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Are You Still Waiting For Possession Of Your Home? Will RERA Help?

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Will RERA Help to get you Ready Possession Home

Are you one of those people waiting possession for your home that you booked years ago? Is your builder giving you constant excuses about the delay? There are millions of people across India who has to face this issue on a regular basis, paying crores of rupees in EMIs and bank loans, without getting possession of their homes. Not only they pay the EMIs but also have to pay their rents resulting in double expenditure. There are thousands of registered cases against developers pending in various courts awaiting decision.

After years of waiting, Real Estate Regulation and Development Act (RERA) will finally be effective from May 1 2017, giving hope to millions of homebuyers across the country. Under the Act, it is mandatory for every state to set up a real estate regulatory authority within 3 months from enactment of the law, to regulate the conduct of developers and take necessary actions against those who are guilty. If the act gets implemented as envisaged, then developers might be forced to pay an interest close to 10% in case of possession delay to home-buyers. If the buyer demands a refund then the developer is bound to refund the entire amount at the same rate within 45 days after the claim. If the developer fails to refund the amount, it can result in imprisonment as well. Amongst all the ill-practices in the Indian real estate sector, RERA is a ray of hope for the millions of home-buyers who spent years of time and money to get possession of their home.

On the contrary, some experts think that even though creation of RERA was to protect the self-interest of the homebuyers, there might be a possibility that many states will alter the laws while implementing it in their respective states. The law means to bring all old projects under the new law as per the regulatory draft but there are reports that many states are trying to dilute the law to provide relief to private developers, so if it happens RERA will only favour new home-buyers.

A report by Hindustan Times stated that in Uttar Pradesh, developers are giving possession to buyers by taking partial completion certificates under the UP Apartment Act which got incorporated a while back. According to the clause, builders deliver possession to buyers without any interior work (buyer will have to manage on its own) or basic amenities, but as per RERA such an act will require developers to pay penalty to the buyer.

Union Urban Development Minister Shri Venkaiah Naidu has stated, “All states will have to apply RERA in its original form and there shouldn’t be any dilution.” But the fact remains, since it’s a real estate law, it comes within the domain of both centre and state, so there is possibility of many years of litigation in case there is any dilution of the law. While the developers are lobbying hard to get the RERA law diluted, buyers have also formed a collective force in order to put pressure on the state as well as central government, so that there is no dilution.

The real estate sector has earned a pretty bad reputation over the years due to various reasons but RERA is seen as a positive move which will re-shape the Indian real estate sector.

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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