Indian real estate | Kolkata Real Estate | Kolkata Property

Active Participatory Role Of Homebuyers In Making Decisions About Insolvency Proceedings Of Real Estate Companies

Homebuyers might be considered as commensurate with the unsecured financial lenders at insolvency proceedings for real estate companies. With the implementation of this new rule, a bulk of the suffered homebuyers, left in the lurch for the compensation from real estate companies such as- Unitech, Jaypee Infratech, and Amrapali and reach a conclusive and of course a favorable speck.

A committee with the task allotted for reviewing the Insolvency and Bankruptcy Code (IBC) and under consideration by the government has made this suggestion, confirmed by a couple of senior officials tuned in with the buzz. With the resolution passed, the interest of all the stakeholders will be equally treated.
People who had invested in Amrapali and Jaypee Infratech projects are left in trouble after they failed to clear their dues. Apart from this, the ministry of corporate affairs has moved the bankruptcy court to ride herd on realtor Unitech.

In order to regulate recklessness of these companies, a 14-member law committee has been constituted to identify facts that “impact the efficiency of the corporate insolvency resolution and liquidation framework” and come up with recommendations to deal with them.
“A proposal is actively considered to give homebuyers a status of unsecured financial creditors,”-said one of the officials.

According to the official sources, the committee is likely to present its recommendation along with draft amendments to the IBC towards the end of this month. With the adoption of this recommendation, homebuyers will have a say in the insolvency proceedings and can be an active part of the committee of creditors. It will also empower them with the voting rights on the resolution plans.

The current IBC norms foster a waterfall financing-eight levels for the order of distribution of proceeds from the sale of liquidated assets among stakeholders. After the settlement of the resolution professionals and administrators, next come financial creditors and workmen’s dues, followed by unpaid dues of other employees except for the workmen. Then comes the unsecured financial creditors, followed by government dues and equity shareholders. Homebuyers are currently the last in the distribution list of the developers.

“The proposed amendment will provide homebuyers a higher spot in the IBC proceedings, as they will be one determinative voice in the resolution plan as well. Homebuyers will share the same base with the financial creditors,”-says, Mr. Mahesh Somani, Chairman- National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

As per the statistics, about 31,000 homebuyers of Jaypee Infratech and 41,000 of Amrapali’s Silicon City project have moved the Supreme Court and appealed that they should be treated in a class with financial creditors. To protect the interest of the homebuyers, the Supreme Court ordered the promoters of Jaypee Infratech not to sell personal assets and deposit Rs 2,000 crore with the court.

Similarly, Amparapali was ordered to submit a plan to deliver possessions. In the case of Unitech, 19,000 homebuyers have accused the company over fund diversion and appealed to the corporate affairs ministry and finally, the case is under National Company Tribunal Law under the Companies Act. The Supreme Court has stayed the move following an appeal by Unitech.

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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.

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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Taxability On Real Estate And Under-Construction Property Under GST

“Applicable GST rate” is where the confusion of the property buyers cut loose. There’s nothing to get panicked if you have the right amount of knowledge of GST levied on the construction sector. The unified tax regime, GST replaces the earlier service charges, cess, VAT and other indirect taxes. Basically, you will have to pay a single tax on your purchase.

In order to remove the applicable GST rate on real estate, the Central Board of Excise and Customs (CBEC) has recently issued a clarification regarding the applicability of GST on ready-to-move and under-construction projects.

“The simplified tax policy will benefit the industry in a long run. It will squeeze the profit margin of the developers and it will put stop to the inconvenient practice of multiple taxations which used to result in an artificially jacked-up project price,”- said, Mr. Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

GST rate on ready-to-move projects– These projects are exempted from GST purview. It’s neither considered as goods nor services. Worthwhile mentioning, projects those have received the completion certificate before giving out the possession will also be considered as ready-to-move projects and thereby not inviting GST.

There is no need of paying GST on those projects for which you already paid the full sale amount before the date of GST implementation (July 1, 2017). But such transaction will attract a service tax of 4.5% under the erstwhile regime. Resale projects will also be considered as ready-to-move ones; GST will not be applicable in such transactions.

In case the buyer has paid a part of the sale amount before GST implementation, he will have to pay GST separately.

GST on under-construction projects– The effective GST rate on under-construction projects or undivided share of land is 12% with full input tax credit. However, the original GST rate on under-construction projects is 18% but one-third of this 18% is deemed as the value of land or undivided share of land supplied to the buyer of the property.

GST on PMAY affordable housing purchased under Credit-linked Subsidy Scheme- Effective from January 25, 2018, any purchased property under CLSS scheme will attract 12% of GST and the effective rate will be of 8% after deducting one-third of the amount charged for the value of the land.

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NCDRC Nullifies Bizarre Claims From Developer For Delay In Possession

Real estate major Unitech has finally been shown the exit by the National Consumer Disputes Redressal Commission (NCDRC). Warding off all the presented facts by the company in its claim for delay in handling the property, the Authority asked them to deliver the possession to the suffering home-buyers within due time along with an interest charged for the delay. The company had even cited that shortage of the labour and raw material caused by the 2010 Commonwealth Game in Delhi was the cause for the delay in deliverance.

