Real estate sector pins hope on Union Budget

NEW DELHI: The real estate sector which has been quite dull for the past two to three years is pinning hope that there would be some relief announced in the Union Budget.

The real estate sector has been the second biggest employer for India after agriculture, and market estimates suggest that it will grow by as much as 30 % in the next decade.

Consequently, the stakeholders have high expectation from this year's Union Budget.

The real estate sector, the builders, developers and investors included are all hoping that the Budget will give the sector a much-needed push, coming as it were, just a few months after demonetisation was announced.

Kishor Pate, Chairman and Managing Director, Amit Enterprises Housing Ltd. said as of now, the tax deduction limit for home loans is just Rs. two lakh, which becomes insignificant when one takes into account the high prices of properties in the larger cities.

Here is the wish list of the real estate sector for the Union Budget and the changes that the industry and its stakeholders are unanimously looking forward to.

The first on its list is income tax relaxation.

"In Mumbai, for instance, the standard housing price is Rs. one crore, so the current tax deduction limit is insignificant for homebuyers in the financial capital. Apart from extending the tax exemption for home loans to at least five lakh, the budget should also introduce concessions on insurance premiums to encourage buyers insure their property," he added.

The real estate wants a clarification on the beneficiaries included under Pradhan Mantri Awas Yojana (PMAY).

According to a recent announcement by the Union Government, a three percent interest rate is applicable for loans up to Rs. 12 lakh and four percent up to Rs. nine lakh, as per the PMAY scheme.

"The scheme also states that two new income categories have been added to avail higher loan amounts with higher subsidies. We look forward to further clarifications on the definition of these beneficiaries," Pate said.

The third in the wish list includes an increase in House Rent Allowance (HRA) deductions for the self employed.

Pate said the salaried individuals already get HRA as a component of their income and can also claim deductions on it.

"However, self-employed individuals are limited to only Rs. 2,000 as a maximum deduction on HRA as per the provisions of Section 80GG. The 2017-18 Union Budget should address this dichotomy," he added.

The real sector wishes that the Union Budget aims to standardize construction materials.

Pate pointed out that a major reason for increasing home prices is the constantly escalating cost of construction materials like cement and steel.

"Standardization of such materials can help reach tax clarity and also make real estate a viable opportunity for investment," he added.

A single window clearance for real estate projects is what the sector is looking forward to.

"As per the usual process, real estate projects need to go through a long line of approvals and this bureaucratic process has been resulting in delayed deliveries. Single window clearances have been a long-awaited step to reduce these bureaucratic setbacks. Once in place, it can give a major boost to the market," Pate said.

A simpler tax norm of the Real Estate Investment Trust (REIT) is another thing the sector is expecting from this year's Union Budget.

Pate stated that until today, the real estate sector has not benefited from any REIT listings, with the model in its current format still weighed down with multiple taxes.

"Taxation for REITs needs to be simplified to allow developers and investors to benefit from REIT listings. It is necessary that the Union Budget 2017-18 recognizes the importance of REITs and provides lower taxation on REIT income, reduction/removal of service tax with leased premises and waiving capital gains during transfer of property to REIT," he added.

The real estate sector also looks forward to a better clarity on the Goods and Services Tax (GST).

Although the GST (Goods and Services Tax) structure has been declared, the stakeholders are eagerly waiting to understand the rates applicable to the real estate / construction industry.

"We seek clarifications on abatement schemes, and scenarios when developers use composition schemes and the resultant credit for input tax," Pate said.

The real sector also looks forward to financial protection with project delays.

Currently, the interest deductions associated with self-owned homes has been limited at Rs. two lakh. However, for projects under construction, the deductions applicable are just Rs. 30,000. Further, the applicable period for the interest is three years, starting from the year that the loan was approved. This has proved to be a hardship for property buyers and investors.

Pate said the Union Budget should focus on further interest deductions in late deliveries and also amend the period of repayment from the year the possession was due.

The overall sentiment in the realty sector may be low, but hopes are high as far as the expectations from this year's Union Budget are concerned.

After being dealt with a severe blow in the form of demonetisation, the sector is not only awaiting a more transparent and organised system, but also a slew of sops and largesse from Union Finance Minister Arun Jaitley on February 1.

