Tuesday, December 26, 2017

Natural Disaster Preparedness: How to Stay Safe at Home

"Natural Disaster Preparedness: How to Stay Safe at Home" 

Find below some steps you can follow to make your home stand the toughest catastrophes like floods, storm, earthquake, and landslides.





This is a guest post by Keys90

Friday, December 8, 2017

How will Real Estate Regulatory Bill (RERA) help home buyers in India?

Real Estate Regulatory Bill (RERA) has been passed and is now being implemented at state levels. How will Real Estate Regulatory Bill (RERA) help home buyers in India? Here is quick look:


Thursday, November 30, 2017

GST – Simplifying Taxation in India’s Complex Residential Real Estate Sector

“One Nation, One Market, One Tax” was the driving principle behind the passing of the GST bill. GST has become one of the most revolutionary tax-reform India has seen in decades. It will almost certainly have a profound effect on the Indian economy; making it easier for businesses and retailers to comply and moderate overall taxation levels that will inevitably increase the collection of taxes. The real estate sector contributes to 5% of India’s GDP and is the second-largest employer in the country. However, indirect tax levies, such as VAT, service tax, excise, stamp duty and registration fees have been a significant hurdle in this sector. GST will simplify tax hurdles and minimize the scope for double taxation. This transparent way of taxation will benefit both the customer, industry and the tax collectors.

Under the ambit of GST, under-construction properties will be charged at 12%; this won’t include stamp duty and registration charges. Today different states impose different property taxes; GST will ensure the buyer pays one uniform rate across all states. To better understand the impact of GST on the real estate sector, let’s take a look at the current tax structure of some of India’s tier-1 cities.


Bengaluru
Mumbai
Pune
Chennai
Gurugram
VAT
4.0%
1.0%
1.0%
2.0%
4.0%
Service Tax
4.5%
4.5%
4.5%
4.5%
4.5%
Stamp Duty
5.7%
5.0%
5.0%
7.0%
6.0%
Registration Charges
1.0%
1.0%
1.0%
1.0%
0.5%
Total Taxation
15.2%
11.5%
11.5%
14.5%
15.0%












The 12% rate on under-construction properties will likely bring down property rates. Developers will now be authorized to take input credits on the sale of property under construction against the taxes that are paid by the buyer. This will bring down the cost for the developers, and in-turn the developers will have to pass on this benefit to the customers. The anti-profiteering provision in the GST bill makes it mandatory for developers to pass on any tax benefits of GST to the customers.However, GST may not benefit luxury real estate. Top luxury apartments in Chennai, Mumbai, Bengaluru, Pune and other tier-1 cities are set to see a major increase in taxation as compared to affordable homes in the same locations because they aren’t given the full set-off in terms of the land component. As things stand, service tax is charged on 30% of the property value, but GST will be charged on the entire value of the property; making it increasingly taxing on luxury real estate. Notwithstanding the burden of taxation on premium furnishing, fittings, super quality of cement and other top-quality raw materials used in the luxury housing market will be significantly more than that used in the affordable housing segment.

The best possible advice for home-buyers and investors “is to wait”. Wait till the property rate on GST is finalized. Wait till the property rates on GST are finalized. At a time, when property prices are already not affordable in most suburbs, if the GST rate were to rise above 12%, the market will certainly take a hit. If you buy real estate when the markets are on the rise, it only benefits the builders. The right time to buy property is when the markets are down as this gives you the best rates, infinite choices, and loans with lower interest rates from banks.

This is a guest post by Dinesh Dhawde

Friday, November 24, 2017

How GST Implementation Would Be Helpful for Real Estate?

Why is the Goods and Services Tax (GST) a welcome change for realty? Read on if this topic piques your curiosity as a property developer or seller.

The Goods and Services Tax (GST) is an effort toward simplifying the process of taxation by bringing different types of taxes under one umbrella. As simple as it seems, the implementation of GST entails far-reaching effects across sectors. Real estate is indubitably part of this spectrum.

Real estate has evolved by leaps and bounds over the last 15 years and will continue this upward trend in the years to come. Properties have always been looked upon as a lucrative investment option. GST promises to reduce the cost of ownership if its rate is lower than the summation of all the existing taxes.

