Cabinet nod to unlock Rs 1,000 crore for Noida Metro

NEW DELHI: The Union Cabinet is likely to give its formal approval on Wednesday to the Noida Metro project, which is in the advanced stages of construction and is eyeing a year-end finish. What is significant for the project is that the Cabinet’s stamp will pave the way for the Centre to release its equity of Rs 1,000 crore in the project.

This will also ensure that the project does not run into any financial hurdle in future. Noida Metro Rail Corporation (NMRC) has set a budget of Rs 5,533 crore for the project that will connect Greater Noida with the rest of NCR. The Aqua line, as this corridor has been named, starts at Sector 71 in Noida and will have an interface with the Blue line extension that Delhi Metro is building from Noida City Centre to Sector 62. The special purpose vehicle to execute the Aqua line project was set up in November 2014.

In January, the National Capital Regional Planning Board had approved the release of Rs 1,587 crore as financial aid to the Metro corridor at a subsidised interest rate.

Since the change of government in Uttar Pradesh from the Samajwadi Party to BJP, the Centre has fast-tracked approvals for the corridor, which has already set several records for pace of construction.

Source: ET Realty

GST gains: Prices of flats may drop by up to 5%

NEW DELHI: Housing price are likely to fall by up to 5% following the implementation of goods and services tax (GST) after the Centre and states decided to peg the levy at 12% on finished houses or apartments.

After allowing for credit for taxes paid on inputs such as cement, steel, paints and other items, the actual burden will be lower. As a result, the price of a Rs 1-crore apartment may come down by Rs 3-5 lakh, said a consultant.

The net price of houses in the affordable segment, which cost up to Rs 30 lakh (at Rs 3,500 per sq ft of built-up area) should fall by 5%. Once GST kicks in, home buyers will not have to pay the 4.5% service tax on the final price that they shell out while taking possession.

As a result, tax consultants and realtors said that fixing the GST rate at 12% was a customer-friendly move and would lead to either lower tax liability or be tax neutral.

For a premium product, however, Credai chairman and CMD of ATS Infrastructure Geetambar Anand said that at 12% GST, customers will benefit from projects that cost up to Rs 6,000 per sq ft.

A premium project may not gain significantly as developers build high margins into such properties. Manoj Gaur, Credai vicepresident and MD of Gaursons, said that if input credits are allowed properly, the 12% GST rate is favourable to buyers.

Suresh N Rohira, partner, Grant Thornton India, said that GST at 12% would certainly bring down the tax liability in the affordable segment. He said that the taxes on inputs for construction are more than 12% of the final price.

But if a developer is working with a high margin, which is the case in premium project, the net tax will remain significant. Priyajit Ghosh, partner – indirect tax, KPMG India, said that under the GST regime, 12% GST on construction sector would make the sector better off. Because of input credit, the net tax on finished product would have a downward pressure.

According to a Crisil report, at present, a developer pays excise tax and VAT on inputs like cement and steel at 27.7% and 18.1% respectively, which vary from state to state. Now, cement and steel will be taxed at 28% and 18% respectively under GST.

Similarly, other inputs like paints and white goods are going to be taxed at 28%. But the final product that is a housing unit will be taxed at 12%, with the allowance of credit against taxes paid on inputs. But as 12% tax will be levied on entire cost including the land, the amount will be sufficient enough to provide for the input credit, said Ghosh.

He said that 12% tax rate is favourable to the industry. For normal houses (up to Rs 6,000 per sq ft), 12% GST on a finished house or an apartment will be effectively reduced to near zero as the developer will take the credit for taxes he paid on inputs. At the same time, the buyer will not have to pay the service tax4.5% of the price of the house. This will reduce the cost of acquisition of the house. In some cases, even input credit could be more than the GST levied on the finished product, but a developer can claim a maximum credit to the extent of the GST he would be paying on the finished product.

Take a simple example: A developer is completing a housing project where the work has been awarded to a contractor. The cost of construction is around Rs 2,000 per sq ft, the going rate in the market for average quality. The contractor will collect a tax at 18% on the amount at which he is completing the work. In this case, he will collect a tax of Rs 360 on Rs 2,000 per sq ft from the developer. If the developer sells the house at Rs 3,000 per sq ft built-up area, which is the going rate for the affordable segment housing, he will pay a tax at 12 % on the final cost. In this case, it will be also Rs 360 per sq feet.

Therefore, his fresh tax liability would be nil. If other expenses and tax paid thereon is included, the developer could have claimed more. But under GST, he can claim only up to the fresh tax liability. But the service tax that a buyer pays so far at the rate of 4.5% will not be levied now. So the next cost for buyers of not-so-premium houses will decline. But if the product is in the premium segment, the entire input tax credit is not sufficient to bring down the fresh tax liability to nil. A premium construction can be done at Rs 5,000 per sq ft. The net tax collected by works contractor would be Rs 900 per sq ft from the developer. But while selling at Rs 10,000 per sq ft, the developer needs to pay Rs 1,200 per sq ft. Therefore, after adjusting against the taxes on input, he will have to pay Rs 300 per sq ft or 3%, which he will recover from the customer. But as the developer will also pay taxes on other expenditures, the net tax liability at 12% GST on finished product would be very small.





