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RERA Likely To Be Incorporated In Maharashtra from 1st May, 2017

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rera rules

The Maharashtra state government will follow the Centre’s Real Estate Regulation and Development Act (RERA), 2016, in order to safeguard home buyers interest from developers. The file for publishing the rules is in the final stages of approval and government is planning to implement the legislation from May 1, 2017. RERA Act came into existence on May 1, 2016 and since October different states began to issue their version of the central act.

Amidst huge uproar from various consumer rights groups and housing activists, the state has amended most of the pro-builder clauses in the draft. The Maharashtra government presented the draft rules in December. The government asked for suggestions from various consumer bodies. More than 650 suggestions and objections were received which were taken into consideration. Most of them were a part of the act but not the draft. Government officials have stated that most of the concerns, objections and suggestions that have been put forward by various consumer groups like Mumbai Grahak Panchayat (MGP) will be incorporated in the Act, post approval from Chief Minister, Devendra Fadnavis.

As per officials, the entire procedure was delayed due to municipal corporation elections. It is expected that the rules would be cleared in this month and will incorporate the changes, suggested by consumer bodies. However, certain consumer bodies have termed the state’s draft as pro builders.

Advocate Shirish Deshpande from Mumbai Grahak Panchayat (MGP), mentioned that it is a welcome move by the state government if there is no dilution of the Central act. He also added that he was relieved that the new rules will revoke the Maharashtra housing act, which was pro builder. MGP has cited more than fifty concerns that were not at par with the Central act. He further added “We have forwarded our objections and suggestions and have been informed that they will be incorporated. However, until the rules are passed, I won’t be relieved.”

One such clause, that housing activists expressed their concern over was the clause where builders are allowed to terminate purchase agreement of flats by giving a one week notice on email, if the buyer defaults on an instalment. The builders were allowed to refund the money without interest to the buyer as per their convenience, within six months. As per the new amendment, the builders can send a termination notice only if the buyer defaults instalments on three occasions. Also, the builder will have to give 15 days’ notice to the buyer. RERA rules articulated by the centre states that builder must refund the money within 45 days, with or without interest depending on the situation. The builder cannot cancel the purchase agreement within a week, if the buyer defaults payment. The state government is also trying to have some alignment between the state rules with the one framed by the centre.

A senior government official has said “there will be no alteration of the act by the state government. After hearing all the concerns and suggestions, necessary changes will be incorporated in the rules, in accordance with the central act. We are focusing on the implementation of RERA from 1st May, 2017.”

Another controversial clause that is expected to be corrected is the one where the builder has to pay a registration fee of just ₹ 1 per square metre. This means the builder has to pay only ₹ 10,000 for a 100,000 square feet project. As per the new amendments, the new registration fee will be ₹ 10 per square metre. The amount will vary from a minimum of ₹ 50,000 to a maximum of ₹ 10,00,000. The current fees under the central rules is between ₹ 5,00,000 to ₹ 10,00,000, for residential and commercial projects.

Another crucial decision was taken for people who reside in rehabilitation buildings. The earlier draft had no provisions for such people if they had any issues with the developer. MGP objected to this particular clause, stating such a provision doesn’t benefit people who reside in rehabilitation buildings neither provide any relief under RERA. The state has also made it compulsory for every builder to display their project records for last five years online. The information needs to be updated on a quarterly basis. Not only this, the new rule will require the developers to publicly display their company’s statement audited by a chartered accountant. The Central rule requires developers to submit annual reports like profit and loss, balance sheet etc. The earlier state draft had no such provision.

The builders’ community is also monitoring the entire situation very closely. They are hopeful that RERA will bring more transparency and accountability from developers and minimize risks on part of the buyer. Chief Economist and National Director of Research in Knight Frank, Samantak Das said “RERA is not against the builders and they will welcome it as well just like the buyers. It might take some time for them to adjust to the new rules and regulations, and change their business model accordingly.” Ashutosh Limaye, National Director of Research in JLL, said “The fly-by-night operators will definitely be affected after the implementation of RERA.”

