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What Has GST In Store For Real Estate Sector?

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What Has GST In Store For Real Estate Sector?

The GST in the real estate sector was introduced with the most important aim of subsuming taxes at several levels and creating a uniform structure. However, the current impact of GST on the under-construction property has increased the actual cost by 3.5 percent. Thus, it has resulted in only adding burden on the buyers.

The initial roll-out of GST at 12 percent was levied on building, construction, civil structure or with the purpose of selling to buyers, completely or in part. Land and immovable property have been exempted from GST.

While GST has under construction properties under it, the inclusion of entire value chain will mean that land purchase will come under GST instead of stamp duty that varies across states.

This may suggest, in theory, that there is a single nation with one rate of taxation for stamp duty and registration across all states. But will this actually happen or will it hike taxation burden as is in the case of GST on under construction properties.

This should be understood in reference to the implications and slow down that Indian real estate, in particular, has faced due to demonetization, GST, RERA and bankruptcy laws. Companies are still trying to work their way out of it.

These are obviously challenging times for the real estate sector as the government is implementing reforms. All the reforms have put the customers in the wait and watch mode. Nobody is making the decision to buy since many months.

There has been a delay in bringing real estate under GST because all the states did not agree on this aspect. Thus 12 percent GST was only levied on building, construction, civil structure or with the purpose of selling to buyers, completely or in part.

If we believe strong views of Finance Minister Arun Jaitley, to bring real estate into the GST – the logical interpretation is that the existing taxes and levies will get subsumed. So will the buyer then be able to avoid stamp duty, registration, cess and such other levies? If yes, how will the states be compensated and, as a result, will it result in a higher rate of taxation?

But with reference to Finance Minister’s statement, “As a result, the final tax paid on the whole product in the GST would almost be negligible.” One can see how it will be beneficial to the customers and buyers will only have to pay one tax, implies that the other duties, taxes, and levies will get subsumed. This would definitely be a welcome change for the buyers and have a positive impact on their mindset.

As for the industry, this will enhance the long-debated transparency in the taxation, reduce the number of taxes levied and introduce the one taxation across the country. No matter which side of the coin you see, there are obvious challenges. Whether all taxes and levies do get subsumed is something that we will need to wait and watch.

Also Read: Badlapur – The Right Investment Zone

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Under the PM Awas Yojana Centre Increases Carpet Area Of Middle Income Group Houses

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Under the PM Awas Yojana Centre Increases Carpet Area Of Middle Income Group Houses

On Thursday, a proposal to increase the carpet area of houses eligible for interest subsidy under the credit-linked subsidy scheme for the Middle Income Group (MIG) under the Pradhan Mantri Awas Yojana (Urban) was cleared by the Union cabinet chaired by Prime Minister Narendra Modi.

After the cabinet meeting, justice minister Ravi Shankar Prasad told reporters that from now on the carpet area of an MIG-I will be increased from 90 sq mts to up to 120 sq mts and for MIG-II category it will be from 110 sq mts to up to 150 sq mts.

Prasad further added, that the move will give buyers in MIG category a wider choice in developers’ projects and boost the sale of ready flats in the affordable housing segment.

A government statement said, “The limit of 120 square metres and 150 square metres is seen as a reasonable enhancement and would cater to the market generally scouted by the MIG belonging to the two income categories specified in the scheme”.

The credit-linked subsidy scheme (CLSS) for MIG is a pioneering step to empower the middle income group to get the benefits of an interest subsidy scheme.

Jaxay Shah, CREDAI’s President said, “Housing for All by 2022 has taken a huge leap forward by the increase in the unit size of MIG Houses under Credit Linked Subsidy Scheme. The average middle class would now be able to afford bigger and better quality homes than before in smaller towns and cities”.

The CLSS for middle income group covers two income segments, Rs 600,001 to Rs 1,200,000 for MIG-I and Rs 1,200,001 to Rs 1,800,000 for MIG-II per annum. In the MIG-1, an interest subsidy of 4% has been provided for loan amounts up to Rs 9 lakh, while in MIG-2, an interest subsidy of 3% has been provided for loan amount of Rs 12 lakh.

According to the government statement, “The interest subsidy will be calculated at 9% NPV (Net Present Value) over a maximum loan tenure of 20 years or the actual tenure, whichever is lesser. Housing loans above Rs 9 lakh and Rs 12 lakh will be at non-subsidised rates”. The CLSS for MIG would be effective up to March 31, 2019.