Tax management is a challenge in the dynamic domain of realty, as any property purchase transaction is governed by a number of indirect taxes such as Value Added Tax (VAT), stamp duty, and service tax. With GST, all indirect taxes pertaining to property deals would be absorbed into one large cover.

We are aware that the effects of GST implementation are not restricted to buyers; developers play a significant part in the story, as they are the ones who initiate projects. Be it procurement of land or a redevelopment project, taxes rule the roost at every stage of property development. In the current scenario, taxes are levied at two levels: center and state. The state taxes the goods and materials, and the center taxes the services. Such a taxation process adds to the complexity of real estate deals, and it is the end customer who bears the brunt of dual taxation. GST implementation promises to put an end to the woes faced by property buyers, as a uniform rate would make it easy for the buyers to interpret the nitty-gritty of property dealings. Even though buyers may need to pay a slightly higher price, GST is sure to simplify the process of compliance to a great extent.


What is the probable impact of GST on developers?


During the procurement of land, developers are required to pay a host of taxes, such as Central Sales Tax, Excise Duty, and Customs Duty. Developers’ expenditure on construction materials comes to be 20 to 25% higher owing to indirect taxes. If all these taxes were to be subsumed, the cost of procurement and development would drop. This would translate into reduced costs for the buyer, which would eventually lead to a boost in sales. However, the actual impact on property prices would be based on the final GST rate.

Given that interdependence is an industry norm, real estate has close relations with other sectors such as finance, IT, steel, and construction. Therefore, if any one industry was to benefit from GST implementation, all the related sectors would simultaneously reflect the positive impact.

Transparency is a major advantage of GST implementation; a unified tax structure makes tax calculation a more comprehensible process for not only the industry bigwigs but also the end customer. Tax evasion would reduce significantly after GST enforcement, as a unified structure leaves no room for manipulations.


How would GST influence the economy?


Considering the booming trend in realty, the contribution of this sector to India’s gross domestic product (GDP) would be 5%. GST itself is estimated to account for 2% of the country’s GDP. 

Is there any section that would not witness the impact of GST?

Indirect taxes are not levied on possession-ready property, so resale dealings would not be affected significantly by GST implementation. 

In conclusion, GST implementation would prove to be a boon for developers and buyers alike, provided the standard rate is low. Buying high-end luxury apartments in OMR, Chennai would no more be a distant dream, which is a good enough reason to cheer. 

This is a guest post by Pooja

Friday, November 17, 2017

Get the best revenue with real estate investment

We all wish to invest in avenues which give us better profit margins. But it is difficult to gauge them and finally invest. Investment is a matter of the right time you enter and the exact time to exit out as well. You need expertise for this kind of investment which comes only with experience. The best investment option available in the market today is the real estate. It is a booming industry and almost all the investors are pooling their money in this lobby. The developers keep on giving handsome returns to all the investors who help them in providing the investment to complete the projects.


  • How does the real estate work?

Real estate is a business of constructing properties for the end users. Since real estate is at a boom and is in the demand by every individual, it is a huge money-making business. But not all investors buy it for self-consumption. They invest when the project has just started or in the initial phase and get out of it when it nears completion or is completed. This way the holding period of the construction gives them humongous profits which is the fruit of investing while you can hold it for a while. The profits are just unimaginable. But do you need a huge investment for such a profit. Well it completely depends on the kind of investment you would like to do and the budget you have.


  • What you need to be careful of?

If you wish to invest for a goal then you need to be calculative. But if you need to do it just for investment purposes then a small amount of profit would also excite you. But you need to be very careful while dealing with real estate developers. There are many loop holes that need to be known by the investor. The basic thing to be done by you is to be sure on the paper work. Check on the property and the land it is built upon. The titles should be clear and the paperwork should be accurate. Also, if you are investing in a property then ensure you get all the rent agreement formats seriously and keep them updated as and when needed. Many times, your property needs to be sold to someone who wishes to use it for self-consumption.

All such things help you to be safe from any legal formalities or complications. It is a way to protect your property and investment amount. You would find many fraudsters who dupe you of the money and sell your property to multiple people to make more profits but in an illegal manner. This can be evaded if you are smart enough and know all the loop holes of the game. It is not easy to get into the act completely as it is just a side income you wish to generate for your better future. But if you wish to make it big in this game then I suggest you know all that is required.

