential bungalow that may not be part of a ‘residential complex’.
There seems to be no plausible rationale for taxing a residential complex and not construction of a bungalow that may entail a higher cost of construction in many cases. Further, no rationale has been provided for the threshold of 12 dwelling units in a residential complex. The service tax should not be levied, because the sector is paying a number of taxes.
b) Value Added Tax: VAT has been introduced in 20 states. For the successful implementation of VAT it is important that there should be uniformity in the rates, rules and regulations throughout the states. Not only do the rules vary but also the regulations. There is an urgent need to abolish CST as VST and CST cannot go hand in hand. It is important that local levies be completely abolished from all states.
c) Free Trade Agreement (FTA): The government may consider signing up of more FTAs with other countries in the interest of the real estate segment. However, while doing so, the interest of the domestic players should be borne in mind.
d) Form C: Uniformity regarding the permission to issue a Form-C for the purpose of purchasing goods to be used in the work contracts. The State Government should abide by the Central Laws regulating the issuance of Form-C.
e) CST: According to the norms of CST, sale includes work contracts. Hence, any goods moving from one state to another for the purpose of usage in execution works contracts now fall under the ambit of inter state works contract and the state from where the goods are moved is liable to impose the tax.
f) Excise Duty on Immovable Property: The excise duty should not be levied in the case of immovable property like in the case of installation of lifts to encourage this sector.

Real Estate in Pune city- A feel good factor...

Pune real estate has been the most consistent markets across the country and the future seems very good because of lots of growth drivers and prevailing good economic conditions. Here are few factors responsible for this.

1. Since 2007-2008, the city has witnessed the launch of more than 200,000 units of which more than 150,000 units have been absorbed till Q3 2012, resulting in 23% remaining unsold; the reason behind the same is the rate of absorption is not able to match the pace new launches.
2. Construction activity concentrated more on eastern and western Pune, about 33%and 28% of the under construction units are located in West and East Pune respectively.
3. Strong growth of IT/ ITes and Auto & Auto Ancillary sector (17%) is one of the driving factors for Pune’s real estate growth and will continue to be for coming 5 years.
4. Currently the IT/ITeS sector accounts for 74% of total office space and this percentage is going to go up with new IT/ITes offices becoming operational in the coming years.
5. Office space in Pune witnessed growth from 20.4mn sq.ft. in 2007 to 64.7mn sq.ft; however the absorption has been slowing down leading to gradual increase in vacancy level. Presently the vacancy level stands at 26% as on Q3 2012.
6. Majority, almost 95% of overall office development in Pune is focused on eastern and western Pune.
7. In western Pune, the residential prices are bound to rise in majority of destinations with some destinations outperforming others. Destinations closer to Hinjewadi IT Park and along Pune-Mumbai By-pass will witness higher appreciation as compared to farther locations.
8. Hinjewadi, Wakad, Tathavadeand Ravet are expected to witness maximum price appreciation in Pune residential market; primary reasons being
i) 80% of office space located in western Pune concentrated in Hinjewadi; it increases importance of residential market in proximity.
ii) West Pune has become a self-sufficient zone, reducing dependence on Pune City.
iii) Due to present state social and physical infrastructure in the region, proximity to workplace has gained paramount importance for home buyers
Hinjewadi:
1. Since 2007, total of 15,000 units launched in Hinjewadi of which more than 11,000 units have been sold resulting to 76% absorption till date.
2. Prices in Hinjewadi will move up to Rs. 8000/sq.ft from average level of Rs. 4000/ sq.ft.; appreciation of about 100%.
3. Besides reasons mentioned above, growing preference of walk-to-office concept has made Hinjewadi most sought after destination among IT professionals.
Wakad:
1. Since 2007, total of 15,570 units are launched of which 12,864 units have been sold accounting to 82% absorption till date.
2. The prices in Wakad are expected to touch Rs. 8,600 / sq.ft mark in 2017 from present average level of Rs. 4,500 / sq.ft.; a 91% appreciation.
3. A drop in new launches in 2012 in region will help to decrease the unsold units from previous years.
Tathawade
1. 4 km from Hinjewadi, physical characteristics similar to Wakad but prices 5% less than that of Wakad.
2. Since 2010, a total of 1,400 units launched of which more than 1,000 units are absorbed; absorption 73%.
3. The prices in Tathawade are expected to touch Rs. 8,500 / sq.ft mark in 2017 from present average level of Rs. 4,300 / sq.ft; a 98% appreciation.
Ravet:
1. 9 km from Hinjewadi, relatively a new location
2. Since 2010, a total of 1,750 units launched of which 1,200 units are absorbed; absorption 70%.
3. Prices in Ravet will move up to Rs.7, 800/sq.ft from average level of Rs. 3,950/ sq.ft; appreciation of about 98%.

These are the excerpts from the recent reports from the a leading research agency..