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Real Estate Regulator will impact the way you buy a house

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Real Estate Regulator

The availability of developer and project information on a RERA website will be useful in many ways

It’s been almost a year since the Real Estate Regulatory Act (RERA) was passed by Parliament. Since then we’ve seen the rules being notified by the central government and a few of the states, with a nationwide roll out deadline of 1 May 2017, which is not too far away.

Once the state regulatory authorities are set up, we expect to see information posted by developers on their websites . These might vary from state to state as their governments have framed rules which although follow the central government guidelines but have been tweaked as per their considerations.

From a prospective buyer’s point of view, the availability of developer and project information on a RERA website will be useful in many ways.

So far, a buyer’s primary source of information about a project was whatever that was revealed by the developer’s marketing campaign or other promotional material that might have been handed over to prospective buyers.

However, this information might be limited and in some cases not entirely accurate. RERA makes it obligatory for a developer to reveal a great deal of information about a project that ranges from land ownership details to sizes based on carpet area to delivery deadlines. This being besides clauses that broadly cover penalties for delays as well as a clear definition of how ongoing projects will be listed. 

This is one clause which most prospective buyers will look at with keen interest. At present, there are hundreds of projects across the country in various stages of construction, and many among them are close to completion but still have unsold inventory.

We have, over the past year and more, seen a lot of end users actively considering buying into these ready to move unsold inventories. On 1 May when RERA gets functional, a question that will be on every buyer’s mind is whether the property they’re planning to buy is covered by RERA or not. The criteria of being listed under RERA might differ from state to state but a RERA listed under-construction project will sell out faster than a one that isn’t. 

Going ahead, developer websites will see information as required by RERA being posted prominently. I expect projects that are RERA-complaint to generate greater buyer interest. In fact, in a year’s time or so, projects will be compared for RERA compatibility. A RERA compatibility index could soon become an important tool for buyers to refer to. 

I expect the RERA roll out to impact new project launches positively. Buyers will have complete clarity about a new project, something that was always ambiguous earlier.

With funds marked in an escrow account and project sanction plans and clearances displayed and most importantly delivery schedules mentioned, buyers will feel more confident about investing.

With affordable housing getting a push from the government and being clearly defined now, we’ll see tens of thousands of new buyers entering the market. For these first-time buyers, the presence of RERA mandated details in a developer’s brochure or website will work like a stamp of approval from the government. 

It’s interesting to note here that states such as Maharashtra, Uttar Pradesh, Gujarat, Karnataka and Delhi, which see regular launches of real estate projects and attract investor interest have been quick to frame RERA rules.

It shows their eagerness in regulating the real estate sector which in these states provide jobs as well as generate revenues for the government.

We have observed that in countries where real estate is regulated well, buyers take investing decisions much faster and with better clarity. Their decision depends solely on their willingness to invest, and is not based on a determination of a project’s or developer’s credibility, something that is taken care of by a law such as RERA. I expect this to happen in India soon.

Source: Livemint

 

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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