Source : ET Realty 

RERA will not be diluted: Rajnath Singh to homebuyers of Greater Noida West

NOIDA: Homebuyers of Greater Noida West (Noida Extension) met Union home minister and senior BJP leader Rajnath Singh on Monday, who assured them that irrespective of the result of the UP polls, the Real Estate (Regulation and Development) Act, 2016 (RERA) will not be allowed to be diluted in the state.

“We met Rajnath Singh and expressed our fear that RERA may get weakened in UP, with various pro-buyer measures being ignored while being adopted,” Kumar, president of Noida Extension Flat Owners Welfare Association (Nefowa), told TOI, adding that “irrespective of which party forms the government, RERA will not be allowed to be diluted in UP.”

Nefowa had met senior Delhi Pradesh Congress Committee president and former Union minister of urban and housing development Ajay Maken on Sunday over the issue.

“We are approaching all political parties so that homebuyers’ issues and concerns are kept in mind when the government is formed after the election,” Shweta Bharti, general secretary, Nefowa, said.

RERA, passed by the Union government and adopted in several states, is due for adoption in UP. The Act is expected to prevent several malpractices in the real estate business and bring about transparency in the sale and purchase of property.

Source: ET Realty 

Relief to builders in Gurgaon & Faridabad as fire dept issues provisional NOCs for flats

CHANDIGARH: In a first-ever major relief to builders, the Haryana government on Monday announced the issuance of provisional noobjection certificates (NOCs) by the fire department with regard to construction of 15,000 flats in Gurugram and Faridabad districts.

Haryana department of urban local bodies officers said a meeting was organized with members of the executive committee of the National Real Estate Development Council (NAREDCO), an apex national body for real estate industry under the ministry of housing and urban poverty alleviation, at CM Manohar Lal Khattar's residence.

The issue was part of the 20-point memorandum submitted by the NAREDCO team headed by its president Parveen Jain. Khattar flew in from Rohtak to meet the delegation, which included heads of almost all leading developers and builders operating in Haryana.

Earlier, the government had refused to rework the property tax formula as sought by the builders' body. It, however, gave an assurance with regard to an advertisement policy for places developed and maintained by private builders. The urban local bodies department had been insisting on sharing the revenue from advertisements in areas developed by such colonizers.

“The meeting lasted for over three hours. We had a lot of issues to be discussed. The CM was kind enough to summon all department heads to discuss these. Some issues like fire clearances were resolved, while those solved on the spot included clearances for electricity usage and advertisements in colonies among others. This was a fruitful meeting,“ claimed Jain.

Source - ET Realty

Budget 2017: Infrastructure sector seeks higher allocation, tax breaks

NEW DELHI: The infrastructure sector's stakeholders expect a rise in budgetary allocation for 2017-18 and tax breaks to reinvigorate the industry.

"Over the last few years, the government has been trying to address the impediments to the infrastructure growth story. However, investment in the sector is yet to reach the desired level," Vishwas Udgirkar, Partner, Consulting, Deloitte Touche Tohmatsu India, told IANS.

"Budgetary allocations are expected to increase and with bank capitalisation taking place due to demonetisation, it would be interesting to see if any announcements are made to facilitate channelising this much needed capital to the sector."

According to Manish Agarwal, Partner Leader Infrastructure with PwC, public sector spending is expected to remain the prime driver for infrastructure build-out over the next year as private sector investment remains subdued.

"Financial stress in the banking system remains a key hurdle to private investment coming back into the sector. Addressing this, along with implementation of Kelkar Committee recommendations, could revive PPPs (public private partnerships) faster," Agarwal said.

On the merger of the Railway Budget with the Union Budget, Agarwal noted that the move will help to bring in more focus on the key issues relevant to the budget.

"The Finance Ministry will be able to start taking a view on allocation between rail, road, water to optimise logistics costs, and make transport greener," Agarwal said.

"While road and rail are likely to get large allocations, we expect to see growth in allocation to inland waterways and Sagarmala programes."

The provisions for attracting global funds such as pension funds and sovereign wealth funds would go a long way in facilitating infrastructure development, said Jaijit Bhattacharya, Partner, Strategy and Economics, KPMG in India.

"Along with an increase in budgetary allocation for the infrastructure sector, it is crucial to establish regulatory mechanisms in infrastructure creation, which enables private investment in infrastructure funds such as National Investment and Infrastructure Fund (NIIF)," he said.

"In addition, a more aggressive adoption of asset recycling is desirable as it would free up a very significant amount of funds which can be further invested into more infrastructure.

