Homebuyers’ Body FPCE Beats the Bushes for President’s and PM’s Mediation for RERA Reiteration by WB Government.

Starting from its inception, till its deviation from the central real estate Act, the Housing & Industrial Regulation Act, 2017 (HIRA) of West Bengal state government, has been creating a big-time buzz in the Kolkata property market. People, willing to buy flats in Kolkata has been set from side to side by the institutional call and its potential impact on Kolkata real estate.

Now, it seems like the state Act didn’t go well with the pan-Indian homebuyers’ representative body FPCE. The Association is up against the redundancy and it seeks central government’s arbitration in this entire event. It’s worth mentioning that FPCE has been representing the homebuyers in all ongoing RERA related cases in Bombay High Court.

As per the latest reports, the forum for People’s Collective Efforts (FPCE), a non-profit company representing homebuyers, that had put all its effort to shift the gear for Real Estate (Regulation & Development) Act, 2016, (RERA) implementation, has asked for the intervention of PM and the President of India in sidestepping the central real estate Act and creating state-level legislation Housing & Industrial Regulation Act, 2017 (HIRA) by the West Bengal state government in particular.

Abhay Upadhyay, president of FPCE and also an active member of the Central Advisory Council, RERA said, “In September 2015, we initiated a movement ‘Fight for RERA’ for the passage of RERA by the parliament. Now we are fighting to save RERA from being made redundant. We hope the central government and lawmakers would understand that seriousness of the issue and take necessary steps to save RERA.”

It’s no secret that Indian real estate market had to undergo a series of reconstructive institutional decisions in the past couple of years and still the shadow of which is very much in the scene in all kinds of parts and parcels in realty transactions. Meanwhile, this is supposed to another cusp from both the structural and investors’ standpoint.

However, in its official letter, the homebuyers’ body clearly requested the President not to give a go to the Bengal government for a separate state-level realty regime. FPCE has made a clear point that no other states than West Bengal have brought forth a separate state-level legislation which will somehow belittle the importance and spirit of the central law.

The constant change in institutional decisions and the volume of opposition they are receiving from different authoritative organizations are up-against the investment sentiment in a big time now which is not a positive sign for the Kolkata real estate market. If the market is going to continue with its existing wait and watch mode; it might also weaken the sales volume in the coming days and also push back the active rollout of RERA in the district,”- said Mr. Mahesh Somani, the Chairman of National RERA Committee and head of eastern zone National Association of Realtors (NAR-India).

Currently, the central government is examining the likelihood and prospect of two individual (state and central) existence on the same subject for the regulation of the real estate sector. After being notified back in 2017, the central real estate Act mandated all the states to notify their respective Acts, before the presence of the state regulatory authority (RA) with the due time and this was the set rule for every other state apart from J&K.

In a previous Central Advisory Council meeting, a sub-committee was formed by the government with the objective of urge the Bengal government to adopt RERA, including the supervision of the implementation of RERA across other states; FPCE now wants this sub-committee to notify their report regarding this matter.

Reportedly, FPCE has suggested revoking the West Bengal HIRA from implementation and asked for one central RERA across the country. Members of the homebuyers’ body also had a meeting with Congress President Rahul Gandhi where they requested Gandhi to raise the concern and to initiate conversation with the Mamata Banerjee Government.

Meanwhile, the state Act has been accused of diluting a couple of the key clauses of the central Act- the definition of force majeure clause and the garage. Where the central Act says that the force majeure clause can be brought into play only in case of war, drought, floods, earthquake, fire or any other natural calamity affecting the regular development of real estate projects; HIRA comes with another version where it says that apart from the mentioned conditions under RERA, force majeure clause can be declared for any other circumstance prescribed.

On the garage part, RERA has defined garage as a place within a project that has a roof and walls on three sides for parking any vehicle, but it does not include unenclosed or uncovered parking area. HIRA, on the other hand, defines a garage as an open space sanctioned by the housing society or the competent authority.

States that have notified the Act and formed the authority have started passing orders. States like Kerala and Telangana have notified their state rules under RERA, but have not set up an authority.

