Delhi to have Real Estate Regulator by Year-End

Delhi will have real estate regulator by this year-end, Urban Development Minister S. Jaipal Reddy said Thursday. He also said the government was talking to other states to have similar regulators. “The state governments have sounded positive. It would take time to happen. But Delhi will get a regulatory authority for the real estate by this year,” Reddy told.

He said the legislation process for the real estate regulator for Delhi would soon be completed as the draft bill has been circulated to the stakeholders.

According to him, the regulator once in place would prevent real estate players from indulging in unnecessary profiteering.

The minister also said the Metro rail will stretch to 190 km in the national capital region by the time the Commonwealth Games start here October 3.

Reddy to ask Finance Ministry to Review Service Tax on Housing Sector

S Jaipal Reddy, the urban development ministry will ask the finance ministry to review the proposal to bring the housing sector under the service tax net from April 1, 2010. “We will approach the finance minister in the next few days and ask him to review his decision of bringing housing under the service tax net,” said Urban Development Minister S Jaipal Reddy. He was speaking at a conference on Indian Real Estate organised by Associated Chambers of Commerce and Industry of India (Assocham). Real estate players and various industry chambers are already lobbying the government to withdraw the service tax imposed on the housing sector (at 3.3 per cent, with abatement) , as it would discourage buyers.

“This is not the right time for service tax implementation as the government’s objective is to encourage people to own houses. We have to wait for another month or so to see if the finance ministry listens to our request,” said KP Singh, Chairman, DLF Group. Addressing issues faced by the real estate sector today, the Reddy said availability of land — which is a state subject — has become a major concern. “If we want India to cater to the issue of demand and gap in the housing sector, apart from the central government, it is the state government which should become the facilitator.”

He also said since land is very limited, the best way forward is to go for vertical development (building high-rise buildings) instead of the present approach of going horizontal. “In Delhi, we would allow vertical development of real estate dwellings in older areas and remaining sprawl of Delhi provided the Municipal Corporation and Delhi (MCD) assure availability of all basic amenities such as water, power, etc.” In this regard, Reddy said the Ministry of Urban Development would soon come out with a new relaxed Floor Area Ratio (FAR) regime without specifying any time frame for it.

Another pertinent point that has been a concern for real estate developers is the number of clearances one has to take to start a project. “Today, there are more than 50 agencies from where we have to take our clearances. We have to ensure that the best way forward is to have a single window system as it would not only save time, but also ensure transparency,” said Navin M Raheja, Managing Director, Raheja Developers Ltd. “It is very important to have a single window clearance system in real estate sector,” echoed Anil K. Agarwal, Past President, Assocham.

Singh feels if real estate and urban development has to reach a self-sustaining level in India, “we have to follow the way it has been done in the telecom and IT sector”. “We need to have a visionary like Sam Pitroda, who can think centuries ahead in the real estate and urban development sector to formulate policies. Today, we are concentrating on meeting shortages, when policies are being framed. This needs to change fast, as we have to take the aspirations of people when we build a nation.”

Tightened Monitory Policy and Newly Imposed Service Tax Set to Boost Property Prices

Further monetary tightening by the Reserve Bank of India (RBI) and imposition of service tax on under-developed housing complexes, as proposed in the Budget 2010-11, will lead to increase in property prices, according to real estate companies. India’s central bank last week hiked two major policy rates - the repo rate and reverse repo rate - by 25 basis points each. “The recent monetary tightening by the RBI was on expected lines, but further tightening will certainly lead to increase in property prices. Further rate hikes will impact affordability of home loans,” K.P. Singh, chairman of DLF, India’s leading real estate developer, said here Friday.

“The monetary policy should be such as it encourages this important sector of the society. The policies should encourage people to buy homes, particularly the middle class who wants to buy,” he added. In the budget, Finance Minister Pranab Mukherjee proposed to bring development of real estate complexes under the ambit of service tax. At this, Singh said this is not the right time to impose service tax as the industry has just started recovering.

According to Navin Raheja, managing director of Raheja Developers, if the RBI hikes the key policy rates further and the government decides to impose service tax on under-construction apartments, “it will pressurise the real estate companies to pass on the burden to consumers.” “The prices of properties will go northwards in that case.”

100 years on, government reworks property registration rules

20 Mar 2010, 0129 hrs IST, Surabhi, ET Bureau

NEW DELHI: Registering a property could soon be painless affair with the government planning to replace the century-old Indian Stamp Act, 1899 with a simpler law that will do away with a large number of antiquated provisions and fees.

