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How infrastructure status will change the reality for real estate



infrastructure status

The Union Budget 2017-18 was announced with the theme of Transform, Energise and Clean India (TEC) was largely geared towards rural growth, infrastructure, and poverty alleviation, with a huge impetus to affordable housing. The thrust on affordable housing renews government’s vision of ‘Housing for All by 2022’, giving a cheer for the housing segment.

After a wait of several years, the government has finally awarded infrastructure status to the largely-neglected affordable housing, which is encouraging for developers. Infrastructure status will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable projects.
According infrastructure status will further simplify approval process for affordable projects, create clear guidelines and increase transparency in the segment. Such a market, which will further be made accountable through the Real Estate Regulatory Authority (RERA), could attract debt and pension funds to invest in the affordable housing segment.

Further, the government has tweaked the definition of Affordable Housing projects under the scheme for 100% deduction of profits from tax of an undertaking. Earlier, flats up to built-up area of 30 sq. metres in four metro cities and up to 60 sq. metres in other cities were to be considered under the scheme, which has now been changed to ‘carpet area’ and the 30 sq.m. limit now applies to only within the municipal corporation limits of the four major metros.


Moreover, this time period has extended from three years of approval to five years. We expect that these moves will definitely aid supply in the affordable segment by ensuring that a greater number of projects will come under the ambit of the scheme, which has remained largely under-penetrated till now, despite immense pent-up demand. For instance, households earning up to Rs 200,000 per annum and above poverty line itself accounts for almost half of the total demand for housing between 2017 and 2020.

In order to cater to the supply, the government has targeted to build 1 crore houses by 2019 for homeless and those living in kuchha houses. Moreover, the industry will also be enthused by the Finance Minister’s allocation of Rs 23,000 crore towards Pradhan Mantri Awas Yojana, which is almost a 53% increase from that of last year.

In a major relief to housing developers, the Finance Minister has changed the time period for calculation of notional rental on unsold stock held by developers for tax purposes, which will now kick in only one year after completion.
Housing developers have been suffering from major cash flow problems in the past couple of years as there is substantially high unsold stock in most of the cities due to the suppressed housing demand. The demonetization has compounded their problems with a further slowdown in sales. This measure provides them with some relief and the opportunity to focus in pushing the sales of their stock.

For investors, the announcement regarding a reduction in holding period from gains from immovable property for long term capital gains tax from 3 years to 2 years will result in lower tax liability and help to boost individual investments in the sector.
Another matter for cheer was for joint development agreement signed for development of property, the liability to pay capital gain tax will arise in the year the project is completed. This will help in creating more positive demand for land assets for future developments.

The focus on transportation sector as a whole is a very positive and far sighted development. Transportation, including rail, roads, shipping, which has received a provision of Rs 2,41,387 crore 2017-18 along with specific announcements of creating over 3500 km of rail network and 1.40 lakh km of road network will ensure greater accessibility thereby creating more nodes of economic development. Further the proposal of having a METRO policy is a welcomed move. These will help in de- congesting the cities and create potential urban centres for future development

Scrapping of the Foreign Investment Promotion Board (FIPB) would further pave the path for foreign companies to invest in India. At a time when the government is pursuing its ‘Make in India’ mission and further liberalizing FDI norms across sectors, this move will go a long way in reducing bottlenecks for foreign investors from certain sectors such as defence, aviation, banking in the country.
Some of the aspects that the Union Budget missed, and those that could have created a better impact on the real estate sector include, lack of provisions for increasing the tax deduction for interest paid on housing loans which could have been a welcomed relief and a morale booster. Further, as many from the real estate sector had commented before the budget, some additional benefits for first time home buyers could have been included to provide the additional impetus.

The Budget also did not address crucial aspects like SEZ policy or provide any further tax relief for SEZ. This is critical as globally Free Trade and low tax zones have a significance in creating the right environment for economic growth..

Over all this is an extremely sensible budget that focusses on promoting long term and sustainable growth even as the country and its economy faces many headwinds from global issues such as BREXIT, US politics, increasing oil prices and general uncertainty.”





Ahmedabad Real Estate News

Under Construction Flat Booking Finds Tax Deduction Under Time Constraints



Tax Deduction

If a buyer makes a transaction to book an under-construction flat and if he acquires it within the three-year period of the sale of his old house, then he is entitled to a tax deduction, says a ruling from the Mumbai bench of the Income-tax Appellate Tribunal (ITAT). If an apartment is booked in an under construction project than it must be viewed as a method of constructing residential tenements, says the December 18 judgment.

That means if the buyer uses the entire gain from the transaction to buy another house within two years or construct another house within three years. The two- and three-year period applies even if the buyer bought another house a year before selling the first one. But the property should have been bought in the name of the seller.

It is mandatory that within a period of two years after or one year before the date of transfer of old house, the taxpayer should construct a residential house or acquire another residential house within a period of three years from the date of transfer of the old house. The date of receipt of compensation will determine the period of acquisition or construction in a case of compulsory acquisition.

This exemption is effective and can only be claimed in respect of one residential house property purchased/constructed in India. In the case of multiple house purchases or constructions, the exemption under section 54 will be available in respect of one house only. Any purchases made outside the country does not fall under any kind of exemption. Section 54 gives relaxation in such cases by providing relief to the taxpayer who sells his residential house and acquires another residential house from the gained capital.

