How GST Impact on Real Estate?

Under GST, the treatment of rent is very clear. Landlords who are earning rental income by giving their properties for residential use will not be taxed under GST - thus there will be no GST on rent for houses. However, the GST rate on commercial property rent will be 18%, and it will be levied only by those who are earning more than Rs 20 lakh annually. If the landlord is unregistered due to the threshold limit, the taxable person has to pay GST on rent under reverse charge - at standard GST rate on commercial rent.

Goods and Service Tax impact on home loans

GST impact on the loan taker

Before evaluating the potential impact of GST on home loan EMI and costs, let us understand the components that are bound to be affected under GST. The main cost of taking a home loan is the interest payment on the principal amount. Similarly, any stamp duty levied in respect of documentation of home loan will also not change with GST, as stamp duty is not levied under GST.

GST impact on lender

Lender - In other words, banks and financial institutions that extend loans for real estate will receive ITC in relation to the services received. Also, purchased goods, which they can use against their GST output tax liability, which is good news.

Reduction in black money in the era of GST

GST will help cut down on the cash component in construction, as input will now have to be obtained from registered vendors to get the input tax credit. This would go a long way to reduce the black money component in real estate. In addition, the GST return process will ensure that both the supplier and the recipient of the goods and / or services are liable to disclose transaction details. Price, amount, GST rate etc.

FDI increase under GST

Investments coming from foreign shores are likely to have a positive GST effect - benefiting the NRI community, mainly due to a seamless-inclusive channel. Simplification of taxation is possibly the most positive GST effect on investment, which will also increase the confidence of the NRI market to invest in Indian real estate.

GST applicability on FSI / TDR

Floor Space Index (FSI) / Transfer of Development Rights (TDR) - Used by developers, are rights in land. As per GST law, not all immovable properties are excluded from the purview of GST, such as sale of land. There is a lack of clarity on whether FSI / TDR sales are to be considered "part of the land" - if they are, they too will stand out from the GST; If not, GST will be applicable.

GST on intellectual property rights

The GST law provides for the taxing of the supply of goods or services, or between both the concerned persons or different persons, without consideration. Typically in the real estate sector, multiple entities in the same group use single logos / trademarks without consideration, which can take advantage of GST, while no tax was previously applicable.

GST on barter Transactions

Many barter transactions are seen in the real estate industry. For example, giving free flats in exchange for 'development rights'. In the previous regime, barter transactions were mostly exempted from VAT, as a 'price' was not included. However, under GST law, all types of supplies such as barter, exchange, and so on, and the value of supplies will be taxed according to GST rules.

During Financial Crisis How To Manage EMI Payments?

Unlike our ancestors, who worked hard for years to buy their home are open to the idea of ​​purchasing their property for home loans. There is no doubt about taking home loans due to government policies. But at the same time, motivating oneself has made the youth tense and fearful about the unexpected future. Out of all the loans a person takes for a lifetime, the home loan is the most difficult to repay. A normal home loan is taken for a period of 5 to 30 years. EMIs are easier to manage when a home receives some rental income, but this is not the case with self-used property.

Well, we have never seen the future. But at least we can be ready to face it. In this writing, we have shared some great tips to help you manage the payment of EMI during financial stress.

1) Don't Overload Yourself - If you have invested in multiple properties, and repaying a home loan is a difficult task that makes you feel stressed, and then take action on time. Instead of living a stressful life, you should consider getting rid of the burden. These days, you can easily sell a property, even if it is under debt obligation. Alternatively, you can rent it to a suitable tenant or real estate company. By renting property or renting it to a person or business organization for a long period, you can earn a regular income that can be used to pay off debt.

2) Speak to the bank at the right time - Whenever you feel inability to repay a home loan, do not hide the truth from the bank by avoiding its message or call. Rather, you should be transparent about your position to the bank. In general, banks try to support their customers in adverse circumstances.

3) Maintain a contingency fund- To face the effects of adversity such as job loss or economic downturn; you should maintain expenses for about 6 months as a contingency fund. Due to low interest rates in savings accounts, you can keep this money in fixed deposits.

4) Get insurance - Does not come with a life guarantee card. In certain situations such as job loss, economic downturn or death, loan installments may not be paid on time. Failure to pay a home loan can lead to a situation when the house or its collateral will be confiscated. To prevent such situations in unexpected future, you should get home loan insurance.

5) Make quick payments - In some situations, it can be difficult to repay the EMI of a home loan. But reducing EMI payments every month will increase the outstanding principal amount. If possible, try to make a quick repayment of the principal amount as it will reduce the financial burden. Remember that repaying home loan should be your priority over other expenses.

How to save tax from your real estate investment?

Buying a property is the biggest purchase or investment that most people make in their lifetime and the government realizes this. The government has allowed income tax deduction if the property is purchased on loan. The borrower can claim deduction from 1.5 lakh to 2 lakh under the Income Tax Act on home loans. Entire interest can be deducted directly from income if the property is not occupied by the borrower. These above conditions apply even if the money is from friends, family or private sellers.

There is a problem with the current market situation, as projects are delayed in completion. This in turn causes problems for borrowers. If their house is not fully constructed then the borrowers cannot deduct any interest. A buyer, on the other hand, receives the benefit of the principal amount. Upon possession, the borrower of the property can claim a deduction for the interest paid during the pre-construction period. To take advantage of the current scenario, a couple must take out a joint loan that allows each to claim a full tax deduction for both principle and interest. This also applies to children and parents.

