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It is a common practice to buy property in Pune, Mumbai or any other location for end usage or investment purposes. Nowadays, with new and more elaborate projects coming up in various parts of urban cities, many people tend to buy houses and flats more than what they actually intend to use as a means of future investment or for future planning. However, the trend has also set in of using this extra property for commercial purposes like setting up an office, clinic or running some kind of business from the same premises. It is more often the case with people who are doctors, chartered accountants, lawyers or other jobs which are majorly work from home professions or which involve meeting clients and doing deals majorly from homes. This practice, however insignificant it might seem, is illegal.
- As per the rules of the Government, residential properties cannot be used for commercial purposes or else they will be treated as commercial properties and will attract higher rates of taxes like the property tax, water and electricity surcharge and other taxes in accordance with the commercial property laws. As a result, if a rented residential property is being used for commercial purposes or even a self owned one, the owner will have to pay a higher tax depending on the rules of the state government and will have to obtain prior permission for the same.
- A residential property or house in Mumbai, Delhi or any other particular location of your choice can be used for commercial purposes in cases where the particular state allows it but after the permission of the residential society and the complex owners. This might also require permission from the local municipal body which will decide whether or not to allow such an establishment and whether all the relevant permissions have been got from the locals and the residents. Some states allow a part of the residential property to be used for commercial purposes and accordingly the taxes are levied and the surcharges come into play. However, in all cases, approval and permission of the residential society and the real estate developer is required.
- There are set rules and procedures for converting residential properties into commercial ones and for that you have to separately apply to the municipal body as per the requirement, the size or area of the property being converted, the purpose of use and the resources it would require. This would in turn attract higher property taxes and water and electricity cess as per the prevailing norms and the owner will have to bear it. So in cases where the property has been rented, the owner can object to the conversion and setting up of commercial practices on account that he will have to pay higher tax rates without moving up the rent.
However, certain practices do not count as setting up a commercial establishment like running yoga or meditation classes, dance and music lessons, tuitions or any such activity. Everything which requires professional help will attract commercial property billings in case you plan to set it up in your residential complex.
Budget 2017 -2018 is really expected to hold promise for the real estate sector. The Budget 2017 provides the reforms in the industry in the form of tax incentives and other provisions of the tax related to the income tax. The real estate sector being the largest second contributor to the economy is experiencing certain issues in their growth. The relaxation of the Foreign Direct Investment norms had allowed inflow of the FDI that supports the growth of the sector. The demonetisation had affected the sector growth for a short term. The real estate developers in the sector are facing some issues with the development.
The act related to the real estate such as Real Estate Regulation and Development Act (RERA), 2016 and Benami Transaction Act are passed to bring the changes and transparency to the sector. The accessing of the funds is made simpler and cheapest as compared to other means. The reduction in the rates of the interest in addition to that of the demonetisation will increase the purchasing power of residential buyers that will in turn increase the growth of the sector. The builders in India are expecting the real estate sectors for the growth that was promised in the Budget 2017 – 2018. The demand-supply gap should be reduced.
Tax associated with the Section 8o-IA and Section 35AD of the Act for undertaking, which in turn develops or operates, maintains the facility of the infrastructure have been further extended to township projects. These acts and provisions are favourable for increasing the promotions of the real estate developers for improving the construction of the infrastructure facilities such as the roads, educational facilities, medical facilities and sanitary facilities.
There are issues that pertain to the Joint Development Arrangement (JDA). The suitable controls should be brought for solving the JDA. Finance Act, 2016 had included the Section 8o-IBA with the grants that exempts house projects with the condition that project should be finished within the time period of 3 years from the approved date. No exemption is allowed for the MAT projects since separate amendments are added for provision of exemptions to those MAT projects.
If the exemption is not provided, it leads to attract 20 percent of taxes below MAT that leads to disallowance of the grants of tax incentives. Finance Minister engaged in revival of infrastructure of corporate companies such as SEZs and developers. MAT exemptions are applicable to the infrastructure companies that lead to the economic growth with the investments in infrastructure developments. The provisions of Section 43CA and Section 50C of the Act used for deemed taxation should be removed by tacking the understatement of the consideration of investigation mechanisms. The builders in India believe that the Budget 2017-2018 will lead to develop the real estate sector.
With the help of RERA and Finance Bill the real estate sector is going to change a lot in the near future. It was expected since long as it can offer easy money at lower rates, get investment guidelines and also better expectancy. Hence in coming days, one can see huge reforms in the real estate sector particularly in the affordable housing segment.
- The government of India also has provided the definition of affordable housing projects to pave the way for 100 percent tax subsidy on profits of an affordable housing undertaking.The implication of the same will be much helpful the industry to have a push that was much needed during this slack season.
- The leading builder’s and market players in the real estate such as like Shappoorji Pallonji Joyville as well as Tata Value Homes, etc., have also rebranded to offer the best facilities in their schemes. Now they can also have easy finance from leading financial institutions such as IFC, Kotak Investment, and HDFC Capital.