After the sale of an asset, the difference between the buying price and the selling price is a capital gain or a capital loss. These are further classified as long-term or short-term. If a property is held for 24 months or less, with effective from 2017-18, then that asset is treated as Short Term Capital Asset. Then an investor can make

treated as Long Term Capital Asset. Then only a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) can be made on that investment.

ITAT agreed that booking of a new flat in an under-construction apartment should be considered as a case of “construction” and not “purchase”, hence following the earlier decisions of the Bombay high court and the tribunal itself. Further ITAT allowed the fact that the construction can began prior to the date of sale of the old asset. Same was stated in the earlier judicial decisions of the Karnataka high court and Ahmedabad ITAT, that the date of commencement is not relevant but it is the completion of construction that comes in relevance to section 54.

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India Real Estate News

HDFC and Quikr Make A Deal



HDFC and Quikr Make A Deal

According to a deal between HDFC and Quikr, a stake of more than 3 percent will be given to the mortgage giant in return to its transfer of offline and online real estate brokerage business to the classified ads platform.

After acquiring Commonfloor in 2016 Quikr already has a major presence in online real estate broking.

“Most of the searches for real estate are moving online. Quikr has a much bigger presence online. Through this deal, we are partnering Quikr in the broking business,” said HDFC MD Renu Sud Karnad. According to her, this deal will strengthen Quirks position with offline support.

The deal suggests that HDFC will transfer to Quikr its entire shareholding in HDFC Realty, a real estate brokerage platform, and HDFC Developers, which runs the HDFC RED online platform.

Karnad added that the deal expects Quikr to generate home loan leads for HDFC. The transaction consists of a co-branded alliance between both parties and the HDFC brand will continue to be used online for a year.

The e-real estate classifieds platform HDFC RED has around 7,000 project listings and generates traffic of over 80,000 unique visitors per month. HDFC Realty has a 300-member, in-house sales team, and 7,000-strong nationwide broker network. Avendus Capital was the exclusive financial adviser to Quikr while Kotak Investment Banking acted as the exclusive financial adviser to HDFC on this.

30 million monthly users make Quikr India’s largest classifieds platform. It runs multiple vertical businesses across real estate, automobiles, jobs, services, and goods. The Quikr Home, its real estate vertical generates 3.5 million monthly unique visitors.

Both companies intend to work closely and conduct analytics and identify potential homebuyers, and therefore home loan customers, early in their home-buying journey. Quikr founder and CEO Pranay Chulet said, “We see great synergies between Quikr and HDFC as we start working together to bring a seamless online-to-offline platform to developers and consumers.”

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India Real Estate News

Retaining The Sustainability: GRIHA Launches Star Rating For Urban Homes



GRIHA Launches Star Rating For Urban Homes

Green Rating for Integrated Habitat Assessment (GRIHA), is the National Rating System of India, a Sanskrit word meaning – ‘Abode’. Human architecture has always consumed resources in the form of energy, water and material from the environment. From their construction to operation, these habitats absorb the resources throughout their life cycles, emitting wastes in the end. This emission could be direct in the form of municipal wastes or indirect emission into the atmosphere, such as from electricity generation. Hence GRIHA was formed to reduce an architecture’s resource consumption, waste production and overall environment impact up to certain national acceptable limits.

In attempt to quantify all these aspects, like energy consumption, waste generation etc. GRIHA tries to manage, control and bring down the respective to the best possible limit. Being a rating tool, it helps people to assess the performance of their respective projects against the national benchmarks.

Hence it becomes an evaluation of the environmental performance of an architecture on a holistic level. Covering its entire life cycle, this evaluation provides a specific standard for a ‘green building’. This rating system aims to strike a balance between established institutions and emerging concepts, on a national as well as the international level.

The process starts with an online submission of documents according to the criteria. Then a team of professionals and experts from GRIHA Secretariat takes a site visit for the evaluation of the building.  There are four different sections categorized by 34 criteria in GRIHA rating system. Some of them are site selection and site planning, conservation and efficient utilization of resources, building operation and maintenance, and innovation. 

Sanjay Seth, CEO, Green Rating for Integrated Habitat Assessment (GRIHA) Council says, “A rating between one and five stars is being provided, helping the costumers to know about the sustainability of the houses”.

According to the Union Minister, Hardeep Singh Puri, the climate resilient and sustainable buildings are the need of the hour. As the government is aiming to construct around 1.2 crore houses for the urban poor under the affordable housing scheme.

In one of his keynote addresses, Andreas Baum, Ambassador of Switzerland to India and Bhutan said that the Indo Swiss collaboration is operating with the Indian Bureau of Energy Efficiency in the development of guidelines for energy efficient housing.

“At present India is witnessing a rapid urbanisation, if each building becomes greener than the last one, then we have a huge opportunity and hope for our country. We need to look beyond the conventional methods of building, in order to provide our citizens with a good quality of life. Hence, GRIHA gains important in meeting our national goals with respect to a sustainable society”, says Dr Ajay Mathur, director general, TERI & president, GRIHA Council.

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