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Sunday, June 4, 2017

GST would match or be lower than the multiple indirect taxes on real estate

Priyanka Parashar/Mint
Goods and Services Tax (GST) is set to get implemented from 1 July 2017. There are different GST rates prescribed for various goods and services, which may impact their cost. A homebuyer will have to pay GST at the rate of 12% to buy a home. We talked to Rajeev Talwar, chief executive officer, DLF Ltd and chairman, National Real Estate Development Council (Naredco), about how GST will impact home prices. Along with GST, we also discussed the implementation of Real Estate (Regulation and Development) Act, 2016 (RERA), and more. Edited excerpts:
How will GST impact home prices?
Real estate sector was heavily taxed and we welcome a single stable 12% GST rate, inclusive of the value of land and with full Input Tax Credits. We are of the view that the actual tax impact under GST would match or would be lower than the existing multiple indirect taxes on the sector. There are a few things where we are still awaiting clarity like whether affordable housing will remain out of the ambit of GST or not, as is the case at present for implication of service tax, or whether there will be any abatement for homebuyers.
If not home prices, will it impact the profit margins of developers?
About margins, again it will be too early to say. But yes, margins will get impacted because when the tax is lower, prices should come down. Maybe some margins do get impacted and maybe in some areas they will remain unchanged. It may impact different segments differently, like affordable or luxury segments, because you have to pay a higher tax on higher-costing products. So maybe in case of luxury housing segment, there could be some impact on margins. But then when you say luxury or the premium segment, then the premium there also exists to take care of it. So, I think, hopefully it will allow a fair play of market forces.
GST is scheduled to get implemented from 1 July. At the same time RERA requires all the ongoing projects to get registered before 31 July. How are real estate developers managing these two big reforms? Do you think a 3-month window to get the ongoing projects registered is less?
No, we don’t think so. We were preparing for all such statutory requirements for long. Besides that, there is enough computerization in India. There are enough digital initiatives. I am sure that the earlier the Act gets implemented the better it will be. It will give time for people to get accustomed to the new ways of working or to the new regime, whether it is in real estate or taxation. I am sure this will not pose a problem.

with thanks : LIVE MINT : LINK ; for detailed news.

GST- A positive development for Real Estate


GST- A positive development for Real Estate

Mahesh Jaising / Prashanth Bhat

Real estate industry in India in the recent past has seen a phenomenal growth, not just in the Tier 1 cities, but even Tier 2 and Tier 3 cities and towns.  The industry is in the cusp of increased regulations, with bills such as the Real Estate (Regulation and Development) Bill, pending for approval in the side lines.  GST is another development that will have a significant impact on this sector.

Even though construction services has been taxable under VAT and service tax for a decade or so, the industry is still plagued with uncertainty on key basic issues that remains unsolved leading to intense litigation, especially on issues like transfer of development rights in land, taxability of joint development agreements, taxable value for goods and services, etc.  While it is expected that immovable property transaction, ie, transfer by way of sale of immovable property after completion, would continue to be outside the purview of GST and be liable only to applicable stamp duties, the proposed shift to the GST regime is expected to usher in the wings of change and wipe the slate clean in a bid for a fresh start on the indirect taxation of all other real estate transactions.  However, the foremost thought in everyone’s mind is whether GST is indeed the solution to an industry riddled with complex structures and issues.  

Today, this industry has two primary levies, Service tax and VAT, with overlap of tax base and constant disputes on the rate of tax, given the multiple options available for discharge of taxes across States.  This has resulted in diverse practices being followed by developers, across geographies and even within each State.  These issues should be put to rest under the GST regime and the practices and positions should be common across India.  Hence, the taxes paid by a home buyers across States should more or less be the same.  