"This would unleash a virtuous cycle and considerably accelerate infrastructure development. In the road sector, this strategy is termed as TOT (Toll-Operate-Transfer) and is being actively embraced."

Besides higher allocation, the sector is hopeful of tax sops.

The Construction Federation of India (CFI) said it anticipates the Union Budget 2017-18 to bring substantial relief in direct and indirect taxation and also remove anomalies in the taxation laws.

Source - ET Realty

15,000 flats to be given provisional fire NOCs in Gurgaon & Faridabad

CHANDIGARH: In a first-ever major relief to builders, the Haryana government on Monday announced the issuance of provisional no-objection certificates (NOCs) by the fire department with regard to construction of 15,000 flats in Gurugram and Faridabad districts.

Haryana department of urban local bodies officers said a meeting was organized with members of the executive committee of the National Real Estate Development Council (NAREDCO), an apex national body for real estate industry under the ministry of housing and urban poverty alleviation, at CM Manohar Lal Khattar's residence.

The issue was part of the 20-point memorandum submitted by the NAREDCO team headed by its president Parveen Jain. Khattar flew in from Rohtak to meet the delegation, which included heads of almost all leading developers and builders operating in Haryana.

Earlier, the government had refused to rework the property tax formula as sought by the builders' body. It, however, gave an assurance with regard to an advertisement policy for places developed and maintained by private builders. The urban local bodies department had been insisting on sharing the revenue from advertisements in areas developed by such colonizers.

"The meeting lasted for over three hours. We had a lot of issues to be discussed. The CM was kind enough to summon all department heads to discuss these. Some issues like fire clearances were resolved, while those solved on the spot included clearances for electricity usage and advertisements in colonies among others. This was a fruitful meeting," claimed Jain.

Other issues taken up during the meeting included rationalization of external development charges and change of land use fee and relaxation in floor-area ratio. "With the fire department agreeing to issue provisional NOCs, our companies will be able to sell 15,000 flats," Jain maintained.

Meanwhile, an official of the urban local bodies department, who was also present in the meeting, said, "Clearing outstanding arrears to the tune of Rs 900 crore to the excise and taxation department was also discussed."

Source: ET Realty 

Alternative route between Gurgaon and Manesar in the works

GURGAON: Huda is working on an alternative route between Gurgaon and Manesar to decongest the Delhi-Gurgaon expressway. The new route will connect Southern Peripheral Road (SPR) with NH-8, bypassing the Kherki Daula toll plaza, largely benefitting commuters coming from the Faridabad side.

At present, SPR connects with NH-8 around one km ahead of the Kherki Daula toll plaza. Under the new plan, the alternative route will start from the road dividing sectors 75 and 75A, and it will connect NH-8 near Sector 83 through the road diving sectors 76-77. Some developers, who have their projects in these areas, have come forward to help the urban development authority construct the road.

With the completion of this road, people coming from Faridabad side through SPR can directly go to Manesar without having to cross the Kherki Daula plaza and pay the toll. It will also give a boost to several real estate projects being developed along SPR, which is on the verge of completion.

“We have taken possession of the land required to construct the roads of sectors 75, 76 and 77 after completing the acquisition process, which was stuck due to litigation. We have levelled the land so that till the time the metal road is constructed, people can use this route, if they wish,” Huda administrator Yashpal Yadav told TOI on Tuesday. He, however, refused to give any timeline for completion of the road, only assuring to complete the project on priority basis.

Yadav said Huda has engaged a consulting firm that will prepare the estimate within the next two weeks for the construction of these sector roads. “Once the estimate is ready, we will start the process for construction of the road,” he said, adding, “some builders have shown interest in constructing this road against adjustment of their pending external development charges (EDC)”.

Welcoming the development, Manav Gopal, head of sales & marketing of MAPSKO Group, said, “The new link road bypassing the Kherki Daula toll plaza will connect new Gurgaon with SPR, thus reducing headache and commutating time for residents and enhance the connectivity of that area. The long queues at the toll plaza were the main hindrance for people not opting for residential properties in new Gurgaon. So, in other words, it will boost the real estate sector in new Gurgaon tremendously.”

Harinder Dhillon, VP (sales), DLF, said, “This is good news as the proposed road will decongest the expressway and allow smoother commute for the cars plying on this stretch of the expressway, which is like a new year gift for the residents of this area. The development will improve connectivity to new Gurgaon and make these upcoming sectors an even more attractive option for potential buyers.”

