No Hike in Ready Reckoner Rates in Maharashtra, India

Apr 2,2019 / By Prahalad Singh / No Comment

Ready Reckoner Rates in Maharashtra:

For the 3rd year in a row, the Maharashtra Government has decided to keep the present ready reckoner rates unchanged due to slow down in the realty market. The Inspector General of Stamps and Registration Office, Pune has sent a circular to all the offices of Deputy Inspector General of Stamps and Registration Department in the State to maintain the old ready reckoner rates and register property and documents as per old rates. Though the Registrar of Stamps had suggested a nominal hike in the ready reckoner rates, the State Government issued a clear direction on it asking the authority to continue with the old ready reckoner rates.

What is ready reckoner rates?

Ready Reckoner rates are the rates of the residential, commercial or plotting property for a given area and are issued and regulated by the respective state government. These rates are regularly updated on a yearly basis depending on the plan of the government for such price changes.

The 2017-18 rates will continue to apply this financial year as well and will be effective from April 1, 2019. As a matter of fact, the earlier hike in ready reckoner rates which was even more than the existing market price of land and flats also headed to a decline in transactions. Despite the land prices saw a drop, due to the lack of buyers with deep pockets and strict norms of financial institutions to provide the easy loan to realtors, the ready reckoner rates were not changed and continued on the higher side. As a result, there was a huge demand from the realtors and developers to reduce the ready reckoner rates and bring them in a match with market facts.

According to most builders, existing rates are not as affordable as the market, It is inactive for the last two-three years. In some areas, the land and flat prices are really going down and these rates must be made more reliable. According to some property experts, linking of property purchase with Income Tax has created a problem for the buyers as they have to pay tax on the difference amount of ready reckoner rates and actual buying rates.

As per Mumbai’s leading builder/developer Hiranandani, those areas where the rates have actually fallen, builders can’t sell their flats at reduced rates since the Income Tax Act doesn’t allow any sale below 5% of the Ready Reckoner Rate for that area. Suppose, the Ready Reckoner Rate in an area is Rs 6,000 but the sale has taken place at Rs 5,500, both buyer and seller still have to pay additional tax on the Rs 500.

With relaxation in GST for affordable housing stock, reduced home loan rates, and unchanged ready reckoner rates, the property market is likely to witness some positive movement during Gudhi Padwa and Akshay Tritiya, considered as the most auspicious period for property transactions.

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Revised GST rates lead to a drop in housing prices in Rajasthan

Apr 2,2019 / By Prahalad Singh / No Comment

Housing prices in Rajasthan:

The Goods and Service Tax (GST) Council in its 33rd meeting that has been conducted on 24th February 2019 has made a decision to lower the tax burden reducing GST.

Property prices, which had grown exponentially in the state, are expected to fall, as the GST council’s decision of cutting the tax rate on under-construction properties will be implemented from 1st April 2019.

On the under-construction properties, consumers will now have to pay 5% of goods and service tax (GST), as against the existing 12% while on affordable housing to 1% from the current 8%. GST council has also increased the scope of affordable housing to those costing up to Rs 45 lakh and measuring 60 sq-mt in metros and 90 sq-mt in non-metro cities.

Statistics of buying a flat after GST rate slash

In the present condition, if a buyer buys a flat worth Rs.1 crore, he has to pay approximately 18% as a tax, including registry, stamp duty, and GST, which is a huge amount. Now a buyer will have to pay Rs.5L, instead of Rs.12L as GST Tax. This could prove to be a major relief for the homebuyers.

Similarly, a buyer buying a house falling under the affordable housing scheme class will be benefited considerably too. If a flat cost is Rs.20L (under the affordable housing scheme), the buyer will have to pay Rs.20000 instead of existing Rs.36000. As the bracket of affordable housing is increased to Rs.45L in the GST Council meeting, this will also ease middle-income groups.

Homebuyers believe that this move would bring cheer for them and the Rajasthan real estate market which was facing a slowdown. At the same time, it is expected that the market will recover in the months to come.

