Real Estate Taxation-Income property tax law in India

Understanding of Income Tax laws is important in any property transaction. Few terms and provisions which are important to know are:

Capital Asset [Sec 2(14)] :

Capital Asset means property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible, but exclude:

  1. Stock in trade held for business
  2. Agricultural land in non-urban area i.e., an area with population less than 10,000.
  3. Items of personal effects, i.e., personal use excluding jewellery, costly stones, silver, gold.
  4. Special bearer bonds 1991
  5. Special bearer bonds 1991 5%, 7% Gold bonds & National Defence Bonds 1980.
  6. Gold Deposit Bonds 1999.

Real estate is a Capital Asset. Even Letter of Allotment if containing legal bindings is considered as Capital Asset.

An asset which is held by an assessee for less than 24 months is called as Short Term Capital Assets whereas an asset which held for more than 24 months, is called as Long term Capital Asset. In case of share and securities, this period is reduced to 12 months.

Ransfer [Sec 2(47)]:

Transfer includes;

  1. Sale, exchange or relinquishment of a capital asset
  2. Extinguishment of any rights in a capital asset
  3. Compulsory acquisition of a capital asset under any law
  4. Conversion of a capital asset into stock-in-trade
  5. Transfer of rights in immovable properties through the medium of co-operative societies, companies etc.
  6. Transfer by a person to a firm or other Association of Persons [AOP] or Body of Individuals [BOI]
  7. Distribution of money or other assets by the Company on liquidation
  8. Distribution of capital asset on dissolution.
Capital Gains:

If the Property is held for less than 2 years from the date of purchase, the same is termed as ‘short term capital asset’ and the gain on sale of such property is taxed at applicable normal rate of tax.

However, if the asset is held for more than 2 years from the date of purchase, the same is treated as ‘long term capital asset’ and becomes entitled to host of tax benefits like:

  • Cost adjustment for inflation
  • Reinvestment benefit
  • Concessional rate of tax at 20%

Cost adjustment for inflation

Section 48 of Income Tax Act provides that the cost of acquisition and improvement thereon shall be adjusted upwardly for inflation referred as cost inflation indexation. The Act has provided 1-4-2001 as the base year and notifies indexation factor every financial year.

Reinvestment Benefit

Sections 54, 54EC and 54F provides various kinds of tax reliefs if the capital gain or sale consideration is reinvested in purchase of another residential house or invested in specified bonds. The maximum limit of investment in specified bonds is Rs.50 lakhs. The benefits under these sections are mutually exclusive and can be taken together. However, the tax benefit varies depending upon whether the sold property is residential or commercial.

Concessional rate of tax at 20%:

The Act provides that capital gain on sale of immovable properties as finally computed after taking benefit available under various sections, shall be taxed @ 20%.

The above benefits of long term capital gain are available only for personal assets and not for assets held as business asset.

Tax Deducted at Source (TDS):

Tax Deducted at Source or TDS as its commonly known refers to collecting income tax from the payment source. Under the scheme of TDS, Deductor who is a person/company is liable to deduct the Tax at source from the payment being made to the other party. Deductee is the person, from whom the tax is being deducted or accrued for deduction.

In India, w.e.f. 1-6-2013 the Buyer is required to deduct tax @ 1% from the payment made to Seller/Developer and deposit the same with the Government authorities.

The cut-off value for such a transfer of property is above Rs.50 lakh. So if you have a house or a plot of land, which is valued above Rs.50 lakh at the time of sale, then you will have to pay a TDS of 1% while selling it which will be deducted by Buyer and deposit with Government on Seller’s behalf. Agricultural land is exempt from this. TDS @ 20% is applicable for NRI, at the time of sale or transfer of property. However, such NRI seller or the Buyer may apply to Income Tax authorities for lower rate of tax deduction.

How Co-working spaces are boosting realty?


India is intrinsically working on it’s entrepreneurs.

Recently, India jumped 23 slots in the world ranking of  ease-of-doing-business, which is a clear consequence of the booming start-up culture that India is witnessing.

While many of these offices are yet to own their own commercial real estate, they’re thriving off the latest trend in commercial sector – Co-working spaces.

Co-working spaces house a number of small businesses, companies and startups under one roof, that fulfills most of their professional needs. If you walk into one of these places, you may come across a team of five members working with 5 seats and 2 desks, with another team working just a few feet away from them.

This concept allows startups to have an actual vibrantly decorated office for a monthly fees, which flexibly accommodates varying needs. In India’s sprawling startup scene, the concept seems to be doing really well.    

Co-working Real Estate – Current Scenario

India currently has about 600 co-working spaces spread across all major cities with Bengaluru, Delhi and Mumbai having the biggest share.

Over the past few years, the popularity of co-working spaces has increased immensely primarily due to the sprout in the number of startups in India.

There are about 180,000 seats in India’s coworking real estate, which is growing at a breakneck pace. For instance, the size of total real estate in 2017 measured around 1.8 million square feet, whereas only the Q1 of 2018 registered a 2 million square feet in total.

Benefits of Coworking Spaces

Coworking spaces offer a number of benefits to the startups as they take away the primary obstacle of paying for a full-built office. Startups can utilize as much as they need and still get a modern workspace to work at.

Here are some other reasons for which a startup would like to work at a coworking space.

No Bigger Upfront Costs

It’s naturally easier for a business who is just taking off to get an office without investing lakhs at one go. Most coworking spaces don’t demand for lakhs in investment but just a monthly fees of using the designated corner of the office, which is lesser than a leased office at a prime location in Mumbai.

When it comes to extracting the full value for the money, startups can’t ask for more. We’ll use 3 desks and 6 seats with Wifi, let’s lock it at 30,000 per month in the downtown of the city for 8 hours a day. Electricity, cleaning and reception area included.

It’s more than profitable than renting a shack somewhere in the suburbs for the same price minus every amenity offered at this price.

Minimum Leasing Hassles

If we compare shared spaces with a regular leased commercial office property, the hassles of leasing are pretty low.

There are no legal tenders required to take a coworking place for lease or on contract and you just pay the fees as per your requirements. You don’t have to take care of maintenance and you can use the place 24X7 which is a great option for homegrown startups.

Some coworking providers may ask for a 10 month security deposit but even then, it’s not an investment that you have to make. The day your job is done, you can move ahead to a new place without a worry.  

Vibrant Work Environment

The modern lot of coworking spaces are in sync with the modern office needs. They use vibrant furnishing, interior decor and enough space to breathe for everyone.

All the business essentials such as fast Wifi, coffee makers, front desk reception are also taken care of by the provider, which otherwise are your headache.

Moreover, a dynamic environment where everyone is hustling to get big goes a long way in boosting your enthusiasm about your own work, rather than a isolated cubicle in a jam packed ten story tower.

Wide Range of Options

It’s not like that a coworking space is limited to a given number of chairs and tables. You can choose the more premium cabinets which possibly include sky gardens and pool tables for the extra buck.

Alternatively, you can settle for a smaller arrangement as you begin and then expand as you get more members on the team. Most other independently leased offices won’t give you this freedom.  

Side Perk

Coworking spaces also offer a number of side perks such as networking opportunities and reserved parking space. As the competition increases, more new innovative features will be added to the current crop of coworking spaces.

A few of them offer guest access to additional team members and in-house pantry for the members at times. These perks are can’t be nearly as expected from an office leased independently.

What do you need to set up a Coworking space?

Looking at how things stand, there is a lot of promise in this sector for growth and an ever increasing demand for remote offices. Hence, delving into the coworking market to set up an office of your own isn’t a bad idea either.

Many new coworking startups are working as providers between the leasing businesses and the real estate owners, which allows them to operate without actually buying the place.

A lot of coworking spaces exist in the major localities of the metropolitans and it’s hard to compensate such locations without investing millions at a go.

Therefore, coworking startups serve everything that makes a piece of commercial property come alive for the prospecting businesses. Here are a few things that you would have to keep in mind, if you want to set up your own coworking space business.  

Find a Great Office Floor or Building

As states, you don’t have to buy a whole building to start up. You can do very well by leasing a whole floor or a small building from the property owner.

Given the profitability of the market which has raised about $68 million in the recent three years, property owners would want to give off their office space for setting up a coworking hub.   

The hunt is much more difficult than it sounds because bigger and better locations are often reserved for Multinationals who’d have a strong backing to pay for the lease.

Therefore, professional commercial real estate advisors will be required in your case who could set you up with the prospects in your city and get the ball rolling.

Getting the Office Space Ready

Once you have your hands on a great office floor, you can begin with the interior setup. Depending upon how well the property is prefabricated to be an office, you’ll have to make the additions.

Some properties already have a good carpet flooring, the Air Conditioning figured out and security system in place, which’ll save you some costs.