You can get in touch with many real estate brokers who has immense knowledge about the property and the business to help you to take the right decision. These brokers should be registered with the real estate lobby and should have a good background. If they are not the right people then you would face challenges and losses as well if not paid much attention. Real estate is a huge pool of investors and you would need to be smart on all your actions to make a good profit out of your investment. So, ensure you have all that would make your investment profitable.


This is a guest post by Mukul Malik

Monday, November 13, 2017

Odd even rule has drawn public attention to the alarming pollution levels in Delhi. Now, we need a long term sustainable solution for curbing vehicular pollution and jams. Here is one – an App based public transport system.

By: Sachin Gupta | Find me on Twitter

1. The Problem

Last few months have seen heated debates among environmentalists, activists, policy makers, and public at large about the deteriorating air quality in national capital Delhi. Aam Aadmi Party Government in Delhi led by Arvind Kejriwal has announced some measures to curb the rising pollution levels. Notably among them has been the animatedly debated ‘odd-even formula’.  We wish them best and hope pollution levels reduce drastically in Delhi.

So, what contributes to Delhi’s Pollution? Let’s have a look:




Transport contributes 22.7% to overall pollution levels in Delhi. Out of which Heavy and light trucks contribute about 14.2%. Private vehicles that include cars (4 wheeler) & 2 wheeler contribute 6.6%. Public transport that includes buses and 3 wheeler contribute 1.9%.

Government of Delhi has announced variety of measures to curb pollution at all levels. One among them is ‘Odd-Even’ formula which intends to target 4 wheeler. Will it succeed? We will have to wait for the 15 day trial run.

 

2. Existing situation

But what is the existing situation as far as transport is concerned? With growing GDP, more and more people are able to afford their own private vehicles to commute in the city. According to Delhi Economic Survey, the vehicular population in Delhi registered a 135.59 % jump between 1999-2000 and 2011-12 to touch 74.53 lakh. As things stand today, Delhi adds 1400 cars a day on its roads. About 50% of these cars sold run on diesel. Despite the world class Metro Rail, the public transport has not been able to keep pace with growing demand.

Sumit Sachdeva, Who lives in Faridabad drives a petrol CNG car, says, “I have to go to my office on Lodhi Road from my home in Sector 21C in Faridabad. There is no door to door public transport facility. If I want to take Metro Rail, then, first I have to take an auto from home to Metro station and then another auto from Metro station to office. It’s too time consuming and at the same time expensive”.

Manish Sharma, who lives in Greater Kailash II drives a diesel car, says, “I am in a sales job and there is no way I can use the existing Metro Rail or other Public Transport systems. I have 3-4 meetings a day and all these public transport systems don’t connect me at all”.

Everyday there are Lakhs of such cases where people use their own private vehicles rather than using the public transport. This not only raises the pollution levels but at the same time chokes city roads leading to massive traffic jams.



 

3. Proposed Solution

It is clearly evident that unless government provides high quality public transport system with last mile connectivity, citizens will continue to use private vehicles.

It is in this context, we provide this solution with the motto that “Public Transport needs to compete with Private transport in terms of comfort, safety, and cost efficiency”.

With the existing infrastructure of Metro Rail, citizens can be made to use public transport more. All that is needed is the last mile connectivity. So, how do we get the last mile connectivity? By deploying ‘Metro Shuttles’ as shown in the picture below:


    3.1. Implementation of Metro Shuttles:

A high quality 14 seats electric shuttle costs about Rs 3.5 Lacs with following specifications:
  • Overall Dimensions:4650*1675*2020mm
  • Seat Capacity:14 Persons
  • Motor:5kw DC Motor
  • Body Color: Customized
  • Fuel: Electric
  • Emission Standard: 0 Emission
  • Maximum Speed(Unload / Full Load):30km/H
  • Battery:6V*8
  • Max driving distance (20km/h constant speed on flat road) (Km)    ~80

The idea is to connect people with Metro rail using these Metro Shuttles. Each Metro Shuttle will run within the radius of 5 km with multiple predetermined Metro Shuttle Stops. Metro Shuttle Stops will be created keeping in mind that no individual should walk more than 500 meters to catch a Metro Shuttle.

These Metro shuttles can be manufactured in India, thereby, giving boost to Make in India campaign.