Source: ET Realty

DPR soon for Metro corridors in Ghaziabad

GHAZIABAD: Union minister Gen V K Singh (retd), who represents Ghaziabad in Lok Sabha, held a meeting with senior officals of the district administration at the collectorate on Saturday to review the progress of various development works in the district including Metro projects, NH-24 widening work and rapid rail transit system.
Senior officials of Ghaziabad Development Authority (GDA), Ghaziabad Municipal Corporation (GMC), power department and the police were also present.
In the meeting, the DMRC said a detailed project report (DPR) for the construction of two Metro corridors would soon be submitted to the GDA. The GDA board had given its in-principle approval for the project in September 2016, and sanctioned Rs 1.09 crore to the DMRC for preparation of DPR.
"The DMRC has already received Rs 32.76 lakh from the GDA as the first-stage mobilisation fee for preparation of the DPR. It is being finalised and will be submitted to the GDA very soon," a senior DMRC official said.
The project involves extension of Delhi Metro's Blue line — which terminates at Vaishali at present — to the under-construction Mohan Nagar Metro station. Another corridor will link the under-construction Noida City Centre-Sector 62 Metro line with the proposed Vaishali-Mohan Nagar line at a suitable point by extending it across NH-24 and Indirapuram. The project includes the construction of a new Metro station in Indirapuram.
According to a DMRC survey, the corridor to link Vaishali with Mohan Nagar will be approximately 5km long, while the corridor stretching from Sector 62 Metro station till the Vaishali-Mohan Nagar line will be nearly 4.5 km long.
Other infrastructure projects, including the under-construction Dilshad Garden-New Bus Stand Metro corridor, NH-24 widening work and the rapid rail transit system, were also reviewed during the meeting. "Various aspects of the Smart City Proposal that has been submitted to the Union urban development ministry were also discussed. All departments will have to work in tandem if Ghaziabad makes the cut in the next round of the Smart City selection," Ghaziabad mayor Ashu Verma told while talking to media.

Source:TOI

GST unlikely to burden home buyers

MUMBAI: Home buyers are unlikely to be burdened with additional tax outgo and cost from the introduction of GST. Real estate has been brought under the GST ambit partially through works contracts that will be levied a 12% tax, which is likely to keep the impact neutral for homebuyers, tax experts said.

The key indirect taxes levied on real estate are excise duty, value added tax and service tax totalling 9-11%, excluding stamp duty which varies being a state levy.

These, barring stamp duty, would be subsumed in GST under the new indirect tax regime that will also allow input tax credit for developers. The sector, however, is awaiting clarity on the abatement rate for the land cost.

“The current effective rate of taxation for real estate is in the range of 9-11%, excluding stamp duty. The proposed rate of GST at 12% should not, therefore, lead to any rise in property prices,” said Pratik, partner and national leader-indirect tax at PwC India.

“Further, entire input credit is also allowed to the sector. This should incentivise the people to come within the tax net and help reduce the cash component in the economy.”

The final impact to buyers of under-construction properties will be the net effect of savings on currently unabsorbed input taxes and the increment in GST rates over the current tax rates.

Currently, input taxes such as excise duty and central sales tax on construction materials that are paid by the project developer are not allowed to be offset against indirect taxes collected from customers.

Source:- ET Realty

Delhi-NCR average city-level office rentals rose 1% in Jan-Mar: Report

Gross average rental of the Delhi-National Capital Region office market showed marginal appreciation in the quarter ended March. The third largest office market in India, in terms of stock, recorded almost a 1% appreciation in average rents at Rs 78 per sq ft per month, showed a JLL India report.

The average has been arrived at by considering office assets spread across Delhi’s Central Business District and Secondary Business District as well as Gurgaon and Noida. As it is on a stock-weighted basis, the higher office stock of Gurgaon has influenced the average number.

While Delhi-SBD witnessed a decline of 6% in average rentals, Noida saw an appreciation of 4%. Similarly, Delhi-CBD rents declined by 1.4% from a year ago whereas Gurgaon witnessed a 1.3% gain over the same period. The average rents of Delhi’s CBD and SBD went down to Rs 246 and Rs 138, respectively. On the other hand, average rentals of Gurgaon and Noida went up to Rs 76 and Rs 44, respectively, the report said.

“The relatively affordable rents in both Noida and Gurgaon micro-markets make them attractive to IT/ ITeS occupiers, among others. With this key differentiating factor, Noida is expected to remain an attractive destination for occupiers seeking consolidation or large campus-style developments and alternative office facilities in SEZ developments,” said Manish Aggarwal, Managing Director – North & East, JLL India.