On the other hand, the developers believe that the lower tax burden on home buyers is expected to drive demand in the affordable segment which, successively, will keep developers engaged in building more affordable homes.

The decision is expected to help the government as well constantly move towards reaching its target of ‘Housing for All 2022′. Furthermore, the move would also inspire developers to construct houses in the government’s scheme, which are not yet getting takers.

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New Tenancy Act in Tamil Nadu

Mar 29,2019 / By Prahalad Singh / No Comment

New Tenancy Act in Tamil Nadu:

Last week, Chief Minister of Tamil Nadu has begun an exclusive portal www.tenancy.tn.gov.in under a new act called The Tamil Nadu Regulations of Rights and Responsibilities of Landlords and Tenants Act 2017 which is meant to balance the rights of the tenants and owners. It also aimed at replacing the old Tamil Nadu Buildings (Lease and Rent Control) Act. 1960, also known as the Rent Control Act.

As per the terms of this law, all tenancy agreements should be written and shall be compulsorily registered with the rent authority.

In 2017, the state government had submitted the bill in the assembly to execute the tenancy act that will cover all the metropolitan areas but it was passed a year later.

Who will be the rent authority?
In this portal, people can create a tenancy registration number under the tenancy act utilizing which they can register their agreements with the relevant rent authority. Rent authorities would be appointed in every district, supervised by a deputy collector rank officer to settle the disputes between tenants and owners.

Will they establish Rent courts and tribunals under this act?
Yes, Rent court and tribunals will also be established as part of the new act in each district.

Specifications and highlights of TNRRRLT Act, 2017
Immediate Execution of the Act: The TNRRRLT Act came into effect on the 22nd February 2019, and the act also governs and mandates those tenancy agreements executed prior to the enactment of this law. Moreover, even people who have already rented out places will have to register their agreements with the concerned rent authority within the next 90 days.

Compulsory registration: Although the old Rent Control Act directed registration of the tenancy agreements going beyond 11 months or over Rs. 50,000 in value, the new act directs all tenancy agreements to be registered with the Rent Authority, regardless the term and value of the tenancy. It covers both commercial and residential occupancies including the use of educational premises but does not include the premises registered under the Factories Act, 1948.

Who can fill the application?
The application may be filed by both landlord and tenant.

Why written agreement and registration Require?
As per Section 4 of the Act, all occupancies shall be made by way of an agreement. Also in respect of verbal occupancies formed before the start of the Act, the individuals shall modify the terms of the tenancy in writing within 90 days from the date of notification of the Act.

Requirements under the Stamp Act: It is also mentioned in the new act that all tenancy agreements are to be stamped as per Article 35 of the Indian Stamp Act, 1899.

Independent Registration: Registration is independent under this new Act of registration needed under the Indian Registration Act. Both parties are still responsible to register the agreements as per the Indian Registration Act excluding registering the agreement with the Rent Authority under the new act.

Would this act cover leave, license, property management agreements?
The act is aimed to be a complete code of tenancy. License agreements being of a similar nature are also covered. As the registration under this act is mandated for tenancy/lease agreements. Therefore, despite the agreement is titled or termed ‘license’ or ‘leave & license’, ‘Property Management Agreement’, if the terms or titled of the agreement form any right in the immovable property, then such agreement has to be registered under this Act. The ‘terms’ of the contract will define the nature of the agreement and not the ‘title’ given to such agreement.

Is registration required on renewal?
The rules drafted in this matter direct that any renewal is treated as a fresh tenancy demanding registration again. Contrary to the old law, the process of registration has been made online and there is no fee for registration of the tenancy agreement, though, nominal service charges be placed by the portal for registration.

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Properties to Get Costlier as Stamp Duty in Mumbai Hiked to 6%/commonfloor

Mar 5,2019 / By Prahalad Singh / No Comment

Stamp duty and registration charges in Mumbai continue one of the largest sources of revenue for the state government of Maharashtra. As a matter of fact, the government has been pitching on Mumbai’s real estate boom to encourage growth and development.

