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Why Indian Real Estate Market is a Good Investment Bet for NRIs

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under construction projects

As the new financial year kicks in, Indian Real Estate with the NRI Diaspora at the forefront is poised for accelerated growth.

Non-Resident Indians have for long been active and important investors in Indian Real Estate. Settled abroad, NRIs have the advantage of exposure to global standards of real estate. They have been instrumental in bringing financial and technological best practices to India from abroad. The year 2017 has heralded a positive shift in Indian real estate already. Lowering of interest rates, the announcement of new credit linked subsidy scheme has made market finance more accessible. Regulatory updates like RERA and GST are also inducing a lot of positivity in the market. But the biggest news is coming from the affordable housing space which has now been designated with the infrastructure status. NRIs on their part have rewarded these efforts with reinforced confidence and vision.

In this story of rebound, NRIs have taken a strong lead as active buyers of Indian property. The NRI populace at 30 million is almost equal to the entire population of Canada. In 2016, the influence of NRI buyers was clearly observed with rising incomes and improving the economy. As the demographic focused on younger participants, demand for properties in small unit sizes further rose. 2016 is also remembered for some major initiatives by the central government. The Benami Transaction Act, RERA (Real Estate (Regulation and Development) Act, 2016) and demonetization of higher currency notes of five hundred and one thousand were some of the major steps taken by the government to bring in transparency and better real estate transactions. It brought stability and restricted non – serious investors.

By the end of 2016, the total investment in a primary real estate in key Indian markets reached $9.6 Billion. Further, 20 per cent of the NRI investments is made by Non-Residents settled in the UAE. Indians settled in the United States, Canada and Australia also hold significant investments in Indian property markets.

As against $6 billion NRI investments in 2013, the figure is expected to almost double in 2017, with approximately $11.5 billion to be invested this year. This would account for 20% of the total market, estimated to reach the $60 billion mark this year. The figure could go even higher, given the proactive approach adopted by the government in addressing the concerns of the realty sector.

Government intervention alone is not pushing these figures. A depreciating rupee has also provided stimulus to investments from NRIs. The digital medium has also created an unprecedented awareness for property investors today. An online tool like project comparisons carries the ease of comparing different projects on different parameters. Digital is effectively bridging the geographical gap as almost entire information regarding a property purchase is available with the click of a button. So even if a non-resident is physically able to visit the project site, he/she can still make informed decisions using online resources.

As the new financial year kicks in, Indian Real Estate with the NRI Diaspora at the forefront is poised for accelerated growth.

Source: The Financial Express

GST Real Estate

The Year-In-Review: 2017 Kept The Realty Market On A Constant Lookout

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Realty Market On A Constant Lookout

The year 2017 was a game changer for the real estate sector. With challenging reforms like Demonetization, making their way into the market, impacting the realty sector on high levels. Then came the big regulations such as Real Estate (Regulation and Development) Act and GST, which brought transparency and accountability, hence organising the realty market. Coupling the Demonetization with the imminent implementation of RERA and GST resulted in a major slow-down in terms of real estate sales.

A constant turmoil went throughout the industry during this period, but gradually the trends began to change, as the buyers started to look for ready flats instead of under-construction flats. Such major factors changed the ways of business operation of the developers. A relief was felt among the home buyers as their rights were now protected by RERA, hence generating a wave of confidence to invest more in the real estate market.

With an unlimited possibility of investment, the real estate sector proved to be one of the best choices among the masses, as every investment guaranteed a sure shot return. But the real estate sector stumbled at the implementation of the Real Estate Regulation & Development Act (RERA) and generated a large number of unsold units, ultimately bringing down the prices. With deliveries on time and transactions going transparent, these excessive number of unsold units, brought customers a luxury of choosing the properties of their choice at their budgeted prices.

Till date, about 223 housing projects have registered under Tamil Nadu RERA. About 1100 projects and realtors have registered in Gujarat, with MahaRERA with more than 14000 registered projects. To curb down the complex cascading tax structure and cutting tax burden on consumers, the Goods and Services Tax (GST) was introduced on July 1, 2017, in line with ‘One Nation, One Tax’ model. This new tax was only applicable to under-construction projects and hence made the ready-to-move-in apartments, a more attractive option for the buyers.

Not satisfied with the current rate of GST, the National Real Estate Development Council (Naredco) has recently urged the government to halve the GST rate for the real estate sector to 6 per cent to help boost demand for new homes.

The tax authorities began cracking down on the Benami assets after the amendment of the Benami Transactions(Prohibition) Amendment Act. Till date, the income tax department has been able to seize 541 properties. Moreover, funds of about Rs 1,800 crore in various bank accounts are being frozen and more action is expected soon. In its next step, the government is planning to crack down on Benami properties by making it mandatory to link Aadhaar with property transactions.

The affordable housing sector might see a jump in sales, after the revision of the carpet area for the Middle Income Group (MIG) category under the Pradhan Mantri Awas Yojna (PMAY) scheme. An increment of about 90 sq m to 120 sq m in MIG-1 and 110 sq m to 150 sq m in MIG-2 were made in the carpet area. Providing the middle income home buyers with bigger and better houses.

These toughened laws are pushing the non-complying companies into a merger with the bigger players. Hence eliminating the delay and other setbacks, the consumers are being more protected, the increasing purchases in the real estate market are finally turning it into a global market.