Source : ET Realty

NGT has no power to decide on real estate project exemption: Environment ministry

NEW DELHI: Union environment ministry has questioned the jurisdiction of the National Green Tribunal (NGT) to take a decision on the Centre's recent notification which exempted bigger building projects from the time-consuming 'prior' green clearance and brought smaller ones within the ambit of 'environmental conditions' through easy 'self declaration' procedures.

In its affidavit filed before the NGT last week, the ministry noted that the tribunal has "no jurisdiction to test the validity of a subordinate legislation" issued by the Centre in exercise of its powers enshrined under existing Act.

The affidavit was filed in response to a plea of the Society for Protection of Environment and Biodiversity which sought quashing of the December 9 notification on the grounds that it was in contravention to the provisions of the Environment Impact Assessment (EIA), 2006 and the and Environment Protection Act, 1986.

The ministry in its affidavit referred to a recent Bombay high court judgement while challenging the jurisdiction of the tribunal. It also argued that through the notification it has attempted to decentralise the clearance process and integrate the environmental conditions in building permissions.

"World over, this responsibility of granting building permission and incorporating and enforcing environmental concerns in these projects during construction and post-construction is being done by the local authorities. The ministry has taken note of the apprehensions regarding present lack of capacity in local authorities for undertaking such task, and built in corrective measures to take into account the fact that local authorities are best placed and suited to undertake this task most effectively," the ministry said.

Environmental lawyer Sanjay Upadhyay, however, said, "In my view, the NGT does have the jurisdiction although a limited one. The NGT has passed a detailed judgement on the subject (earlier) which has not been overturned by the Supreme Cour".

NGT will hear the matter on February 2. Seeking to simplify environmental clearance processes for building projects, the ministry has made changes in the EIA rules which now integrate environmental condition in building bye-laws to fast-track permissions.

Source: ET Realty

Chambers seeks ‘industry’ status to real estate sector

VIJAYAWADA: Andhra Pradesh Chambers of Commerce and Industry Federation (APCCIF) president Muthavarapu Murali Krishna wrote a letter to Union Finance Minister Arun Jaitley suggesting various measures for promoting the real estate sector.

He stated that the real estate business had slowed down in the last couple of years in spite of tax incentives, and that focus on affordable housing to lower and middle-income groups and other supportive measures were needed.

Moreover, the sector was hit by demonetisation, which severely impacted sale as potential buyers deferred their purchases in anticipation of a fall in property prices.

Mr. Murali Krishna said that the Central government should take some confidence-building measures in the budget to give a boost to the real estate sector.

Mainly, the real estate sector should be given ‘industry’ status so that it could raise funds easily. Devoid of that recognition, the developers were forced to borrow at higher interest rate from financial institutions and comply with stringent sanction processes.

Giving tax relief in the form of an increase in interest deduction limit from ₹2 lakh to ₹4 lakh, reduction in or waiver of stamp duty for home registration, bringing down the level of taxation of income of Real Estate Investment Trusts, waiving capital gain tax for developers at the time of transfer of property into REIT, and imparting clarity on interest rates applicable under GST regime were among the host of steps the APCCIF wanted the government to take to remove the impediments in the growth of this sector, which was a significant contributor to the Gross Domestic Product.

Source: The Hindu

Interest rate needs to be lower, acceptable, stable: President

KOLKATA: With strong macros and inflation in check, President Pranab Mukherjee today pitched for "stable, lower and acceptable" interest rate to attract prospective investors to West Bengal in particular and India in general.

The country's current account deficit has shaped up because of "prudent" fiscal management and the economy has been growing in the past decade despite 2008 global financial crisis, he said.

Addressing the third edition of Bengal Global Business Summit here, Mukherjee said: "Inflation is well under control. All the parameters and study suggest that there should be a lower, acceptable and stable interest rate which will encourage prospective investors in India, particularly in the state."

The country's fiscal deficit and also the current account deficit have "improved substantially", he said.

All macro-economic parameters are "strong" because of prudent fiscal management, investor-friendly policies and comfortable external factors despite the fact that the traditional export market has shrunk, the President said, noting that the country however has been able to capture other export markets in Asia.

Stating that India's economy has shown resilience in the past 10 years, the President spoke of how India's economy has grown consistently despite the impact of 2008 global financial crisis.