NAREDCO chairman Rajeev Talwar and president Niranjan Hiranandani both agreed that this move would help in meeting the aspiration of millions of MIG home buyers.

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Pune Smart City Targets Rs 100 Crore Grant From World Bank

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Pune Smart City Targets Rs 100 Crore Grant From World Bank

On the basis of designing performance-based programmes for smart city, the Pune Smart City Development Corporation Limited (PSCDCL) is eyeing for Rs 100-crore grant from the World Bank. The central government has set criteria to give out money which includes smart city projects their progress and execution. However, PSCDCL is losing out on the progress criterion as its launched projects are moving at a very slow speed.

Rajendra Jagtap, CEO PSCDCL, said, “We have decided to take part in the fast-track round to get grants for Pune’s smart city projects. There are three categories, which we need to fulfil. Except for some problems faced in the execution of projects and their progress, we are sure we are fulfilling all the mentioned criteria. The World Bank will be giving Rs 100 crore for every city in every state that fulfils the criteria. We are quite ahead in Maharashtra, compared to other cities in the state. So, we are confident of getting Rs 100 crore. Before I took charge as the CEO, there was a delay in floating tenders for the Smart City company. Therefore, there has been a little delay in execution and progress of the projects.”

“Owing to people’s protests against some projects, we faced a problem in starting and executing projects. The Aundh area street design project is one such example. Now, we have decided on people’s participation before starting projects in their area,” said senior PSCDCL official explaining reasons for a delay.

The 14 smart city projects that have kicked off are:

  • Livelihood through The Lighthouses of Pune;
  • Slum rehabilitation of Dr Babasaheb Ambedkar vasahat Aundh;
  • Street and pedestrian walkway;
  • Central command and control centre for public transport;
  • Vehicle health monitoring;
  • Passenger information through mobile app and website;
  • City common mobility card;
  • Traffic demand modelling project;
  • Pune maximum solar city;
  • Plastic bottle recycling project;
  • Smart lighting;
  • 100 percent grievance redressal system for water with the help of PMC care;
  • Quantified cities movement;
  • The garbage vehicle monitoring management system.

Out of these 14 projects, The Lighthouses of Pune, PMC care, plastic bottles recycling project, mobile application project and the central command and control centre for public transport project have been completed. Nonetheless, the remaining projects are still underway even after starting more than a year ago.

A screening framework has been prepared, comprising three sections — Part A, B and C in order to facilitate the screening of states and short listing of SPVs which are interested in participating in the Indian Smart Cities Programme. SPVs should be presented on November 30 after all information is furnished by the state. December 11 is the last date of receiving the submission from the state/union territory.

Also Read: Almost 52 Percent Of Residential Units Registered Under MahaRERA Remain Unsold: Report

 

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RERA To Ensure Completion Of Realty Projects

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Cluster Redevelopment In Thane City Gets Approved By Maharashtra CM

RERA’s senior counsel, Darius Khambata said on Monday that the overriding principle of RERA Act is to ensure completion of a project. He explained that the original promoter does not his loose the right over the project and unsold flats, even if its registration is revoked for breach caused by him and the RERA authority tasks another builder to complete work, as a contractor.

Khambata has been appointed as amicus curiae (friend of the court) to support Bombay HC before a bench of Justices Naresh Patil and R G Ketkar to whom daylong submissions were made on a constitutional challenge filed by builders to RERA provisions.

Enforced on May 1, the builder had argued that RERA Act is unduly penal and violates their fundamental right to trade, in property, and by its retroactive application on pending projects illegally impairs old contractual obligations. RERA allows developers at a chance at redemption by giving fresh timelines at the time of registration to complete pending projects.

Khambata stated, “There are sufficient safeguards that protect a promoter if there is a bona fide stay on a project,” pointing to sections 8 and 37 that allow the promoter to be appointed a contractor to complete a project even if registration of a project is revoked over defaults. The revocation can only cease the sale of flats and not meddle with any other promoter rights just because his obligation to the building is taken away.

Khambata said the Act was constitutional and reasonable. What, however, should “be struck down as unconstitutional” is the provision that allows an “additional chief secretary or member of Indian Legal Services” to be appointed as a `judicial member’ on the RERA appellate tribunal. The judicial member has to mean a judge or a person qualified to be a judge, something the builders also said.

Khambata submitted that there is no acquisition or expropriation of the builder’s right to the project and refuting submissions made earlier by a builder’s lawyer.

Also Read: CREDAI New India Summit

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