The finance ministry has already kicked off a preliminary exercise for drafting the new law and is hopeful of finalising it by the end of the year. The draft will also be discussed with state governments to elicit their views before a final decision is taken, government officials familiar with the development said. 

“The current law was written more than 100 years ago. Since then the form of business and transactions have completely changed and we feel that there is a need to replace the Act,” said a senior government official. 

Stamp duty is levied on a number of financial and legal transactions. At present, the documents are physically verified by different departments, making the process of registration a time-consuming activity. The new legislation is expected to address some of these issues. 

The proposed legislation is likely to recognize electronic stamping and electronic payment of stamp duties. At present, the facility is available as part of the MAC 21 e-governance initiative for companies that wish to file their papers online with the Registrar of Companies. 

The legislation could also allow payment of duty on instruments and court fees through modes like demand drafts and bankers’ cheques, which are not permitted under the existing law. 

“The emphasis has now shifted to e-governance and such a provision will make it easier for citizens to adhere to laws and be much more convenient than the physical act of buying and pasting stamps,” the official said, requesting anonymity. 

The provision could also help reduce the leakage of revenue because of stamp duty frauds, he said. The government is also planning to rework the current structure of stamp duty fees and penalties. Duties charged in the smaller denomination and often, obsolete paisa would be replaced with rupees or be calculated as a percentage. 

Significantly, the Law Commission, led by Justice AR Lakshmanan, had suo moto taken up the issue of amending the Indian Stamp Act last year. It had suggested in its report that the required fee for any transaction or court fee should be paid by demand draft, cash, postal order, banker’s cheque rather than through non-judicial stamp papers or special stamps. 

Base rate clouds home loans

Mahua Venkatesh, Hindustan Times

Email Author

New Delhi, March 07, 2010

Commercial banks are concerned over the Reserve Bank’s new interest rate system under which lending rates are to be linked to a base rate. They are seeking clarifications in an attempt to de-link home loans from the plan.

This is because the expected base rate of around 8.5 to 9.5 per cent could lead to home loans being offered at 10 per cent or more. At present, home loans are available at 8.5 per cent for start-up customers at “teaser” rates offered by some banks.

Bankers say home loan rates must be kept at affordable levels for consumers.  

“Though most concerns over the implementation of the new system have been addressed by the Reserve Bank of India, certain more clarifications are awaited,” the chairman of a public sector bank told Hindustan Times.

Bankers say “teaser” rates to lure customers should be discontinued, but add that lending rates cannot be unreasonable either.

“Affordable housing is an important issue and we are yet to get clarification from the central bank if home loans would also be linked to the base rate,” said M S Sundara Rajan, chairman and managing director, Indian Bank.

The base rate system, due to be implemented from July 1, would replace the current practice of benchmark prime lending rate (BPLR) system. Nearly 72 per cent of all loans are currently priced below the BPLR. The new rules, aiming for transparency, forbid loans priced below the base rate.

According to the draft of  RBI guidelines, the actual rate a borrower will pay would involve the base rate and additional charges linked to costs, tenure and the risk premium specific to a borrower.

The current BPLR is between 11.5 per cent and 12.5 per cent. Source: Hindustan Times

Union Budget 2010: Steel demand to increase

26 Feb 2010, 1826 hrs IST, Rakhi Mazumdar, ET Bureau

KOLKATA: The union budget proposals of finance minister Pranab Mukherjee, will indirectly boost the overall demand for steel. In particular, the decision to raise outlay on urban development and housing by 75% to Rs 5,400 crore and an additional 25% of plan outlay for rural infrastructure, has come as a shot in the arm for domestic steel companies. 

Base metals analyst at Angel Broking, Reena Walia Nair said: "Though no specific mention has been made with regard to steel, growth in infrastructure will obviously translate into growth for the steel sector as well. We have already seen a surge in equity stocks following the FM’s budget speech. The market seems to have responded very positively to the budget. Going forward, steel stocks are likely to look up too." On Friday, Tata Steel shares gained up 1.11% to Rs 573.65, while the Steel Authority of India (Sail) stock jumped 3.26% to Rs 218.45 on the BSE. 

"Apart from a higher outlay on housing and rural infrastructure, incentives to individuals for investing in infrastructure bonds will also spurt steel demand,"Anil Surekha, director finance, Ispat Industries which makes high value steel used in durables. 

Commenting on the budget proposals, Steel Authority of India Limited chairman S K Roongta said: "The changes in income tax slabs will leave more disposable income in the hands of consumers. This will in turn boost demand for consumer durables which use value added steels. Moreover, the reduction in home finance rates for loans upto Rs 10 lakh will also be beneficial for housing sector and hence lead to higher consumption of steel." 