           3.1.1. Financing

Let’s assume, there is a requirement of 100,000 Metro Shuttles to cover whole city.
Cost of buying these Metro Shuttles = 100000x350000 = Rs 3500 Crore.
Now, who will provide funding for buying these Metro Shuttles? Here is the plan:
  • Government of Delhi to announce the launch of Metro Shuttles system.
  • By just paying 10% (Rs 35000), an individual with a valid driving license can buy a Metro Shuttle to operate in the city. These drivers will not be on payroll of Delhi Government but will be guided by Delhi Government’s Rule Book of Public Transport system.
  • Remaining 90% (Rs 315000) to be financed by banks at subsidized interest rates of say 5% with Government of Delhi providing collateral support. Therefore, there is no risk for banks to give loans to Metro shuttle owners who normally don’t have necessary papers to get loan.

           3.1.2. App for Metro Shuttle Stops

An app will be developed with information about Metro Shuttle stops, drivers, and timings. Citizen can download the app on their Mobile phone in order to locate the nearest Metro shuttle stop with navigational capabilities. Any individual who wishes to commute within the city can use the Metro Shuttle to go to Metro station or vice versa take a Metro shuttle from Metro station to the nearest stop for his home. Metro Shuttle stops need to be created in such a way that any individual using the app shall not walk more than 500 meters to reach to Metro shuttle stop.


           3.1.3. Pricing

Ticket Price for using the Metro Shuttle will be highly affordable. And it needs to be fixed at say Rupees 5. People can pay in following formats:
  • Cash (If a user wishes to pay in cash, then, the ticket price could be Rs 10. This is to encourage users to use Metro Shuttle Card).
  • Metro Shuttle Card that can be charged at the metro station itself or Pre paid Metro Shuttle Card can be sold at super markets. A person using the Metro Shuttle card can swipe the card at the swipe machine attached to all Metro Shuttles. The money goes directly to the central authority and from there Metro Shuttle Driver can claim once every week or fortnightly.

           3.1.4. Real time tracking

Metro Shuttles will run in 2 shifts with only one shift allowed for an individual driver to operate.
  • 6 AM to 3 PM
  • 3 PM to 12 MID NIGHT
All the drivers driving Metro Shuttles will be registered by Government of Delhi and their behavior & capabilities can be tracked by the ratings provided by users on their Metro Shuttle App.

    3.2. Political Benefits:

Government of Delhi can draw huge political mileage by implementing this proposal. Indirectly, they will be providing jobs to over 1 Lac people (many of them can be women drivers). 

Can it be implemented? Yes, all it needs is a ‘Project Champion’ and in a matter of 2-3 years, the plan can be successfully implemented. And subsequently be adopted in other NCR cities.

We have to note that in many developed countries in Europe, Government provides last mile connectivity to people. In addition to trains, they have trams which take people from one stop to another within the city. However, In India, building trams is a futile and expensive exercise. Instead, we can easily implement Metro Shuttles.


    3.3. How to discourage use of Private Vehicles:

In addition to implementing the Metro Shuttle system, Government can tax the use of private vehicles in following way:
  • High cost of parking
  • More taxes on fuel

4. Conclusion:

In a nutshell, government needs to provide high quality public transport system. A system that is inexpensive, can be implemented fast, and at the same time strengthens the government’s political capital. Metro shuttle system can be the answer.

Thanks! Please comment and we can take the discussion further. Maybe we find some other ideas :)

Kindly share :)




Have any Questions?

Saturday, September 23, 2017

The Real Impact of the RERA Act

It’s been over four months since the Real Estate Regulation Act (RERA) came into effect in India. While the much-welcome move from the Indian parliament came as a boon for home-buyers in the country, there were (and still are) a lot of teething issues for developers and builders and the real-estate sector as a whole.

As is known, the RERA Act covers all projects that were still being executed and hadn’t received a Completion Certificate as on the date of commencement of RERA Act, that is May 1, 2017. Thus, many under-construction properties have come under the ambit of the RERA Act. All of these projects had to be registered with the housing regulatory authority, and the developers or builders concerned had to provide regular updates on the approvals at various levels. All these registered properties have to follow the rules of RERA.