Outline of the things you’ll need to integrate

  • A Refreshing interior design
  • Plumbing and Electrical Fittings
  • Internet Wiring
  • Furnishing – Chairs, Desks, and bean bags

The costs associated with these things would mainly depend upon your business model. There are all kinds of coworking spaces that offer various amenities, while some just offer a nice place to sit in.

Depending upon the business environment, some coworking spaces could be as simple as a coffee shop with chairs tables and a small pantry, while some could be comparable to a 3 star hotel, including space for events, and board meeting rooms.

Operating the Coworking Space

After the infrastructural setup, you’ll need the things that keep the office going.

  • Staff – You’ll need to hire a team of security guards, stewards, housekeeping professionals and managers who’d make sure that the space runs as expected. You can share these responsibilities among your own team as far as conditions allow.
  • Software – Managing the bookings, collecting fees and alloting office space without a software would be hard to imagine. Therefore, significant thought needs to go in getting software ready for the coworking space.
  • Sales and Marketing – Marketing is an active process and a pivotal one when we talk of real estate businesses. No matter how jam packed your office space is, it’ll need the support of new customers constantly flowing in, to keep it running.

Are Coworking Spaces Profitable?

The current trends are pretty promising if we look at India’s market for coworking spaces.

WeWork which is one of the largest coworking providers in India has grown up to a capacity of 12,000 members across its various ventures in India. The company evaluates around $45 billion globally with more funding flowing in.

Similarly, Workafella, which has grown out of Chennai is another prominent example of a proliferating startup, have spread its wings in 5 of the major metropolitans of India.

Same goes for 91Springboard, which now has 21 centers in 9 of the cities in India and is currently banking on the large number of corporate events, it hosts.

The key factors in making a coworking space successful as revealed by the owners of these startups can be briefly summarized as follows.

  • Unique propositions that no one else offers to attract clients.
  • Lucrative styling that breathes freshness into the visitors as soon as they step in.
  • Smart mergers and tie-ups that could allow you to make the most of the office space.

Given the commercial real estate of India and the presence of about 8600 startups in India, the demand for a vibrant cultured office space is quite evident.

Leasing a commercial real estate in metropolitans (where most of the coworking spaces exist) is no child’s play. Most offices can’t afford the rent for a uptown property, and tiny-sized cubicles don’t do for a team of 8 to 12 members, without counting in the costs for operation.

Hence, the shared economy is a great idea for businesses to find a proper spot for their office until they grow out of it, and till then, a the need for coworking space would be felt.

Revenue Streams for Coworking Spaces

There are several ways by which a coworking startup can earn. It’s not limited to only letting chairs and desks for lease.

Memberships

It begins by making loyal customers and we often name them as members. The basic idea is to sublet a portion of the office space to interested business people for a membership fees which include a range of facilities and perks.

Here are a few examples of the memberships offered by some of the leading coworking spaces in India.

91SpringBoard

9JCM

Bangalore Alpha Lab

Utility Rentals

After memberships, come the add-ons. It’s a well established fact that offices need extra supplies from time to time. Even the modest office goers can’t do without wanting for an extra PC or a personal printer at some point in their office-life.

Hence, renting out utilities is another revenue stream for coworking providers. You could simply hand out necessary office utilities that usually cost a lot to members who need something proprietary or extra at times.

The best example of this is the internet speed. Only a few can live without a super fast connection, and if it’s available in the office, only a few would want to skip on it outside their membership plans. Then there’s always room to add more items such as meals and access to entertainment section.

Hall/Audi Rentals

If the property has large rooms that can be converted into makeshift auditoriums or conference rooms, those can act as a separate source of income for you.

91Springboard has a track record of hosting about 13,000 events in a year which and a major chunk of their revenue comes from networking events that take place at their venture. Isn’t that great for publicity as well?  

Future Prospects Of Coworking Spaces in India

The sector is growing at a great speed as of yet and has a lot to offer in the future as well.

The top lot of coworking organizations currently active in India are expected to add about 7 million square feet of coworking space to India’s commercial property landscape which opens up a lot of opportunities for everyone.

Saturation in this sector is expected but it won’t come before the next 5 years, which means it’s a thriving time for running a coworking space in India as of now.

It’s naturally easier for a business who is just taking off to get an office without investing lakhs at one go. Most coworking spaces don’t demand for lakhs in investment but just a monthly fees of using the designated corner of the office, which is lesser than a leased office at a prime location in Mumbai.

There are no legal tenders required to take a coworking place for lease or on contract and you just pay the fees as per your requirements. You don’t have to take care of maintenance and you can use the place 24X7 which is a great option for homegrown startups.

Moreover, a dynamic environment where everyone is hustling to get big goes a long way in boosting your enthusiasm about your own work, rather than a isolated cubicle in a jam packed ten story tower.

Conclusion

On a whole, there is a lot of promise in the sector and coworking space will form a significant portion of the upcoming commercial real estate market of India.

As more startups come up and the enthusiastic culture of working in a modern office sets deeper in India, more coworking spaces would be needed, for which the supply is already taking place.

For businesses too, coworking spaces are generating enough revenue make hefty profits, due to the number of benefits a coworking space offers in comparison to a traditionally leased office.

6 Property Prerequisites Every New Home Buyer Should Know

Ready to buy a new home?

After securing the amount and finalizing the apartment, there are a number of steps that are still left to be followed.

Usually, we don’t talk about the aspects of buying real estate, that isn’t directly in our sight. Most real estate buyers, when they step out to buy an apartment, are unaware of things like Occupancy Certificate or Property Transfer Forms, because these are the builder’s responsibility.

But as a smart buyer, you must know about the legalities associated with buying a house to protect your interest as the house owner in the best way possible. We hear about real estate scams and developer-resident disputes every day, and by all means, you would want to avoid such a case.

Therefore, we have laid down some of the basic things that every new or first-time house owner must know before-hand. These are not ground rules but checking these things in advance would help you make the best property decision, and enjoy your stay for a long time.

  • Verify the Authenticity of the Real Estate Project

It’s hard to forget the huge property scam of Bangalore where 1500 crore rupees were falsely solicited with the help of a fake real estate project.

Buyers were shown a lucrative residential location where construction had begun and the price on offer was too cheap to miss out on. This resulted in 5000 sign ups from various parts of Bangalore, and people ended up losing lakhs of rupees because of this treachery.

In order to avoid such a thing, following are a few legal documents you can verify before handing over the booking amount to any real estate developer.  

  • Title of the Property

The property title is a legal document that lays down the ownership of the land on which the project resides and the name of the property owner. It is one single important document that you must check before initiating any conversation regarding the property.

The title comes with a few clauses that must also be checked, such as marketability, any encumbrance (if applicable) and the tenure of over 12 years.

Keeping these things in check will allow you to make a safe deal. The marketer, broker, and the builder are obliged to present these documents at any time you ask.   

Title Documents consist of;

  • Succession Certificate
  • Partition Deed
  • Sale Deed
  • Government Grant Order  

Other aspects related to the title

  • Nature of Title – Nature of title describes the type of ownership that the builder has over the land and the property. Not all ownerships are of the same type. There are three main recognizable title types – On Lease, Freehold Property, On Development Rights.

In case the builder is entitled to development rights, the power of attorney and property agreement, are to be rested with the seller of the property.  

  • Registration – The title documents entailed in the set of official documents must contain stamp and registration insignia from the jurisdictional registrar of the locality. If you’re unable to verify this, beware of the property type.
  • Litigations – There should be a well-maintained account of litigations, active or pending, against the developer, that is verifiable from the local court. In case litigations are related to the property in some way, you must watch your step before advancing forward.
  • Original Copy – Original Copy of the title must also be present with the builder at the time of booking the apartment so that you can be sure that the developer is genuine enough to be trusted.    

In case of resale flat in India

If you’re buying a resale flat in India, there is a separate set of documents that you need to take care of. We have briefly mentioned those as well.  

  • Set of Deeds of Sale

The document connects the owner of the property to the seller of the property and tracks the true ownership of the property before it is handed over to you.

  • Share Certificate  

If the flat resides in a cooperative society, the share certificate proves the share of property in the society and acts as the title of ownership in this case.

  • Title Report

The Title report is a report that signifies the authenticity of the title against any defaults in the sales deeds and bank loans, that may affect the transaction.

  1. Verify the Developer/Seller’s Identity

When you search for properties on sale, there is always one person of contact that gets you through to the property. Then there is a person who gives you brokerage advice and then there is the seller of the property himself.

All of these people may not be significant except the seller. It is as important to check the identity of the seller as it is to verify the ownership. In the Bangalore scam we mentioned earlier, the owner of the property was living with a fake identity and didn’t originally belong to the city either.