"This budget is largely neutral for the steel industry and Tata Steel. But it does contain other growth measures which may have an indirect effect on the steel demand," Tata Steel managing director H M Nerurkar said. 

"The focus on infrastructure spending, allocation of funds for railways and highways, emphasis on power sector growth, focus on rural and urban development augurs well for the steel industry," Vikram Amin, excecutive director, Essar Steel said. 

However, the budget proposals will lead to a hike in excise rates from 8 to 10% which is slated to make steel costlier. "This step was largely factored in by the industry," Mr Surekha of Ispat Industries said. Also, the proposed clean energy cess of Rs 50 per tonne on coal will lead to a hike in steel companies’ coal bill. In case of Sail, it will lead to an additional burden of Rs 50-100 crore. Source: Economic Times

Real estate cos concentrating on affordable housing: Selja

6 Mar 2010, 2202 hrs IST, PTI

PANAJI: After the prick in real estate boom, the industry is now looking at construction of affordable housing as the next alternative, Union Minister for Housing and Urban Poverty Alleviation and Tourism Kumari Selja said today. 

"The real estate boom saw the private players to go in for construction of high income housing facilities. Now the market realities have forced these people to look at affordable housing construction facilities," Selja said. 

On the sidelines of a tourism event, the minister told reporters that the ministry has always laid emphasis on affordable housing. "We have been urging states and private sector to conceive models providing affordable housing," she said. 

The Minister said that the recent CREDAI national convention also had 'affordable housing' as its theme. Source: Economic Times

Andhra govt issues notices to SEZ developers over land use

TREN /Mar 04, 2010 – The Andhra Pradesh government has slapped notices on the developers of special economic zones (SEZs), asking them to explain delays in project execution and seeking details on the use of land allocated to them, after opposition parties alleged that many SEZs were misusing land acquired with government support.A body representing SEZ developers, however, blames the delays on the global economic downturn and the government’s failure to provide assured infrastructural support.Andhra Pradesh has 73 notified SEZs—the highest in the country. Another 30 SEZs are awaiting notification, giving the state 103 of the 346 SEZs approved by the Union commerce ministry nationwide.“Of the 73 notified SEZs so far in the state, with a projected investment of some Rs70,000 crore, only 19 SEZs have become operational, attracting an investment of some Rs10,000 crore,” said Kanna Lakshminarayana, Andhra Pradesh’s minister for major industries and commerce.“The government would take back the land allotted to the developers of SEZs if they failed to convince the authorities on delays in setting up industrial units or (have been) found using the lands for other purposes,” Lakshminarayana warned.The notified SEZs had acquired 27,722 acres of land across the state, the minister added.Opposition parties have claimed that the developers of these SEZs were trying to make money by using the land for real estate development.T. Sunil Reddy, chairman of the Andhra Pradesh SEZ Developers’ Association, said the global economic slowdown was largely responsible for the delay in the implementation of SEZ projects. The government’s inability to provide the infrastructure assured to them had also played a major role in raising the development cost and turning the SEZ projects unviable, he added. 

As many as 42 SEZs are coming up in state capital Hyderabad or its neighbouring districts of Ranga Reddy, Medak and Mahaboobnagar, where the cost of land acquisition is very high.B.R. Meena, vice-chairman and managing director of Andhra Pradesh Industrial Infrastructure Corp. Ltd (APIIC), the nodal agency for SEZs in the state, admitted that government agencies had failed to provide the assured infrastructure to many SEZ developers.“APIIC is developing 20 SEZs on its own and had assisted another 23 SEZs in acquiring land. While two more SEZs are also (being developed) by the government agencies belonging to urban development, 28 SEZs are being developed by the private players,” said Meena.APIIC, he added, was preparing a report on how many SEZs had failed to take off despite the government fulfilling its infrastructural obligations.Reddy of the SEZ developers’ association said the absence of additional tax benefits in the proposed extension of the Software Technology Parks of India Scheme was also holding back small and medium information technology (IT) and IT-enabled services (ITeS) firms from moving to SEZs.“Another major reason for IT/ITeS units not showing interest in SEZs is the proposed new direct tax code that threatens to take away tax exemptions to SEZs,” said the chairman of a private IT/ITeS SEZ, who did not want to be named.As many as 43 SEZs in Andhra Pradesh were to host IT and ITeS firms.