The Biggest Financial Plan For PMAY Urban Under Cabinet’s Approval

The cabinet is about to give a go ahead for the biggest ever financial plan for the Pradhan Mantri Awas Yojna Urban (PMAY-U) to measure up the budgetary requirement for 1.2 crore affordable housing development across urban areas of the country by 2022. Under this scheme, the share for the central government for building affordable homes in a couple of upcoming financial years was estimated at around Rs. 60,000 crore.

It’s expected that the government will raise this huge amount from the non-budgetary resources. Fund-raising entities such as HUDCO or National Small Savings Fund (NSSF) are likely to help the housing ministry to cumulate the amount. By far, NSSF has deposited Rs. 1.2 lac crore.

In the present financial year, the housing and urban affairs ministry requires about Rs. 8,000-Rs. 10,000 crore to meet the vast urban affordable housing need. The budget proposal had a consideration of raising Rs. 25 crore from additional funding from 2018-19 and the similar amount will be needed in the next fiscal to ensure that there’s no financial crunch. However, the housing ministry has approved 39.25 lac houses under the scheme. Finance minister Arun Jaitley had announced to establish “Affordable Housing Fund” which will be anchored in the National Housing Bank (NHB) to raise the amount from the non-budgetary resources.

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Union minister Hardeep Singh Puri said, “The Centre’s flagship scheme Pradhan Mantri Awas Yojana (Urban) would not face any financial constraint because of the creation of a dedicated ‘Affordable Housing Fund’ announced in the Budget 2018-19.”

The minister said so far, this was the massive increase of funds as against Rs 6,042.81 crore allocated for PMAY (U) in 2017-18.

“Union budget coupled with institutional incentives will foster considerable real estate selling across India. Both the private developers and investors will have an extensive landscape to invest in,”-said Mr. Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

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Essential Facts About GST For Homebuyers

Indian market got acquainted with the Goods and Services Tax or GST on July 1, 2017. The unified tax regime has subsumed all existing indirect taxes into a single tax. However, Real Estate is a sector which will yet to be entirely brought under the new taxation regime. Experts believe that inclusion of real estate into GST ambit might prove to be a game changer for the sector. GST will absorb multiple indirect taxes into one single payable and thereby it will reduce the construction cost significantly.

Homebuyers are likely to be benefited with the better transparency as there will be a single tax to be paid on the real estate purchase. Let’s have a look at the GST impact on various aspects of home buying-

Luxury properties to be more expensive– The raw materials those are used at large in the development of luxury housing projects such as- glass, aluminium, monuments stones, ceramic fittings and lamps etc. will fall under 18-28% GST slab which is higher than the previous tax slabs. A higher tax rate will escalate the cost of the construction.

GST on under construction projects– The effective GST rate on under construction properties is 12%, but along with the stamp duty and the registration charges, it will be something around 17%.

No GST has been levied on ready-to-move projects which means investing in these projects won’t fetch you any tax benefits under the new taxation regime.

Impact on raw materials– The revised tax regime has brought a significant change in the pricing of the building materials. Developers can claim input tax benefits on the purchased raw materials now. While some of the construction materials will cost higher, there are certain materials which will cost lesser now. Here’s a comparative tax rate chart with respect to the major construction materials pricing-

Construction material Pre-GST tax rate GST rate
Cement 24 % 28%
Ceramic tiles 26% 28%
Paints and varnishes 26% 28%
Sand lime and fly-ash bricks 6% 5%
Pillars and iron rods 20% 18%
Putty and wall fittings 26% 28%
Wall paper 18.5% 28%
Plaster 26% 28%

“Potential homebuyers should know these facts about GST so that they can have the maximum tax benefits while purchasing their dream homes. Developers are asked to pass on the input tax benefits to the end-users by the GST Council which will be very much favourable from the buyers’ standpoint,”- said Mahesh Somani, Chairman- National RERA Committee,  National Association of Realtors India (NAR-INDIA).

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How Will RERA Benefit The NRI Buyers?

Undeniably the implementation of The Real Estate (Regulation and Development) Act, 2016 (RERA) is backing the real estate sector towards achieving a better accountability. Pre-RERA real estate sector used to be the most unruly sector with the poorest transparency level between the buyer and the seller. Non-residential Indians wanting to invest in Indian property market can now avail better transparency level along with standardized practice method. This is how implementation of RERA brings benefit for NRI property investors-

1. Accountability on real estate developers- Real estate developers has to comply with RERA norms for their business continuity. Thus, it’s obligatory for the developers to register their on-going projects with the state regulatory authority (RA) and to secure a timely deliverance along with a proper quality check. Now buyers shouldn’t be worried about project completion.