Here are some measures that can be taken in this regard.

  • Residential Status – It is important to verify the residential status of the person as there is a high degree of NRI property scam in Indiia. People claim to own several properties in India and solicit booking amount with a fake identity.

Later on, it becomes very difficult to press charges against the person and the person faces a deep setback due to the scam.

  • Identification of Partners in Property – The biggest cause of property disputes is the non-cooperation between partners and untimely back-out of one of the partners, which affects everyone including the buyer. Therefore, it is mandatory to check that the owners of the property, in case the property is jointly owned, are identifiable and no court cases are running against them.
  • Authorization – You must also check if the person selling you the property has legal rights to do with verification from a local court. Many a time, the authorization to sell the property is with someone else for arbitrary reasons and the owner scams the sellers without proper authorisation.  
  1. Government Permissions Given to the Property

There are several government checks performed on the property before it is given approval for construction or even sale of apartments. These permissions come in the form of certificates issued by the government as the development of the project advances.

There are umpteen real estate projects that have been constructed without prior permission from government authorities and have been sold to the residents without a worry.

Before RERA came into existence, these laws that overlooked the sale of such properties were not strongly implemented, but now there is a clear process of passing properties. Heavy penalties are imposed on projects who fail to produce such certificates. 

Here are a few you should always take care of;

  • Intimation of Disapproval (IOD)

Wondering what is IODIt is called the intimation of disapproval but here disapproval refers to an authorization or permit. Matter of fact, it is also called a building permit or IOD in construction.

The IOD provides a clearance to the builder to start the construction process after several checks from local authorities are done.  These checks are carried out during the site inspection process, where it is determined if the land parcel is fit for construction or not. Engineers at the Building Proposal Office determines the eligibility of the project before issuing the IOD.

The IOD certificate usually takes about a month to month and a half to complete as there are 40 different checks made before issuing. Several local authorities sanction permissions such as Fire Clearance, Permission from Traffic and Coordination Department, Environmental Department, Sewerage Department etc.

An IOD is an initial permission given to the builder for the developer and the actual architectural plan is separately checked.

  • Commencement Certificate (CC)

CC full form in construction is Commencement Certificate, which is given by the local authorities to a real estate builder as a sign of commencement of the construction.

In comparison to IOD CC is an official permission for the commencement of construction. The IOD is an approval for the buildable land, where CC is recognized as the letter of approval for the building.

It is handed out after the builder has submitted the architectural plan for the building and various checks have been made for the same.

From the perspective of the buyer, it’s important that you check the commencement certificate before investing in a building project. If the builder doesn’t have this certificate, chances are that the project is being developed illegally.

  • Building Layout Approval  

Building layout approval is used to determine the layout plan of the construction project which is checked for compliances to the existing layout laws. The terms that we used earlier such as FSI and FAR values are checked for the project, in order to approve it.

Usually, the Municipal Corporation is responsible for providing approval to the building layout of the project. The layout approval is the part of building approval procedure where the building plan is checked for compliances.

The building layout approval is mandatory before building anything on the given land. Even if you have IOD, you can’t start construction until you have building layout approval first with you as these both look at different aspects of the same thing.

Building layout approval affects the projects in the later stages as well. For instance, at the time of redevelopment, the Mumbai authorities have certain rules that work in this sector.

Recently, re-development in some parts of Mumbai has taken off as a business and the factors that control the redevelopment directly affect how this is compensated to the owner of the property.

  1. Stamp Duty on Property Documents

Stamp duty is a sum of money deposited with the government for registering your real estate transaction. Once your document is stamped by government officials and local registrar, only then you become the lawful owner of the apartment.

It is often said that even after possession of the property, it is crucial that you obtain the ownership documents by paying the stamp duty.

Stamp duty is one of the most important aspects of the whole real estate transaction that will take place between you and the seller. Each state imposes its own stamp duty and it is considered as a tax for registration of the property.

You can check the same on the various documents presented before you by the selling party. There should be proper mention of the stamp duty and the amount paid to obtain it.

Stamp duty varies from state to state but the general percentage that is followed in most states in about 5% of the total value of the property.

  1. Tax Appropriation

The completion of property tax and timely settlement is another point of concern that often misses the eye of the buyer.

Most real estate developers hide their property tax status from the buyers because the development costs often bootstrap them from paying taxes on time. This leads to penalties later on that are bore by everyone involved in the transaction.

Hence it is very important to check the tax status of the real estate developer and make sure that it is being paid on time. Even if it’s not paid, you should have enough confidence in the real estate developer that they will pay the taxes without further ado.

This can be verified from the office of municipal authorities of the locality and the developer will be highlighted as a defaulter in case taxes aren’t paid before you make the purchase.

In Case of Redevelopment

A lot of properties in Mumbai are being redeveloped in order to make them functional again and make heavy gains on properties that are considered dead.

Over the years, redeveloping properties in suburbs of Mumbai has taken off as a major real estate trend and the implementable laws have seen the light of the day very recently.

For these properties, similar tax laws exist. If you’re buying an apartment or an office flour that has been reconstructed, the tax has to be paid for the new construction.

In many cases, the builder is obliged to pay rent to the original property owner till the reconstruction completes. Therefore, these clauses can also be checked in case you’re interested in investing or buying a reconstructed property in Mumbai.

  1. RERA Compliance

Real Estate Regulatory Authority of India that came into existence in 2016 is an important step forward in clamping down project delays and unfair project deliverability.

Before RERA came into existence, these laws that overlooked the sale of such properties were not strongly implemented, but now there is a clear process of passing properties. Heavy penalties are imposed on projects who fail to produce such certificates. 

In addition to strengthening the developer-buyer relationship, RERA has done a lot of work in making sure that the buyers don’t have to face consequences due to delays in projects.

A number of recent reforms have been made to the marketing of the project and how the possession of an apartment takes place.

Therefore, after the inception of RERA, each project is expected to carry a RERA registration number, which can only be obtained once the project complies to various RERA prerequisites before starting off with sales.

You can check the project’s registration status at official RERA portals of various states. A few of them are given below.

RERA Punjab

RERA Goa

RERA HP

RERA Maharashtra

Conclusion

In conclusion, there is a lot of things that home buyers usually ignore before making the purchase. We have listed a number of such things in this article which will help you make a safe real estate transaction in the future.

Usually, we don’t talk about the aspects of buying real estate, that aren’t directly in our sight. Most real estate buyers, when they step out to buy an apartment, are unaware of things like Occupancy Certificate or Property Transfer Forms, because these are the builder’s responsibility.

If you’re buying a flat or an apartment in a new building project, you’ll need more than a just good reputation for the project. Doing a background check on various things like government permission, identities of the builders and the tax status of the project will help you avoid unnecessary consequences later on. 

Things you can’t afford to miss about before Renting your Property in India!

The property renting business in India is vast. According to the 2011 Census, about 27.5% of the Urban population lives in rented accommodations, which means nearly 1/3rd of the real estate in cities is engaged in the renting activities.

Despite being such a large proportion, the property renting mechanism in Tier 2 and 3 cities is highly informal.

This is because, when someone gives their property on rent in India, they use generic contracts and renting lease agreements. The actual picture is much bigger, wherein you need to understand your and the tenants right clearly.

If you aren’t aware of things like Leave and license agreement format or the difference between renting a property and giving it on a license, you need to go through this article right now!

What is Leave and license Agreement in India?

Leave and license agreement refers to an agreement made between the owner (licensor) of the property and the tenant (licensee) for a limited period of time where the latter uses the property for residential or commercial purposes.

The owner receives compensation for the license in the form of “license fee” which is otherwise regarded as “rent”.

This agreement usually lasts for 11 months of tenure and has to be registered with the sub-registrar of the locality.

The agreement is a form of license distribution mechanism that gives the tenants some rights over the property they’re going to use. The agreement also lays down various clauses and permissions that the owner of the property wants to be obeyed by.

One may think that this agreement is similar to what we call as a rent deed or lease agreement, but it is quite different from that. The Leave and license agreement format is pretty different from a rental agreement, which is why people in India refrain from giving their property on rent in India.

Difference between a Rental Agreement and a Leave and license Agreement

Legal Acts

The primary difference between the two can be inferred by the legal acts through which these two agreements came into existence.  

The Rental Agreement works under the Maharashtra Rent control Act, 1999, wherein a separate body of jurisdiction controls the rules associated with the act.

On the contrary, the Leave and license Agreement abides by the Indian Easements Act,1882 wherein the owner licenses the property to a befitting licensee, who exercises limited control over the property.

