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RERA Likely To Be Incorporated In Maharashtra from 1st May, 2017

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The Maharashtra state government will follow the Centre’s Real Estate Regulation and Development Act (RERA), 2016, in order to safeguard home buyers interest from developers. The file for publishing the rules is in the final stages of approval and government is planning to implement the legislation from May 1, 2017. RERA Act came into existence on May 1, 2016 and since October different states began to issue their version of the central act.

Amidst huge uproar from various consumer rights groups and housing activists, the state has amended most of the pro-builder clauses in the draft. The Maharashtra government presented the draft rules in December. The government asked for suggestions from various consumer bodies. More than 650 suggestions and objections were received which were taken into consideration. Most of them were a part of the act but not the draft. Government officials have stated that most of the concerns, objections and suggestions that have been put forward by various consumer groups like Mumbai Grahak Panchayat (MGP) will be incorporated in the Act, post approval from Chief Minister, Devendra Fadnavis.

As per officials, the entire procedure was delayed due to municipal corporation elections. It is expected that the rules would be cleared in this month and will incorporate the changes, suggested by consumer bodies. However, certain consumer bodies have termed the state’s draft as pro builders.

Advocate Shirish Deshpande from Mumbai Grahak Panchayat (MGP), mentioned that it is a welcome move by the state government if there is no dilution of the Central act. He also added that he was relieved that the new rules will revoke the Maharashtra housing act, which was pro builder. MGP has cited more than fifty concerns that were not at par with the Central act. He further added “We have forwarded our objections and suggestions and have been informed that they will be incorporated. However, until the rules are passed, I won’t be relieved.”

One such clause, that housing activists expressed their concern over was the clause where builders are allowed to terminate purchase agreement of flats by giving a one week notice on email, if the buyer defaults on an instalment. The builders were allowed to refund the money without interest to the buyer as per their convenience, within six months. As per the new amendment, the builders can send a termination notice only if the buyer defaults instalments on three occasions. Also, the builder will have to give 15 days’ notice to the buyer. RERA rules articulated by the centre states that builder must refund the money within 45 days, with or without interest depending on the situation. The builder cannot cancel the purchase agreement within a week, if the buyer defaults payment. The state government is also trying to have some alignment between the state rules with the one framed by the centre.

A senior government official has said “there will be no alteration of the act by the state government. After hearing all the concerns and suggestions, necessary changes will be incorporated in the rules, in accordance with the central act. We are focusing on the implementation of RERA from 1st May, 2017.”

Another controversial clause that is expected to be corrected is the one where the builder has to pay a registration fee of just ₹ 1 per square metre. This means the builder has to pay only ₹ 10,000 for a 100,000 square feet project. As per the new amendments, the new registration fee will be ₹ 10 per square metre. The amount will vary from a minimum of ₹ 50,000 to a maximum of ₹ 10,00,000. The current fees under the central rules is between ₹ 5,00,000 to ₹ 10,00,000, for residential and commercial projects.

Another crucial decision was taken for people who reside in rehabilitation buildings. The earlier draft had no provisions for such people if they had any issues with the developer. MGP objected to this particular clause, stating such a provision doesn’t benefit people who reside in rehabilitation buildings neither provide any relief under RERA. The state has also made it compulsory for every builder to display their project records for last five years online. The information needs to be updated on a quarterly basis. Not only this, the new rule will require the developers to publicly display their company’s statement audited by a chartered accountant. The Central rule requires developers to submit annual reports like profit and loss, balance sheet etc. The earlier state draft had no such provision.

The builders’ community is also monitoring the entire situation very closely. They are hopeful that RERA will bring more transparency and accountability from developers and minimize risks on part of the buyer. Chief Economist and National Director of Research in Knight Frank, Samantak Das said “RERA is not against the builders and they will welcome it as well just like the buyers. It might take some time for them to adjust to the new rules and regulations, and change their business model accordingly.” Ashutosh Limaye, National Director of Research in JLL, said “The fly-by-night operators will definitely be affected after the implementation of RERA.”

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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