The Maharashtra government’s decision to raise a 1% surcharge on stamp duty for properties in Mumbai, could negatively affect the realty market and home buyers, nowadays when property deals are already charged with high tax rates.

It would be raised on the sale, lease, mortgage, and gift of real estate transaction, within the area of the Brihanmumbai Municipal Corporation (BMC). The existing stamp duty on houses in Mumbai is 5%, which will now increase to 6%, making properties more costly.

Stamp Duty CF

How the Stamp Duty Hike Will Impact the Homebuyers?

This move is particularly discouraging for the mid-segment homebuyers who are thinking of buying property due to easy availability of options and reduce interest rates currently.

Hence, if the ready reckoner rate for a property is Rs 2.75 lakhs and the agreement value is Rs 5,50,000,00 lakhs, then, the stamp duty will be calculated on the agreement value of Rs 5,50,000,00 lakhs.

A Comparative Study of Property Charges Before the Hike

Assume you buy a 200 sqm flat near Andheri where the Ready Reckoner rate for residential property is Rs 264200 per sq.mt. Considering the property’s agreement value is the same as the Ready Reckoner Rate in the locality, your property price calculation will be as follows:

Total Cost of the property before the hike
A. Area of the flat	200 sqm
B. Ready Reckoner Rate	Rs 2,75,000/sqm
C. Price of flat (AxB)	Rs 5,50,00,000
D. Stamp Duty (5% of C)	Rs 27,50,000
E. Registration fee (1% of C or 30,000, whichever is less)	Rs 30,000
F. Total cost (C+D+E)	Rs 5,77,80000

A Comparative Study of Property Charges After the Stamp Duty Hike

Total Cost of the property after the hike
A. Area of the flat	200 sqm
B. Ready Reckoner Rate	Rs 2,75,000/sqm
C. Price of flat (AxB)	Rs 5,50,00,000
D. Stamp Duty (6% of C)	Rs 33,00,000
E. Registration fee (1% of C or 30,000, whichever is less)	Rs 30,000
F. Total cost (C+D+E)	Rs 5,8330000

The above table is showing that before rate hike one has to Pay Rs.5,77,80000 for a 200 sqm flat in Maharashtra but after a rise of 1% as a surcharge, for the same property, people have to pay Rs.58330000 which goes Rs.550000 more.

But wait, this isn’t the actual cost of the apartment. There are many other un-advertised costs which are hidden and are calculated over and above the advertised price. And yes, do n’t make the mistake of underestimating these costs as they normally make up to 20% of the advertised cost.

Here are what all the costs a builder/developer will charge you when you actually buy the apartment/property and sign the buyer’s agreement in Maharashtra:

What Are the Hidden Charges a Homebuyer Have to Pay to Buy a Flat in Mumbai?

Nature	Amount in Rs.	Calculation Basis
BSP	3000000	1200 Sq. feet * 2,500
PLC	120000	4% of BSP. PLC location depends on buyers
EEC & FFEC	60000	1200 Sq. ft * Rs. 50 per Sq. ft.
EDC & IDC	120000	1200 Sq.ft. * Rs.100/ Sq.ft.
Open Car parking space	125000	Fixed amount (differ from project to project)
Covered parking space	200000	Fixed amount (differ from project to project)
Club membership	45000	Fixed amount (differ from project to project)
Power back-up	30000	Fixed amount (differ from project to project)
Electric Connection charges	3000	Fixed amount (Approximate value)
Water, Drainage, and Sewerage	3000	Fixed amount (Approximate value)
Stamp Duty	180000	6% of BSP. Need to be paid to the government
Registration Fees	30000	1% for every state
GST Tax	360000	12% of BSP. Need to be paid to the government
Total Advertise Cost	3000000
Total (Extra and hidden costs)	1276000
Grand Total	4276000

Please note that all the charges are calculated on the basis of Super Built-up Area and not Built-up Area. As per industry standards, the difference between the super area and built-up area is approximately 18-20%. i.e. while you pay the price for 1200 sq.ft. (super area), the actual built-up area in your apartment would be somewhat 960 sq.ft. (1200 – 20% of 1200) = 960 sq.ft.