"It has grown at 7.6 per cent per annum despite the fact that there was 2008 financial crisis, which had a setback on all developed economies. It was followed by euro-zone crisis. The World Bank and IMF had to revise growth projection and they had downgraded," he pointed out.

Mukherjee further said India too felt the impact of the 2008 crisis which took a toll on the growth rate in 2008-09.

Before the 2008 crisis, the country's growth was over 9 per cent, "but our average national growth has been 7.6 per cent in the last decade".

Source: ET Realty

Top 10 expectations of real estate sector from Budget 2017

Real estate industry has high expectation from the upcoming budget 2016-17. Stakeholders are demanding that central government gives relaxation in income tax rate, provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.



Take a look at some of the major expectations that stakeholders have from the upcoming Budget 2016-17:



Industry status
Directly or indirectly, the real estate sector contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now. In its absence, developers are forced to borrow at high-interest rates and comply with a stringent evaluation process. Unavailability of funds at a reasonable rate of interest delays the construction process and increases the final cost of homes, negatively impacting the end consumer.

Giving industry status to the entire real estate sector, instead of granting infrastructure status only to the affordable housing segment, would help in pushing the housing demand in India.



Single window clearance
For the real estate sector to really grow and execute its projects on time, various government approvals should be given in a timely manner. Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.



Clarity on beneficiaries under PMAY
The government recently announced that interest rates of 3% would be applicable on loans of up to Rs. 12 lakh and 4% on loans of up to Rs 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). Now, two new income categories can avail higher loans with interest subsidies. The Budget should give more clarity on the actual definition of beneficiaries who can avail of these benefits.

For example - would young urban professionals hoping to buy their own apartments but not belonging to either the EWS (Economically Weaker Section) or the LIG (Low Income Group) segments be allowed similar subventions? Also, affordable housing is largely available in the fringe areas of metros and tier-II, III cities. Would certain redevelopment projects within metros meeting the affordable housing definition be granted similar benefits?



Financial protection from project delays
The deduction on interest of self-occupied houses is capped at Rs 2 lakh. For under construction residential units, however, if the construction is completed after 3 years, then the deduction is just Rs 30,000. This 3-year period starts from the end of the year in which the loan was taken. Lately, there have been many delays in the completion of many housing projects beyond the 3-year period.

This has caused hardships to property buyers. To provide them some relief, the government may consider allowing interest deduction in such cases without the cap of Rs. 30,000, and from the year in which the possession was due to the buyer as per the terms of the agreement.



I-T sops for first-time home buyers
Can a first-time home buyer looking at an affordable project get additional income tax incentives for at least five years? The Budget should throw more light on this. Any efforts in this direction would help the government move closer to its objective of delivering ‘Housing for All by 2022’.

Also, given the lack of institutionalized rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments to owned homes. It could also encourage more developers to come up with products suiting these segments.



Simplified tax norms for REITs
We have not seen a single REIT listing till date because of the presence of multiple taxes. Until tax hurdles are removed for developers and asset holders, it is highly unlikely that we will see any REIT listing. The government should recognize the capacity of REITs to improve market conditions for the real estate sector and remove the policies constraining their growth. The government should look at:

• Reduced level of taxation of REIT income
• Waiver of capital gains for the developer at the time of transfer of property into REIT
• Removal of service tax on lease premises



Higher tax saving on home loan & home insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes.

Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.


Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Source: Times of India 

Railways to rope in private players to modernise 23 stations at Rs 4000 crore

NEW DELHI: The railways has decided to rope in private companies to redevelop and modernise 23 stations, including the iconic Howrah Junction, Mumbai Central and Chennai Central.

The first private sectordriven redevelopment plan at Habibganj, near Bhopal, is expected to be flagged off by the PM shortly , paving the way for seeking private participation for the other 22 projects, most of them British-era facilities.

Bansal Construction will redevelop Habibganj station at Rs 400 crore -spending Rs 100 crore on modernising the main station and the rest on creating secondary facilities.

Apart from the 23, contracts for redevelopment of at least two stations in Delhi Anand Vihar and Bijwasan -are expected to be finalised by March, sources told TOI. Faridabad in the National Capital Region is also on the modernisation list.