2. Timely update- Builders are now time-bound in terms of project deliverance. Alongside they need to update a quarterly progress report on the development on the state RERA website.

3. Secure investment- RERA mandates builders to maintain an escrow account with 70% of the received amount from the buyers. This amount can only be used for existing development work.

4. Better transparency- RERA is a big relief for the NRIs as there is significant transparency between the developer and the buyer. Now with the presence of the RERA website NRIs can access any data about the developer and their project works from anywhere. They will get to watch the project status on the site at any time.

5. State-wise distribution- Since real estate is a state subject, thus RERA is spread separately in states. NRIs can track all the project development works according to their area preferences. Interested NRIs can check for the details of the projects on state RERA websites.

6. Builders liable for interests- In case of possession delay, the builder is liable to pay interest on the value of the project to the NRI buyer until the delivery. Thus, NRIs don’t need to follow up builders regularly. Any delay will result in compensation which will benefit them anyway.

7. Simplified process-Under RERA real estate transaction and follow up have become less complicated than earlier which is a bigger benefit for the NRIs to understand the entire transaction process. Now they have a legal platform to raise their voice and file complaint against any deceptive act of the builders. RERA will monitor every realty transaction so that it can protect the consumer rights at its best.

8. Presence of a regulatory body- Now a regulatory body can be easily accessed to get exact information about construction works or the developers. Before RERA buyers used to move consumer courts for reporting fraudulent cases. Now buyers can easily approach the state RERA authority on account of any misleading approaches by the realty stakeholders.

“Real estate sector in India has been evolving into a secured and intelligent investment venture for the NRIs. NRI buyers can now actually monitor the development progress of their invested projects and use the legal platform in case of any default whenever needed. With increased security level of investment, enforcement of RERA broadens the scope of realty investment in India,”- said Mr. Mahesh Somani, Chairman- National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

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Inclusion Of Real Estate in GST Will Take More Time

Explaining it as a complex process GST Council member and Bihar Deputy Chief minister Sushil Modi said the inclusion of real estate in Goods and Services Tax (GST) would take “much longer time” than anticipated. The GST Council is likely to have another meeting subject to real estate inclusion in GST ambit.
Answering to a query about the tentative timeline of real estate inclusion under GST purview Susil Modi said, “It is up to GST Council to decide. But I think it will take much longer time and it is not that easy. Let other things stabilise in the GST, then petroleum products and real estate.”

Modi, who is also the Finance Minister of Bihar, said the inclusion of real estate in GST ambit will be discussed in the next meeting of the GST Council. State lived taxes such as- stamp duty, registration charges and property tax which is a municipal levy are kept out of GST range.

Every state finance minister is concerned to secure state revenue and the centre assured protection up to 14 per cent of the revenue, stated the minister. GST stabilized rates on 178 products from the top tax slab 28% after the meeting of Guwahati of GST Council.

The minister said, “In the earlier regime, the small businesses with below Rs 1.5 crore (annual turnover) were exempted from excise duty. Most of the small businesses were below less than Rs 1.5 crore cap. Now, all of them came to net of GST.”

In contradiction with the statement that the decision of rate cut on number of items from higher bracket of GST and racking them those up in the lower slab was taken in view of Gujrat assembly elections, Modi said, “88 per cent of small business in Bihar fall below Rs 1.5 crore (annual turnover). It is not the case for Gujarat.”
The market is finding it tough to comply with the unified tax regime. On which the minister thinks that it will some more time for complete adaptation of this revised indirect tax format. “Earlier in the VAT (Value Added Tax) system, 40 per cent was online based and the rest was done manually. The GST is end-to-end automation,”-said Modi.

The minister assured that the existing system would be simplified in the coming two-three months in terms of compliance as the compliance system will be less complex and more business-friendly. As of now for than 80 per cent issues have been resolved and some are yet to be worked on regarding the existing tax rates, confirmed that minister.

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