India Budget 2010-11, a mixed bag for real estate sector: NIREM

by Chief Economic, IDS NIREM*

26 February 2010

IDS National Institute of Real Estate Management (IDS NIREM) believes that contrary to the popular demand of and expectation for huge impetus to the housing and real estate sector, the India budget 2010-11 has brought a mixed bag for this sector. Though, some benefits have been extended to housing and real estate sector, the burden imposed will definitely undermine the benefits. The burdens and benefits for the real estate sector are as follows:

The burden:

·   Widening of Service Tax net:

Real Estate Developers will have to pay service tax on transactions where consideration is collected from prospective buyers prior to completion of construction. However, it seems service tax will not be applicable if the full payment is made after completion of the construction.

In addition, other services provided by the builders to prospective buyers such as providing preferential location or external or internal development charges (excluding vehicle-parking space) etc. shall also be covered.

Renting of immovable properties is also under service tax net and the definition of ‘renting of immovable property service’ has been clarified as well as widened to cover rent of vacant land under contract for undertaking construction of buildings or structures for business purposes. This may have negative effect on to the properties bought or to be bought solely for investment purpose.

Excise Duty on Cement:

Excise duty ion cement has been increased which will increase the cost of construction and it is expected that per unit cost for prospective buyers will also increase.

The benefits:

Some emphasis has been given to promote housing in general such as:

·   Extension of Interest subvention scheme upto March 31, 2011,

·   Extension of deadline for completion of pending housing projects by one year without losing tax holiday u/s 80-IB. However, MAT may affect the companies executing such projects.

·   Extension of 1% interest subsidy on housing loans upto Rs. 10 lakhs and where the cost of the property is under Rs. 20 Lakhs. This along with along with increase in the tax slab rates for individuals should provide the necessary demand boost for low-cost housing. 

·   Relaxation in norms for built-up area of shops and other commercial establishments in such eligible housing projects and

·   Increased budgetary allocations for urban development and housing schemes.

·   extension of investment linked deduction benefit to convention centres located in the NCR of Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for purposes of deduction u/s Section 80-ID of the Income-tax Act).

Overall, this budget will have mixed affect on the Indian real estate sector. However, looking at the overall economic scenario, we also need to consider that the budget was presented against mutually conflicting objectives, where-in it is not possible to meet the demands of each individual sector. Another important aspect is that very clearly the Finance Minister took pragmatic approach instead of populist measures, which is a good sign of a growth orientated government.

*

IDS National Institute of Real Estate Management (IDS NIREM) is India’s first integrated centre of learning for Real Estate education, training, consulting & research. It currently offers courses in different areas of real estate management. For further Information, please contact:

Key changes proposed for real estate sector: PwC

Published on Fri, Feb 26, 2010 at 17:08   | Updated at Sat, Feb 27, 2010 at 11:07 Source: Moneycontrol.com

By PwC

Special emphasis has been given to promotion of housing and Hotel sectors. Benefits proposed for Housing sector include extension of Interest subvention scheme upto March 31, 2011, extension of deadline for completion of pending housing projects by one year without losing tax holiday u/s 80-IB, relaxation in norms for built-up area of shops and other commercial establishments in such eligible housing projects and increased budgetary allocations for urban development and housing schemes.

Proposed benefits for Hotels include extension of investment linked deduction benefit to new hotels of two-star category and above anywhere in India and extension of commencement date for two-star, three-star or four-star category hotel or convention centres located in the NCR of Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for purposes of deduction u/s Section 80-ID of the Income-tax Act).

Certain immovable property transactions involving time gap between the booking of a property and the receipt of such property on registration excluded from anti abuse provisions relating to transfer of immovable property without adequate consideration.

Indirect tax proposals impacting the sector include increase in Excise duty applicable to cement and cement clinkers. Service Tax net has also been widened. Putting to rest all controversies regarding applicability of service tax on rental arrangements, definition of ‘Renting of immovable property service’ clarified and also widened to cover rent of vacant land under agreement / contract for undertaking construction of buildings or structures for business purposes. ‘Construction of complex service’ activity deemed to be a taxable service provided by the builder/promoter/developer unless entire consideration paid after the completion of construction. Additional services provided by builders to prospective buyers such as providing preferential location or external or internal development charges (excluding vehicle-parking space) covered.

Realtors dub budget 2010-11 as insufficient for the sector

PTI

Friday, February 26, 2010 19:10 IST

Mumbai: Even as shares of major realty firms rallied on the BSE boosted by Pranab Mukherjee's 'consumer friendly' budget, city-based realty players expressed their disappointment by calling it 'negative' for the sector.