Rights Of the Owner

The Rental Agreement act is somewhat partial towards the tenants as it has rules that favor the tenants more in the case of a dispute. For instance, the property owner can’t revoke the amenities provided to the owner even if the rent remains unpaid.

This is one of the main reasons why 11 million units in India stay unused because the owners are not ready to give them on rent!

Whereas the other act is evenly paced for both the tenants and the owners. It makes sure that the transfer of interest taking place it between the two parties isn’t partial to any of them.

In case, any of the terms mentioned in the Leave and license agreement are not met, the owner reserves the right to evict the premises under the law.

Transfer of Interest

In a rental arrangement, the owner transfers the rights over the property to the tenant for a limited period of time as mentioned in the agreement. While the tenant has occupied the property, the rights are reserved for the tenant and the owner can’t possibly violate those rights until the agreement holds true.

This system clearly favors the tenants more over the owners.

In a licensing arrangement, the licensor doesn’t transfer the rights over the property to the licensee but gives them on a temporary permit. This permit allows the activities that the licensor seems befitting and nothing else. Neither is the property owner obliged to fulfill demand outside the agreement nor is it required to entertain unlawful properties.

This arrangement gives the power to the licensor in the strongest regards.

Benefits of Signing a Leave and license Agreement  

For the Owner (Licensor)

  • The provisions of the Leave and license Agreement Format work in stronger regards for the owner in case they want the premises to be evicted before the license term ends. This is hard to do in a renal contract.
  • If the tenant is unable to pay the rent to the owner, the tenant can be held punishable under law, which acts as a security for the owner while giving their property on a license.  
  • Due to the presence of such provisions, if the tenant initiates a dispute over the property, or refuses to vacant it in the contractual time, the owner will have an upper hand.
  • This increases owner confidence in the whole licensing market, further allowing them to make better-secured monetary gains from their real estate assets.

Download Maharastra Government L and L Agreement Form

For the Tenant (Licensee)

  • As the agreement is a lawful document, the same can be used anywhere in India for proof of address.
  • The tenants can be sure of the staying or working conditions that would be provided to them as stated in the agreement.
  • The agreement also protects the tenants’ interests for the security deposit, conditions of the property and allowed commercial or residential activities.
  • The tenants are also protected against any kind of fraudulent arrangements or unwarranted hike in licensing fees (rent) while they occupy the property.

Leave and License Agreement Registration Online

If you want to register online for a leave and license agreement, you can do so by visiting the registration portal.

First you’d have to submit your documents online and create a login with the website. Then your documents and case will be reviewed before the final copy of the agreement is prepared.

For instance, the e-registration portal for Maharashtra can be accessed here.  

Pre-requisites for the Leave and license Agreement

In order to sign a Leave and license agreement, you must meet a few prerequisites properly. We have simplified the process below for you.

Terms associated with the Agreement

Licensor Details

  • Name of the Owner or the Licensor
  • Permanent Address of the Licensor
  • Contact Information of the Licensor

Licensee Details

  • Name of the Tenant or the Licensee
  • Permanent Address of the Licensee
  • Contact Information of the Licensee

Agreement Details

  • Physical address of the Property
  • Length of Duration of the Agreement
  • Security Deposit
  • License Fees (Rent)
  • Additional Charges (if applicable)
  • Individual terms and clauses

Leave and License Agreement Registration Charges

There are two major types of charges involved in the Leave and License Agreement, – Registration and Stamp Duty.

The registration can be done in two ways.

Offline – You can visit a local lawyer and prepare the draft for the registration. Alternatively, you can also prepare the draft and sign it yourself.

The registration takes anywhere between 500 – 1000 INR depending upon your locality and if you’re going through a lawyer, the charges can scale up to 5000 bucks.

This method is costly but the most reliable as you’d be controlling all the phases of the registration process, you don’t have to worry about anything going wrong as an actual lawyer will be reviewing the application.

You can also work with a mutual lawyer with the licensee party in order to discuss the terms correctly and come to mutual agreement about the draft.

Online – You can also create the leave and license agreement format in word and then upload send it for review via the e-registration portals. This probably won’t require you a lawyer and any extra fees.

There are several state portals that provide e-registration capabilities to the residents for doing so. You can check Maharashtra Government’s Portal here.

This is the fastest method as your file is handled online and you don’t have to run around courts for signing the deal but you don’t control most of the aspects of the process. So, if you’re completely sure of your draft, then only choose this process over the other.

The process works for leave and license agreement for commercial premises and residential premises.

Leave and License Agreement Stamp Duty Calculation

Stamp duty is the amount of money paid to the registering authorities for the stamp that validates the agreement.

The stamp duty can be calculated by the following mathematics

  • Multiply the number of months for which the agreement is to be signed with the monthly rent (licensing fees). Call it A
  • If you have paid any rent up front before the agreement initiates, call it B
  • Calculate 10 percent of the security deposit and multiply it with the number of years for which the agreement is to be signed. Call this amount as C
  • Now add A, B, and C. Call this total amount as D.
  • 0.25% of the total amount (D) is your final stamp duty.

Important Clauses that must be present in Agreement

As good practice, you can include the below-given clauses in your agreement to make it factually strong.

The date from when the license comes into practice.

Total tenure for which the property will be licensed to the licensee.

Any clause that influences the decision of renewal of the license.

Any clause that influences the decision of termination of the license.

Details of the gradual escalation in the licensing fees after a certain period of time.

List of all the charges such as maintenance, rent and other charges that may incur in special cases.

Rights and duties to the welfare of the premises of the licensee.

Rights and duties to the welfare of the premises of the licensor.

What happens if the agreement terms are not followed.  

Important Documents and Procedures for Transferring Shares in a Society

Just like shares in a company, one can own shares in a cooperative housing society but the meanings of the shares are pretty different.

In a cooperative society, shares are created by the members that form the society. These members further divide the responsibilities of the society among themselves.

If a certain member wants to transfer the shares owned by them to a new person, certain Society transfer forms are required. These forms govern the transaction as the society isn’t owned by any single authority but a committee of individuals. Hence, proper reporting to everyone is required.

We have explained some important terms related to the same below.

Application for transfer of share certificate

If you want to transfer your shares to someone in a cooperative society, you can begin the process by submitting an application. This application must abide by some given guidelines for authenticity. This application is also called request letter to society for transfer of share certificate.

Documents required for the Transfering the Shares

  • The above-mentioned application or request letter.
  • A Deed for the Transfer of Shares
  • Share Certificate or Stock Certificate originally possessed by the owner.
  • PAN Card copies of the buyer and the seller. Buyer and seller are the transferors and the transferees.
  • Address documents of the person who is submitting the application for transfer of shares.
  • A bank verification copy for the authenticity of the signature of the applicant. This copy needs to be attested by the authority attesting the copy for the applicant with the bank’s official stamp and sign.
  • An affidavit containing the signature of either of the parties.    

Society forms for transfer of flat

Society Transfer Form

In a cooperative society real estate, if you wish to transfer the ownership of a flat to someone else, you have to obtain prior permission from the managing authority of the cooperative society.

In order to make this transfer a society transfer form set is used which defines the details of the transferer and the transferee in writing.

You can find forms related to forms for transfer of flat in a cooperative housing society here.

Concluding Words

To sum up the whole article for you in fewer words;

Due to tenant favoring laws in Indian real estate system, there has been an overall decrease in confidence from the property owner’s perspective. This is mainly due to the several disputes that arise between tenants and the owners.

In order to increase this confidence, if you’re going to rent your property to someone, you can use the Leave and License Agreement which protects the owners’ rights in a better way than a rent agreement would.

There are a number of aspects related to the signing of Leave and License agreement, which must be taken care of when the draft for this agreement is being prepared.

In case you want to transfer your flat in a cooperative society, you will need a transfer application submitted to the cooperative society. A list of important documents for the same has been given in the article.

Must Know Terms – IOD, CC and Society Forms for the Real Estate Business in Mumbai!

The real estate market in Mumbai is soaring these days with construction activity. Real estate developers are setting up their best housing and commercial projects in Mumbai due to the rising demand for various real estate occupations.

Amidst all these, if you’re in the realty business, you might come across completely unheard terms from time to time.

The lack of knowledge can contribute eventually lead to legal misinterpretation which sometimes invites problems for the concerned individuals. Especially after the inception of RERA in India in 2016, several new laws have been incorporated.

The Mumbai property scene has been littered with legal cases where RERA penalized builders for not adhering to the aforementioned laws. Hence, obtaining a keen understanding of these rules is inevitable for the participants of this business.  

The realty business in Mumbai is quite organized as opposed to other parts of the country and everything requires various permissions, allowances from the in-charge authority at various steps.

An overall understanding of these terms will help you keep things in check, whether you’re a buyer, builder, seller or agent.