  • The Much-Needed Respite

One of the highlights in the RERA guidelines is that any real-estate property, be it a luxury apartment in OMR Chennai or a simple 2BHK in a suburban location of Mumbai, will be priced on the basis of the carpet area, and not the super built-up area. As per a report in The Economic Times, BMR & Associates LLP’s Manoj N Kumar, who is a Partner in Direct Tax, has clarified that the carpet area is 30–35% lesser than the super built-up area of a project. The sale of projects on a carpet-area basis can lead to a significant increase in the per-square-foot price of the project, he adds.


  • The WIP Bane

The newly introduced rules under the RERA Act bring about a major transformation in the way real-estate dealings have been taking place in India. Switching to the new rules was expected to take some time, especially in the case of under-construction properties that have already seen a lot of paperwork. And, as can be seen, the shifting of gears has slowed down the growth of the sector in many states. The properties that were under construction at the cusp of the switch to RERA are bearing the worst brunt as their regularization and documentation had to be changed midway. And, until these properties get completed, their respective builders and developers are not willing to start off with new projects. This means, there is a lot of pressure on them to complete the ongoing projects and sell them, failing which there will be a pile-up of unsold inventory.


  • The DeMon-RERA Impact

Experts express unison in the opinion that the demonetization drive by the Indian government in November 2016 was a blow to the real-estate sector because of the unprecedented and heavy cash crunch that made an appearance without any warning. Add to that, the RERA Act has forced builders and developers to mend their ways and set things straight, and bring about transparency at every level.

The back-to-back moves by the Indian government have taken the businessmen in the sector by shock, and it is only natural that they will need time to ensure things are in order. Until then, the sector is expected to continue facing a slowdown. However, given the motive of RERA to ensure thorough regularization and accountability in real estate, it is believed that the sector will start looking up gradually and that the benefits of the Act will be here to stay.


This is a guest post by Dinesh Dhawde

Monday, September 4, 2017

Chennai Real Estate Crawls out of Lull; Witnesses Growing Demand and Cut in Inventory

The dampening effects of the demonetization policy on the real estate market in Chennai seem to have started to reverse. The policy, which was announced in November last year, coupled with the real estate bill and the devastating floods that shook the city in 2015, had a back-to-back blow on property rates in Chennai. The result was that the city started accumulating a lot of unsold inventory owing to paucity in demand, although, surprisingly, the rates were not going down.

Now, it seems, the rates of residential properties are coming down notably. And, taking advantage of this emerging trend of price fall, buyers are taking properties on rent instead of purchasing them. According to The Real Estate Management Institute, the average weighted rental value of residential properties in Chennai, as well as some other tier-I cities like Mumbai and Delhi,are on an upswing--somewhere in the range of 8% to 12%. Moreover, media reports suggest that banks and other financial institutions, too, are contributing to this positive development by bringing down lending rates for home loans.

Experts note that there has been about 15% increase in property sales in the first half of 2017 as compared to the same period last year. They attribute this growth to the demonetization policy of last year. A majority of the property rate hikes this year were seen in South Chennai, in relatively affordable places like Mahindra World City, Navalur, Padupakkam, Sholinganallur, and Thalambur.

The spurt in demand has brought about a major reduction in unsold inventory in Chennai, with a supposedly 30% drop in the past two years, according to Knight Frank India. Because there was a bulk of unsold inventory over the past 1.5 years, there were no new flats coming up in Chennai. The real estate consultancy believes that the unsold inventory in the city can easily be exhausted in another six years.

With the real estate market scenario getting better after the demonetization drive, commercial office space demand is slowly increasing. This, according to Knight Frank India, is a sign of employment prospects, which will lead to increasing incomes and housing needs, which means need for more residential properties. The vacancy levels of office space has come down to 10.8% in Jan-Jun 2017 from 22.5% in the same period in 2015. The highest rental growth has been witnessed in the Old Mahabalipuram Road or OMR Business District, in locations such as Guindy and Taramani.

The major contributor to the commercial real estate market in Chennai has almost always been the IT sector. This sector alone accounted for 0.7 million sq ft of office space in the city in this year. However, demand from the banking and financial sector is also increasing. With the limited office space now, and the increasing demands, the weighted average rental values of commercial real estate have increased to about Rs. 55 a month for one square foot.

This is a guest post by Dinesh Dhawde.