- There are also many common grievances addressed by the government such as delay in possession, taking a long time for approvals, and other issues related to the real estate sector and RERA implementation have been now given more importance. The experts in the field expect better transparency in deals with the help of the new law. The formation of regulatory authority will be much helpful to the buyers as well as the developers in the industry and hence the development of the project will be more streamlined.
- These new changes will help the builders, as well as the market as there will be many more new players in the field that can take the competition to the new height and hence the ultimate benefits, will go to the buyers only.
- There are many other benefits Government have offered to the builders which are other than the SOPs. It includes a low rate of interest as well as a subsidy to the buyers. As per this scheme, the buyer who is taking the loan for the first time can have loan up to 12 lakhs from the Pradhan Mantri Awas Yojana.
- Many of the states also have introduced new policies for the segment in the affordable housing. There are also many land parcels auctioned by various states to offer the housing facilities to the required people. The affordable housing also has got its place in the Pradhan Mantri Awas Yojna as a major part.
Hence in the coming years, there are many areas which can be seen more developed as a part of the affordable housing only. Many developers also take part in this campaign as they can also have an opportunity to have some contribution in this segment.
Hence, a number of measures taken from the auction of open plots till offering of subsidy to the buyers have made the buyers and builders achieve their dream.
After two years, the Union Ministry of Urban Government has given its approval to Delhi’s LLP (Land Pooling Policy). The Chief Minister of Delhi, Arvind Kejriwal has been notified the rules and conditions after getting permission from the Lieutenant Governor. Around 89 villages have been turned into urban under this new rule and will also be developed as per the DDA (Delhi Development Authority). Over two years, the policy was stuck because of not getting approval for urbanizing agricultural lands from the concerned authorities. According to the Delhi Municipal Corporation Act, 1957 of section 12, once rural villages have turned as urban then they required being converted into developmental areas. Only after satisfying these criteria the Delhi Development Authority can able to invite aggregators and landowners to surrender their lands.
What is DDA 2021 Master plan?
The existing property in Delhi are far from the reach of a normal man, and the space crunch also restricts some new developments. Due to these two aspects, the Delhi Government has hardly participated in the Delhi Property markets. The Delhi Development Authority has planned to build up to 25lakhs of housing units by 2021 under its Master Plan. This plan would require land of 10000 hectares in order to meet its target. This DDA policy will surely affect six satellite zones and around 96 villages. However, this will help the development body a lot to meet its target. Even if half of the 20000 acres of land has developed, then it would be enough to fulfill the housing needs of the National Capital Delhi, according to the DDA and hence the government is taking steps in this direction.
The Scheme of DDA
Under the Master Plan 2021 scheme, farmers can directly able to transfer their agricultural lands to the DDA that would accept the land parcels, which is more than 2 hectares. This is because those two hectares used to develop infrastructures like drainage, road, water supply, electricity, sewer lines and so on. After that, the Government body would also return some fixed percentage of lands to the farmers. For both parties, this policy is a win-win situation. The Delhi Development Authority’s land pooling model has two types of schemes such as,
- People those who surrender land between 2 to 20 hectares can get back 48% of the developed land parcel
- People those who contribute more than 20 hectares can get 60% of the developed land parcel back.
Certain conflicting policies
The Government has approved FAR (floor area ratio) for the Transit-Oriented Development Policy. FAR means the ratio of the sum of building floor area to the plot size on which it is built at 400. However, the floor ratio is less than 250 for the LPP. While Transit-Oriented Development Policy promotes a development of areas within high transport systems like the Delhi Metro, but LPP aims to develop a large area for a residential and commercial purpose.
The real estate sector is one of the major pillars of the Indian economy, due to the significant contribution to its growth. But despite its major importance, it has always been plagued with inefficiency, lack of transparency and corruption. This has diminished stakeholder confidence in real estate. To address this, the Indian government has introduced Real Estate Regulation Act (RERA). The specialised regulator will bring uniformity and transparency in the relevant laws governing this sector.
What is RERA and How Did the Act Come About?
The real estate sector in India is recognised globally for its size and growth potential. It is the second largest employer in the country after agriculture and it is expected to grow at 30% over the next ten years. By the year 2020, the Indian real estate market is set to touch USD 180 billion.
Yet, there have been few regulations in this area for a long time.
Over the years, the image of the sector had been tarnished due to the fraudulent practices of a few individuals and companies. In addition, home buyers faced a lot of issues with developers and agents regarding construction quality, delays in delivery and other problems. However, there was no effective forum for the house-buyer to voice out his/her complaints.
Recognising such issues, the Central government tried hard to make this sector adhere to certain rules and guidelines.
RERA is the result of this effort. Now, each state and Union Territory (UT) will have its own Regulatory Authority (RA). Each RA shall frame its rules and regulations as per the guidelines provided by the Act. Under RERA, property buyers, sellers and agents should be aware of numerous provisions:
Important Provisions of RERA
- As per the new law, developers are not allowed to make any changes to the construction plan without the written consent of 2/3rd customers of a project. This is to ensure that the buyers are completely aware of the changes proposed by the developer. In addition, the law forbids the developer to increase the cost of projects.
