Maha Gov may consider stamp duty waver for affordable homes

In a first, Maharashtra Government is contemplating on waving off stamp duty on small homes. While the planned waiver is expected to offer relief to buyers of small and compact homes, the revenue collection gap will be filled by increased charges on larger apartments.

The government will give up stamp duty, levied at 5% of the property value on homes in the affordable segment and offer a concession on the charge on mid-sized homes. With a view to supporting the central government’s vision of housing for all by 2022, the Maharashtra government has proposed a waver of stamp duty for houses with an area of less than 250 square feet and providing discounted rates for flats up to 450 sq ft. on the other hand, Residences above 450 sq ft will cost 10% more with the state planning to increase ready-reckoner rates by as much as 10% from April 1, according to sources.

This scheme will greatly benefit small and affordable category home buyers in extended suburbs of the Mumbai metropolitan Region and also tier-II cities of the state. With several other proposals of the Union Government favouring homebuyers, this additional waver would persuade end-users to buy homes and help the government achieve its vision of Housing for All.

favours for home buyers

The Real Estate Bill which was passed in the Rajya Sabha on Thursday largely seeks to protect the interest of home buyers, at the same time aims to bring more transparency, accountability and efficiency in a sector which has hitherto been fundamentally unregulated and unorganised.

Delays in project delivery by developers, zero accountability on builders and opacity in project details and payment structures has blemished the credibility of the real estate sector for a long time resulting in lack of trust of buyers, which this bill aims to set right.

Moving ‘The Real Estate (Regulation and Development) Bill, 2015′ for consideration and passage, Urban Development Minister M Venkaiah Naidu said, it will not only bring transparency but also help in regulating generation of black money, to which the real estate sector contributes the largest in the country.

Here are things home buyers need to know and how the bill speaks in favour of them –

• Timely completion of projects: the bill ensures the completion and delivery of flats on time as stringent regulations are imposed on developers for any violations of the Appellate Tribunals or monetary penalties or both.
• Carpet area to be defined: The bill defines carpet area as net usable area of an apartment which means now a home buyer will be charged only for the carpet area. This comes as a huge relief to home buyers as developers now-a-days quote on super built up area or sellable area which is nearly 30-40% more than the usable area.
• Punish developers, real estate agents: as per a provision of The Bill, imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both can be awarded. Besides, Misleading advertisements will be punishable offence where first-time offenders will be fined 10% of project cost and repeat offenders could face a jail term.
• All clearances before project launch: the Construction of a project can start only after getting statutory clearances. Prior to the launch of the project, developers will have to get all the clearances necessary to go ahead with the development.
• Part of home buyer’s money to be kept till project completion: A minimum of 70% collections from buyers should be deposited in separate escrow account to cover the cost of construction and land. The bill prohibits unaccounted money from being pumped into the sector; 70% of the money has to be deposited in bank accounts through cheques.
• Registration of projects with Regulatory Authority: The Bill provides for registration of all real estate projects with Regulatory Authorities to be set up, which will require developers to disclose project information as well as details of the promoter, project, lay-out plan, land status, status of approvals, and agreements along with details of real estate agents, contractors, architects and structural engineers.
• Developers to provide after sales services: The Bill has increased the period from 2 to 5 years for developers to be accountable for any structural defects arising within 5 years of project construction. Developers cannot change architectural plans without the consent of two-thirds of home buyers.
• Speedy redressal of complaints: Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days.
• Delays to attract interest: Both builders as well as home buyers will have to pay the same interest rate for any delays on their part.
• Insurance on land title: to benefit consumers in cases where the land titles are found to be defective, The Bill provides for an insurance of the land title.

Home buyers lose 85% of tax benefit on delayed possession

 Did you know that a tax deduction of Rs 2 lakh annually is permissible against payment of interest on home loans, if the house is acquired within three years of taking the loan? and, if the possession takes place after three years, the exemption reduces to a mere Rs 30,000 a year — a drop of 85% – that’s like rubbing salt to an injury of delayed possession with absolutely no fault of yours!

Considering the ongoing turmoil in the real estate sector, most builders are committing delivery after four years of booking, so home buyers lose out on a big chunk of the potential tax deduction. Partner and national head of KPMG, Vikas Vasal, said the three-year possession condition was introduced to expedite construction of projects, but it did not pay off due to the market slump.

For people with annual taxable income of Rs 5 lakh or more falling in the top income tax bracket of 30%, the benefit resulting from this proviso drops from Rs 60,000 to Rs 9,000 per year. For instance, on a home loan of Rs 50 lakh taken at 9% interest for 20 years, the total loss through the entire repayment period will be Rs 8.81 lakh.