In Gurgaon, rents in older, strata-titled properties are expected to correct and may affect the overall growth rate. However, the established DLF Cyber City precinct as well as upcoming and existing quality IT and other commercial projects are expected to command a premium over prevailing average rents, thus driving rental growth in this micro-market, he added.

In the first quarter of 2017, leasing activity remained largely slow in the Delhi-CBD due to lack of vacancy in quality assets, and only select occupiers taking up space. With occupier exits overshadowing the sluggish transaction activity, this micro-market recorded its worst performance in 13 quarters. On the other hand, Delhi-SBD saw its net absorption improve to a three-quarter high on the back of moderate-sized transactions in a few quality projects.

Many strata-titled projects are struggling from a lack of occupier demand in the Delhi-SBD. Delhi city has often seen developers employ the strata sale model. In the suburban locations, however, the lease model has been more prevalent, which makes them more attractive to large occupiers. Rents in certain precincts of Gurgaon, especially DLF Cyber City, had touched triple digits last year on the back of healthy demand, the report said.

Both the CBD and SBD of Delhi city will continue to cede ground to the suburbs, which have become more homogeneous office markets and are finding greater acceptance with even traditional, non-IT occupiers thanks to availability of more cost-effective office facilities. Most of the anticipated leasing activity in these two micro-markets is likely to occur in quality buildings and result in cyclical periods of good absorption levels.

The office footprint across NCR has risen steadily over the years. From 47 million sq ft in 2010 to 96 million sq ft in the first quarter of 2017, developers in Delhi-NCR have been aggressively building new office stock. The quality of assets has been improving too – with larger floor plate options for corporates and smaller floor plate options for IT and other occupier categories.

Gurgaon leads the way in its grade-A office stock, followed by Noida and Delhi-SBD. Delhi-CBD, on the other hand, has limited grade-A stock and an almost nil supply. This has fuelled occupiers’ move towards the suburbs of Gurgaon and Noida, both of which have emerged as preferred office corridors. The lack of adequate land in Delhi for fresh office developments is another factor helping the suburbs.

Source- ET Realty

Government mulls easing FDI in construction, retail & print media

The government is moving ahead with the further opening of print media, construction and retail sectors to foreign investments, and detailed deliberations in this regard were held in the finance ministry on Wednesday.

The commerce and industry ministry may soon approach the Union Cabinet to get the final approval on the proposals, sources said.

According to them, the government is considering to relax foreign direct investment (FDI) norms in certain areas of print media.

Currently, the government allows foreign investment in areas such as printing of newspapers and publishing of scientific magazines with certain conditions and FDI caps.

There is also a proposal to ease the policy in construction and development sector, under which an Indian company could be allowed to bring FDI even for undeveloped plots in any project.

Currently, 100 per cent FDI is allowed in the construction sector subject to various conditions.

One of the norms is that the Indian investee company is permitted to sell only developed plots, which means plots where trunk infrastructure - roads, water supply, street lighting, drainage, and sewerage, have been made available.

Sources said the government may put certain restrictions while making changes in this condition.

The whole exercise is aimed at providing investor-friendly climate to foreign players and in turn, attract more FDI to boost economic growth and create jobs.

The government is also mulling easing policy in single brand and multi-brand retail trading.

There is a consideration to allow 100 per cent FDI in the single brand retail sector through automatic route with certain conditions.

Currently, FDI up to 49 per cent is permitted under the automatic route but beyond that limit, government's nod is required.

Further, the government is weighing the option of permitting overseas retailers to open stores for selling 'Made in India' products.

Besides, Union Food Processing Minister Harsimrat Kaur Badal is pitching to permit FDI in non-food items, along with food products, under the multi-brand retail policy.

She wants that foreign players should be allowed to sell non-food items along with food products processed and manufactured in India under the FDI in food policy.

The easing of the policy will be on the lines of the announcements made by Finance Minister Arun Jaitley in the Budget for 2017-18.

The government last year relaxed FDI norms in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies, real estate and news broadcasting.

Foreign investments are considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports, and highways to boost growth.

Foreign investments will help improve the country's balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.

Source- ET Realty

Builders to get up to 35 bps concession on construction loans from SBI

State Bank of India, the nation's biggest bank is stepping on the gas on marketing to sell home loans and remain the top mortgage company.

As a marketing thrust, SBI has also decided to offer up to 35 basis points concession on loans for construction to the builders for the affordable housing segment.

"We are tying up with builders and offering them construction finance on easier terms for affordable housing projects. This, in turn, helps marketing of home loans," SBI chief general manager for Kolkata circle Partha Pratim Sengupta said at an event in Kolkata.

One basis point is 0.01 percentage point.

SBI announced lowering of home loan rates last week and accordingly women borrowers get home loan at 8.35% for up to Rs 30 lakh, while other salaried borrowers get loans at 8.40% a year.

This was matched by its rivals ICICI Bank and HDFC as they are all trying to take advantage of the central government's push towards affordable housing.

The government envisages housing for all citizens by 2022 which is the year India completes 75 years of Independence.

Source- ET Realty