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RERA Effect On Real Estate Agents

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RERA Act 2017: Effect On Real Estate Agents

The Real Estate Regulation and Development Act (RERA) introduced new regulations not only for real estate companies but for real estate agents as well. Now, it is mandatory for every real estate agent to register themselves before dealing in any real estate transaction. The broker segment is estimated to be a 4 billion dollars industry in India, with almost 5-9 lacs brokers in the business. However, just like the real estate industry, this sector has also been highly unregulated and disorganized over the years. So, how will RERA impact the brokers and agents?

In progressive real estate markets, real estate brokers and agents need to register and get certified before doing business but in India, there were no such provisions till now. There has been a need for proper vigilance and systematic functioning for a long time, besides there is a lack of transparency and responsibility in the sector. Once agents register themselves under RERA regulations, it will help them to gain the trust of home-buyers and investors which will increase sales; hence it is beneficial to the consumer as well as brokers and developers.

Registration details for Agents under MahaRERA:

  • ₹ 500 to Mahaonline for Maha-Rera website (additional charges might apply).
  • Charges for the individual, proprietor, or proprietorship firm will be ₹ 10,000.
  • Charges for partnership firm, society, private Ltd/Ltd company, LLP, etc. will be ₹ 1,00,000.
  • Agents will need to maintain separate records for accounts and other documents for each individual project.
  • Agents will get registration number along with certificate within 30 days of registration from respective authority.
  • The registration will be valid for 5 years and renewal should be done 60 days prior to the expiry of registration.
  • The registration certificate should be displayed at business place.
  • The registration number should be displayed on all advertisements, selling or purchase papers. Non-compliance might be subject to penalty.
  • In case the project is not complete then agents are liable to pay a penalty of ₹ 10,000 or a maximum up to 5% of the value of the deal or project.

Under RERA brokers cannot make any false promises about amenities or services which are not mentioned in the documents. Moreover, brokers will have to provide all information and documents at the time of booking. RERA will also ensure that inexperienced or unprofessional brokers are dealt with accordingly. Not even 100 brokers have registered so far, so the number is a bit on the lower side but it is expected that more will register in the coming months. One of the major concerns that brokers have raised is that increased cost of compliance will leave no room for profit especially for those who operate on a freelance basis or independently. Unlike the real estate developers who have register within 31st July, there is no timeframe as such for brokers to register as of now.

The success of RERA will depend a lot on proper implementation, therefore, the central government needs to closely monitor the implementation of RERA in all the states across India. At the same time, the centre needs to ensure that there is no bifurcation from the draft rules proposed by them. Many states are yet to establish regulatory authorities where agents can register themselves, while some brokers are complaining about the heavy penalties in case of default as they are claiming that the broker’s commission is way less as compared to penalties.

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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