The circle rates of properties in Gurgaon, which is a prime real estate market, have been reduced by 3-8% for the fiscal year 2017-2018.

The government officials and experts are expecting this move of rate cut to be positive for the otherwise stagnant market, as more homebuyers will now show interest in buying properties because of low prices. The market is sure to gain some momentum by the rate cut.

The circle rates in Gurgaon were reduced in the previous fiscal year also by 10-15%. However, the circle rates were untouched in the previous two years. (2015-16 and 2014-15)

As per the reports which were submitted by the field officers, the rate cuts have been decided. Although majority areas of the district have witnessed the rate cut, rates have been increased by 3-5% in some areas like the areas near Huda sectors to bring consistency.

The revenue collections are expected to increase from stamp duty after the slashing of rates.

The areas of some developers including DLF and the area of Sushant Lok saw no revision of rates. On the other hand, the rates in sectors 58-115 have been reduced by 5%.
The rates in the villages which come within the boundary of the city have been reduced by 3-5%, which include Moalehera, Sikanderpur Ghosi, Bajghera, Sukhraili, Nathupur, Sarhaul, Chakkarpur and Sarai Alawardi.

The few areas which have witnessed an increase in rates (2-4%) are, Friends Colony, Jawahar Nagar, New Palam Vihar, Jacubpura, Subhash Nagar, Hira Nagar, colonies of Old Gurgaon and Gandhi Nagar.

As the GST shall roll out on July 1, flat owners with maintenance charges above Rs. 5000 shall be required to pay an additional tax of 2.5% over these maintenance charges. These charges exclude water and electricity charges, stamp duty and property tax.

Against the existing rate of 15.55%, the new rate after GST implementation shall become 18%. Those societies having an annual corpus of balance exceeding 20 lakhs shall be covered under this regime. Again, the scope of balance excludes stamp duty, water and electricity charges, property tax as well as maintenance charges deposited by apartment owners.

Tax paid on the materials bought in for the purpose of renovation, repair of maintenance of society’s premises or flats say steel, paint or cement, same shall be deducted from the total tax amount required to pay as per GST. Please note that GST is required to be paid in full at first and then credit on such tax adjustments can be claimed thereafter.

One annual return is required to be filed under the current tax regime which shall be replaced by 37 under the GST regime. A flat 18% of tax is attracted under GST against the current regime with 15% service tax, 0.005% as non-agricultural tax and 0.5% as Swachh Bharat Tax leading to a total of 15.55%

Society corpuses are predominantly going to observe the major effects of GST as these societies are stand to lose out amount on account of extra tax of 2.5% on account of GST. Additional stamp duty is required to be paid in case of delay in conveyance deed.

This tax enhancement will further add pressure on society’s corpus. Conveyance deed is handing over the ownership of land to society by builder.

Till date more than 400 Benami transactions have been unleashed by the income tax authorities pertaining to plot of lands, bank accounts, jewellery and flats. To tackle the issue, 24 dedicated Benami prohibition units have been set up by the apex direct taxes body, Central Board of Direct Taxes.

To initiate swift action, these units shall be guided by the investigation directors. 240 cases with market value of property more than Rs. 600 crores are under the provisional attachment of the properties. While in 40 cases with the market value of immovable properties of more than Rs. 530 crores have been attached. These immovable properties belong to cities like Mumbai, Delhi, Madhya Pradesh, Kolkata, Gujrat and Rajasthan.

There was one beneficial owner in Madhya Pradesh-based listed company who bought land worth Rs. 7.7 crore in the name of his driver. There were several sheel companies created which exist just on the papers and holding several immovable properties.

In another case in Sanganer, Rajasthan, A man with no means found holding nine immovable property to benefit his former employer. Similarly, certain number of properties were acquired through shell companies in Kolkata as well.

In November, Benami Transaction (Prohibition) Act 2016 came into effect which covers tangible or intangible property, movable or immovable property. Corporeal or incorporeal property. It empowers the provisional attachment as well as subsequent confiscation of Benami properties. A rigorous up to 7 years and a fine up to 25% of the fair market value can be imposed in case of Benami transaction. Prosecution of the benamidar, beneficial owner as well as the abettor is also allowed under the act.

The Noida Metro project finally gets its formal approval for its advanced stages of construction on Wednesday. The project is aiming to get finished by the year end facilitating its commuters in Noida. The Cabinet stamp has finally paved a way for equity worth Rs. 1000 crores required in the project.

With this green signal, it is been assured that the project will suffer no future financial crisis as well. A budget of Rs. 5,533 crore has already been allocated to the project connecting rest of NCR with Greater Noida starting at Sector 71 in Noida. This will be named as The Aqua line with an interface as Blue line extension from Noida City Centre to Sector 62.

An aid of Rs. 1587 crore was released in January after the approval by the National Capital Regional Planning Board. This finance at subsidized interest rate shall be employed at the Metro corridor. Since the BJP has came to power in Uttar Pradesh, fast track approvals are granted for the corridor.

Located at sector 124 Noida, a new project stretched across 3 million sq ft has been ventured by the ASK Property Investment Advisor which is a real estate private equity firm of financial services firm ASK Group. A whooping invest of 200 crores has been pumped in ATS Infrastructure’s project .