Let’s start with the various types of property assets and the terms related to these.

Must know terms for the Real Estate Builders

Related to Construction

Loading Factor

Loading Factor is a mathematical number that describes how much extra area is available to a flat owner except the carpet area.

This number is decided by the extra area that is usually available to a flat owner in a housing society just around the flat. This area is also called the super built-up area.

The loading factor determines how much super built area will there be in the project and it is essential to calculating the net amount of space occupied by the construction. The factor comes in handy while explaining the additional common area in a given building.

Loading factor is usually described by a given number. Suppose a building has 25% super built-up (area in addition to the carpet area), then the loading factor becomes 1.25.

With the knowledge of the right loading factor, the developer can make accurate estimates of various little things that count in the development cycle.   

  • Super Built-up Area – It is the area available to the resident that is not included in the built-up area of the house. It usually includes the area covered in lobbies, elevator hallways, corridors etc.
  • Carpet Area – Carpet area is the enclosed area of a flat or construction available to a resident inside the flat. The carpet area is devoid of the thickness of the wall. Hence it’s marginally lesser than the actual area of the flat.
  • Common Area – In a real estate construction, common areas are those that are used by the occupants commonly. Such areas are shared spaces and no one owns them exclusively. Some examples of these are the parks, hallways etc.

Open Space Ratio

Open Space Ratio is the ratio of open space available in a land parcel to the total space available in a land parcel. Hence, it defines how much open space a real estate project has in it.

OSR is calculated by keeping several things in mind. Not all uncovered spaces can be treated as open spaces in the real estate terminology. Usually, parking lots, open parks and areas that can be directly used by the occupants are considered as open spaces.

It goes by saying that a healthy open space ration is somewhere above 80%.

Floor Space Index

Floor Space Index is the ratio of the total built-up area of the construction in ratio to the total area available for construction.

The ration basically tells that how much of the constructible area needs to be left open and is usually under the discretion of the local authorities of a locality.

It is also known by the name of Floor Area Ratio and is represented by a number. For instance, if the constructible land is 100 square meters, and the FSI value is 0.8, then construction is allowed on 80% of the land.

Per Square Foot Rate

It is the price of the property per square foot. The price is used as comparison measure to compare the prices of various properties. If a property has the same per square foot rate, then the area covered by the accommodation unit is measured.

The term encloses the built-up area in itself.  

Related to the Authorizations

Intimation of Disapproval (IOD)

Wondering what is IODIt is called the intimation of disapproval but here disapproval refers to an authorization or permit. Matter of fact, it is also called building permit or IOD in construction.

The IOD provides a clearance to the builder to start the construction process after several checks from local authorities are done. 

These checks are carried out during the site inspection process, where it is determined if the land parcel is fit for construction or not. Engineers at the Building Proposal Office determines the eligibility of the project before issuing the IOD.

The IOD certificate usually takes about a month to month and a half to complete as there are 40 different checks made before issuing. Several local authorities sanction permissions such as Fire Clearance, Permission from Traffic and Coordination Department, Environmental Department, Sewerage Department etc.

An IOD is an initial permission given to the builder for the developer and the actual architectural plan is separately checked.

Commencement Certificate (CC)

CC full form in construction is Commencement Certificate, which is given by the local authorities to a real estate builder as a sign of commencement of the construction.

In comparison to IOD CC is an official permission for the commencement of construction. The IOD is an approval for the buildable land, where CC is recognized as the letter of approval for the building.

It is handed out after the builder has submitted the architectural plan for the building and various checks have been made for the same.

From the perspective of the buyer, it’s important that you check the commencement certificate before investing in a building project. If the builder doesn’t have this certificate, chances are that the project is being developed illegally.

Building Layout Approval  

Building layout approval is used to determine the layout plan of the construction project which is checked for compliances to the existing layout laws. The terms that we used earlier such as FSI and FAR values are checked for the project, in order to approve it.

Usually, the Municipal Corporation is responsible for providing approval to the building layout of the project. The layout approval is the part of building approval procedure where the building plan is checked for compliances.

The building layout approval is mandatory before building anything on the given land. Even if you have IOD, you can’t start construction until you have building layout approval first with you as these both look at different aspects of the same thing.

Building layout approval affects the projects in the later stages as well. For instance, at the time of redevelopment, the Mumbai authorities have certain rules that work in this sector.

Recently, re-development in some parts of Mumbai has taken off as a business and the factors that control the redevelopment directly affect how this is compensated to the owner of the property.

Society Transfer Form

In a cooperative society real estate, if you wish to transfer the ownership of a flat to someone else, you have to obtain prior permission from the managing authority of the cooperative society.

In order to make this transfer a society transfer form set is used which defines the details of the transferer and the transferee in written.

You can find forms related to forms for transfer of flat in a cooperative housing society here.

New RERA Rules That Must be Kept in Mind For the Builders

In the wake of malpractices adopted by the developers in various parts of the country and to substantiate buyer interest in real estate again, RERA had released some important rules for the developers.

These rules are designed in the favor of the buyer and several penal actions have been taken against developers who have not been able to meet these rules. It makes it all the more important to follow these rules, hence, they’re worth mentioning in the article.

These new rules are primarily made to avoid delays in the delivery of real estate units to buyers which is an ongoing nuisance in the property scene.

Affidavit by the Promoter

It has been made compulsory to submit a written affidavit in order to promote properties. The promoter must include the date of completion of the project clearly in the affidavit or they’d be penalized for the same.

Recently, RERA fined seven real estate developers for not adhering to RERA rules in Maharashtra, which goes as a clear warning to everyone.

Strength of Possession Date

From a long time, the possession date has been tossed around like a vague term that often didn’t meet the expectation. But this is going to change now.

The agreement of sale will be made to carry the possession date clearly defined as per norms. If a project gets delayed and the possession date goes out of sync, the developer will be liable to pay the interest for the days elapsed in the delay.

Land Title should be Clear

Many a time, the land title of the project isn’t given by the promoter which hides the fact if the land is under some kind of dispute or not. Disputes often lead to delay of the project and in such a case, you’re not allowed to promote the offer. This has been done to keep the buyer in the right light.

Separate Account Needed

RERA has made it mandatory to open a separate bank account in a scheduled bank to deposit the money extracted from the buyers for the development of the project.    

Any money that is withdrawn from this bank account shall be used only for the development purposes or to cover the value for the land. Even the withdrawals made from this bank account shall be under scrutiny for the legitimacy of the progression of the project.

What if the rules are not followed?

These rules are made with strong conviction in mind. If the developers fail to follow any of these rules, there would be penalties imposed and the developers also stand the chance to lose the registration depending upon the gravity of the action.

In case a developer fails to deliver the project on “the possession date”, they’d be penalized for not completing the project on time and would also have to pay interest to the buyer for subsequent days of delay.

The buyer also has the right to withdraw the full amount of money from the builder in case they wish to.

Must know terms for the Real Estate Buyers

Real estate buyers are the biggest concern for the moment in Mumbai as all the focus in on them for all kinds of real estate activities. If you’re new the real estate business, you must come to know the basic terms that govern the market.

As a buyer, you must understand your rights and duties correctly so that you can make a safeguarded buying decision in the process. Here are a few terms that will help you do this.

Buyer’s Agent

When you go out to buy property, you will encounter two types of real estate agents. One would specialize in the sale of properties, and the other in the purchase. in your regards, you will need the buyer’s agent, a person who is typically expert at helping people buy properties.

These professionals are well rehearsed with all the legal formalities required for the purchase of property and would help you in finding the best deal for you.

The other type is called the listing agent, who specializes in the sale of properties, wherein most businesses who want to sell a property, enlist their real estate.  

Closing

Closing is basically the phase when the real estate transaction gets completed. It is also referred to as the closing date when the buyers complete all the formalities such as the signing of deals and the payment of the sum to the owner of the property.

When you’ve successfully bought a property and all the rights to the property have been transferred to you, you can say that you have made the closing.

Earnest Money Deposit

Earnest Money Deposit is a token money that is given to a prospective property owner to show that you’re interested in the deal and you’d like to book it before paying the full amount.

Earnest Money is different from down payment. Down payment is usally of the magnitude of 10-20% of the property but Earnest money is somewhere between 5-10% or as deemed appropriate by the property seller.

Real Estate Realtor

Realtors are fundamentally real estate brokers who facilitate real estate deals and make the necessary formalities for you in order to close a deal but not every real estate agent can be referred to as realtor.

Realtors are usually members of a real estate association that recognizes them under the national status. For instance, Spacio Realtors are ISO 9001 certified.

Certificate of Occupancy

Certificate of occupancy is obtained by the real estate developer which signifies that the property is fit for occupancy. It is issued by the MC of a locality after making several checks on the property for the developer.