Saturday, August 26, 2017

HRA Exemption, Rent Deduction and Tax Benefits for Home Loan in India

Author: Sachin Gupta | Find me on Twitter

Many a times, we are all confused with tax calculations on House Rent Allowance (HRA) and tax benefits on home loan, etc. Believe it or not, planning your HRA carefully can go a long way in your financial planning and therefore studying and understanding the various guidelines related to HRA is paramount for a salaried class and a business person.


  • HRA Exemption:

According to section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules, least of following three is exempt from tax:

  1. Actual HRA received 
  2. Rent paid in excess of 10% of salary (Basic + DA) 
  3. 40% of salary (50% if residing in a metro i.e., New Delhi, Kolkata, Chennai or Mumbai) Salary for the above purpose means BASIC + DA.


Let’s take an example. 
Suppose that you’re residing in Mumbai and paying a rent of Rs 20,000 per month and that your salary package comprises of the following: 
  1. Basic — Rs. 50,000 per month
  2. DA — Nil 
  3. HRA — Rs. 20,000 per month (40% of basic)

Now, the exempted amount of HRA will be least of the following three figures: 
  1. HRA received i.e., Rs. 20,000 
  2. Rent above 10% of basic i.e., Rs. 15,000 (Rs. 20,000 – Rs. 5,000) 
  3. 50% of basic i.e., Rs. 25,000
The least of the three is Rs 15,000; therefore, in this particular case you’re entitled for HRA tax exemption of Rs. 15,000 p.m. (per month) out of total HRA received of Rs. 20,000 per month.


In other words, net taxable portion of the HRA works out to be Rs 60000/- per year. 
net taxable portion of the HRA = Total HRA received per year – HRA Tax exempt per year
                                                    = (HRA received per year Rs 240000/-) - (HRA tax exempt per year Rs 180000/-)
                                                   =Rs. 60000 per year


There are four variables in HRA tax calculations namely, salary (i.e. basic pay plus DA), HRA received, rent paid and the city of residence (whether metro or non-metro). In case all of the four elements remain same throughout the year, the HRA tax exemption calculation is to be done on ‘annual’ basis. On the other hand, if there is a change in any of the variable during the year then HRA tax exemption calculation is to be done on monthly basis.

In case the place/city of residence and place/city of working is different, for the purpose of HRA calculation, place of residence will be considered and not place of working. Suppose that you’re working in a factory or a company located in Meerut (near New Delhi) while residing in New Delhi. So, for the purpose of HRA, your maximum entitlement for tax purpose will be 50% of the basic instead of 40% because for metros HRA tax entitlement is 50% and for non-metros it is 40%.

If the employer refuses to allow the HRA tax benefit, then in that case just claim it while filing your return of income and get the refund of excess TDS deducted from your salary. Further with effect from AY 2014-15 a person claiming HRA of more than INR 100000/- will have to submit the PAN of the landlord to claim the exemption. 

Both the working spouses can claim HRA tax benefit separately, if both of them are paying rent and landlord issues either two separate rent receipts or only one receipt specifying the amount or proportion paid by each, then both husband and wife are entitled for HRA exemption according to the amount of rent paid. 

One can avail tax benefit of HRA if the person is living in the house of his/her parents. In such a case, one will be entitled for HRA tax exemption, but the owner of the house who may be the father/mother is assessable for the rental income derived from the house, provided such transaction should be genuine & not with an intention to evade tax. However tax benefit of HRA will not be available if one is living in the house of his/her spouse as no commercial transactions can occur between Husband & wife.



  • Deduction for Rent Paid

A self-employed person can claim tax benefit for the rent paid for his residence and can claim a deduction under section 80GG of the income tax act. As the self-employed person doesn't receive any salary, so there is no HRA and consequently question of HRA exemption – under section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules –doesn't arise.


As far as home loans are concerned following tax benefits are available to the tax payer:
  1. Tax benefit on principal repayment under Section 80C – Repayment of Housing Loan subject to maximum limit of INR 100000/-. (Maximum deduction under section 80C is INR 100000/-).
  2. Tax benefit on interest payment under Section 24(a) & (b). For self occupied property INR 150000/- and for let out property or deemed to be let out property there is no monetary limit to for interest payments.

  • Claiming both HRA and Home Loan Tax benefit
You can Claim both HRA and Home Loan Tax benefit provided you have a house in one city for which you have taken a home loan and you reside in another city due to work or similar reasons, then you are eligible to avail all the benefits including HRA, tax benefits on principal repayment of home loan and tax benefit on interest payments of home loan. But, if your house is vacant then you still have to pay notional rent income.

