The 1990s was a seminal decade in India. Liberalisation and privatisation ushered in by then Finance Minister Dr Manmohan Singh in the game-changing 1994-95 budget induced competition and growth in various domains such as banking, retail, etc. The housing sector too saw a sea change with the private developers taking over and the government’s role becoming limited. Needless to add, the housing market went through the roof in no time. While incomes of many people increased in tandem, a vast majority also found themselves priced out at the same time.
To cater to the latter segment, who belong to the median or lower income groups and constitute a sizeable proportion of India’s burgeoning urban population, affordable housing schemes emerged in the suburbs of metros. To underpin the momentum, both central and state governments rushed in with policy support to encourage private players to invest in the affordable housing segment. Those ranged from waiving off service taxes, land use charges and exempting external development charges (EDC) and internal development charges (IDC) to subsidised loans. From being a provider of affordable housing, the government’s role changed to that of a facilitator.
But the yawning demand supply gap persisted. To tame it, in 2015 the Modi government launched the flagship programme called “Housing for All by 2022,” with an aim of constructing a staggering 2 crore houses by 2022. To achieve it, however, it realised more needed to be done. Hence, it went a step further with the landmark declaration in the just-concluded 2017-18 budget, in line with a long-standing demand of real estate developers – infrastructure status to the affordable housing segment.
With it, the central government hopes to inch closer to its target of helping all Indians realise their dream of owning a home by 2022. Here’s a dekko at its sweeping regulations meant to help buyers:
- First and foremost, the infrastructure tag would make it mandatory for banks to lend to developers of affordable projects at cheaper interest rates (currently developers borrow at steep rates of 18 to 24 percent). This would encourage more builders, including top tier ones, to foray into the segment. Supply would be boosted and more importantly prices of housing units would come down, thereby enabling more low-income group people to buy homes. This will complement the earlier announcement of 4 and 3 percent interest subsidy to buyers for a housing loan of up to Rs 9 lakh and Rs 12 lakh for a unit of up to 800 square metres.
- Besides making homes cheaper, laws also intend to make them spacious. In the 2016-17 budget, houses with built-up area, which includes the common space for lifts and corridors in buildings, of 30 square metre and 60 square metre were given 100% tax deduction on profits. In this fiscal’s budget, those numbers have been made applicable to the carpet-area, which includes the wall-to-wall area. This would in effect up the qualifying size for affordable houses. At present, the 30 square metre measurement is applicable for affordable housing projects located in the four metros and the 60 square metre is applicable to those within 25 kilometre from the municipal limits of the four metros.
Increasing the size of houses, would also bring more projects under the ambit of affordable housing thus making more units available for home seekers.
The budget has made legislations to benefit builders, with profit featuring at the top of their agenda, too. A roundup of the sops given to constructors follows:
- In addition to access to reduced borrowing rates, the deadline to complete a project would now be extended to five years from the current three. This would go a long way in easing pressure on builders as a lot of time is soaked up in procuring requisite approvals. Once they overshoot the deadline, however, all benefits will be denied to them.
- A year’s income tax relief has also been provided to builders as there is little income from rent on completed units that are not sold.
Finance Minister Arun Jaitley has also announced a slew of other measures along with the aforementioned ones to achieve the goal of housing for all. For instance, he has proposed halving the income tax rate to 5% for those making up to Rs.5 lakh per annum. This move would likely spur demand for affordable homes. He has also announced pumping Rs.23, 000 crore into Pradhan Mantri Awas Yojana to build one crore rural houses by 2019. Further, he announced National Housing Bank (NHB) will refinance individual housing loans to the tune of Rs.20, 000 crore in 2017-18.
Unlike the direct government involvement in nations like Hong Kong and Singapore, where public housing has been a roaring success, the Modi government has decided to incentivise the private sector to fillip the affordable housing sector. If it pans out as per plan, the government would have a major feat to boast about.
Under Construction Flat Booking Finds Tax Deduction Under Time Constraints
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.
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.”
Retaining The Sustainability: 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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