November 2018 Vol 02
Affordable Housing on salt pan land?
With nearly 300 hectares of salt pan land in the city now open for development of affordable housing, here’s assessing its chances at successfully meeting targets. As one of the world’s most densely populated cities, providing affordable housing to its citizens is among Mumbai’s topmost priorities. And with this view in mind, the latest released Mumbai Development Plan (DP) 2034 proposes to release about 3,000 hectares of public and private land, previously tagged as No Development Zones (NDZs), for constructing one million affordable homes. In addition, civic authorities will unlock another 300 hectares of salt pan land for the same purpose. All these initiatives beg the question: how effective will this new land availability turn out to be, considering soaring costs of property ownership in the city?
Affordable housing? From Palghar and Boisar in the west to Dronagiri, Ulwe and Kalamboli along the eastern suburbs – such projects are far and few. However, this new availability of salt pan lands along Dahisar-Goregaon and Ghatkopar-Mulund is likely to see a slight correction in property prices. “DP 2034 has focused on beautification and recreational facilities such as theme gardens, old-age homes, farmer markets and many more, additionally marking 12,859 hectors as natural areas and listing them under NDZs. As per the plan, Maharashtra will release 3,355 hectares of land, of which 2,100 hectares will go to affordable housing and the balance for commercial and retail development,” shares a spokesperson from NAREDCO.
Environmental risks: There was a good reason why salt pan lands were kept out of the construction ambit all these years – they not only provided livelihood to thousands of salt harvesters but also helped maintain Mumbai’s ecological diversity. “We are not taking rising sea levels seriously. Also, infra development has not been able to keep pace in the past 20 years with even the existing surge of real estate activity. The Mill Land development around Dadar and Parel are classic examples, where traffic congestion and a lack of any recreational space are only some of the results.
Source: Times Property, Saturday 17 November 2018
Purchasing property abroad? Keep paperwork ready for scrutiny
Apart from proving to the taxman that the value of the property is commensurate with your income and that you’ve complied with FEMA, there are other RBI related issues to be considered. The income tax (I-T) department has launched a major operation to investigate illegal funds and properties stashed abroad by Indians. There were recent reports that the I-T department has launched investigations against at least 7,500 Indians who have bought properties in Dubai in the past few years.
Purchasing a property abroad can get complex depending on the structure that the buyer uses for the transaction. The tax department may want to know the source of funds and the Reserve Bank of India (RBI) wants to know whether the individual struck to the Liberalised Remittance Scheme (LRS) regulations. The simplest way is to remit the money to a foreign bank account up to the permissible annual limit and buy a property in your name. But the rules can get complicated if you are borrowing money or if you are planning to form a company abroad to buy and hold property.
Grey areas cause problems: Under the LRS, any Indian can remit up to $250,000 abroad in a financial year. A family of four can remit $1 million. The regulator has specified the restrictions on the use of these funds. The money, for example, cannot be used to buy lottery tickets, betting, or other speculative activities. The individual can, however, use it to purchase property, provide for maintenance of relative, invest in stocks and funds, set up a company, and so on. Tax experts feel that many of the individuals who are under scrutiny may have used the grey areas in the law to buy property abroad. About a decade ago, some Indians remitted funds, set up a company and bought property through the firm. RBI later clarified that an equity set up to buy real estate is not allowed.
Source: Business Standard, Monday 19 November 2018
New builder must take on all liabilities of old project
Housing regulation authority Maharashtra Real Estate Regulatory Authority (MahaRERA) has directed a builder to honor a home buyer’s agreement signed with the previous developer despite not having any such agreement with her of their own. The builder had been using the absence of these documents in his defense for not giving the home buyer a possession of the flat. The MahaRERA was hearing a plea filed by Mala Sen seeking possession of her flat and interest on delayed possession. During the hearings, Sen’s advocates Sandip Karu and Dinesh Mishra contended that Sen had booked two flats in the West End project in Malad West in April 2006 with developer Amit Patel. The project was, however, transferred to Ahimsa Developers who renamed the project to Ahimsa Heights. After dillydallying for years, in 2013 Patel promised her flat C-304 in the new building and gave her only a letter saying so. No agreement to this effect was signed. But when the Ahimsa Heights project was completed, the developer denied her possession which is when she approached the MahaRERA.
MahaRERA member Vijay Satbir Singh observed that Patel had neither terminated the agreement for sale executed for Sen in 2006 nor refunded the money. Ruling that Sen is a “lawful allottee” in the project, Singh observed that since Ahimsa Builders had taken over the project from Patel, they are bound to take on all the liabilities too in respect of the project including that of the complainant. Ahimsa and Patel were then directed to execute the registered agreement for sale with Sen for flat C-304 subject to a payment of Rs 10 lakh agreed upon by Sen’s advocate during the hearings. “Since the arbitration petition is pending before the High Court, the agreement is executed after final disposal of the proceedings,” the order said.
