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Redevelopment proposals in Mumbai drop 50% after HC’s construction ban in March

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The BMC’s development plan (DP) department said new redevelopment proposals between May and December 2016 dropped by 50% compared to previous years.

MUMBAI: Redevelopment of housing societies in the suburbs has been hit hard following last year’s Bombay high court order banning all new constructions in Mumbai from March 1, 2016.

The BMC’s development plan (DP) department said new redevelopment proposals between May and December 2016 dropped by 50% compared to previous years. “We received barely 600-650 proposals in this period compared to around 1,300 each year. This is a direct fallout of the court order,” said Vinod Chithore, chief engineer, DP.

The BMC is expected to lose an estimated Rs 600 crore this year because of the shortfall in various construction premiums and development charges builders pay to the civic authority. It collected over Rs 4,000 crore in 2015-16, but managed barely Rs 700 crore between September and December last year. It now expects to collect a total Rs 3,461 crore by March end.

Developers have to pay assessment tax, premium for additional construction rights (fungible FSI), staircase premium, development charges, sewerage charges and open space deficiency premium.

The real estate industry is now the second-biggest source of revenue for the BMC after octroi, and the ban could shave off more money from its coffers if it is not lifted soon, said officials.

A majority of the redevelopment projects affected are in the western suburbs of Khar, Bandra and Santacruz, involving single buildings. Many societies had sealed agreements with developers when the court judgment last February came like a blot from the blue and stalled the projects.

The order came after a division bench of the high court pulled up the state government and the BMC over their failure to solve the problem of the city’s polluting dumping grounds.

The court said that a pollution-free environment was a fundamental right and that compliance with municipal solid waste rules appeared to be a “distant dream”. The ban, however, does not apply to slum redevelopment projects, redevelopment of old and dilapidated cessed buildings in the island city, those involving housing authority (Mhada) colonies and construction of hospitals and educational institutions. The HC told the BMC not to process any applications or new residential or commercial projects.

The court had ordered a similar stay against construction in the Kalyan-Dombivli region a year ago because the local administration failed to resolve the issue of closing down the Adharwadi dumping ground in Kalyan. The Kalyan-Dombivli Municipal Corporation is believed to have already lost around Rs 70 crore as revenue during this period. Later, the corporation awarded a contract to a private contractor to shut the dumping ground.

Vijay Ballamwar, BMC’s deputy municipal commissioner (solid waste management) said the corporation will soon file its affidavit before the high court, listing the compliances it has already adhered to since the ban.

The court wanted the state and BMC to prepare an impact assessment study on how constructions affect solid waste generation (with plans to mitigate it), and making wet-dry waste segregation mandatory and to set up facilities for disposing biodegradable waste. Ballamwar said the corporation has already tightened security at the Deonar dumping ground, fenced it and installed close-circuit cameras. “Recently, we floated a tender to produce energy from waste at Deonar,” he said. The city generates 8,600 tons of garbage a day.

Source: economictimes.

Regulations

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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