The increase in excise duty on cement and clinker from the current 8-10% coupled with the hike in fuel prices is likely to pinch consumers indirectly as the cost of construction will go up.

"The cost of construction is certainly going to rise as excise duty on cement and clinker has been hiked to 10%. Even though it is a partial roll-back, this will hit property developers as also buyers," leading real estate developer Rustomjee's chairman, Boman Irani, told PTI here.

Irani, however, said that he was not expecting any significant rise in property prices. He also said that the sector expected the Government to further reduce service tax on the purchase of land, home sales and fresh constructions. However, the service tax has been maintained at 10%.

Last year, the tax was reduced to 10% from 12.5% due to the (economic) slowdown that led to falling revenues. Another leading real estate firm, Hiranadani Developers, also dubbed the budget as insufficient.

"The budget is insufficient, incomplete and impractical. Except the finance minister's proposal to extend the 1% interest till March next on loans for houses upto Rs20 lakh, no other benefit has been given to boost affordable housing," Hirandani Group's managing director, Niranjan Hiranandani, said.

He also said that the sector had sought cheaper capital and faster project clearances which has not been given any importance in the budget.

Similarly, real estate and retail advisory firm, Beyond Square Feet, said the Budget was highly disappointing as the Government had completely forgotten the retail sector, which is a key driver of the economy as well as the real estate sector.

"The finance minister has forgotten the retail sector completely even though it contributes more than 12% to the GDP. The Minister also forgot the promises made about the FDI for the retail sector. This will surely affect the realty sector as developers would not be keen on mall projects," the firm's chief Mall Mechanic, Susil Dungarwal, said.

Meanwhile, according to Sahara Prime City's CEO, Sushanto Roy, "the budget proves the Government’s pragmatic approach instead of a populist one. Though there are not too many big bang reform-centric announcements, but what has come as a relief to the markets is the absence of major negatives, barring the hike in MAT, increase in excise duties and increase in the levy of oil prices."

Despite higher social spending, the Government did not overshoot its FY-10 fiscal deficit target of 6.8% by too much, he said.

"I expect the realty and infrastructure sectors to gain from this budget. The infrastructure sector shall get benefited from higher Government allocation and from the proposal of a deduction of Rs 20,000 towards investment in infra bonds. The realty sector would also benefit from continued focus on strengthening existing affordable housing schemes and extension of tax exemption period for real estate projects from the existing 4-5-years," he said. Source: DNAIndia

RBI changes definition of PIO for the purpose of FEMA

TREN, February 27, 2010; Reserve Bank of India has amended the definition of PIO vide its circular number 25, [ref. RBI/2009-10/ 286 A.P. (DIR Series)] dated January 13, 2010 for the purpose of purchase of immovable property in India by the People of Indian Origini (PIOs). 

In this regard, attention of Authorized Dealer Category-I banks has been invited to the existing clause (c) of Regulation 2 of Notification No. FEMA 21/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000, as amended from time to time, in terms of which 'a Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

(i) at any time, held an Indian Passport or 

(ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

However, Government of India, notified vide G.S.R.813 (E) in the Gazette of India dated November 12, 2009 [Notification No.FEMA.200/2009-RB dated October 5, 2009] an amendment to clause (c) of Regulation 2 of the Notification referred to above. Accordingly, 'a Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

(i) at any time, held an Indian Passport or 

(ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 

The circular also requests Authorised Dealer Category-I banks to highlight the amendments among their constituents and customers concerned. Source: GOPIO

Time for a realty regulator?

20 Feb 2010, 1213 hrs IST, Namrata Kohli, TNN, Source; Economic Times

Kumar Gera, president of Confederation of Real Estate Developers’ Associations of India (CREDAI), voices his skepticism:  “There is no harm in having a regulator, provided the objective is to ensure that all parties responsible for the successful completion of a real estate project fulfil their respective obligations . The parties I refer to are the developer , the local authority, the service providers, the purchasers, and the financing agency. It is only when all these parties do what they are obliged to do that a project will be successful. If any one of them fails, the desired result is not achieved. Hence, all responsible parties need regulation under the same act or bill. If this is not done and only a developer is targeted, the desired results cannot be achieved and it will be one more bottleneck in the system.” 

Ashiana’s Vishal Gupta reiterates this point and says that this will only create another level of authority leading to more delays, red tapism, and higher cost, which will be ultimately counterproductive for end users. He says that by doing this, we are challenging the competence of existing authorities who regulate real estate at local level , as now, every developer needs to get his project plans sanctioned , land use changed, get licence for construction, follow building bylaws, and get a commencement and a completion certificate. He suggests that instead of a regulator , we need a fasttrack consumer redressal court where justice is dispensed, as real estate investment is the single largest investment a person makes in his lifetime. 