Stamp duty on city properties set to go up 1% to fund infra
Mumbaikars will soon have to pay 1% additional stamp duty on a property to fund transport infrastructure projects in the city, like metro and monorail, Mono Rail Transport System (BRTS), freeways and sea links. The state called it a surcharge that is a percentage of the land/property value. It’ll push up property stamp duty to 6% from the current 5%, making flats costlier in the city. In its statement of reasons, the bill said “it is considered expedient to levy a surcharge by way of the stamp duty leviable on the instruments of sale, gift and usufructuary mortgage of immovable property within BMC” to ensure the corporation or agency undertaking notified Vital Important Urban Infrastructure Projects has sufficient funds. The usufructuary mortgage is when the mortgagor hands over possession to the mortgagee till the repayment is done. Officials said such transactions were negligible in the city. The government will pay the corporation or agency that has undertaken the notified project a grant-in-aid approximately equal to the amount realized by the surcharge.
Stamp Duty Surcharge: The money is to be used for the project in a manner specified by the state government. Recently, the Mumbai Metropolitan Region Development Authority (MMRDA) had asked the government to provide funds by levying a surcharge on stamp duty or increasing the premium on floor space index (FSI) for funding the transport projects. It is implementing various metro projects, besides the Mumbai Trans Harbour Link, etc. It had sought the financial aid on the plea that its land bank is drying up. The 1% additional levy has been in place under the other urban local bodies after the Local Body Tax was abolished in 2015. Officials said Mumbai alone was not taxed. Across the state, 21.5 lakh documents were registered last year and the revenue earned was Rs 26,500 crore. In Mumbai, about 2 lakh documents are registered annually and last year, the revenue earned was Rs 10,500 crore. This year, given the recession in the real estate industry, the target has been lowered to Rs 10,000 crore for Mumbai and to Rs 24,000 crore across the state, said officials.
Govt plans to slash visitors’ parking slots in hsg socs to 5%
The state government has proposed to reduce parking slots for visitors in housing societies from the mandatory 25% to just 5% of the total space allotted for the purpose in the new development control rules. Activists said this will lead to further congestion as visitors will be forced to park on roads. Housing experts said the existing 25% rule is hugely misused by builders who sell these slots and make a profit. Moreover, several housing societies flout this norm by putting up boards outside their gates stating that car parking by visitors is not allowed inside. The government has proposed the changes in a modification plan published on November 13, inviting public suggestions for and against it.
Development control rules make provisions for parking space in societies according to affordability. In case a builder wants to construct more parking, he must pay a premium to the BMC. In several instances, builders sell visitor parking to residents or the society itself allows it to exist members as rarely is any authority interested in keeping a check on it. The government did not amend the regulation for 25 years, despite the fact that now Mumbaikars prefer to have a vehicle even while living in 1BHK flats measuring 450 sq ft. Indrani Malkani, trustee, Together VCAN, said, “Reducing space for visitors parking will be counterproductive as it will force more people to park on roads.” Ramesh Prabhu of Maharashtra Societies Welfare Association said, “Visitors need parking too. This will create more hurdles.” Shirish Sukhatme of Practising Engineers Architects & Town Planners Association though said, “It’s a welcome decision. At many places, builders are struggling to recover parking construction cost from flat buyers.”
Claiming rent as business income isn’t easy
A common point of dispute between taxpayers and the Income Tax (I-T) authorities is the treatment of rent earned from a property. Taxpayers like to show such rent as business income as they get the benefit of depreciation, higher deduction of expenses, and the owner doesn’t need to pay any notional rent when the property is not let out. As it leads to revenue loss, the I-T department scrutinizes every case in depth to see if the taxpayer should be allowed to claim rent as business income. The primary reason for disputes is that the I-T Act doesn’t provide a definite answer on how to rent from a property should be treated. It, therefore, depends on the circumstances of each case. The courts have ruled that classification of income from rent depends on whether the property is let out to enjoy the rental income or the owner is exploiting it commercially.
If you rent a property as an individual or as a company, in most cases you need to mention rent under the section ‘income from house property’ in the income tax return (ITR) form. It doesn’t matter whether it’s a house (residential) or an office (commercial). When rent can be classified as business income depends on each case. There are, however, broad guidelines that a taxpayer can look at to see if rent can be business income. Rental income can be business income when, say, a business and its assets are leased out as a going concern, or assets are leased out along with furniture and fittings and other associated structures, or in addition to leasing of properties, various other services are regularly provided (like lifts, security, or other amenities such as machinery, canteen, housekeeping, etc).
Source: Business Standard, Thursday 29 November 2018
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