Category: Kolkata

New Year Surprise: SBI Cuts Base Rate by 30 bps to 8.65%

State Bank of India has slashed its Base Rate – an earlier lending benchmark by 30 basis points to 8.65% which means loan borrowers can now lend money from the banks at a cheaper rate. This is a surprising move at the onset of the year and is likely to be carried out by other banks too in the coming days. Yet the bank hasn’t made any changes in its existing benchmark. Thus there will be no change in the marginal cost of the lending rate (MCLR).

From the banking source, it is revealed that over 80 lac borrowers are likely to get benefited from this reduction. On its website, SBI declared, “Base rate reduced from 08.95% p.a. to 8.65% p.a. w.e.f. 01.01.2018.” The bank has also lowered the BPLR (Benchmark Prime Lending Rate) from 13.70 percent to 13.40 percent.

The Base Rate is the minimum lending rate below which banks can’t lend money. The reduction in the Base Rate will definitely benefit the active borrowers, who had borrowed money as home loans from the bank before April 2016 and also people who rose at floating rate. Additionally, the bank has also decided to extend the active waiver on home loan processing fees till March 31 2018, for the new customers who are willing to purchase home and people who want to switch their loan account to SBI.

“This surprise move is likely to usher in more residential property sale throughout the country. A large number of people, willing to buy their dream home in Kolkata and other cities can actually avail easy to repay home loan accessibility. Additionally, the waiver on home loan processing fees will translate in bigger sales and credit growth for the mortgage lending financial institutions, – said Mr. Mahesh Somani, Head- East Zone, National Association of Realtors India (NAR).

However, along with this latest announcement SBI has become the lowest among the other mortgage lenders. Earlier, the bank has reduced its Base Rate by 5 basis points from 9% to 8.95% in September 2016 which had been followed by the other financial institution until this latest announcement. This reduction is an effort of SBI to certify the transmission of reduction in the policy rates in the recent past. However, around 30-40% loans in the industry are still linked to base rates.

According to the latest market predictions, lending rates are an unlikely trend downward unless there is a steady resurgence in credit growth and higher loan volume ad-lib for lower rates.

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Risk Involvements In Auctioned Home Purchase

There’s no myth in the selling of repossessed properties. These properties are sold through physical or e-auctions. Though these auctioned properties offer ample scopes to the bargainers, it’s a slightly riskier investment zone and needs to be gingerly invested. A lender legally repossesses a property, when a buyer fails his/her repayment.

The bank claims only the base price against such property put up for auction, commonly known as the base price the price gets determined by the total outstanding loan amount of the defaulter to the lender. The decided base price somehow remains lower than the current market appreciation by at the most 30% in some cases. The auction process has become transparent since the online platform was made available for the bidders. These properties are auctioned on an “as is, where is” basis. It’s worthwhile mentioning that more than retail investors, high net-worth real estate investors shine on these deals with their nexus with bank managers and agents.

Banks recoups its dues from the bid amount of the auction. Seeing as these auctioned properties come with an “as is, where is” clause, banks don’t hold any responsibility. From a buyer’s perspective, they need to ensure whether the risk is as good as the discount they are getting from the lender. Before one chooses to invest in such auctioned properties here some precautions that you need to watch for-

Loans from other lenders
Sometimes auctioned properties have their other dues. Mostly this happens in the case of land parcels than that of constructed flats. In such cases, the property might be mortgaged to other lenders too. Most of the lenders work on original sale agreement, share certificates and NOC from the housing society. One needs to diligently verify other co-related documents such as documents provided by the bank, the civic body and, the tax authorities. In case of joint-ownership property make sure owners are the co-borrowers in the loan agreements for avoiding future troubles.
Other outstanding dues
The winning bidder has to bear other all other pending co-related liabilities such as- pending society dues, electricity bill, outstanding tax dues. All these additional dues will cost added to the buyer. In case the earlier owner has projected less value during the time of registration and the department has raised any claim on that can put an investor in troubles in the coming days. Thus, the previous circle rate should always be verified. For under-construction projects, verify from the builder whether there is any outstanding.

