REAL ESTATE IN RERA ERA!

RERA makes it mandatory for every builder to get his project registered in RERA if the land on he is developing the project to exceed 500 square meters or more than eight units.

As per section 4(2)(I)D), every promoter is required to open RERA separate account in a scheduled bank to cover the cost of construction and land cost of the project

Section 14(3) of the RERA Act, 2016 provides the remedy to the allottees in case of any structural defects incurred in the five years from the date of giving the possession then the promoter is liable to rectify the defect at his own cost.

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10 Rules Everyone should know before investing in Real Estate

1. RERA Registration – RERA makes it mandatory for every builder to get his project registered in RERA if the land on he is developing the project to exceed 500 square meters or more than eight units. As per section 3, no builder can do a sale or advertisement without getting his project registered in RERA.

2. Separate account- As per section 4(2)(I)D), every promoter is required to open RERA separate account in a scheduled bank to cover the cost of construction and land cost of the project. Every builder has to open a separate account in which he has to deposit 70 percent of the amount collected from allottees. Withdrawal from this account can be done after submission of the certificate of CA, architect, and engineer.

3. Disclosure of carpet area -Now as per the RERA, every builder needs to disclose the carpet area of the inventory for sale in brochures and agreement to sale. Carpet area has been defined in section 2(g) as “carpet area is defined as ‘the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment’”.

4. Defect Liability-Section 14(3) of the RERA Act, 2016 provides the remedy to the allottees in case of any structural defects incurred in the five years from the date of giving the possession then the promoter is liable to rectify the defect at his own cost. Further, in the event of promoter’s failure to rectify such defects within 30 days, the aggrieved allottee is entitled to receive appropriate compensation which is to be decided by the concerned state RERA Authority

5. Standard Agreement to sale – RERA has given the specified format of an agreement to sale. So every builder will be using the format provided by the RERA of the concerned state.

6. Quarterly update on construction – Builders has to do Quarterly update on which they have to update project details including the number of units sold, approval taken to date, Certificate from professionals. It will help buyers to track online the progress of the project.

agreement for property sale

7. Advance agreement to sale – Builder cannot take more than 10% of the total cost of the unit before entering into a written agreement.

8. Complaint filing- If the buyer has any complaint about the builder /agent, he can make a complaint to RERA. The RERA will resolve the complaint within 60 days.

9. Approval for alteration in the sanctioned plan- If a builder wants to make any changes in plan and common areas of society, then he has to take the approval of 2/3 allottees.

10. Agent Registration – Every agent /property dealer is required to get registered in RERA.

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GST rate cut can encourage real estate industry

Homebuyers are immersed with very good news. Beginning o this month, the budget proposed an extra deduction of ₹1.5 lakh on interest rate paid on loans for affordable housing estimated up to ₹45 lakh. A week ago, the State Bank of India decreased its negligible cost of lending rate (MCLR) by 5 basis points over all tenures. By themselves, the two measures are probably going to have a constrained impact. The extra deduction may not get completely used and the rate cut by SBI is negligible at best. However, if these advantages are joined with a prior change in GST rules, the weight on the purchaser’s pocket could ease significantly.

In March, the GST Council diminished the GST rate for residential under-construction property from 12% to 5% and for affordable housing from 8% to 1%. The real estate segment, which was flopping under the triple effect of the Real Estate Regulation Act, demonetisation in 2016 and introduction of GST in 2017, finally had something to cheer about.

But, the decrease in GST rates won’t reduce home costs for purchasers to the same extent. Under the new standards, developers won’t be able to claim input tax credit (ITC). The new tax rules decides that 80% of inputs and input services must be bought from registered people. Any deficiency in buys as indicated by these standards, will draw in a tax levy. For example, tax on cement purchased from an unregistered individual will draw in a 28% duty. Under the past system, the builders could claim ITC for the tax they paid when obtaining different products and building materials, including steel, cement, paints and electrical things. This used to be in the scope of 2-3% of the base cost. Likewise, remember that the introduction of GST has not subsumed the stamp duty and enrollment fees that are still a state subject and fluctuate depending on the location of the property.

In case they can’t claim ITC, builders are probably going to increase the base cost of the unit to account for the unclaimed amount. This, thus, will eat into the overall increase of the buyer from the GST rate cut. The overall gain is decreased from 7% to simply 4.5% because of the elimination of ITC.

But, even after taking to considering the loss of ITC, the bringing down of GST rate will convert into noteworthy savings for homebuyers, particularly those picking the affordable segment.

Under GST rules, sale of a prepared to-move-in residential or commercial property isn’t viewed as a supply of a good or service. Subsequently, no GST is payable in such cases. The tax just applies to under-construction property. Till now, realy property was more in demand because of the fact that there was no GST. But, the rate cut has scaled down the price gap between under-construction and finished projects in the affordable segment. This is probably going to restore demand for under-construction affordable housing ventures, particularly in more current markets and rising urban cities.

The redefinition of affordable housing and the GST rate cut could breathe new life into the real estate sector. It will also simplify tax rules for the real estate sector and improve compliance.

Contact Certicom Consulting who have best GST consultants for any further queries.

Lower tax on raw materials are demanded by Real Estate Developers

In an offer to make life simpler, the Indian real estate developers have requested from the finance minister Nirmala Sitharaman to consider lowering down the GST on raw material if she wants existing two tax slabs of 1 per cent and 5 percent to give 100 percent profits. They said that lower GST on raw material will cut down their input cost prompting price correction that would help home purchasers to save money and for the industry sales development is legitimately useful for the developers.

Talking on the issue Avneesh Sood, Director at EROS Group stated, “GST for real estate segment was constantly under scanner as clients needed to pay 12 percent GST, which was very high. For complete straightforwardness and high demand Government of India revised the GST rates which have been beneficial for the real estate part making the sector beneficial and offering boost to affordable housing. I accept 1 percent for affordable and 5 percent for the rest of the category is most minimal ever GST for real estate. Presently, the government should consider cutting down the tax on raw material to burden on developers which thus will have lower pricing of units for home purchasers.”

Remaining in sync with Avneesh. Suresh Garg, CMD at Nirala World stated, “Modi 2.0 Government is concentrating on reasonable housing and attempting to provide requirement of every single other fragment as well.  Rather than paying the high tax due to various taxes earlier,  presently we have 2 classifications 1 percent for reasonable and 5 percent for other housing projects. Overhauled rate of GST is useful for home purchasers since they don’t need to pay more than 5 percent expense that was 12 percent before yet the disposal of input tax credit is not a positive step for real estate. However, in the present situation, those developers who have obtained material ahead of time for the project are picking old GST rates with ITC since they will have space to offer a cushion to home purchasers. But, for new projects, they need to pursue the new GST model where 5 percent will be forced because of no input tax credit. As I would like to think, the alternative of new GST and old GST with ITC ought to be executed and enable developers to pick any of them.”

For detailed info, Contact Certicom Consulting.