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Mumbai Real Estate Sees NRI Homecoming After Two Years

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Mumbai Real Estate

When it comes to invest in real estate in India, Mumbai attracts the maximum interests from the Non-Resident Indian (NRI) community. Despite the highest property prices in the country, Mumbai continues to garner attention as the most sought after investment destination in India. In the current scenario, a stable government in the centre and a growing economy has ensured a sustained preference by the NRIs.

Earlier NRIs constituted 20% to 25% of sales in the Greater Mumbai real-estate market but during the last two years, the market has seen a dip of about 7% in this sector. This has happened due to various factors such as frequent changes in rules and regulations and delayed possession, a lack of transparency and the exorbitant pricing. The real estate sector went under the big change with the Demonetization, which effectively pointed it away from cash transactions. Then followed a series of new regulations such as RERA, GST, which had a tremendous effect on the market, taking it down a slow path as the potential buyers and investors opted to wait for a better opportunity.

As most of the states started to fall in line at the initiation of the implementation of the Real Estate Regulation & Development Act (RERA). The landmark law finally brought the long awaited transparency and accountability requirements for developers into the system. The Goods and Services Tax (GST) impacted the business operations of the developers. Affecting the older ways of working, Demonetisation did not affect self-governing developers with the right products targeted at the working masses. Therefore, the rest realised the importance of reforming of the business models, in order to improve the potential of the market.

Hence after the dearth of two years, NRIs have slowly started to purchase property in the Mumbai region. All owing to the Real Estate Regulatory Authority (RERA) and a liberal home loan regime, which are together acting as great confidence-boosters. According to the latest figures by the Confederation of Real Estate Developers’ Associations of India (CREDAI), the number of attendees at the property exhibition in Dubai was a huge figure of 13,500 NRI visitors, where 210 builders showcased their projects. Also the choice of the NRIs have shifted from luxury apartments to the smaller houses, which are proving to be the better options for investment.

The encouraging reforms by the central and the state government has given a new momentum to the real estate sector. The introduction of the real estate investment trust (REITS) Act, relaxed Foreign Direct Investment (FDI) regulations and the decrement in the rate of interest has helped in replenishing the real estate sector.

Trying to boost the sales, the developers are running overseas campaign, to promote the changing face of the real estate sector. The job insecurity abroad has propelled the NRIs to buy houses, back in the country, where they can live in case if they decide to return home. There are subvention schemes that are being offered by the developers. Where NRIs has to just pay 5% to 10 % on booking and the rest after possession making it an attractive option.

“USA, UAE, Hong Kong, Singapore and Australia are seeing our seminars, roadshows and events. That are being conducted to spread the awareness about features such as the fixed deadline for getting possession, hence generating a good response. Our Andheri project has seen a 25% sales of inventory towards the NRIs,” said Rahul Maroo, senior vice-president and head of international sales at Omkar.

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GST Real Estate

Karnatka RERA, GST: Co-operative Housing Societies Sees A Price Hike

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Karnatka RERA, GST

After a new ruling by the court, the co-operative housing societies in Karnataka are seeing more transparent and expensive sites for purchases. The housing societies are now supposed to register under the Karnataka Real Estate Regulatory Authority and Goods and Services Tax (GST).

Earlier this year, the Karnataka State Government Employees House Building Cooperative Society and others have approached the high court, to challenge the restrictions imposed by the Real Estate (Regulation and Development) Act, 2016 (RERA Act). The retrospective operation of RERA was brought under question, as it has taken away the rights provided to the societies under the Karnataka Cooperative Societies Act, claimed the petitioners. Specifically, the restrictions imposed on their activities under the Sections 3, 4 and 13, claiming to be affecting their businesses.  

RERA being an Act implemented by the Central Government. Accepted by the State Government, and formulating into its own rules and regulations. Also they have brought the cooperative societies under its purview. However, the cooperative societies have been functioning according to the regulations of Cooperative Act 1959. Hence this conflict has become the basis of the application, calling for negating the RERA.

The application argues further by claiming the status of Cooperative Societies as that of a non-profit based outfits. Where they develop layouts and distribute sites at lower rates, with the members paying amounts in small instalments. Therefore, terming this act of bringing them under the ruling of RERA as unconstitutional.

The latest ruling will affect the 50,000 cooperative housing societies in Karnataka, with the majority in the region of Bengaluru and Mysore. Till now, only one society seems to get registered under RERA. Among these thousands, the number of cooperative societies which are currently in the process of developing layouts are 10,000. These societies are now supposed to be registered under RERA.

Another part of the ruling says that GST will also be applied to all the CHSs and they need to register under the new taxation regime as their turnover collections are likely to exceed the limit of Rs 20 lakh. An 18% GST will now be applicable to any transfer fee that has been paid to the society by the new owner on exchange of ownership of flat.

As soon as the society gets registered under GST, there are various filing obligations, which had to be met. Complying with the provisions of the reverse charge mechanism, the societies have to bear an 18% GST on the payments to the unregistered service providers, such as cleaners, electricians and plumbers.

“The effect created by the Cooperative housing societies, making profit during the property boom in the Bengaluru and the other major cities of Karnataka, has come to an end. RERA and GST have finally brought a transparency to the system”, says K Chandrakanth, a member of the Karnataka Homebuyers’ Association.

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