If the borrower has only one house and is self-occupied, there is no taxation in this case, but if there are more houses and it is neither exempt nor occupied, then taxation here can be a bit complicated.  In such a case, the owner should get the national rent value and pay tax on it. An appropriate method is followed to calculate the national price, taking into account the value of the municipal property and the Rent Control Act or the ongoing rental rates of the locality.

If a person is trying to claim a housing loan deduction and Housing Rent Allowance (HRA) at the same time, it causes trouble. Many claim HRAs because they have a home in a different city and live in a different city. The department allows you to claim an HRA in the same city with real reasons, such as if you have a suburb in the city and your office in the city. When calculating the national value of your second home, you can deduct some taxes like municipal taxes and also 30 percent of the value for repairs and maintenance.

When it is time to sell the acquired property, the tax paid is calculated on the profit generated. If it is sold within three years of acquisition, the seller is required to pay Short Turn Capital Gains (STCG) and the time period is more than three years, they are required to pay Long Turn Capital Gains (LTCG) requires surcharge which is more than about 20 percent. If one buys a new asset equal to the long-term capital gain within one year before the date of sale, the entire tax outgo can be saved. This property is under construction. The time period is three years. While calculating STCG and LTCG tax, one can deduct money on corrections and also to acquire assets such as payment of stamp duty, legal fees and brokerage.

Trends those are likely to shape the real estate market in 2020

2019 was a relatively challenging year for Indian real estate, which faced a slowdown in the sector. Nevertheless, the recession made Indian developers aware of where they stand and the drawbacks are to blame. As a result, industry experts expected, in 2020, to adapt to several changes in terms of preference, demographics, technology and policies, in a bid to boost buyer sentiment and promote affordable housing sales.

Even with the slowdown in the sector, sales showed some signs of improvement in Q3 and Q4 of FY19, due to redemptions made by developers in their product offering, based on an understanding of consumer demand. New age developments are more suitable for millennial, which are actually the target group of many affordable housing developers,” says Dinesh Doshi, Managing Committee Member, CREDAI MCHI, Raigad.

Top Realty Trends in 2020

Real estate to operate the end user

The market is becoming increasingly end user driven. “While the number of real estate investors is already small, this segment is shrinking further. In the coming year, it seems that almost all of the demand will come from end users, with the supply of products targeted primarily to them, says Mayur Shah, Managing Director, Marathon Realty.

Demand to increase compact housing, co-working and commercial space

The demand for 'compact housing' is likely to increase a great deal across the country. In different regions, homes whose price is right have the potential to elicit good feedback from consumers. Developers will address this challenge, going further,” says Shah. The healthy demand for co-working spaces seen in 2019 is likely to continue until 2020. The growth of the commercial real estate segment, which is attracting foreign investments, will also help in improving the economy.

Heavy Dependence Technology

New-age customers rely heavily on technology and social media as they enter the housing market. Thus, it will become imperative for developers to adopt and leverage technology, to engage with customers, to enhance the experience at every point of view and to create positive perceptions about the field. Adoption of technology will also increase efficiency, quality and transparency, which will lead to change in the sector, ” he explains.

Challenges facing real estate in 2020

The industry is seeking support from the government, to overcome some challenges and to emerge from the recession. While the government has taken several steps so far, continuous reforms are necessary in many key areas.

·     Industry status and single-window clearances

·     Funding from banks

·     Financial bailout

·     GST burden and input tax credits

·     High stamp duty charges

·     Home loan interest rates

What are the rights and duties of the buyer related to RERA?

Section 19 of the Real Estate Act states that a home buyer shall:

• Accessed to obtain information related to approved plans, layout plans as well as approved by specific authority and other such information. 
• To know the phase-wise scheduling of the project including the provisions of water, sanitation, electricity and other facilities. 
• Entered to claim possession of the apartment, plot or building. 
• At such a rate one is entitled to claim a refund of the amount paid along with the interest and may be compensated in the manner provided under the Act. 
• After handing over the physical possession of the unit, it entered for necessary documents and plans, including common areas. 
• Responsible for making the necessary payments specified in the sales agreement at the appropriate time and place.
• They will also have to pay their share of registration fees, municipal taxes, water and electricity charges, maintenance fees, land rent, and other charges.
• Essentially responsible for participating in the formation of a union or society or collaborative society.
• Responsible to pay interest as stipulated. If mutually agreed upon by promoters and allottees, the interest may be reduced.
• Take possession of the unit within two months of obtaining the occupancy certificate.
• Responsible for participating in the registration of the deed.

How to file a complaint

• Registered allottees or organizations of any voluntary consumer association under any law can approach the Real Estate Regulatory Authority or Assistant Officer to lodge a complaint.
• The fees will be determined by the authority.
• The authority may direct that specific cases or issues be heard and decided by a single bench of the chairperson or any member of the authority.
• After giving a reasonable opportunity of hearing to any person, the authority shall appoint an assistant officer to conduct an inquiry in the prescribed manner.
• The application for compensation will be dealt with expeditiously by the officer concerned. The matter will have to be disposed of within 60 days from the date of receipt of the application.