Property titles
In most the cases banks provide loan against a clear title. Yet, some instances are there, where banks sanctioned loans for properties that don’t have occupancy certificates. Thus, there is no place for guesswork while investing in an auctioned property. Checking all due diligence of the property has become easier with RERA execution. Now legal diligence of any ongoing and under construction property, including builders’ info along with his previous track record will be available on the state RERA website. But when it comes to an auctioned project, it’s beyond RERA purview. Hiring a real estate lawyer for scanning all transactions for a reasonable time period (at least for the last 30 years) is highly recommended. Make sure that property doesn’t involve any tenancy records.

Physical condition of the construction
Since the property has been repossessed by the bank, there is high chance of the low-maintenance of the asset. Even before the auction banks hardly pay any heed regarding the physical condition of the property. Thus, before diving in the process, you should visit the property and its surrounding locality to have a fair assessment of the property condition. If possible, assign a civil engineer for this task for bringing the present property condition and prospective valuation under the radar.
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NHB Approaches For GST Rate Reduction On Affordable Housing

National Housing Bank is in conversation with the GST Council and the other authorities to cut down the effective Goods & Services Tax rate 12% after measuring out the lowering of the land prices that could smooth over the tax burden and advance the residential property sale.
Being the regulator of the housing finance companies NHB is expected to recommend lower GST rates for affordable housing category in particular even if the general category is under consideration at an effective rate of 6%, confirmed 2 people familiar with the development.

Realtors had conversation with the finance and housing ministry officials where they put forward a similar change in the existing GST rate. Presently, under-construction projects are under 18% tax slab of GST and while it allows abatement of one-third of the total apartment cost towards land purchase cost counting the effective tax rate at 12%.

Experts say that reducing tax level on under-construction properties will reflect in sales figures as it will likely to boost market demand for under-construction projects. As projected, the government might earn better revenue if the tax rates are dropped to 6%. Nevertheless, government will consider and audit its revenue size before reaching any conclusive decision. Again, chances are there of adverse possibility in respect to lowering tax rate i.e. – excess credit in builder’s hand which would be converted to an additional tax and ultimately passed on to the end-users.

Real estate developers also are in for of lowering the tax rates on under construction projects. According to them enquiry for under-construction projects has drastically dropped ever since it was set under 18% tax slab of GST. A rate-cut will definitely motivate them towards investing in under-construction projects than waiting for those to be completed. As per the current market scenario buyers have shifted towards ready-to-move projects for saving the additional tax amount.

Additionally, the gap between the tax rates for on-hand and up-coming projects has weakened the market demand for under-construction projects. Presently, there is no additional tax burden for under construction projects and for under-construction projects it’s 12%.

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Key Facts To Know About GST For Real Estate Developers/Builders