Giving another perspective , RE/MAX (a global network of brokers ) India’s Samir Chopra feels that a regulator would help eliminate anomalies in the existing legal system due to multiplicity of authorities and procedural complexities. He says this federal regulatory body cannot hold responsibilities like providing guidance on policy framework, resolution of stakeholders’ concerns, and consumer rights’ protection. “Broadly, an independent regulator with clearly set guidelines and directives to follow will ensure fair competition and protect the interests of builders, brokers, investors , and above all — consumers. The model regulation could have a quick redressal mechanism for real estate industry, which is often faced with a litany of disputes.”

Some industry insiders also feel that having a regulator may not solve the problem and there are enough regulations at present. According to Sharad Jhingan, COO of Pvt Equity Fund at Lanco Infratech Ltd, “The real issue is enforcement and enactment of regulations .” He adds that there are several regulations for a lot many things now, despite which real estate developers have major time and cost overruns in their projects. Besides, they continue to violate norms by indulging in prelaunches or assuring a fixed return on investment, thereby acting more as NBFCs (non-banking financial companies ).

Cut to the consumers, and they badly want someone to lend a voice to their woes when they are at the receiving end. According to an MNC executive, Manish Khurana, “We people put all our savings into a property, which can turn out to be a big risk in this highly speculative market. It’s high time real estate sector got organized and our rights protected.”

Consumers feel a regulator will not only lend a voice to consumers, but also help in creation of a more transparent market and hold developers accountable . According to Akash Kapur, an investor : “When telecom, petroleum and civil aviation industry are doing well with a regulator – the end user is a beneficiary . Also, it provides a level playing field for market players. It’s high time the real estate industry is regulated.” 

Deepak Parekh, chairman of HDFC, has been very vocal about a regulator. He feels that the regulator’s primary role should be to ensure adequate consumer protection in any case of real estate fraud. Today, the only recourse a consumer has is either a consumer court or a civil court, both of which can take ages before a case even comes up for hearing. Thus, there is a need for basic consumer protection for an individual’s largest investment in a physical asset. 

Drawing a simple parallel, Parekh says that a person who sells you a mutual fund product, irrespective of the amount invested, has to be registered with the Association of Mutual Funds of India and has to clear an advisory module exam. Similarly, insurance agents have to be licensed and go through mandatory training and an examination under the auspices of IRDA. But when one buys a house, there is no regulator to ensure that the transactions are in order. All that a common man relies upon is good luck and trust.

A regulator needs to ensure best practices and transparency within the sector. For instance, the regulator can mandate that all apartments be sold only on the basis of carpet area and not super-builtup area. Further, the real estate regulator can ensure that projects are completed on time and clear titles are given to consumers.

The next question which arises is that since real estate is a state subject, will a regulator have to be set up at the state level. “Admittedly, the logistical ch a l l e n g e with setting up a real estate regulator is that it will have to be done at the state level. Again, at the state level, there will be a need to coordinate with municipalities and other local bodies. But even if each state has its own regulator , there should be a national body that will promote best practices and oversee the functioning of the state-level real estate regulators. Citing a relevant example, he says it happened with electricity.

How did so many states agree to break transmission, distribution and generation chain? Initially, only one or two states were willing to do the trifurcation , the rest were not. Again, it happened because the Centre promised states funds under APDRP (accelerated power development and reforms programme ), if they went through the trifurcation . When there is something like that, states comply, because they want cheaper money or they want grants or something. The same model as in electricity , where you have the Central Electricity Authority and then the state regulators , can be adopted for real estate, ” says Parekh.

Globally, there are many countries where a real estate regulator is working well, like RERA Dubai. Real Estate Regulatory Agency (RERA) is a subsidiary agency under Dubai Land Department, which is a government organization that regulates real estate market and aims to maintain a healthy real estate investment in the emirate of Dubai.

In the US, real estate brokerage services are regulated by state-level real estate commissions or boards. These boards or commissions are granted broad and exclusive rulemaking and enforcement powers. More than two-thirds of the states in the US do not have separation of real estate regulation and brokerage services. Thus, most state laws allow or require participation of real estate licensees on real estate commissions and boards. 


It is now increasingly being felt that there is a need for independent regulation where officials on the board or the commission must not be practicing brokers or must surrender their licence for the duration of their public service. The importance of independence stems from the fact that because of dominance by brokers and other industry members on these boards, real estate commissions tend to neglect consumer interests. 