Government’s Decision to Deduce the GST Rates

This is not the end. Recently, the GST Council has made a decision to reduce the Goods & Service Tax (GST) rates for under construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type	Existing Effective GST Rate	New Effective GST Rate	ITC Availability
Residential properties outside affordable segment	12%	5%	Without ITC
Affordable housing properties	8%	1%	Without ITC

Once the decision will come into force, the property rate will decrease and will benefit the homebuyers across the nation. The above property calculation table where the GST rate is taken as 12% on the BSP, the buyer has to pay Rs.3,60,000 as GST charges on their home. The purchase will be reduced by Rs.2,10,000 (Rs.360000 – Rs.1,50,000). We can say that homebuyers will save up to Rs.2,10,000 on their purchase.

How the Stamp Duty Hike Will Impact the Mumbai Property Market?

Property in Mumbai is remarkably overpriced and most of the demand is moving towards Navi Mumbai and Thane. Now, those who are moving from the suburbs to the Island City will be the ones who would be most affected. If the surcharge is imposed, homebuyers will move to Thane and Navi Mumbai for their housing needs more actively.

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GST Update: New GST Rates For Real Estate

Feb 26,2019 / By Prahalad Singh / No Comment

The Goods and Service Tax (GST) Council in its 33rd meeting has been conducted on Wednesday, 24th February 2019. The discussion on real estate related issues have been discussed and The lower tax burden on home buyers is expected to push demand in the segment which will, in turn, will keep developers committed to building more affordable homes. The decision will provide relief to the middle-class homebuyers in metros as well as non-metro cities. At the same time, the decision is expected to help the govt’s move towards achieving its target of “Housing for All by 2022”.

Demand for residential properties is expected to receive a major boost following GST the government’s decision to reduce the Goods & Service Tax (GST) rates for under-construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type	Existing Effective GST Rate	New Effective GST Rate	ITC Availability
Residential properties outside affordable segment	12%	5%	Without ITC
Affordable housing properties	8%	1%	Without ITC

3. New Definition of Affordable housing – A residential house/flat of carpet area up to 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having a value up to Rs 45 lacks.

Both conditions will have to be met – house having a carpet area of 50 sq mtr valued at 50 lacs will be taxable at 5% and not 1%.

As per GST Council, Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (the whole of MMR).

4. Builders for the above types of residential projects will not be eligible to claim the input credits. As a result, the elimination of Input Credit Tax benefit may hit profitability for the supply side.

5. Transferable Development Rights /Joint Development Agreements / Long term lease premium and FSI(Floor space index) transfers shall be exempted only in case if it pertains to a taxable residential project, in other words, TDR(Transfer of Development Agreements) for commercial projects will be taxable @ 18%

6. Above changes will be effective from 1st April 2019 after notifications are issued

How will the new GST Rate Benefit the Homebuyers?

Now the homebuyers will get a fair price deal. Earlier, the GST Tax rate was 8% for affordable housing properties and 12% for regular housing projects. But in the GST Council Meet that happened on Feb 24, 2019, the GST rate was cut down to 1% for affordable housing projects and 5% for regular housing projects, with no input tax credit.
Affordable Housing plans will get attracted to GST at 1%.
The interest of the homebuyers/consumers towards buying a property has been increased.
Input Tax Credit not being passed on home buyers/consumers will not be an issue.
Un-utilized ITC(Input Tax Credit), which has been used as the cost of the project should be removed and should lead to a better price.
Tax structure and tax compliance should become simpler for builders.

Note:
TDR – Transfer of Development Rights
JDA – Joint Development Agreements
FSI – Floor Space Index
ITC – Input Tax Credit

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Category : Affordable Housing