- The developer has to give a declaration that is supported by a written affidavit that states the period within which the project or a specific phase of the project shall be completed.
- In the case of defaults or delays in possession, the buyer can withdraw from the project and claim refund of the amount paid along with the interest. But if the buyer doesn’t want to withdraw and doesn’t want a refund, the developer must pay interest for every month of delay until the property is handed over for possession.
- Each phase of an apartment will now be considered as a standalone real estate project under RERA. It is necessary to obtain separate registrations for each and every project.
- Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the RA. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration number will be provided project-wise by the regulatory authority.
- Developers must register each and every property. Non-registration will attract a penalty of 10% of the total project cost. In the case of a repeated violation, the developer could land in jail.
- In case a developer violates an order of the appellate tribunal of the RERA, he/she could face a maximum jail term of three years with or without fine.
Benefits of RERA to Home Buyers
Under the new law of RERA, there are certain benefits that buyers are entitled to:
- Escrow Account:
As per the law, the developer has to transfer 70% of the money paid by the buyer to an escrow account. This is to ensure that developers use the funds do not misuse the money paid by the buyer.
- Carpet Area:
A developer must sell the property to buyers based on carpet area only and not on the super built-up area. Super built-up area is equal to the carpet area and the thickness of the outer walls and common areas such as lobby, lift and stairs. It is illegal to sell property based on super built-up area.
- Five-year Warranty
A provision under RERA ensures that in the first five years, the builder has to take care of all structural defects in the building.
- Redressal System
The introduction of the RERA means home buyers can now approach their State Real Estate Regulatory Authority in the case of any grievances.
How RERA Affects to Real Estate Agents and Developers
The RERA directly impacts real estate developers and agents. Gone are the days where builders had the freedom to use funds as per their requirements. The new provisions ensure much stricter control of funds and their management. Developers have to deliver projects in a timely manner or they could risk high penalties.
As for real estate agents, it is mandatory for them to be registered with the Regulatory Authority as well as the developer.
Once they are registered, it becomes very difficult for agents to mislead buyers.
To sum it up
Regulation in the real estate sector has been long due. The introduction of RERA is hailed as an important move. While the Act has been implemented, it is important for each state to create awareness and empower home buyers.
Kolkata is a wonderful city with so much to offer. So, on the off chance that you want to move into Kolkata then you will definitely love the city once you settled in here. Kolkata is arranged on the banks of Hooghly River and this stream partitions Kolkata from Howrah. More than 4.5 million individuals live here in Kolkata and its building up each day in all regard.
Kolkata: Real Estate Market
While on one side Indian real estate market faced some fluctuations and instability, Kolkata’s reality market is comparatively stable. Under the undisturbed and unvaried number of demand from the city’s and nation’s property buyers – Kolkata’s real estate market is kindling a positive rate of appreciation. The market of Kolkata has proved all real estate forecasters wrong especially those who have been stating that Indian property market is hitting rock bottom.
Currently Kolkata is the one of the few cities that is showing a leveled supply and demand chart, if not a positive one in some quarters. So if you’re planning to move to Kolkata or have just moved there, Tollygunge and Behala are among the best places to live in! On one side Tollygunge is known as the home of Tollywood, the Bengali film industry while Behala is one of the oldest residential places in Kolkata.
Tollygunge: The Iconic Tollywood And Golf Course
Located in South Kolkata, Tollygunge is probably one of the best places to live in Kolkata. Known as the home of the iconic Bengali film studios and the Golf course, this locality is well connected through roads, metro as well as local trains. Commuting from Tollygunge to rest of Kolkata is far easier than from other parts of Kolkata. Tollygunge is located in close proximity to almost all parts of South Kolkata and offers easy access to several parts of Central Kolkata as well.
Metro is one of the major, cheapest, and fastest forms of commute in the city and connects Tollygunge with pretty much all the other parts of Kolkata. The residential hubs flourishing here are mostly apartment buildings and complexes.
The South City shopping complex, one of the best shopping malls in south Kolkata, is very close to Tollygunge. This locality is also the home of many premier academic institutions like ITI Tollygunge, B.D memorial institute, the Future Foundation School etc.
Behala: A Rapidly Changing Locality
Behala is located in south west Kolkata and is one of the oldest residential localities in Kolkata. A few years back if someone was moving to Kolkata, he/she probably wouldn’t have thought of Behala. But things are changing rapidly. In the last few years there have been numerous new projects in Kolkata and Behala has gained from all these developmental projects. The latest addition is the Metro network and currently the work is going on in full swing. Once the metro network is accessible, it will be one of the best places to live in Kolkata. Right now you can use public transport or drive to any place in Kolkata from Behala.
Apart from the above mentioned places you may look for Kolkata property at the following places also:
- Salt lake
- Lake Town
Apart from being the commercial, cultural and financial hub in Eastern India, Kolkata is also the City of Joy. The city has a lot to offer. In case you are visiting Kolkata for the first time, it would take a little while for you to get settled in but you will fall in love with the city after that.