Maharashtra CM approves cluster redevelopment in Thane city

 MUMBAI: Nearly three weeks after the Bombay high court cleared the decks for cluster redevelopment in Mumbai suburbs, Thane and Navi Mumbai, chief minister Devendra Fadnavis approved the regulation for the reconstruction in Thane city by implementing the urban renewal scheme.

“This will pave way for redevelopment of old, dilapidated & unauthorised buildings in planned manner & in large public interest,” Fadnavis tweeted on Thursday.

In Thane, cluster redevelopment projects will get an FSI of 4, depending on the width of the road next to the project. To ensure the policy does not further crowd the region, the minimum size of a cluster will have to be 10,000sqm, said an official. Builders will also have to develop public amenities on 25% of the plot, leave 15% for open spaces and implement development plan reservations.

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Positive move - GST: Win-win for buyers, developers

The Goods and Services Tax (GST) roll-out in July provides a unique opportunity for both, buyers and developers.

With Goods and Services Tax (GST), one of the biggest tax reforms of independent India all set to be a reality soon, the real estate sector is expected to get a boost. The good news for both, the developers and home-buyers is that they will all stand to gain from this historic financial move.

Industry experts feel that the move will help the sector in a big way. Jaxay Shah, President, CREDAI, talking about GST and its possible impact on the real estate sector, says, "CREDAI welcomes the introduction of GST as a major reform since it integrates all central and state taxes into one comprehensive tax regime for the entire country. Trade and industry are major gainers of GST as it will eliminate multiple taxation at the state and centre level, with consequent cascading effects. However, for all other sectors, GST is their total indirect tax liability; for the real estate sector, GST fixed at 12 percent, is only a fraction of its tax burden. The real estate sector is exceptional because the GST regime does not eliminate multiple taxation. Stamp duty, levied by the states on all immovable property would continue to remain in force, even after the implementation of GST. The additional burden on real estate on account of the stamp duty aver ages between 5 and 8 percent of the value of the immovable property. Besides, the stamp duty is payable on every transaction. Lastly, stamp duty is levied by the state governments on circle rates or guideline values of the property, which are arbitrarily determined and far in access of the value at which the transactions take place."  

Shah further explains, "Unless abatement for land is allowed, cost to the end-consumer would go up. CREDAI would, therefore, urge the government to minimise double taxation on real estate by treating land as zero rated under the GST regime. The positive multiplier effect of real estate on other industries would make up for the revenue loss and the nation would be thankful for a tax regime consistent with the objective of Housing for All by 2022."

Explaining the new reform further, Sachin Menon, partner and head, indirect tax, KPMG, India elaborates, "The government has specified the GST rate of 12 percent on the sale of under-construction properties (including the value of land). Sale of land completed property is not subject to GST. The primary inputs such as cement are taxable at 28 percent, whereas steel will attract a GST of 18 percent. Although developers can claim full ITC (Input Tax Credit), refund of any excess unutilised ITC is not permissible. While there is a positive impact due to higher input tax credit, the inclusion of value of land for payment of GST at full rate of 12 percent, is not in line with the industry expectations."

Sharing industry inputs on the same, NAREDCO Chairman, Rajeev Talwar, points out that GST is the biggest reform in the finance sector since 1947 and NAREDCO compliments the union and the state governments for painstakingly working out this path-breaking reform, "We had submitted a white paper the government with the detailed analysis of tax rates at multiple points and their implications and are indeed happy that the paper has been studied and considered by the GST Council. The heavily-taxed real estate sector welcomes a single, stable 12 percent GST rate, inclusive of the value of land and with full Input Tax Credits (ITC). NAREDCO is of the view that the actual tax incidence under GST, would match or be lower than the existing multiple indirect taxes on the sector. The GST rate for work contracts, which will also be offset by input credits, is expected to provide a seamless and simplified tax policy. The 12 percent GST for construction of projects for sale to buyers will be a much-required shot-in-the-arm to speed up the growth of this sector."

Considered to be a game changer for the sector, NAREDCO president, Parveen Jain, agrees, "There is no doubt that GST will be a gamechanger for the Indian economy, including the real estate sector, since it will subsume more than 6 major taxes and levies into a single consolidated tax. Additionally, the unified tax regime will stop the unwanted practice of double taxation, which hurts real estate and other sectors, given its cascading effect with inflated prices for end-users. NAREDCO is further hoping that the GST Council will also address issues related to the affordable housing segment, which was exempted from service tax in the previous tax regime."