Ahmedabad Real Estate News

Under Construction Flat Booking Finds Tax Deduction Under Time Constraints

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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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Mumbai Real Estate News

Mumbai’s Development Plan 2034: Second Draft Sees A Steep Drop In Responses

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Mumbai’s Development Plan 2034

The second edition to the Mumbai’s Development Plan (DP) 2034 has been seeing an unenthusiastic response in comparison to the draft DP released last year.  BMC made this draft public in the month of October this year. The Brihanmumbai Municipal Corporation’s (BMC) first edition of the Development Plan included the open space management, steps to boost civic amenities, affordable housing, floor space index (FSI), prevent encroachments as well as outline policy on land usage, built-up area (BUA) etc.

The second part of the draft DP, covered the 111 hectares in three areas of the city, Oshiwara business district from SV Road to Link Road, Parigkhari from LBS Road to Mithi river in Kurla and the  Bandra-West A block. Till the date it has received only 28 suggestions and objections so far, deadline for the feedback being December 30. Allotted by the Metropolitan Region Development Authority to the BMC in 2016, these three areas came late as by then BMC was already done with the completion of the draft DP 2016 for the entire city

Few parties have responded to this second draft DP 2016. One of them is Bandra Reclamation Area Volunteers’ Organisation which have objected towards an entire municipal market being marked as a parking lot in the area. Vidya Vaidya belonging to the above organisation claims that they have been working for providing the area a zero-waste status. In regards to their response, she further discloses that they also suggested waste segregation centres to be earmarked in the draft.

Another organisation submitting suggestions and objections to the latest edition of the draft DP, is the Urban Design Research Institute. According to the organisation’s executive director, Pankaj Joshi, the prime reason behind the lukewarm response is that the talked about areas are small in sizes. These land parcels are house slums in Oshiwara and Parigkhari, and slum dwellers are unlikely to give feedback. He still spares a possibility of getting few more responses before the deadline.

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Mumbai Real Estate News

Reforming The Realty Market: RERA Redefines Carpet Area

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Reforming The Realty Market

To bring consistency in the sale of flats in the real estate sector, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has issued a circular, redefining the carpet area calculation and instructing the developers to adhere to this standard, refraining away from selling on the built-up area, while creating sale agreements.

The new carpet area will be the net usable floor area of an apartment with the internal partition wall but excluding the terrace, veranda, external wall and the balcony. Built up area being the sum of carpet area, wall thickness, ducts, exclusive balcony and verandas. Super built up area is the sum of built up area and common facilities like veranda, staircase, lift etc.

Despite the mandate by the Maharashtra Ownership of Flats Act, earlier there was no mechanism to enforce the carpet area selling rule. But now after the implementation of the Real Estate (Regulation & development) Act, RERA and the establishment of the regulatory authority, this rule will help buyers to get the value of their money.

Adding class to the realty sector, this reform will set a specific calculations of area measurement for every builder instead of their own definitions of built up area. Maharashtra is among the first of the states to implement RERA and fulfil all the norms set up by the Central government for a smooth transition.

These set of new rules will increase the per square foot rate in certain areas, prices of apartments should remain unchanged. Till now the built-up area, larger than the carpet area, was the basis of the calculation of the sales price, taking down the price per sq. ft. area. Now as the carpet area been deemed as the basis for the price calculation, the prices are anticipated to be raised up to retain the profit margin.

Stopping the unprincipled developers from misleading buyers, this new definition will bring more transparency in the system. With a higher loading factor, the developer can inflate the saleable area. This allows him a room to lower the rate per sq. ft. on the inflated saleable area. This can be highly misleading as consumers easily can get attracted to a seemingly better-than-market offer. However, only the loading factor has changed and not the flat size.

“We gladly receive this move by RERA as it defines carpet area as the standard. Now each builder has to walk the same path. Earlier, various builders used to confuse the buyers by ‘setting up’ their own carpet area, built up area and super built up area” said Shirish Deshpande, executive president Consumer Rights Group, Mumbai Grahak Panchyat.

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