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Narendra Modi eyes real estate assets in drive against graft

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This tax loophole is used by the wealthy to buy real estate in someone else’s name. However, data on the scale of such activity is not available.

NEW DELHI: Prime Minister Narendra Modi has quietly plugged a tax loophole used by the wealthy to buy real estate in someone else’s name as part of his campaign against corruption, a senior tax official said on Monday.

While the focus of his administration was managing the fallout of a shock move last month to scrap old 500 and 1,000 rupee notes, the official told Reuters that the department expected to step up scrutiny of real estate assets with suspicious titles.

Tax officials expected to use returns for the current year that are filed in July as well as other means such as raids and data from bank transactions to gather information about suspicious real estate assets, the official said.

“This is our priority for next year,” said the official, requesting anonymity as unauthorized to speak to the media.

Any move to clean up India’s messy real estate market could prove to be a mammoth and messy task and would come even as the Modi government is facing mounting criticism of its handling of the cash crunch that followed the scrapping of higher denomination currency notes.

India’s land records are patchy and arcane. Analysts say people such as politicians, businessmen and non-resident Indians often use cash they haven’t paid taxes on to buy property, but put it in the name of their relatives or trusted employees.

But often apartments and land pass down generations in a family without the original owner’s name ever being changed in the title.

Data on the scale of such activity is not available. But industry estimates show about 5 to 10 per cent of real estate in many cities is bought by people who have evaded taxes.

In his monthly radio address on Sunday, Modi defended demonetisation, which he has billed as an attempt to fight corruption, and said the government would implement the law to clean up India’s real estate records in coming days.

“There is no question of a retreat,” Modi said.

The law, called the Prohibition of Benami Property Transactions Act, which came into effect on Nov. 1, says people who hold assets that don’t actually belong to them could face up to seven years in jail, besides seizure of the property.

The government has yet to spell out how it will update real estate records and land registries.

Analysts said the real test for Modi would be to increase compliance and punish people who have evaded taxes without causing hardship to others.

“The relentless pursuit of black money needs to be backed by solid execution. Otherwise this will just remain on paper,” said Amit Maheshwari, a partner at consultancy Ashok Maheshwary & Associates LLP.

Source: economictimes

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373 Maharashtra Cities To Fall Under PMAY Scheme

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The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

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Real Estate Sector May Fall Under GST What Does It Mean For Buyers?

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One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

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Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt

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In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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