As a buyer, you must seek for CO in order to ensure that the property you’re buying, especially a flat, is fit for living. The CO is given as a sign that the hygienic factors associated with the property are well amended to.

Allotment Letter

Allotment letter is provided by the real estate developer to the buyer issuing that the property has been allocated to the buyer by the developer. The property may or may not be complete at the time of allocation but the letter must be there.

It is often done after the deal has been closed between the two parties.

Encumbrance Certificate

It is a certificate that verifies any encumbrances held by the property at the time of property buying. It basically clears the property of any encumbrances that may hinder the deal or cause a delay. It is usually issued by the registrar in order to ensure the smooth flow of the deal.

If you want to protect your interest in the deal, you can obtain this encumbrance certificate so as to be sure of the deal from your end.

Joint Ownership Agreement

If you’re going to buy the property in partnership with someone else, you can sign a joint ownership agreement which will help you clearly define the rights of the other person over the property.

Joint ownership are necessary in order to safeguard your end of the deal whenever a dual arrangement is made.

Conclusion

The real estate market is full of terms that are not self-explanatory and can lead to consequences if not explained correctly. With this article, you’d be able to inform yourself of the various terms that relate to the developer and the buyer alike.

For detailed property advice and how to initiate a deal, you can contact Spacio Realtors.

The Fundamentals of Smart Real Estate Investment in India

India is a dynamic country and all it takes to learn the dynamics properly in order to get rich.

The same philosophy applies to real estate in India.

If you’re aiming at the investment market of India, you need to understand how it is done, what all things work here and a few basic concepts about real estate investment in general.

Before, beginning, let’s answer the fundamental question that is popping right now in your mind.

Why Real Estate in India?

Real Estate in India continues to be a lucrative asset considering the multifarious growth that is constantly taking place in India. The population is rising, the jobs are rising, and everyone needs a house to live or stay in.

As this growth keeps pumping more demand in the market, there is a lot of money to be made in the process.

Apart from this fundamental reason, there are other benefits as well, that are listed below.

Secure Asset

Real estate is a safer investment as compared to other assets such as stock market, capital ventures, and your own run business, as the chances of loss are lower.

For instance, If you invest 50 lakhs in the stock market, chances are that you can convert the sum into 50 crores but at the same time, you can also end up losing everything in one go.

Whereas when you buy a house worth 50 lakhs, you can use it until you sell it off, and with each passing year, the value of the house will only rise. Even if you sell it for 50 lakhs after living in it for 5 years, you’ve saved 5 years of rent. So, the scope for loss is pretty thin.   

Heavy Returns

For the people who have the capacity to invest in large numbers, have the avenue to convert lakhs into crores. Real estate investments when done right, can fetch heavy returns with the passage of time and can be utilized in multiple ways to generate income.  

Most Probable Appreciation  

One great aspect of real estate is that unlike most of the things, it’s value doesn’t go down. The value appreciation may slow down or may not take place at all, but it doesn’t go down.

The market keeps up with its uncertain nature and there will always be opportunities to make some money.

Moving ahead, let’s look at some basic real estate concepts

Must Know Real Estate Concepts

Before you step into shoes of a real estate investor in India, it is advisable to know some basic steps that would help you get a better grasp of the industry.  

  • The Property Life-Cycle

Most real estate markets move through a definite process that determines how value will be made in it. There are four broad steps to it.

  • Recovery
  • Expansion
  • Hyper Supply
  • Recession

The recovery phase predominantly outlines the market condition when it is slowly improving from a recent disaster. Things are getting better and buyer interest is slowly rising again.

Expansion an Hyper Supply dictate the phase when the market goes from booming to ready-to-explode. Everyone is investing in this phase and little thought is given to the potents of sale.

Finally, the bubble breaks and everyone realizes that the demand just doesn’t exist. The property is ready but the buyer is not, hence it is sold at reduced prices and the overall profit nosedives.

Lesson – So, when you go out to buy, the market you’re interested in, will be going through one of these phases. You can take the decision to invest, the amount of investment or search for a new market accordingly.

  1. Growth Potent and Goal

It is hard to tell the future with certainty and real estate is all about playing with the uncertainties. Hence, don’t lull yourself in believing that you’d triple your money in five years.

But what can be done is that you can analyze the property trends and make a plan that will work for you. It will can include a plan B and full-fledged profit-making opportunity.

While most people say that, “choose a profitable location”, you must consider your goal first. Are you going to hold the property for 3 years or 10 years? Are you investing 10 lakh or 1 crore? Do you expect to make 10 lakh in 2 years or 50 lakhs in 5 years?

All of these considerations will make a certain location good or bad with you. The growth potential of a location must be aligned with your spending capacity and intended goal, then only you’ll make a smart decision.

  1. Kind of Investment  

Like everything else, there are a number of ways in which real estate investment in India works.

For instance, you can simply buy a house, or buy a plot and build a house, or buy a pre-leased house, or buy an office and give it on rent, strike a partnership and so on.

Certain investment types favor certain markets and the prerequisite about this can immensely help you in making a profitable decision.  

Where to invsest?

There are umpteen markets and micro-markets where you can invest wisely, but our focus in this article would be to consider upcoming smart cities in India.

The reason behind this is the high growth potential, upcoming builder projects, and an overall rise in buyer interest, making them a considerable option.

The top 5 choices among upcoming smart cities 

Vishakhapatnam 

The commercial hub of Andhra Pradesh and the largest city in the state, the city is amidst a complete industrial overhaul.

Developments

  • Upcoming Industrial Projects with Chennai
  • Metro Rail Project

Locations

  • Madhurwada
  • Seethammadhara
  • Beach Road
  • Gajuwaka

Chennai 

Chennai is the capital of Tamil Nadu and yet another industrial hub in south India. It is currently poised at becoming one of the best places to invest in India.

Developments

  • Ring Road 2
  • New Metro Circuit
  • Chennai Monorail   

Locations

  • Poes Garden
  • Kalathur
  • Perambur

Kochi

The soon-to-be IT hub of India which is currently expecting serious developments in the airport business and has been on the hot list for NRI real estate investment in India.

Developments

  • New Trans-shipment Terminal at Vallarpadam
  • IT SmartCity
  • Oceanarium

Locations

  • Kokkanad
  • Kaloor
  • Aluva

Pune

Pune enjoys a number of substantial reasons for the real estate market to boom in this city. Some of these being fast-paced IT developments, climatic conditions, and well performing real estate market.

Developments

  • International Airport
  • New Metro Connection
  • New Bus System

Locations

  • New Airport Road
  • Wakad
  • Model Colony

Indore

Presence of an IIT and an IIM in the same city brings a lot of interest from rest of the parts of the country to Indore, besides its proliferating pharmaceutical industry.  

Developments

  • Delhi Mumbai Corridor
  • Bus Rapid Transit System
  • Major Road 12

Locations

  • AB / Ring Road
  • Dhar Road
  • Khandwa Road

Conclusion

After having learned the various dynamics and options, you can take your decision with a much better state of mind. There are still a number of calculative aspects such as

how to tell the market trend?

How much investment will suit what market?

What are average ROI rates in the mentioned locations?

All of these questions can either be answered by getting on the roads and doing a close survey or by consulting a real estate advisor. Hence, if you’re not an expert in yourself, it’ll be wise to consult someone as these trends are hard to read off an internet article.


The Best Places in India for Real Estate Investment for NRIs

NRI real estate investment is gaining new momentum in India in the aftermath of economic reforms being made in the country. Non-Residentially Indians already represent a major stake in the market due to their heavy cash inflow in Indian real estate markets.

recent report stated that the real estate returns across 8 major cities of India have been encouraging and about $11.5 billion of capital is expected to be invested in the subcontinent by the NRIs.

This can be attributed to many reasons. Some of them being NRI interest in their motherland and hopes of settling back to it as they retire, or gaining rental income from pre-existing properties. Other reasons include fully functional business opportunities in India as the dollar to rupee conversion opens up investment windows for NRIs.

The Rupee Push

The recent turnarounds in the international currency exchange have proven out to be beneficial for NRIs. Rupee rates plummeted below record levels in the past few decades by crossing the 71 INR per dollar price.

Although it was bad news for other markets of the trade in the country, it meant that the same number of dollars abroad could buy more in India.

No better opportunity for prospecting NRIs who are already interested in investing. They were offered a major push towards this timely moneymaking chance.

Spacio Realtor’s NRI investment advisory and brokerage desk have been actively monitoring all the latest requests. If you’re an NRI who wants to grab this short-lived chance of making additional income on the sidelines, you can contact us.