Presently, home buyers pay service tax and VAT on purchase of residential units when booked prior to their completion. There are also various elements of non-creditable tax costs, like excise duty, customs duty, CST, entry tax, etc paid by the developer on his procurement side, which is inbuilt into the pricing of the units.  All these tax costs add upto anywhere between 22%-25% of the price of the units.  The proposed GST should replace these multiple taxes with a single tax and should also ensure smooth flow of credits through the chain.  Hence, it is widely expected that GST should reduce the construction cost in the hands of the developer and thereby aid in reducing or atleast maintaining the current level of prices in the real estate sector.  The only dampner could however be high GST rates (like the 27% GST rate that is doing the rounds) which will offset any possible gains on incremental credits.  Stamp duty is not proposed to be subsumed under GST and hence will continue as it is today.  

with thanks : Money Control : LINK : for detailed news

GST: How it will impact the real estate sector

GST: How it will impact the real estate sector
New Delhi: Implementation of the GST law will have a positive impact on the real estate sector with expected reduction in its tax burden, according to property developers and consultants.
"The enactment of this law will single-handedly solve many of the challenges faced by the real estate sector and help in pulling the sluggish sector out of its long slumber. Heavy taxes that are being paid currently by the developers will automatically go down by a considerable percentage," realtors' body NAREDCO President Parveen Jain said.
with thanks : Zee News : LINK

Wednesday, May 3, 2017

India property developers on notice: Clean up act or go to jail

Under laws that came into force Monday, developers have to use at least 70 percent of sale proceeds to complete residential projects, rather than funnel money to other jobs, and will no longer be allowed to start pre-selling apartments before all building approvals are obtained. Developers who don't comply with the new laws face up to three years in jail. 


The moves are aimed at cleaning up an industry where more than 30 percent of housing projects run at least a year over schedule, and developers are known for corner-cutting tactics such as starting work before all approvals are granted and using sub-standard materials. Developers accused of wrongdoing have seen their shares tumble, even as the main property index has surged this year. 


With thanks : Economic Times : LINK : for detailed news.

RERA: 5 Things You Should Know About India's New Property Rules To Protect Home Buyers

In a relief for home buyers, India has enacted new laws that govern the country's sprawling and overcrowded real estate market with harsh penalties against erring home builders.
Here are 5 things you should know about the new rules.

State-level legislation

While the main real estate act is centralised, individual states will have to ratify their own rules, and will have their own regulatory authorities. However, so far, only 13 states have notified their respective laws to the centre.
Both new building projects and ongoing projects will be subject to the laws, with the exception of certain projects that have already been completed.

Tighter screening of home builders

Home builders including those who have ongoing construction are required to register with their local state regulatory authorities in the next three months, and provide regular updates on the status of the building projects on the regulators' websites.
Builders will be required to deposit 70 per cent of the money they collect from prospective home buyers into an escrow account that will only be used for construction purposes. They will also need to disclose details of exactly when the property will be completed, and how much money they have already collected.
In addition, any new advertising of unsold property for ongoing projects or any major structural changes will need approval from two-thirds of existing occupants or home owners.

No more early bird deals

Home builders can now only advertise property and homes once they have received all the regulatory approvals.
In addition, builders will also have to enter a registered sale agreement if they collect more than 10 per cent of the home value at the time of booking the project.

Penalties for delayed projects

If a builder has delayed a housing project they will now have to either refund the entire amount they have charged, or pay interest on it until the home is delivered to the buyer.
Defaulters will be subject to an interest rate of two percentage points higher than that being offered by the State Bank of India, on the amount already paid.
Home builders that violate the new laws could be imprisoned for up to three years.

Real estate disputes

In case of disputes, instead of going to civil courts, home buyers can now take their complaints in connection to their property projects to special real estate courts that will be set up in each state. This is aimed at speeding up the current redressal process.
with thanks : huffington post : LINK : for detailed news report

Go after owners of benami property, PM tells officials

Prime Minister Narendra Modi on Tuesday reviewed the government’s initiatives against black money and directed revenue officials to speed up action against benami property holders.

At a three-hour meeting two days after the deadline for deposits under the Pradhan Mantri Garib Kalyan Yojna (PMGKY) ended, he discussed further steps against tax evaders. The authorities plan stringent action against tax evaders, given the dismal collection under the second round of PMGKY.

The government has collected just Rs 2,300 crore by way of tax, penalty and surcharge under the second tax compliance window launched after the November 2016 demonetisation. Official sources said Modi wanted quick implementation of e-assessment to minimise human interference. He told officials to find ways to widen the tax base by bringing more people under the tax net.

Post-demonetisation, the revenue department had warned those involved in benami transactions of rigorous imprisonment of up to seven years. Through advertisements in newspapers, it had cautioned that benami properties would be attached and confiscated. It had also attached assets around the country and registered about 250 cases. The properties included agricultural land, bank deposits, apartments and jewellery.



with thanks : Deccan Herald : LINK : for detailed news