1st July 2017- was the date of India’s biggest tax reform. Till date the disorientation regarding this rule has been observed in the current market. Initially, it was stated that the real estate sector wouldn’t be there under GST ambit. Hence, by far it’s clear that on-hand residential constructions will attract 12% taxation and under-constructions will be under 18% tax slab. Still, there are brimming bewilderment regarding input tax credit, taxable supplies, earlier Service tax issues and many more. Here we will have a close look at the laws and provisions under GST and inspect its actual eventuality on real estate market.
Credit of duties and taxes paid on the inputs lying in stock as on the introduction day of GST, under-construction residential/commercial properties on the very day of implementation of the unified tax regime-
As per Section 140(3) of the CGST Act, 2017, credit of eligible duties is granted to the suppliers of the construction services (builders/developers who were availing abatement in terms of Notification. No. 26/2012-ST dated 20thJune, 2012) referring to the inputs displaying as on 1.7.2017 which stand for-
a. Such inputs are meant to be used for making taxable supplies;
b. Only registered person is entitled for input tax credit on such inputs;
c. The mentioned registered person is in possession of invoice or other approved documents confirming payment of duty under CENVAT credit rules, 2004 referring such inputs;
d. Such invoices or other approved documents were issued previous to 12 months directly prior to the appointed selected day i.e.-1.07.2017.
Those who have already paid the construction service tax as per previous law– If already the service tax is paid, then there is no further GST paying in terms of Section 142 (11) (b) of the CGST Act, 2017 under the provisions of chapter-V of the Finance Act, 1994.
GST can’t be collected as additional charges by the builders– One thing needs to be remembered that builder/developer can charge GST in lieu of additional amenities, customerized facilities or interior/exterior modification suggested by the buyers. If such additional facilities provided before the first occupation or before the receipt of the OC, then this additional charge will be included to the transactional value or total consideration for the supply of the construction service and GST will be paid on such transaction is 18% on 2/3rd of the total consideration and 1/3rd being the redemption permissible.
In case buyer demands any external/internal alteration such as- wood work, sanitary fittings, power back up etc. undertaken after first occupation or receipt of the OC, then it will not be treated as part of the construction service, rather will be treated as independent works contract service, which is not a part of initial construction service. Such charges will be taxable under 18% GST slab without any abatement value. Other charges such as- parking lot, preferable location, firefighting installation, Gen-set facility also are supplied in addition to the construction service. Consequently, GST at the rate of 18% on 2/3rd of the Value for such naturally bundled services is to be paid on the said charges also.
Construction service eligible for “Composition Scheme” or not– Provisions of composition levy are considered under Section 10 of CGST act, 2017 are not relevant to the supply of services. (Except restaurant services)
GST on projects which have received neither OC nor receipt of first occupation– The Sec. 142(10) and 142(11) of the CGST Act, 2017 deal with the taxability of on-going projects. Here the rules have been discussed in details-
1. When the total consideration was received before 30.06.2017 from the customers for an under construction property which is neither occupied nor has received the OC Service tax payable on the consideration received at 15% on 1/4th of the consideration and there would be no GST on the same says ( Sec. 142(11)(b)- refers).
2. In case a part of consideration was received prior to 30.06.2017 for any under construction property which is neither occupied nor has received OC service tax is to be paid on the consideration prior to 1.07.2017 and there would be no GST to the amount against which the ST is payable. For the resting consideration paid after 1.07.2017, GST is to be paid as the date of payment of the balance amount or the date on which the invoice was issued by the developer, whichever in advance.
3. For on-going construction builder/developer who have raised the invoice within 30 days from the same earlier than 30.06.2017 but the payment received from the customers after 1.07.2017, ST is payable on the consideration so received at 15%, 1/4th of the consideration and there would be no GST for the duration. On the balance amount payable w.r.t the following payment act falling on or later than 1.07.2017, GST is to be paid accordingly (ii) rule.
4. For the consideration received after 1.07.2017 from the consumers in respect of the under-construction properties GST will be charged at 18% rate on 2/3rd of the consideration.
GST on the owner’s share of the apartment constructed by builder/developer and given to the land owner as per the rule and the about the calculation of such payment– On the share of the land owners builders/developers have to bear the GST, despite the land received for the development, apart from the GST on the builder’s/developer’s share of the construction.
Under this transaction builder receives consideration for the construction service given by him, from two categories of service receivers:
1. From landowner: As per the land development rights. 2. From the other buyers- Normally in cash transactions, thereby paying GST not only on his portion of the building but also the part of the landowner.
If the builder is liable to pay this entire amount of both his and the land owner’s share then GST is payable when the possession or the right of property is transferred to the land owner by entering into a ‘conveyance deed’ or related instrument. The value of the flats/portion of the building supplied to the land owner is determined in the provisions of Section 15 of the CGST Act, 2017 read with Rules governing Valuation as envisaged under Rules 27 to 35 of the CGST Rules, 2017.
According to the rule the supply of such goods or services is for a consideration not entirely in money, the value of the supply will be-
i) The open market value.
ii) In case that open market value is not available under the clause (a), be the aggregate of consideration in money and any such additional amount in money corresponding to the consideration not in money, if such amount is known at the time of supply.
iii) If the value of supply is not resolved under clause (a)/ (b) then the value of supply of goods or services or both will be conforming kind and quality.
If something happens like the above mentioned then the value of supply of the flats will be calculated as the similar set of projects charged from the buyers. For some reason if there is any correction in the price range of such apartments during the period of sale, then the other flats will be sold nearer to the date on which the land is given for the construction purpose.
Lay out charges/Plotting charges/ Development charges/ Conversion charges collected by the competent local civic bodies whether entire reverse GST charge-
As per the entry at Sl. No. 4 of notification no.12/2017-CT(R) the services which the central government, state governments, UTs or even local authority offer in the terms of any activity related to any purpose authorized to a municipality under Article 243 W of the Constitution, are not liable. “Regulation of land-use and construction of buildings” is one of such functions entrusted by the municipality at Sl.No. (b) of 12th schedule under Art. 243W of the Constitution. In view of the subject Lay out charges/ Plotting/Development and Land conversation charges are collected under State legislation are exempted from GST. 243W, the said charges for the concerned services are let off under sl.no.4 of Notification No. 12/2017-CT (R) dtd: 28.06.2017. Thus, such charges are collected by municipal authorities/ town planning/ Revenue authorities including VUDA/ HMDA won’t attract any GST. Thus, such charges are collected for the services in relation to the functions under Art. 243W of the Indian Constitution.
Disclaimer– The above mentioned information doesn’t include any legal advice. This is just a simplified concept in order to provide lucid GST solution to the real estate stake holders. For detailed legal information regarding central/state GST visit- www.cbec.gov.in.
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The Future Of Healthcare Real Estate in India