The Best Places to Invest In India for NRIs

NRI investment in India is usually marked by high-magnitude of capital and premium sector properties. Most of NRI investments go well beyond crores of rupees and focus the top tier cities, where the property turnover is significantly high.

Therefore, for successful investments offering high ROI, we have shortlisted a few places in India that are worth your attention.

Mumbai

Mumbai continues to be at the apex of the real estate market in India. It is bustling with new developer projects and all sorts of luxury apartments that capture buyer interest from the top investors.

Refer to Spacio’s Mumbai Location Analysis for detailed information.

Significant Trends

The most noticeable trend in Mumbai has been the hike in sales of apartments units that went up considerably high in past two years.

Carpet area prices in South Mumbai range between 60k to 125k for luxury flats going well beyond 3.44 crores per apartment. While, in the suburbs, the property rates fluctuate between 7k to 20k.

Furthermore, the sales of flats in Mumbai are being aided by the inception of RERA in the country that is now strengthening buyer interest in real estate again.

One important statistic that came forward due to this was the rise in affordable housing segment. More buyers are opting for affordable housing due to the on-going financial crunch in the country and it is being aided by everyone including bank house loans, government subsidies and new projects offering more-in-less.  

The movement of the workforce into Mumbai in response to new job opportunities is a constant trend. The peripheral areas such as Thane, Naigaon, and others continue to get populated with newer townships each passing year, creating areas for investment.

Where in Mumbai?

  • Navi Mumbai – Navi Mumbai is witnessing rapid infra development n terms of IT parks, the new airport, and residential circles, all of which are attracting investments from all parts of the world. Once completed, these projects would stand among the highest evaluation properties in Mumbai.
  • Thane – Thane is experiencing the fastest growth in real estate which is the hub of residential properties including affordable houses and luxurious projects. Ghodbunder Road is a landmark location for investing in the residential real estate as it has been performing superbly since past few years.

Bengaluru

Bengaluru or Bangalore is India’s unthroned IT capital with offices of various international IT giants and the biggest IT job sector in the country. With a population of over 10 million, the city has some of the finest properties to look for in India.

Unlike other metropolitans, Bangalore has an aesthetically planned architecture that boasts beautiful botanical gardens, commercial places, and residential colonies.

Significant Trends

Bangalore is being seen as the most preferred destination for the startup generation and they have contributed towards the cities real estate growth significantly.

According to Hindu Business Line, Bangalore outnumbered Hyderabad in apartment sales and grossed close to 11,500 units in Q1 2018, which is nearly thrice the sales reported in Hyderabad.

A cumulation of factors ranging from rising IT jobs in the city and the ever-growing outsourcing industry in Bangalore has prompted the sales in Bangalore, which only stand second to sales in Mumbai.

Where in Bangalore?

  • Kanakapura Road – Kanakapura Road is on the way to getting its own metro connection which will improve connectivity with other parts of the city. In midst of these developments, there has been a sharp rise in buyer interest in this area, most of the mid-order.
  • Varthur – Varthur lies in close proximity to the business districts of Bangalore namely Koramangala, Whitefield and others. This has been the primary reason that it has attracted investors in large sums in developing the real estate, and making eventual gains out of it.

Pune

Pune is a growing city in the state of Maharashtra of India that has seen a ton load of growth in the recent years. It’s spreading across various suburbs and villages, fueling in more real estate and opportunities for the buyers.

Significant Trends

Pune has become the hub for a number of industries such as the automobile, Information Technology, and education. This is resulting in a surge of buyer demand in accommodation units in Pune.

The city’s traffic has been a constant problem for the residents and the upcoming airport project is eyeing to resolve this problem. With this new development, the rise in real estate in neighbouring areas would be eventual.  

Experts look at Pune as the market of tomorrow considering how fast it is growing and the vast amount of investment opportunities it has for NRIs. Right now, it is being counted as the rising-metropolitan of India and once it gets there, the people who would have invested in it will be all rich.   

Where in Pune?

  • Hinjewadi and Kharadi – Currently the best property circle of Pune, it has seen a huge amount of growth in demand from buyers due to its geographical advantage. The property circle touches major infotech parks of Pune and hence is experiencing a steady growth in affordable as well as, top-tier properties.

Goa

Goa is a state in the west coast of India that enjoys beautiful sea views and heavy Portuguese influence, making it one of the most popular tourist attractions in India.

Unlike other metropolitans in India, Goa is calmer, more relaxed and less congested (at least in the offseason). It is marked by colonial houses, villas, beach homes and a lot of restaurants.

Significant Trends

The ministry of Goa is taking special steps to develop the IT scene of Goa by introducing startup incubation centres and making it easier for newer small businesses in the state to set shop here.

This will bring in more employment, workers and ultimately, more real estate development in the state.

Due to its aesthetics and smooth paced life, Goa has received heavy interest from NRIs in past few years. For the families who wish to settle down in India in the next decade are eyeing Goa as their preferred home because of the large variety of beautiful homes it houses.

Where in Goa?

  • Dona Paula – Dona Paula lies on the west coast of India directly touching the Arabian Sea. The area offers a large variety of sea-view homes that can a positive attraction for settling down.
  • Candolim – Candolim shares similar geography with Dona Paula and has properties on the upward of 1 crore. A perfect place for NRIs looking to buy a home that’s close to famous monuments and offers all kinds of luxuries.

Falling Rupee Gives NRIs a Great Reason To Invest In India

Welcome to 2018 when the dollar vs rupee battle has taken a historic turn. The rupee has fallen way beyond its limit and as of today, the dollar rates have crossed 70 INR, which is a one of the lowest of all lows.

Why this is happening is another story but someone’s loss is someone’s gold. NRIs and foreign institutions are all set to take advantage of this fact and invest in India, because there is more money to be made on the sidelines.

Many international investment bodies such as Blackstone, Brookefield and GIC have been up with their investment efforts in India. They’re looking to take more advantage of these facts and continue investing in residential properties of India.

Lifetime Opportunity

“NRIs there are coming together as consortia and opting to buy properties in bulk, in deals worth Rs 100-150 crore. They are not buying individual flats but entire wings and even buildings. This way, they can immediately start putting them up for rent,” Prateek Shroff, an international property consultant in Mumbai, said.

You can clearly see that disposable income is being pumped in India’s real estate sector even when it’s not performing so well, to make long term gains.

This can be prove to be one opportune moment as NRIs and other foreign companies get to invest for 10-15% lower amount of cash without moving a finger. This is not only a chance but a big invest opportunity.

Resources say that a similar thing happened in 2013 as well, when rupee plummeted drastically and an overall rise in property investments was noticed, but this time, the things are different.

Why will it pay off?

Over the years, the worsening condition of NRI Indian real estate investment was finally being restored by government policy and a horde of investments being made in all parts of India. Certain property circles that were dead from years were beginning to show some improvement after all.

Such changes can be attributed to RERA, which has helped in increasing buyer confidence in property by putting stricter conditions on real estate scams and improving investment conditions for the buyers.

Right now, Indian markets are poised for profit and while the domestic population is still to cash on that, the NRIs are jumping the queue. Investments made today promise a great capital return in coming few years and what better way would it be when you get 15% discount on a property deal.

Therefore, NRIs who are investing in real estate today are making sure that their cash is in safe deposit and will offer flying returns in coming three years.

Why to be careful?

While the time is great to make some money by investments, there are even more chances for scam at this moment.

If you’re an NRI, your dealing with Indian real estate needs to be sound enough to get you the returns you’re aiming at. It won’t be as simple as picking a cake in the bakery shop down-street.

There are several real estate advisors who would want to pounce on this opportunity to make fraudulent deals or lure the NRI interest into something that has no future prospect.

You need to be careful of whom you’re going to deal with before you invest any money in India’s real estate. We advise you to run a quick research on the properties you want to invest and make sure that they’re classified as safe investments in India. If you’re in doubts, consult multiple property consultants and get the best vote in.

NRIs on a Rush

Several property investors from around the world are reporting that large sums of money are being invested in India’s real estate by NRIs.

There’s inflow from Hong Kong, UK and USA. Even with several legal hurdles on the path of buying property in India, there are efforts being made to cling on to the best properties in India from all parts of the world.

This could give India’s real estate a temporary push for the season and may prove beneficial for the coming times. The market that has been low since ages can finally reap some of the fruits that it was so desperate to have now.

Realty takes in Rupee

In some sense, the circumstantial events that lead to falling of rupee are aiding the realty. Even if the rupee is to fall, the realty is making hefty gains out of it, which may balance out the international losses being reported by India.

For now, we can’t say how long will this property bubble will last but till the time it’s there, it can help India’s property sector get a headstart.   

Effect of Elections 2019

As we know that general elections are poised for 2019, and the realty market is going to another hit. The fact has actually contributed in decreasing international interest in property.