On Jan 29, 2018, NCDRC Justice V. K. Jain arbitrarily superseded all such strange claims and ordered the realty major to pay penalties adhere to the deal executed by both the parties.

Monika Pal Sood, the complainant, had filed a petition where it was denoted that she and few other home-buyers booked flats with Unitech in a project named “Exquisite”, Nirvana Country-2, Gurgaon. Each of the sales was agreed to be of more than Rs 1 crore and the complainants were issued allotment letters.

Followed by the buyers’ agreements the allotment had clocked in. According to the clause 4(a) of the buyers’ agreement, the developer was likely to deliver the possession within a period of 36 months from agreement date which the developer could not fulfill.

Despite defending such allegations made by the home buyers the OP (Unitech) had conceded that the company had decided the allotment to the complainants as well as the receipt of the consideration from them. In a written consideration the OP mentioned several bizarre reasons supporting the company’s inability to project allocation-

1) The development work had to face a severe shortage of available labour and supply of the raw materials due to then ongoing Common Wealth Game in 2010.

2) The unfavoured economic condition generated a massive slowdown in real estate market which had reduced the supply of labour and raw materials significantly.

3) Several rural policy implementations such as- National Rural Employment Guarantee Scheme (NREGS) and Jawahar Lal Nehru National Urban Renewal Mission (JNNURM) are also significant causes behind the labour shortage in the market.

4) A previous written order of the Punjab and Haryana High Court dated 16th July 2012; it had imposed a restriction on the consumption of the groundwater for the building purpose.

5) Limited availability of bricks followed by the restrictions was made by the Ministry of Environment and Forests dated 14th September 1999. Followed by which the production of bricks was stopped within 50 km surrounding of the Coal and Ignite Thermal Power Plans without mixing at least one-fourth part of ash with soil.

6) An Environment Clearance notification was issued by the Ministry of Environment and Forests based on the National Environment Policy which was sanctioned by the Government on 18th May 2006 which was published on 14th September 2006.

Having not received the possession the home-buyers moved the commission seeking justice with respect to the possession allotment or the substitute recompense on the context of which the commission ordered the Unitech Group to provide one and the same ready-to-move residential units in the same locality or restitution of an amount calculated at Rs. 10,000 per sq ft. of the area of the flat as per the fair market value of the similar projects. The complainants also called for an interest at the rate of 12% per annum from the date mentioned a date of the possession in the agreement until the date of actual allocation other than the exemption from the enhancement of overall cost and the service taxes.

“Real estate stakeholders should follow certain code of conduct to maintain fair practice in the industry. This outcome of the judgement will act as a reference to many future cases related to Real Estate disputes and this will definitely act as a reminder for the parties to uphold transparency in their operational behaviour.” said Mr Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

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About 45% Buyers Looking To Invest In Real Estate After Full-Length RERA Implementation

The market needs some more time to absorb the Real Estate (Development and Regulation) Act, 2016 (RERA) as still there are states and UTs those have not notified their respective real estate Act. States will have to carry out the regulations followed by the establishment of respective state RERA Authorities. RERA aims at organizing the real estate sector with the better transparency in operatives.

2018 market looks quite promising as RERA has already set the stage in the favour of the homebuyers in most of the states. Rolling out of RERA indicates approx 45% residential investment in the first half of 2018. With the steady confidence boost by RERA market sentiment is on its recovery path. The market is about to witness steady-going sale volume in the recent future.

“The successful implementation of RERA will reinstate the trust of the buyers at large. With the assurance of timely project deliverance along with the quality check RERA will significantly boost the demand of the real estate sector very soon,”- said, Mahesh Somani, Chairman- National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

Since RERA is the legal protector of the consumers in their real estate purchase, buyers will now have quality real estate products delivered on time. Currently, developers are offering attractive pay packages and discounts to steer clear their inventories. Again, investing in the ready-to-move project is favourable from the buyers’ standpoint as it is exempted from the GST (Goods and Service Tax) regime. Once, the consumer sentiment gets consolidated there will be no gridlock in new project launches. A balanced demand-supply proportion is likely to fuse the oversupply volume as well.

From May 1, 2017, the Act has been brought into action by the central government. It was the time when the market was undergoing the demonetization overhung. Thus, implementation of RERA made the realty sale graph even tender.Whilst no policy change or structural reform barely create any dent in the uninterrupted demand-supply chain of the affordable housing segment. During this massive slowdown, affordable housing sector contributed 17% of the total sale across the major cities of the country. It’s worthwhile mentioning, being the most incentivized sector affordable housing sector is expected to return a voluminous profit by the end of 2025. Buyers are in demand for budget housing ranged within Rs. 50 lacs at large. Alongside the inflation rates appear to have neutralized and lending rates have started declining as well.The availability of budget housing units and a sharp price correction in HIG segment opens a brighter market prospect for the buyers willing to purchase with self-finance.

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