Healthcare real estate is a sub market of the real estate industry. Also known as “medical real estate” the sector helps in designing, constructing, and facility planning of buildings and offices for the healthcare industry. Indian healthcare sector is experiencing so much rapid change, thereby is poised for significant growth. Right now, the sector has developed into one of the largest sectors both in terms of revenue and employment. Thanks to its extensive coverage, investors are pumping money on this sector, which is expected to drive Indian real estate market over the coming years. Healthcare real estate trust is the latest addition in this block.
The total size of the healthcare industry is expected to touch USD 160 billion by end of 2017. Both the domestic and global companies are entering the market and driving the growth to the next level. Not only the hospitals and offices healthcare industry comprises of medical services, medical equipments, outsourcing, student accommodation, health insurance etc.

The demand for patient accommodation in government hospitals has become the crying need of the moment, as most of the salaried people in our country can’t bear expenses of treatment of the private hospitals. For the reason that government hospitals are cheaper, government hospitals overflow with patients on a daily basis. India is currently facing a persistent shortage of healthcare infrastructure in tier I and tier II cities, rural areas in particular. Only a construction boom can be an effective solution to calm this stress down. Government‘s several significant initiatives for this sector gets us a glimpse of the growth prospective of this sector in future. The demand of healthcare sector will advance real estate production in the next decade.

Followed by demonetization hit, India is on the verge of its economic expansion. Real estate sales market is undergoing several constitutional changes in order to gain investment credibility. The confluent factors such as rising middle-class income and change in lifestyle pattern are pushing the sector towards significant sales achievement. The growth will be additionally driven by the healthcare sector by both the governmental and private-partnership enterprises. Since, the healthcare industry is largely dominated by the private players; it is getting backed by large-scale investments from Private Equity (PE) sector as well. There is an existing opportunity for the global players to set up hospital chain in tier I and tier II cities across India.

The increasing demand of prime and alternative healthcare is constant. The future of healthcare industry is somewhat collateral to the real estate industry. A collaborative association of healthcare, real estate and private players can set forth overall good health of the population as well as the economy of the country.
“The key objective of advanced reality is to provide end-to-end solution to the other industries through project planning, budgeting, and proper constructional support. In alliance with healthcare, real estate market will be resulting in significant infrastructural development in the hospital industry,”-said Mr. Mahesh Somani, Head- East Zone, National Association of Realtors India (NAR).

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