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Property Owners May Have To Pay More Taxes As Govt. Proposes VCF Policy



Property owners may have to pay more taxes as govt proposes VCF policy

Property owners will have to shell out more money in the form of new taxes in the wake of infrastructure projects pushing up the prices of land and buildings in the vicinity

New Delhi: Property owners will have to shell out more money in the form of new taxes to be levied by the government in the wake of state-sponsored infrastructure projects pushing up the prices of land and buildings in the vicinity.

According to a proposed plan by the ministry of urban development, public investment in infrastructure projects like metro line, elevated road or railway project push up the property prices in a particular area. On the other hand, the state government and urban local bodies reportedly face shortage of funds, leading to sluggish infrastructure development. To tide over this financial problem, the ministry has formulated a fundraising scheme—value capturing finance (VCF) to capture a part of the increment in value of property due to public investment in infrastructure projects, it said.

“The VCF policy is an innovative method of financing and also a revenue generation tool. It will also help to meet the growing demand for resources to finance ongoing urban infrastructure expansion,” urban development secretary Rajiv Gauba said.

Vacant land, commercial and residential properties would attract various charges like betterment levy, development charges, land value tax and fee for changing land use, he said. Gauba said the mechanism could also be used by other central ministries investing heavily in building national highways, railway projects, power generation and port infrastructure development.

Endorsing the scheme, the finance ministry has also issued an office memorandum stating, “The government has decided that VCF will be an integral part of detailed project report (DPR) of all projects of the central government.”

The ministry has also revised the format for memorandum for proposals of projects to include the VCF mode of funding.

India requires about Rs3,25,000 crore of urban infrastructure investment annually, according to a McKinsey report. A high-powered expert committee, set up by the urban development ministry, in its report in 2011 had projected urban infrastructure requirement at 0.75%, which will increase to 1.5% of the GDP by 2032. In other terms, the investment requirement in urban infrastructure will increase from Rs97,500 crore in 2011 to Rs1,95,000 crore in 2032.

In 2011, the annual urban investments were about Rs32,500 crore, leading to an investment gap of nearly Rs65,000 crore. Meanwhile, the urban development ministry’s proposed VCF policy has received mixed responses from people.

“It would be better to pay for improved infrastructure than remain indifferent. We need to take some responsibility for infra development and the amount we pay would lead to further growth,” a resident of Indirapuram in Ghaziabad district of Uttar Pradesh said.

Another resident of the area said, “We already pay so many taxes to the government apart from the income tax. It is the government’s responsibility to provide facilities to the people. The burden of the same should not fall on us,” he said.

Source: Livemint


373 Maharashtra Cities To Fall Under PMAY Scheme




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?




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




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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