Clearing the air about GST's effect on homebuyers, Menon avers, "As far as buyers are concerned, continuation of stamp duty on the agreement value with an enhanced GST rate will increase the cost of buying real estate unless the developers pass on the benefit of GST to consumers. Given that property prices are market-driven and seldom based on the cost of construction, the expectation of any reduction for the consumer who has already purchased the property seems to be far-fetched. The government is expected to generate higher revenues from the increase in the tax on the sector, especially due to the restriction on the refund of excess input tax credit. Indian real estate is driven by consumer demand and sentiments; unless the prices are brought to a realistic level, an uptick in the demand curve may take some more time."

On a concluding note, Menon explains the trend citing an example of the tax break-up for the consumers, "At present, a buyer, say in Mumbai, has to pay the Maharashtra VAT at the rate of  percent on the agreement value. Besides VAT, the buyer also pays the service tax on the entire consideration at the abated rate of 4.5 percent. Thus, the effective incidence for the buyer is 5.5 percent (approximately) on the sale price. Going forward, under GST, though he will not pay VAT Service tax, nevertheless, he will be liable to pay GST at the rate of 2 percent. So, clearly the tax burden for buyer will increase by around 9 percent unless the same is compensated by way of reduced prices by the developer due to the enhanced ITC."

Read all such Property News at CREDAI MCHI – Thane Unit website.

Affordable housing is the next power house of real estate

The affordable housing segment has not only given a new lease of life to the residential sector, it has also altered the market dynamics.

Affordable housing is the talk of the town owing to favourable policy announcements and tax benefits announced by the Modi government over the past three years.

Some of the policy initiatives include "Housing for all by 2022", "Pradhan Mantri Awas Yojana" (PMAY), grant of infrastructure status to affordable housing, among others, which allows buyers to purchase their dream homes by taking small-ticket home loans.

"Developers, on the other hand, have also received funding at lower rates under the infrastructure status that will induce them to construct more affordable homes in the country. The affordable housing segment will command a decent amount of share in the total residential sales due to increased participation from private players and government support. There is no doubt that India is facing a shortage of housing that can be met only by affordable housing," says Avnish Yadav, deputy general manager (residential services) at Colliers International India.

Industry experts say that real estate has remained unorganized and unregulated for many years, and a majority of people were unable to invest in the sector. "The affordable housing mission has now gained momentum as both the government and financing institutions have put in motion various policies, benefiting the unprivileged section of the society. Due to these reforms, the real estate sector is likely to recover soon and will also regain the trust of buyers. The positive impact of the government policies is visible as more and more people are turning up to buy affordable homes," Pradeep Aggarwal, Co-founder and Chairman of Signature Global, said.

Talking about the growing need for affordable housing, Brijesh Bhanote, CMO of Paras Buildtech India Pvt Ltd, says, "With the rapid pace of urbanization, rural to urban migration and constraints in supply, the requirement for shelter has been growing, especially for the middle and lower-income group of people. The scope in the affordable segment is immense as there has been a shift in demand from big-ticket size purchases from investors to end-users and potential homebuyers who mostly look for budget homes. This segment of housing is going to be the next big thing in the future as developers are also showing keen interest in taking up these projects."

Vineet Relia, Managing Director of SARE Homes, says: "Affordable housing is a necessity that needs to be fulfilled to bring back the real estate sector on track. The market is flooded with the high-end luxury housing, but the segment of affordable housing is evidently lacking in a few states. Once it gathers pace, affordable housing will not only enhance the basic quality of life, but also make good economic sense. Thankfully, affordable housing is drawing in lots of buyers as well as investors and realty majors are looking at enhancing their presence in this segment also."

On the flip side, however, the affordable housing sector involves numerous challenges, including lack of availability of land, rising construction costs, regulatory issues and lack of home finance, which impact the ability of buyers to purchase houses in the organized sector.

"Many developers are now eyeing this space due to huge demand and incentives offered by the government; also, these projects are located at leapfrogged locations that offer land parcels at economical prices for such projects. While these locations may offer cost-effectives homes, the lack of physical and social infrastructure here remains a concern," says Avnish Yadav.

Rising land costs are also a big issue.

"With the government granting a slew of incentives to the affordable housing sector, it can be considered as the future of real estate. However, the government needs to look into the issue of rising land costs and should put in place a single-window clearance mechanism," Sumit Berry, Managing Director of BDI Group, says.

Read all such Property News at CREDAI MCHI – Thane Unit website.

What's trending - Marriage, made in real estate heaven?

Jointly owning your dream home, post you embark upon your marital life could prove to a blissful experience, believe experts.

