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Connect Real Estate Acquisitions with Aadhaar & PAN to Identify Benami Properties

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Connect Real Estate Acquisitions with Aadhaar & PAN to Identify Benami Properties

Linking income tax returns with Aadhaar No and PAN is a welcome step, but not enough to identify every person who is a potential tax payer or a perennial tax evader. It is important to link all real estate acquisitions with these unique identification numbers.

The Benami properties act amendments that came into effect from 1st November 2016, days before the announcement of demonetization needs to be further reinforced and augmented with tools that facilitate auto identification of the property holder. The newly amended law prohibits the transfer of Benami property from benamidar by the real owner. It also permits seizure without compensation of the Benami property by the Government. However, there is some work that needs to be done in tightening the laws for identification of Benami properties.

Each property needs to be identified with Aadhaar
For such identification, every property bought should be linked to Aadhaar numbers, to make the system foolproof. Black money in India has stashed away either in form of liquid cash or in the form of movable or immovable assets. Nearly sixty percent of the black money is pumped into immovable assets in form of both residential and commercial property, by individual or family managed trusts or closely held charitable trusts.

To ensure that such property is not bought in the name of their pet dogs and cats of India by thousands of ultra rich tax evaders, or in the name of loyal servants, fictitious unregistered trusts, each piece of property bought in the last ten years needs to be tagged with an Aadhaar number. True this will be a mammoth exercise. As per estimates over 25000 high-rise structures have been built ever since the high rise buildings act was amended in 2005, creating over two million dwelling units in the high-rise apartment sector alone that would be each costing over Rs 10 Lacs. Another 20 million transactions would have possibly happened in other residential and commercial properties. All these could be linked with the buyers Aadhaar number over the next financial year, so that every property bought becomes Aadhaar linked. If necessary new legislation should be introduced but the mechanism should, however, be simple, fair and un-dimensional to make this massive property identification exercise easily executable.

Transparency and ease of business are equally important
Of course, there will be a shakeup in the real estate market following such legislation. Price rationalization will take place as people who invested massively in Benami property will want to disinvest in a hurry. It is, therefore, imperative that alternative avenues for investing in the real estate businesses are opened up while tightening the screws on Benami property. For years real estate agents have been buying large holdings from property developers and selling them off at a profit without payment of taxes. The builder is usually in league with the dealer syndicates who indulge in property booking. This syndicate reserves four to five lower floors at the start of the project in each building, paying the builder advances in both cash as well as through cheques.

All that practice encourages black money because a lot of the early reservations are not in the form of legal ownerships, but kuccha agreements. This because it would need property tax payment for a flat to change hands from the builder to a broker to flat owners, that is usually avoided by kuccha deals. The legislation change must also have a clearly defined provision by which the property developer takes advances from property dealers as an investor without having to do kuccha deals. To create transparency you have to facilitate ease of business and models abroad exist that make property investing a legal and profitable function without resorting to kuccha deal making. It is time India takes heed of such practices and modernizes its archaic laws in real estate business.

Source: Financial Express

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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Regulations

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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