ATS Infrastructure has raised one offshore fund and four domestic funds and started its real estate private equity fund business way back in 2008. All these investments are employed in residential projects so far. ASK Property Investment Advisor partnered with the ATS infrastructure for its fourth project considering Noida as one of the fastest growing real estate market with a huge potential. The scope of growth in Noida is backed with its commendable infrastructural facilities and proximity to Delhi.

Of all the four projects ventured between these two, three are primarily located in Noida. And ASK has invested Rs. 650 crores in all these projects. Now foreseeing the stability in commercial office sector and having a potential to be a part of REITs, institutional investors are keen to invest their funds in leased office assets. This fact is backed by the inflows into these kinds of assets in 2017 which is fairly high compared to the peak year 2014. The overtaking of funds inflow is four-fold at $3.5 billion.

Rs. 4350 crores of funds are currenly managed by the ASK Group with a commitment of Rs. 2400 crores over 33 investments. The group maintains an internal rate of return (IRR) between 17% to 55% with its six partial and eighteen full exits. This IRR is valued at Rs. 1900 crores.

In 2009, the group raised around Rs. 326 crores by committing 100% of its portfolio. Second domestic fund was raised further by this group in 2011 which was followed by its third fund raising in 2016 at Rs. 1000 crore and 1400 crore respectively. Now the group is heading towards its fifth fund raising of 2000 crores. It has also raised its maiden off shore funds worth $ 82 million.

With the growing concerns over poor construction quality handed over to the homebuyers by various developers in Noida and Greater Noida, Noida Extension Flat Owners Association (NEFOWA) has appealed the concerned authorities to carry out safety audits for the under-construction buildings.

Audit pertaining to the quality of raw material used in construction and other dafety measures to be taken forth for the purpose of disaster managements shall be conducted under this safety audit. Noida falls under the seismic zone 4 as well as close to river Yamuna and the association want all these factors to be taken into consideration by all the realtors who are developing project in and around the area.

Against the existing per-person-per-hectare (ppph) of the city is 500 as per master plan 2021, the NCR Planning board has drafted a Master Plan 2031 and increased this ppph to 1650. As the permissible population density has been increased, Noida shall not be accommodates more real estate project on the similar lines and this will ultimately lead to civic crisis. This issue has already been addressed to Noida Authority, MLA Pankaj Singh as well as industry minister Satish Mahana. The issue may also generate environmental hazards.

The move of enhanced ppph has been opposed in January 2017 by the Nefowa on the grounds that Noida city lies in Sesamic Zone 4 and is not capable to handle such amount of pressure. Even for the stakeholders, this random increase in ppph could lead to serious implications. More density requires more accommodation of apartments and this may also lead the civic system out of gear.

With the implementation of Goods and Services Tax (GST), the pricing of houses is expected to come down by 5% as the state and Central government is planning to peg the levy at 12% on the finish apartments and houses.

As GST rolls in, the additional 4.5% of the service tax on the final price shall not be levied over the homebuyers for the purpose of possession thus bringing the pricing down by 5%. It shall become tax neutral as the GST at 12% is customer friendly.

The actual cost for construction shall be reduced due to the credit granted on account of steel, cement, paint and other essentials thus impacting the price reduction of the complete houses. The expert revealed that an apartment worth Rs. 1 crore is expected to get cheaper by Rs. 3 lakhs to Rs. 5 lakhs. The net price is largely get impacted under affordable segment with cost up to 30 lakhs which will observe this downfall in pricing by 5%.

As the developers are expected to derive higher margins in premium projects, hence those projects may not gain significantly from this move. With proper allowance of input credit, GST at 12% shall be a favourable rate for home buyers. As of now the taxes on the input for construction are fairly much higher than % on the final price, thus GST is expected to bring down the overall tax liability.

As the developer under current scenario pays the VAT and excise tax on the various inputs used in construction including steel and cement at 27.7% and 18.1% respectively which further varies from state to state. Now under GST regime both these inputs shall be taxed at 285 and 18% respectively. White goods and paints are also taxed at 28%. For affordable houses (up to Rs. 6,000 sq ft) as the 12% GST is imposed on the finished houses, effectively it shall cost to zero on account of credit taken by the developer for taxes paid on the inputs. Moreover the buyer shall also get exempted for additional service tax of 4.5% of the price of the house. All these factors will slash down the cost of acquisition.

For a housing project say Rs. 2,000 per sq ft as the cost of construction, the contractor will collect a tax @ 18% i.e. Rs. 360 sq ft from the developer. Now developer if sells this house at say Rs. 3000 per sq ft then the GST levied shall amount to Rs. 360 per sq ft on account of 12%. Hence the fresh liability of the developer will turn zero. In case if the developer add other expenses and taxes, he can even claim more. But under GST regime, he shall be entitled to claim upto his fresh liability.

However, for the projects in premium segment, the entire input tax credit is not at all sufficient to bring down his fresh liability to nil. The gap between the cost of construction and the selling price is quite high due to higher margins with developer. Say the cost of construction for a premium housing is Rs. 5000 sq ft which will account a tax liability of Rs. 900 per sq ft. If the developer sells it off at Rs. 10,000 per sq ft, the developer shall be accountable to pay Rs. 1200 per sq ft. Hence developer shall be liable to pay the differentia; of Rs. 300 sq ft which in any way he will recover from the customer as the cost of project.