People always say that happiness when shared is doubled. That is why when a newly married couple, decides to buy their own dream home, there is a different kind of joy that they share that surpasses everything else. There are a lot of perks associated with home-buying, especially when a married couple decides to take the plunge. We get our experts to share some of them.

A joint ownership:

Ronak and Reena Patel, a young couple who recently bought their home believes, "Joint ownership of a property increases the trust in each other. Owning a home to gether, helps in better planning of the future objectives. From arranging the funds for home-buying to paying the EMIs; in each step, both, husband and wife, get a chance to understand each other's financial limitations and accordingly, plan for the future." Joint ownership has several benefits but the most important one certainly is associated with the benefits pertaining to taxes, loans and duties.

Duty benefits:

"Several states (Gujarat, Delhi, Haryana, Uttar Pradesh, Rajasthan, Odisha, etc), offer some relief ranging from one-two per cent on the stamp duty and registration charges, in case the first owner of the property is a female. In fact, Delhi even offers one per cent relief on the stamp duty for married couples, jointly owning a property. For availing such a relief, it is important that the residential unit being purchased, is in the name of the female (firstjoint owner of the property, depending on the state's jurisdiction)," says Kalpesh Dave, Head Corporate Planning and Strategy, Aspire Home Finance Corporation Ltd ­ AHFCL.

Tax benefits:

In case of a married working couple opting for a joint home loan, both spouses would be individually eligible for an income tax rebate upto Rs 1.5 lakh on repayment of the principal amount, under section 80c and upto Rs 2 lakh on repayment of interest under section 24 of the Income Tax Act. "To avail the income tax benefits on a joint home loan, the co-borrower of the loan has to be the co-owner of the property as well. So, if you are a co-borrower but not a co-owner of your property, then you cannot avail the income tax benefits. Co-ownership is mandatory to avail the income tax benefits," explains Jeevan Kumar K C, Head Investment Advisory Services, Geojit Financial Services.

The extent of rebate that can be claimed by both would be in proportion to the contribution made by them towards the repayment of the home loan. One may consider hisher tax bracket individually and can then decide the contribution percentage in the repayment of the home loan.

Home loan benefits:

Experts believe that a joint home loan is always a better option for couples nowadays, especially when the co-applicant can contribute towards the repayment from their income as well. A joint debt is actually a joint responsibility for both, husband and wife and this responsibility in turn, creates a strong bond between them and increases their alertness levels when it comes to the repayment of the home loan.

When a couple applies for a joint home loan, it often increases the borrowing capacity. If one of the applicants has a low credit score, then the co-applicant's credit standing may help in improving the overall borrowing potential.

The age of young married couples works in their favour when they apply for a home loan to a financial institution, as they can get the loan for a higher tenure (20, 25 or even 30 years in some cases). The longer tenure helps in rationalising the monthly installments.

Factors to keep in mind when owning a home jointly:

"A young married couple must understand and chalk out their budget correctly while purchasing a property and the incurring expenses that follow. One has to be practically well-prepared with the expenses to be borne. This involves managing your expenses well, as purchasing a house involves the maintenance fees, mortgage application fees and other financial responsibilities," opines Sushil Raheja, CEO, Raheja Homes Builders & Developers.

Experts also caution against the risk of choosing a joint applicant as both the partners become legally liable in case of any erratic repayment patterns. As they both utilise their full loan eligibility, the possibility of obtaining another loan becomes difficult.

In conclusion:

If you are entering into matrimony or have been enjoying your martial life for a long time, owning a real estate investment together, could reap huge benefits in the long-term. However, do make sure you cross verify all the necessary details before taking the plunge to avoid any hassles at a later stage.

Read all such Property News at CREDAI MCHI – Thane Unit website.

SBI cuts interest on home loans above Rs 75 lakhs, by 10 bps

Following the RBI’s reduction in risk weightage on home loans, the State Bank of India has made the first move and lowered the interest rates on home loans above Rs 75 lakhs, by 10 basis points, with effect from June 15, 2017

 

Close on the heels of the Reserve Bank of India’s (RBI’s) policy action, India’s largest lender, State Bank of India, on June 9, 2017, announced a lowering of interest rates by 10 basis points, on home loans above Rs 75 lakhs.

The new rates are effective June 15, the bank said in a statement. For salaried women, the new rate will be 8.55 per cent while for others, it will be 8.60 per cent. “Taking a cue from the recent RBI reduction in risk weightage on home loans, SBI is passing on the benefit to its customers, by reducing its interest rates on home loans above Rs 75 lakhs,” MD (national banking) Rajnish Kumar said.