In this case the following situations will arise:

Your own house remains unoccupied while you stay in any other accommodation due to employment/business/profession reasons.  You may stay at a place – it may be a different city or a different location within the same city - different from the place where your own house is situated.  

  • Rented accommodation – You are paying rent:  In this case, you can claim HRA tax exemption while your house will lose the status of self-occupied property and will be treated as deemed to be let out, and thus its notional rental income will be taxable in your hands. However you'll get all the housing loan tax benefits i.e. both interest deduction u/s 24(b) and principal repayment under section 80C.

  • Non-rented accommodation i.e., you're not paying rent as the rent is not being paid, the question of HRA tax exemption does not arise. However, your house will be treated as self-occupied and you'll get the housing loan tax concessions i.e. interest deduction under section 24 and deduction for principal repayment under section 80C. 


In a nutshell, if you have a house, either stay in it or rent it out. Don't leave it vacant else notional rental income of your house (even if it is the only house you own) becomes taxable in your hands although you continue to get the interest deduction on housing loan u/s 24(b) and deduction for principal repayment of loan u/s 80C. Furthermore, as regards the HRA, you will be getting the tax exemption under section 10(13A) so long as you are staying in a rented accommodation and actually making the rent payment, irrespective of whether you are having your own house(s) or not.




Have any Questions?

Monday, July 31, 2017

How Will Real-estate Buyers Benefit From the RERA Act?

After over a year since the Real Estate Bill was presented in the Rajya Sabha, the Real Estate Regulatory Authority (RERA) Act is finally here. The much-awaited Act, which was implemented nationwide on May 1st this year, is aimed at bringing about the required accountability and transparency in the real-estate sector, which has so far been unregulated. Buyers across the nation, including those investing in expensive properties such as villas in Electronic City in Bangalore, are expected to be in the know of projects, right from the get-go.

A day before the implementation of the Act, M Venkaiah Naidu, Union Minister for Urban Development, Housing and Urban Poverty Alleviation, Information & Broadcasting, had tweeted, "#RERA promotes accountability, transparency & efficiency in the sector. Buyer set to be King. Promoter benefits from king’s confidence."

Here are a few benefits that buyers of real estate are expected to gain from the newly implemented RERA Act:
  • The Act will regulate the development work of projects that were ongoing as on the date of commencement of the Act, that is May 1, 2017, and for which the Completion Certificate was not issued. Which means, all ongoing and upcoming real-estate projects will have to be compulsorily registered by the developers. And, the registrations will need to be done before the projects can be marketed.

  • The term ‘carpet area’ has been given a clear meaning in the new Act. It states that the term covers usable spaces, including all areas covered by the internal walls—such as the kitchen and toilets—and excludes areas covered by the external walls—such as balconies and open terrace areas. And, buyers will need to pay for only the carpet area.

  • Unlike earlier days when there was not much transparency in the development work undertaken by developers and promoters, under the new RERA Act, all project-related details, including layout, sanctioned FSI, and number of floors/wings/buildings will need to be shared with buyers.

  • Quarterly updates on the development of the projects will need to be posted by the developer or promoter on the RERA site. The updates will concern the government approvals granted, overall status of the project, etc.

  • In case the developer provides false information regarding the project or breaches any of the provisions of registration, he will be liable to pay up to 5% of the estimated cost of the project.

  • Developers cannot take more than 10% of the project cost as advance without entering into a written agreement for sale.

  • To prevent misuse of the money invested by real-estate buyers, developers and promoters will have to transfer 70% of the received money to an escrow account. This money will be withdrawn for covering construction and land costs, and that too after the necessary certificates are issued by the architect, engineer, or CA concerned, stating that the said repairs are imperative. This measure is aimed at curbing developers’ practice of using buyers’ money for a project other than the one for which the money was reserved.

  • In case the developer does not hand over the possession of the property to the rightful allotted person, the latter can withdraw from the project and seek 100% refund of the amount paid, along with interest.

  • Any structural repair costs in the property will be borne by the developer for five years, as against two years earlier.

  • Non-compliance with the RERA Act will lead to up to three years of imprisonment or a fine of up to 10% of the estimated cost of the project, or both.

This is a guest post by Dinesh Dawde.