In Australia, Real Estate and Business Agents Supervisory Board (REBA) regulates the state’s real estate industry . It is an independent statutory authority established under the Real Estate and Business Agents Act 1978, to regulate people who conduct real estate transactions and other related transactions . The board is the licensing and supervisory authority. It issues licences and certificates of registration to suitably qualified and experienced people. It supervises industry compliance with the act and the standards of conduct required under the Code of Conduct for Agents and Sales Representatives. Source: Economic Times

Real Estate Developers Expecting a Lot from Budget 2010

Developers are re-calculating the upwards swing in the real estate industry, especially housing, provided Government pays special attention the sector. Various developers voice their expectations from Budget 2010.

AVNISH AGRAWAL, DIRECTOR, MERITON GROUP- Talking from common man’s perspective, the bank interest rates should be stabilised. Most importantly, stamp duty should be reduced as it puts financial burden on the buyers; it would be a real relief for the common man who has to bear the burden. Besides, for the new projects many clearances are required; if they can be done through a single window, it will be a major breakthrough.

VIJAY JINDAL, CMD, SVP GROUP- Expectations from the budget are very high. We need something that will help the real estate sector to grow leaps and bounds. Government should take steps to bring more transparency and simplicity to the processes involved in the real estate. Affordable housing must get maximum support from the government. The authorities must understand that the demand is for affordable housing and we need to bridge gap between demand and supply.

ABHISHECK LODHA, MANAGING DIRECTOR, LODHA DEVELOPERS LIMITED- We expect the finance minister to provide specific tax incentive and rationalise stamp duty registration charges, which will lead to further investment in affordable housing projects, which would in turn drive urban development. The budget should make high-priority provisions for the laying down of the necessary infrastructure so that new areas can be opened up. This should result in creating and linking up satellite settlements to main cities that will help tackle the demand-supply mismatch. Further, we look forward to flexibility in FDI norms. Additionally, the budget should offer clarity on the introduction of a real estate regulator, which may not necessarily decide on rates, but should put down firm principles in terms of property dealings and also quality parameters in terms of rating of constructions.

RAJIV SINGLA, MANAGING DIRECTOR, MAPSKO GROUP- Indian real estate sector is passing through a transition phase, where every eye is lying on budget 2010 as the tool to heal the loss. The finance minister needs to focus on offering easy interest rates with more flexible EMIs so that middle class people can come forward to buy their dream house. We should also target foreign investors or NRIs to invest their money in India.

ASHWINI PRAKASH, EXECUTIVE DIRECTOR, PARAMOUNT BUILDERS- I expect a lot from the budget 2010-11 as it can be used as an important step by our government to bring real estate market back on the track. I strongly feel that finance minister would certainly work on promoting real estate investment through various fiscal tools like, continuing income tax rebate on home loans. And at the same time interest rate on home loans should be made more affordable to bring it up to the reach of a common man. In the last two years IT sector and the real estate sector have been the most affected areas and in order to reconcile the earning capacity and to build a sense of security for citizens the government should offer some aid packages to these sectors in Budget 2010 like the US government did.

J K JAIN, CHAIRMAN, DESIGNARCH- The budget must think seriously on decreasing the excise duty to decrease the costs of infrastructural projects. The current economic situation requires the sector to be revived so that the demand for the housing industry increases. To achieve this, the government must look at reducing the property and related taxes along with the taxes on cement and steel, which together contribute to the growing infrastructure needs. Besides, the realty sector would definitely expect some cuts and provisions in the license fee and the service tax being levied in order to revive this ailing industry, apart from measures by the Government to reduce the interest rates on loans to the housing sector. Also, amount of rebate must be increased by Income Tax department for housing sector.

ANIL KUMAR SHARMA, CHAIRMAN, AMRAPALI GROUP- As real-estate sector in India contributes five to six per cent of our GDP growth, the sector needs special attention. Our expectations are not very high but are rational. Government must think seriously about low cost housing. Since the stimulus package, bailed out the Nation from recession, we expect that same should continue for at least two more fiscal years.

GAURAV GUPTA, DIRECTOR, S G ESTATES LTD- While developing the housing for low strata income category, for example, economically weaker section (EWS) and lower income group (LIG) housing, the developer is not able to utilise entire floor space index (FSI) since the height is kept at ground plus three to keep the costing low. So amendment should be made for the balanced FSI usage. In the same lines, some cross subsidisation can be called for, such as refunding the stamp duty to developer once the project is complete. If sec 80 (IB) is restored, nothing like it. Under Section 80 IB (10), in the case of construction of housing projects, 100% of the profits derived in the previous year from a housing project can be deducted if the total commercial space in the project did not exceed 5% of the total built-up area or 200 sq ft, whichever is less.

