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RERA May Revive Real Estate Sector In Second Half, Say Experts

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RERA May Revive Real Estate Sector In Second Half, Say Experts

After May 1, when the Real Estate Regulatory Act (RERA) is in place, the realty sector will likely see an uptrend with slight price correction, say industry players and stakeholders.

This is likely as genuine buyers may pitch in on the back of an improved consumer climate and lower home loan rates.

“Considering the present scenario, the next three-four months are like the gestation period for the realty sector and after six months the sector is likely to gain momentum. We are hoping to see positive impact in the second half of 2017 itself after RERA comes into full effect,” real estate advisory firm PropUrban Founder and CEO Mir Jaffer Ali told IANS.

According to the Real Estate (Regulation and Development) Act, 2016, which came into effect on May 1 last year, every state is supposed to have a RERA in a year’s time.

It will thereon become mandatory for all real estate projects, commercial and residential, to register with RERA for transparent execution.

“At a time when the setting up of a Real Estate Regulatory Authority in each state is set to bring in increased accountability in the markets, we can expect to witness some amount of correction in real estate prices in markets,” property consultant Cushman & Wakefield Managing Director (India) Anshul Jain told IANS.

Ali concurred and said that the cash component in property transactions will see a significant drop, resulting in a fall in land prices, which could be anywhere between 15 and 20 per cent at some places.

On a positive note, almost all banks have also lowered the home loan interest rates post demonetisation which would automatically generate more demand for housing with the sops given to affordable housing in this year’s Union Budget being an added advantage.

The start of 2017 has seen buyer sentiment improve and the anticipation is that with a positive electoral result and encouraging budgetary reforms, the sector should perform better over the course of the year.

Large developers such as the Lodha Group have seen sales of 850 units in February 2017, which indicates a gradual upward trend in consumer sentiment across the segment.

More so, with the dust of demonetisation finally settling, buyers’ sentiments are looking positive in anticipation of higher transparency and efficiency. Genuine requirement for homes coupled with reduced interest on home loans can be attributed to this.

According to a survey by PropUrban, once RERA is fully in place, about 45 per cent respondents would be investing within the next six months, while another 26 per cent are likely to take the plunge within a year.

“Interestingly, now the market will see the return of ‘real buyers’. As for the RERA and Benami Amendment Act, the sector is likely to see positive impact in the short-term — within one-two years,” Ali said.

Moreover, with the deadline of implementing RERA fast approaching, developers are trying to focus on completing their existing projects rather than launching new ones, which is good for the sector and buyers, he added.

With RERA, there would be mandatory disclosure of project details, including those of the promoter, project, land status and clearances. This would increase the credibility of developers and would protect consumer rights as well.

Dharmesh Jain, President, Confederation of Real Estate Developers’ Associations of India — Maharashtra Chamber of Housing Industry (CREDAI-MCHI), told IANS that RERA “will help in bringing in higher transparency and will help the customer to get possession in time. Also, one will know what they are paying for and would be sure they will get what they are promised. In fact, the developers will have to be accountable on the dates and timelines shared”.

Additionally, buyers and developers will now finally be on a level playing field with respect to penalties on delays. Both parties will now pay the same rate of interest in case the buyer delays payment or the developer delays giving possession.

“RERA is a long-term policy measure whose effect will be pretty permanent, in the sense that it will drive unscrupulous or unorganised developers off the market and leave a level playing field for credible players in its wake,” Ramesh Nair, CEO and Country Head of leading property consultant JLL India, told IANS.

“We are now seeing evidence of a gradual revival on the back of pro-consumer measures like RERA coming in, decisive court actions against errant developers, price corrections and renewed confidence in the economy,” he said.

Shubika Bilkha, Business Head, Real Estate Management Institute (REMI), told IANS, “These initiatives will contribute to organising this sector that has been traditionally fragmented and unorganised, while improving consumer confidence.”

Source: Economic Times

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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