Tuesday, July 25, 2017

Rent vs Buying a house? What should I look for?

Author: Sachin Gupta | Find me on Twitter

This piece of the blog is primarily meant for residential end users/occupiers who will either end up owning or renting a house. Now, owning or renting is a dilemma which most of us face sooner or later in our careers. As easy as it may sound, but the decision is never without its fare share of glitches. Sumit Sharma, 29 years old, got recently married. He moved to Gurgaon 3 years ago and is currently working in a reputed company with decent salary and like most people of his age group he was stuck with this dilemma of owning vs. renting. On one hand there is easy access to home loans and plentiful of home supply with most builders screaming aloud from the rooftop to sell their real estate projects across India (oops...Houses) but on another hand there are some worries such as monthly installments, maintenance issues, locality, property valuations, and so on.

So, what are the factors that encourages owning as compared to renting and vice versa. Let’s Break It Down (L BID) to smaller elements. The core elements in this dilemma are:

- Down Payment element
First thing first, the most important element of making a decision to own a house boils down to down payment issue. In most cases, 15-20% of house value is paid towards down payment while the remainder is provided by the bank loan if credit worthiness of the person in consideration is good. Now, minimum price for a ready to move apartment in low rise or high rise building in Delhi NCR region (check the prices for other regions) ranges from 35 lacs to 40 lacs (prices vary for different locations). So, one has to have a minimum of 6-8 lacs in his/her pocket before even thinking of owning a house.

- Cash Flow element
Now, having passed through the first element with flying colors one has to do some cash flow calculations before going to the builder. Minimum rent for a similar apartment in Delhi NCR region (check rentals for other regions) ranges from 12 to 18 thousands with no overheads of property taxes, maintenance, insurance etc, whereas cost of owning will include loan installments + property taxes + insurance + maintenance charges. Monthly loan installment for the remaining 29 to 32 lacs will dent one’s pocket by at least 25 to 30 thousands depending upon the interest rate and tenure of the loan. Globally, housing is considered affordable if it is accessible at 25 to 40 percent of gross monthly household income for either rent or loan installments.

- Bubbles in House Price/Future Value
Bubbles normally lead to exorbitant prices when considered in relation to the underlying fundamentals. In Delhi NCR region, one would have noticed that residential property prices have appreciated sharply compared to the rentals. In most areas of NCR, the prices have appreciated by about 3-4 times in last 5 years whereas rental appreciation had been rather weak. What does this suggest; I guess you guessed it right, the price appreciation in property is not indicative of the actual demand & supply elements. Rather it’s the result of expectations that investors, builders are placing on the region due to forecasted economic growth. Now, when expectations are multiplied by expectations year after year, it leads to bubbles and you & I can only be the victims of the bubbles positively or negatively (in case the bubble bursts).

- Flexibility element
Flexibility element is crucial for those who tend to relocate because of employment, family, or other reasons. It doesn’t make any sense for a person to buy a house for 2-3 years and then again have to sell it because of relocation unless the house is purchased with an investment perspective.

- Credit Quality element
Those who are just starting their career with limited salary and no previous bank record will find it difficult to get the loan unless one has sufficient equity at his/her disposal and hence renting is the most likely choice for them.

- Ease of transportation
In metros and especially in Delhi NCR region, home-office-home travel is getting longer by the day. Buying a house nearer to the office is being considered a vital element. However, that comes with a heavy price tag. However, renting a house close to the office could be a serious consideration if one’s primary focus is the proximity to the office.

- Recreational activities
With changing lifestyle, recreational activities play an important role in one’s decision to own or rent a house. Other facilities such as shopping malls, schools, local connectivity also adds to decision making process of buying/renting the house. However, all these facilities come with a price tag especially in case of buying.

So friends, having considered all the above elements, a certain weightage can be given to each element and final result should be evaluated in favor of owning vs. renting. The analysis can yield different results for different individuals depending upon how much weightage they assign to each element.



 
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Friday, June 30, 2017

World's leading architects - Series 1



Dear readers, from now on, we will be presenting a series of leading architects and their works spread across the world. In the first edition, we present Sir Norman Foster, a British born architect. Here is the info-graphic showcasing his projects.

Other leading design houses, architects, consultants looking to reach out to wider audience can submit their entries at nirrtigo@nirrtigo.com

”Leading