ASHOK GUPTA, MD, AJNARA INDIA LTD. The finance ministry has allowed external commercial borrowing (ECB) in realty projects, which includes integrated townships of 25 acres or 50,000 sq m. However, the Reserve Bank of India has not yet notified it. ECBs should be permitted for funding construction costs of at least those real estate projects which qualify for 100% FDI. I would expect that limit of Rs 1 lakh specified for deduction for repayment of principal amount of a home loan for self occupied residential property should be extended to Rs 2 lakh. I also wish that extension of tax holiday for housing projects under Section 80 IB (10) should be allowed for conceptualising of new projects while also encouraging more projects to come up in view of the incentive that would be coming. Source: Indianrealtynews

Ahead of the 2010 Indian Budget RICS urges action to ensure a vibrant yet sustainable property market

Seeks better housing, better taxation and provision of sustainable infrastructure

New Delhi, Delhi, February 12, 2010 /India PRwire/ -- The Royal Institution of Chartered Surveyors (RICS) recently submitted its proposal for the Union Budget 2010-11, to the Ministry of Finance, seeking incentives for a vibrant and sustainable property market. With an objective to represent the collective voice of the the real estate and construction sector, the proposal was jointly drafted by the RICS Working Committee on Real Estate and Housing, which constitutes senior management across key real estate development firms, construction firms, international property consulting firms and real estate funds in India.

While the fiscal deficit has widened in recent years, RICS believes that fiscal consolidation should not be overly hasty in the coming years as a commitment to investment in public infrastructure is a necessary pre-condition for improved productivity to boost the long term trend rate of growth in the economy.

RICS believes that the main thrust of fiscal consolidation should come from a simplification and widening of the tax base and has set out specific measures in relation to the property sector. It expects further interest rate hikes during the course of 2010 as the RBI moves to dampen growing price pressures and gradually exits from unconventional emergency policy support measures.

Reducing stimulus measures too quickly runs the risk of provoking a second downturn in the economy, particularly if the global environment remains sluggish. It also runs the risk of limiting the pool of development finance which will be necessary to meet the likely demand for affordable housing over the next 5 years. As such, RICS recommends that a gradualist approach to removing policy stimulus is adopted during 2010 to offset expected tightening in monetary policy. The organisation also believes that more needs to be done to address the blockages in the planning systems which have contributed to the run up in land prices.

Summary of policy recommendations by RICS Working Committee on Real Estate and Housing

Housing for all

• Current system of tax deductions for home loans should be increased in tandem with increase in property prices; recommend an increase from Rs 1.5 lakh to Rs 3 lakh for interest payments and from Rs 1 lakh to Rs 2 lakh for principal repayment.
• Tax breaks and extension in tax holiday under Section 80 IB (10) should be restored as incentive for housing development
• Provide exemptions and incentives for the promotion on rental housing
• Opening of the ECB route to the entire gamut of the real estate sector
• Housing development should be exempt from service tax

Improved consumer protection and fairer taxation

• Implementation of a central registry body to address incidence of housing finance fraud
• Supports the implementation of the New Direct Tax Code to simplify and improve the tax system
• Follow a phased approach in the implementation of GST

Provision of sustainable infrastructure

• Government should reintroduce Section 10(23G) of the Income Tax Act to attract private sector participation in infrastructure development
• Residential townships of ~30 acres to be classified as 'infrastructure'; should also apply where additional work is carried out to support housing development such as road building, installation of sewerage, solid waste management etc.; Tax breaks under Section 80-IA should include housing development
• Tax incentives could be increased for projects including low carbon power generation such as hydroelectricity and wind turbines or low carbon transport infrastructure
• Extend tax credits on the expenditure incurred on the installation and cost of energy saving technologies

On the submission of the budget recommendation, Mr. Sachin Sandhir, Managing Director and Country Head, RICS India said, "In India, timing and magnitude of the exit from policy stimulus measures are crucial for the sustainability of recovery in property and land markets. With further tightening of the monetary policy expected during the course of 2010, policy reforms and measures expected from the budget are crucial to the success of realty markets. While, the Government's commitment to improving infrastructure and housing facilities continues, tax breaks should be extended to include housing development. To this end it is advisable to broaden the definition of infrastructure to include urban services and townships. Also, the provision of the ECB route to be extended to real estate projects, other than townships could provide fillip by allowing access to long term sources of finance."