In the second bi-monthly monetary policy review announced on June 7, 2017, the RBI had reduced the LTV (loan-to-value) ratios, risk weights and standard asset provisioning rate, for individual housing loans for new customers. For housing loans above Rs 75 lakh, the central bank lowered the risk weight to 50 per cent, from the earlier 75 per cent. The standard asset provisions, or the amount of money to be set aside for every loan made, was brought down to 0.25 per cent from 0.40 per cent.

In April 2017, SBI had reduced its interest rates by 25 basis points.

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Home loans to get cheaper as RBI slashes risk weight

Home loans may get cheaper, with bankers indicating that the interest rate on such loans will come down, following the reduction of risk weights by the RBI

The Reserve Bank of India (RBI), on June 7, 2017, reduced the risk weight for individual housing loans above Rs 75 lakhs, to 50 per cent from the earlier 75 per cent, while for loans between Rs 30 and Rs 75 lakhs, a single Loan-to-Value (LTV) ratio slab of up to 80 per cent has been introduced, with a risk weight of 35 per cent.

RBI governor Urjit Patel explained that this is a part of the central bank and the government’s attempts, of ‘targeted interventions’ to help prop-up the sagging growth numbers. However, the Reserve Bank left lending rates unchanged in its monetary policy review, citing risks to inflation due to a spurt in farm loan waivers by states but raised the lending capacity of banks to support economic growth.

The decision to reduce the risk weights for home loans over Rs 30 lakhs, will release capital for the banking industry and is a positive move, SBI chief, Arundhati Bhattacharya said, in a statement. The large cut in inflation projection by the RBI in the monetary policy, is in consonance with ground realities and is likely to create room for rate cuts in the latter half of the year, Bhattacharya added.

According to Bank of India MD Dinabandhu Mohapatra, the reduction in the statutory liquidity ratio (SLR) by 50 basis points, effective June 24, 2017, will facilitate banks to meet the LCR requirement of 100 per cent comfortably by January 1, 2019. However, this measure will not have an impact on the credit offtake, as banks are already in a situation of excess SLR, in spite of sluggish credit growth at 5.7 per cent, he said.

“The reduction in risk weights and standard asset provisioning on certain categories of housing loans, will lower housing loan rates and increase the housing loan portfolio of banks,” he said.

The reduction in the risk weights on certain categories of housing loans, is indeed a positive signal, said Rajeev Rishi, chairman of the Central Bank of India. The housing loan segment is the major sector of retail. Since retail loans are only showing signs of growth, reduction in LTV ratio, risk weights and standard assets provisioning, would spur growth in this segment, Rishi explained.

Welcoming the decision of the RBI, ICICI Bank MD and CEO Chanda Kochhar, said the the SLR cut and reduction in risk weights for housing loans, are positive moves that will support bank liquidity and encourage growth in housing loans.

According to Govind Sankaranarayanan, chief operating officer of Tata Capital, the decision to reduce the risk weight on housing finance for properties worth Rs 30-75 lakhs, should help reduce the burden borne by financers through capital costs and lay the platform for a rate cut in the future.

Read all such Property News at CREDAI MCHI – Thane Unit website.

 

Home loans above Rs 75 lakh become cheaper

In a move that will encourage banks to lend more for housing in large cities and make high value home loans cheaper, the Reserve Bank of India reduced the risk weightage on home loans above Rs 75 lakh to 50% from 75% earlier.

"Considering the importance of the housing sector and given its forward and backward linkages to the economy, it has been decided as a countercyclical measure, to reduce the risk weight on certain categories. It has also been decided to reduce the standard asset provisioning on such loans," RBI said in its monetary policy.

In its monetary policy review the RBI retained the repo rate at 6.25% and the reverse repo rate at 6%. The marginal standing facility (MSF) – an emergency funding facility continue to remain at 6.5% as also the cash reserve ratio of 4%.

In another move that will ease liquidity in the banking system by close to Rs 50,000 crore, Reserve Bank of India has reduced the statutory liquidity ratio (SLR) – the prescription for minimum holding of government securities. As against investing 20.5% of their deposits in gilts, banks will now have to invest only 20% with effect from June 24, 2017. RBI said that the reduction was aimed at allowing banks to comply with the international norms on liquidity coverage that come into effect from January 2019.

It was widely expected that the central bank would keep rates on hold. However, economists believed that RBI would ease its stance from 'neutral' to 'accommodative' to send a message that easy money conditions would prevail. The central bank however continued to maintain a neutral stance on the ground that easing of prices might be temporary. It also pointed out that fuel prices have been hiked since the inflation numbers were published and prices might rise further.

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