Sources said the cost of re development of the 23 core station areas will be around Rs 4,000 crore, with the Centre hoping to earn at least the same amount as upfront fee from the developers that bag the rights. The overall cost of building facilities in and around the stations is expected to be around Rs 25,000 crore. A part from modernising a railway station, the private developer will also get the rights to develop surplus land near the station, including building of hotels and other facilities. The lease will be for 45 years.

While the Centre had cleared a plan to rede velop 44 stations last January, not much progress has taken place on the ground, with the development of Gandhinagar having been kicked off only this month. But that development is not driven by the private sector and is instead through a special purpose vehicle with equity from the railways and the Gujarat government.

But now, railway officers said, things have been firmed up with the Boston Consulting Group that has conducted feasibility studies for 55 stations, and 23 are ready for overhaul. The maximum number of projects are expected to be in Mumbai.

“We are not getting into an airport-like model which involved a complex maze of companies and SPVs. We are asking for upfront fee and giving the development rights,“ explained an official. The idea is to get some of the modernised stations up and running by the end of 2018 or early 2019.

Source: ET Realty 

Real Estate Act to be implemented in May

The government today announced to implement the Real Estate (Regulation and Development) Act 2016 from May this year. The Act was passed by Parliament in March last year. 

Minister of Housing and Urban Poverty Alleviation (HUPA) M Venkaiah Naidu today asked the states and union territories to implement the Act from May 1, as proposed in the Act. Addressing a meeting of Chief Secretaries and senior officials of states and UTs, Naidu said, “Real Estate Act is one of the most consumer- friendly laws passed by Parliament and states have no power to dilute its provisions. He said this after getting information that some states wanted to dilute provisions of the Act. 

HUPA Secretary Nandita Chatterjee said no amendments to the Act would be considered at this stage since full implementation of the Act would begin only in May this year when Real Estate Regulatory Authorities and Appellate Tribunals would become functional.  He said the minimum plot size of 500 sq m proposed in the Act for registration of projects with regulatory authorities was arrived at after discussions by the Parliamentary Committees and in Parliament and it can’t be altered now.  

Regarding other issues raised by states,  officials said necessary clarity for the purpose of implementation of the Act can be given in the Rules to be notified by states/UTs, without violating the spirit of the Act.  During the meeting it revealed that Andhra Pradesh, Arunachal Pradesh, Chhattisgarh, Haryana, HP, Jharkhand, Karnataka, Kerala, Mizoram, Rajasthan, TN and Puducherry will notify the Real Estate Rules next month. Punjab and Uttarakhand have said the needful would be done after the polls. 

Source: The Tribune

GST rollout from July 1 as centre, states reach deal

NEW DELHI: India will likely be able to roll out the goods and services tax (GST) from July 1 following a breakthrough on Monday over the seemingly intractable issue of tax administration after the Centre accommodated states' concerns.
“It's a significant head way,“ Union Finance Minister Arun Jaitley said after a day-long meeting of the GST Council with both sides agreeing on most matters.

Under the proposed tax regime, 90% of all assessees with a turnover of Rs 1.5 crore or less will be assessed for scrutiny and audit by state authorities, the remaining 10% by the Centre. Above that limit, Centre and states will assess in a 50:50 ratio. The agreement hammered out was based on a proposal by Tamil Nadu.

“Each assessee would be assessed only by one authority,“ Jaitley said, putting to rest fe ars over dual administration by both state and the Centre.“You won't have to jump from authority to authority, that's the advantage of GST... Computer programming will be done in such a way that there is no discretion (in selection of assessees).“

This division of tax administration had been holding up the finalisation GST tax laws, making it difficult for the government to stick with the April 1 deadline. The GST Council, which has Jaitley as chairman and state ministers as members, resolved to share the entire taxation base between the assessment machinery of the Centre and the states.

Both will have intelligence based assessment powers, Jaitley said. The Centre has also given leeway to states on integrated GST (I-GST), which deals with inter-state sales. Jaitley said the power to levy and collect the I-GST lies with the central government but states will also be cross-empowered in the same ratio as above through a special provision in law. Any IGST disputes among states will be resolved by the Centre.

Regarded as one of India's most sweeping reforms since Independence, GST will help turn the country into a common market by removing state tariffs that act as a barrier to free movement of goods and services. The accord will come as a relief to the Centre after concerns that the November 8 demonetisation may cause states to put up their price. To be sure, the constitutionally mandated timetable requires GST has to be in place by September at the latest.

