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

Stamp Duty CF

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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Real Estate News Smart Residential Living

Modi govt changed rules: Now get bigger homes under PM Awas Yojana

PMAYGood news for all the home buyers in cities. Changes have been made in the Narendra Modi government’s affordable housing scheme Pradhan Mantri Awas Yojana-Urban (PMAY-U).

The government has approved a 33-percent increase in carpet area of houses eligible for interest subsidy under its affordable housing scheme Pradhan Mantri Awas Yojana-Urban (PMAY-U) to attract more beneficiaries, the Housing and Urban Affairs (HUA) Ministry said.

An increase in the carpet area of a house under PMAY-U has been made across all middle-income group groups. For Middle Income Group-I (MIG-I), the carpet area has been increased from 120 sq m to 160 sq m and for MIG-II, it has been increased from 150 sq m to 200 sq m.

The new rules were effective from January 1, 2017 – the date on which the scheme became effective. Under the Credit-Linked Subsidy Scheme (CLSS), each beneficiary can avail funding up to Rs 2.35 lakh on buying of a house under this scheme.

A four percent interest subsidy is available on loans up to Rs 9 lakh for homebuyers with an annual income of Rs 6-12 lakh under MIG-I plan. Three percent interest subsidy is given on loans up to Rs 12 lakh for homebuyers with income between Rs 12-18 lakh per annum.

The change in rules enables more MIG customers to qualify for funding and avail the benefits provided under Pradhan Mantri Awas Yojana-Urban (PMAY-U). Apart from growing the number of beneficiaries, the improvement in carpet area will increase the construction activity and will give a push to the housing sector.

According to Housing and Urban Affairs ministry, an amount of Rs 736 crore had been distributed to 35,204 recipients belonging to the MIG category till the second week of June. After accumulating inputs from various stakeholders, the decision to increase the carpet area for MIG section was done.

Previously, the Centre approved construction of 1.5 lakh houses for urban poor under the PMAY-U in May taking the total number of dwelling units to 47.52 lakh under the programme so far. The approval required an investment of Rs 7,227 crore with central assistance of Rs 2,209 crore.

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Budget 2018-2019 Real Estate News Smart Residential Living

What Budget 2018 have for the Real Estate Sector

BudgetArun Jaitley, the Finance Minister of India on Thursday presented his fourth budget.

Here is what the finance minister broadcasted in Budget 2018:

Affordable Housing funds
The government will also start a dedicated Affordable Housing Fund (AHF) in National Housing Bank funded from a priority sector lending deficit and fully serviced bonds sanctioned by the Government of India.

National Housing Bank

National Housing Bank Act is being altered to transfer its equity from the Reserve Bank of India to the Government. National Saving Certificate Act, Provident Fund Act, and Indian Post Offices Act are being incorporated and certain added people-friendly measures are being announced.

To provide the Reserve Bank of India an instrument to accomplish excess liquidity, Reserve Bank of India Act is being amended to institutionalize a Uncollateralized Deposit Facility.

Securities Contracts (Regulation) Act 1956, Depositories Act 1996, Securities and 23 Exchange Board of India, Act 1992 are being amended to simplify adjudication procedures and to provide for penalties for certain violations. These proposals are in the Finance Bill.

REITs

The Government and market regulators have taken essential measures for expansion of monetizing vehicles like Real Investment Trust (REITs) and Infrastructure Investment Trust (InvIT) in India. From next year, the Government would launch monetizing select CPSE assets using InvITs from next year.

Circle Rates

Currently, while taxing income from business profits, capital gains and other sources related to transactions in immovable property, the consideration or circle rate value, whichever is higher, is accepted and the difference is calculated as income both in the hands of the seller and purchaser.

Sometimes, this variation can occur in respect of different properties in the same region because of a variety of factors including the shape of the plot and location.

In order to minimalize hardship in real estate transaction, Mr. Arun Jaitley projected that no adjustment shall be made in a case where the circle rate value does not surpass 5% of the consideration.

Smart Cities

Smart Cities Mission aims at building 100 Smart Cities with state-of-the-art facilities. 99 Cities have been already selected with an expenditure of Rs 2.04 lakh crore. These cities have started executing various projects like Smart Roads. Solar Rooftops, Smart Parks, Intelligent Transport Systems, Smart Command, and Control Centre.

Projects worth Rs 2,350 crore have been completed and works of Rs 20,852 crore are under development. To preserve and regenerate soul of the heritage cities in India, National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way.

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