Investors like Blackstone are wary of their money and a withdrawal of around 2300 crores was reported recently due to the same fact by several foreign investors.

All of this is in the light of major turnover that comes with each election. The 2014 elections didn’t really help in improving the condition but the inception of RERA was a big step. Now we have to see how do these elections turn out and what will be the impacts.

Not a lot is expected though. It doesn’t matter which party wins, the property sector will slow down after all the major efforts that have been made to pull India’s realty out of dark.

Conclusion

NRIs looking to take advantage of this sudden plummet of rupee need to be careful with their investment; the rush hour can end up in bad decisions if they don’t consult an experienced real estate advisor.

The chances of getting heavy returns are there and the temporary discount for NRIs is something to be cashed on. There won’t be such deals anytime soon, especially in the light of upcoming elections.

The dangling property market of India is set for many changes in coming two years and this short lived bubble may help the real estate with the little push it needs to improve its conditions.

Important Legalities for NRIs inheriting Real Estate in India

If you’re an NRI selling property in India that was inherited by you from your ancestors, there are certain rules and regulations that you must know about while doing so.

There are fundamental differences in the taxation for NRIs and you will find a lot of things uncommon from usual laws. Real Estate transactions involve hefty amount of money and hence, they should be done with the right structure in mind.

Factors such as laws of inheritance, taxes to be imposed on inherited property, rights of inheritance, permissible properties by RBI etc come into play and violating any of the laws can result in messed up real estate consequences that any NRI would want to avoid.

As Spacio Realtors are NRI Real Estate Agents, we would like to shed some light on the process and the legalities of inherited properties by NRIs.

What kind of Properties can be inherited by NRIs?

Although there are restrictions on buying certain categories of real estate in India such as agricultural or farm land for NRIs, they are free to inherit all kinds of immovable property assets.

Inheritance is allowed from anyone in the family of the NRI or even another NRI to whom the property belongs. Person of Indian Origin (PIO) can allot properties to other NRIs based on the nature of the transaction. There are certain rules that govern this kind of inheritance.

Condition of Inheritance

Only those properties, residential or commercial, are inheritable that properly warrant the inheritance of property as per the laws that govern the case of inheritance by an NRI.

Obviously, the relevance of such laws is subjected to the time the inheritance statement or will was written. If certain conditions as depicted in these laws were not met (at the time of allotment of property), the property can’t be inherited.

The same case applies to properties that are inherited from other NRIs or PIOs by an NRI or PIO.

More information on these laws and FAQs are given at Ministry of External Affairs.

Taxation for NRI When The Property is Legally Inherited  

As such there are no taxes imposed on an NRI when they receive an inherited property from someone. Neither does the transferrer, dead or alive, has any such tax obligation to fulfill to make the transaction valid.

There is a clause however, that if the property is reassigned or the rights are transferred to another person by the NRI who originally inherited the property, the recipient is mandated to disclose the property as income. This condition is valid only when the property exceed 50,000 INR in value, which we suppose almost every property will.

Taxation for NRI when The Property is Retained By the Heir During Their Lifetime 

If the NRI decides to keep the inherited property to themselves, there are certain other conditions that come into play.

  • If the NRI status is retained by the individual based on income tax laws applicable to the person, the property will be taxable by the law.
  • If the NRI doesn’t use the property for any kind of monetary gains and only keeps it for occupying it while stay in India, then there is no tax implication.
  • If the same NRI owns more than one properties in India, including the one inherited from someone, then only one of these properties qualifies for exemption of taxes. Tax Return Filing for NRI will be applicable for other properties as only one can be used for stay.
  • The other properties, in case of multiple properties owned by the NRI, are taxed on the basis of rental income value of those properties.
  • Tax Return Filing for NRI also becomes necessary if the combined income of the NRI in India exceeds the basic taxable bracket, including that earned commercialization of inherited property.

Tax Applications while the Sale of Property by NRI that was Inherited  

There are three basic conditions that operate when an NRI wants to sell the property that was inherited.

  1. An NRI is free to sell the inherited property to any citizen of India.
  2. An NRI can also sell the inherited property to another NRI or PIO but this can only be done after prior permission from RBI.
  3. The laws and rights regarding the sale, rent or gift of property don’t vary if the person was not an NRI when the property was inherited by him.  

Implications when the NRI wants to Gift the Inherited Property to Someone

The NRI holds full rights to gift the property to someone in the family without having to go through any tax implications.

In case, the recipient of the property is not a family member or a non-relative, then they have to pay property tax on the net evaluation of the property.

NRIs are not allowed to gift the property to anyone who is neither a citizen of India and nor an NRI or PIO.

Tax Laws for NRI Corresponding to Income from Inherited Property

There are tax implications on both the seller of inherited property – the NRI and purchaser but the same laws don’t govern the taxes imposed.

When the sale is made by the NRI of an inherited property, then the purchaser has to file income tax according to income tax on capital gains. (Section 195 of ITA)

If the time when the NRI inherited the property and the owner bought the property exceeds 2 years in calculation, the NRI will be taxed based on long term capital gains.

In case, the inheritance has taken place after April 2001, the value of property paid by an preceding owner of the property will be taken for computation.

Alternatively, if the property was inherited before April 2001, the value of property, can be computed based on its value as on April 2001 for taxation.

Tax Percentage for Long Term Gain for The NRI

The NRI is supposed to pay 20 percent per annum is they decide to pay the taxes under long term capital gain.

They also have the option to invest in any of the allowed government institutions in the forms of bonds, given the value of investment is equal to 50 lakhs inside a year.

Get Help With Sale of Inherited Property in India from NRI Real Estate Agents

 If the taxing system and Tax laws for NRIs are a bit overwhelming for you or you want a property expert to help you with the sale of inherited property, you can obtain the services of Spacio Realtors.

We’re ISO 9001 certified Real Estate agents in India who offer a great deal of trust in dealing with NRI property.

There are several benefits of going with us in such kind of transaction as we can provide expert guidance on the whole process, mobilize resources for the deal and help you invest your money precisely for the best tax benefits.

These things make the transaction smoother and retain income benefits for the NRIs.

Conclusion

Inheriting property from relatives in India or other NRIs is legally possible for NRIs but selling it comes with added tax conditions. Gifting an inherited property or selling it out for capital gains must be done with legal compliance in order to make the best out of the assets.  


Ambitious solar power initiatives in Real Estate India!

Solar Power is rising at a breakneck pace in India with ambitious projects coming to light each day.

India fulfills most of its energy requirements from coal but solar power is slowly making the move in the subcontinent. Only last year, India attracted 30% corporate funding in this segment.

Japanese investors and other FDIs are planning to invest a whopping sum of $100 billion in India’s solar real estate to make it prosper even more. These are clear signals of the market becoming self reliant and ready to take off.

World’s Largest Solar Power Plant

India will also house the Bhadla Industrial Solar Park, which is set to become the world’s largest solar plant when it starts operating at its full capacity.

In addition, other solar power plants that are planned in India will join the list of world top ten rankings. This way India will takeover USA in solar power generation rankings, staying behind China, which is the world’s number one right now.

Diu’s Accomplishment

Diu is a part of an island union territory in west India that earlier had to import electricity from the neighbouring state of Gujarat. But now, with ambitious developments in Solar electric plants, Diu is meeting most of its electricity requirements with Solar power and has achieved electriciy independence from Gujarat.

This has been possible due to government subsidies in solar rooftop equipment and installations at most of governmental buildings.

Power Purchase Agreements

Fortune 500 companies such as Adobe and Accenture are now coming up with Power purchase agreements in Bengaluru region. The agreements are a vital step in allowing these companies purchase power from solar power generators at fixed rates whenever it is available. Such measures encourage the take up of solar energy in other institutions as well.   

International Solar Alliance

International Solar Alliance is a world-level community of 122 countries that receive ample solar power across the year, which was initiated by Prime Minister of India in 2015.

The steps have prompted the World Bank to offer $1 billion in funds for development of the alliance. This is a major step forward to draw in investments for solar energy from all parts of the world.

Smart Grids in India

In order to solve the growing solar power demand and integration of the same with india’s not so robust power grid system, new smart grids are currently being tested in several parts of the country.

These grids are aimed to optimize the flow of power in the grid where the grid can automatically switch between solar power and main power by detecting changes.

An estimated investment of 44.9 billion USD is expected to be made in the decade of 2017 to 2027, to integrate smart grids in several parts of the country.

Conclusion

India is ready to embrace alternative sources of energy that could help meet power requirements and open up the current situation to a more manageable pricing. There have been proactive efforts by the government and foreign companies.

These efforts will have direct impacts on the growing solar real estate market in India, which is now open for investment.