Jaitley said all ministers present at Monday's meeting agreed to the proposals except West Bengal finance minister Amit Mitra. The state wanted exclusive jurisdiction for states up to the limit of `1.5 crore. Other states did not support West Bengal's demand, said an official present at the meeting. On the other hand, states such as Assam and Maharashtra demanded a higher number of assessees above the `1.5 crore threshold and fewer below.

The Centre also ceded ground on taxation rights over the sea. Territorial waters extending to 12 nautical miles fall under control of the union government but as per convention, states will be empowered to collect tax on any economic activity in this zone. “This decision has been taken after very wide consultations,“ Jaitley said.

“It's indeed a very positive development and takes GST journey forward,“ said Harishanker Subramaniam, national leader, indirect tax, EY India. “What remains now are rates for various goods and services, which I am sure will be decided in March 2017.“

NEW TIMELINE

The council decided on a new timeline for GST's rollout factoring in three key pending matters -final draft legislation and rules, approval of these by legislative bodies and setting of rates for the slabs agreed. “There was a broad view that first of July appears to be more realistic,“ Jaitley said, adding that GST is a transactional tax and can be introduced any time. He said ministers also felt that industry and trade will have to be given adequate notice and once the rates are decided, the GST Network's system will have to be modified suitably. The GSTN is GST's technological backbone.

Tax experts said the latest developments will help industry prepare for the new regime.

“With indication of revised implementation date of July 1, 2017, for GST, industry gets muchneeded clarity and some additional time for preparation for this huge reform,“ said Pratik Jain, leader, indirect taxes, PwC India.

Rajeev Dimri, leader, indirect tax, BMR & Associates LLP , said, “Administrative control with a single authority (either Centre or state) would ensure ease of compliances and assessment for assessees.“

Source: ET Realty

Budget 2017: Government may accord infrastructure status to low-cost housing

MUMBAI/AHMEDABAD: The government may tweak the definition of the infrastructure sector in the upcoming budget to include low-cost or affordable housing, a move that would reduce costs for developers and attract investors, two people with the knowledge of the matter told ET.

The change is being proposed about a month after Prime Minister Narendra Modi announced concessions on interest rates for low-cost housing loans under the Pradhan Mantri Aawas Yojana. “If we want housing for all by 2020, re-categorising affordable housing as infrastructure is essential. The government had sought feedback about this about a week ago,” a person familiar with the development said. “I see this happening in the upcoming budget.”

The government has been pushing Modi’s pet project of providing about 20 million houses across India by 2020. IT has reached out to senior finance ministry officials and the Reserve Bank of India for feedback on the proposed change and how to prevent it from being misused.

“The important thing here would be to define affordable housing or low-cost housing. And these projects will have to be insulated in a way that no one is able to take money out without completion of the project,” another person aware of the development said.

Real estate developers have been under stress as they have borrowed funds at a higher cost. In addition, banks are reluctant to lend money to the sector and the situation worsened after the November 8 announcement scrapping high-denomination currency notes, leading to a fall in real estate sales.

“If affordable housing is given infrastructure status, it would lower the borrowing cost for the developers. Also, regulations should be simplified to directly borrow foreign debt, which can cost around 4-5% on dollar return,” said Hemal Mehta, a partner at Deloitte Haskins & Sells. Industry experts said that while it may appear to be a small change, categorising low-cost housing as infrastructure could have far-reaching results.

“Real estate industry has been asking for the infrastructure status for affordable housing for last three years, but this time it is only logical that it could go ahead. This is mainly because the prime minister has announced the new scheme and infrastructure status will help reduce the borrowing cost and help accelerate growth,” said Jeenendra Bhandari, partner at MGB and Co, an audit and tax firm. The government’s focus is on affordable housing in the rural areas and there could be additional tweaks in this aspect in the budget. Emailed queries sent to finance ministry officials, the Central Board of Direct Taxes and the RBI did not elicit any response.

Regulations will have to be changed so that low-cost housing projects do not attract adverse taxes but easier project finance even from investors outside India, the people in the know said. Industry experts said a change in status, along with clear guidelines, could mean low-cost housing could attract investment from foreign pension funds and insurance companies.

“These projects could have a dollar-denominated debt and offer a return of 4-5%. This would work well for both domestic developers as well as foreign investors,” an expert said. As per the recommendations, the government can look at allowing tax-free returns to foreign investors that invest in low-cost housing. This could solve some of the funding issues the sector is facing.

Source: ET Realty