Co-operative Housing Society

what you can do if you fail to repay your home loan

A WAY OUT
Here’s all you need to know about what you can do if you fail to repay your home loan

First-time home-buyers need a lot of effort to arrange funds to buy a house. Therefore, a home loan is seen as a great enabler to invest in your first home. However, under certain circumstances, if the borrower fails to pay the loan EMI on time, then it leads to financial distress.

So what happens if a home loan borrower fails to pay their EMI on time? What are the repercussion and recuse options in such situations?

FAILURE TO PAY HOME LOAN EMI

Lenders classify a home loan as a Non-performing asset (NPA) if the borrower fails to pay his home loan EMIs for 90 consecutive days. Once it is classified as a NPA, the lender will issue a 60-day legal notice to the borrower asking him to pay his dues. If the borrower still fails to honour his commitment during this period, the lender will issue a 30-day public notice notifying the auction of the property and its valuation as assessed by the lender. Therefore, the borrower gets at least five months after his first EMI default before his lender takes possession of the property and auctions it.

NAVEEN KUKREJA,

CEO AND CO-FOUNDER, PAISABAZAAR

WHAT CAN A BORROWER DO TO OVERCOME DEBT DISTRESS?
Options available to home loan borrowers under debt distress are:

NEGOTIATE WITH THE LENDERS AND RESOLVE THE PROBLEM;

BORROWERS CAN EXPLAIN THE REASON FOR NOT PAYING THEIR LOAN ON TIME WITH VALID REASONS SUCH AS AN ACCIDENT, FINANCIAL CRISIS OR LOSS OF JOB;

THE BORROWER CAN ASK THE LENDER TO REFINANCE THE HOME LOAN;

LIQUIDATE EXISTING SAVINGS AND INVESTMENTS TO REPAY OUTSTANDING EMIs;

BORROWERS THEMSELVES CAN SELL THEIR PROPERTY AND PAY BACK THE AMOUNT INSTEAD OF BANKS TAKING OVER IT AND SELLING;

THE BORROWER MUST TAKE HIS LENDER IN CONFIDENCE IF HE PLANS TO SELL THE PROPERTY HIMSELF.

ACTION BY BANKS
According to experts, banks usually prefer to consider all feasible alternatives before seizing the property and auctioning it off. So if the borrower is unable to service his EMIs repayments due to temporary reasons such as job loss, a medical emergency or loss of income due to an accident, he should convince his lender with relevant documents regarding the temporary nature of his problems during the notice period itself. If convinced, the lender may restructure his loan rates and other terms and conditions to lessen his burden.

“To recover a home loan, lenders sell or seize the assets or mortgaged property of the borrower. This is an authority given to lenders under the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act) to protect their interests. Banks usually do not resort to selling the property immediately and try resolving the case by understanding the reason behind non-payment of EMI and further ease the process of repayment. Property is sold by the bank only in certain extreme cases.”

ANUJ PURI,

CHAIRMAN, ANAROCK PROPERTY CONSULTANTS

HOW MUCH TIME DOES THE BORROWER GET BEFORE THE BANK AUCTION?
Experts point out that proceedings by a bank in taking the property of the borrower into their possession and disposing off it are undertaken under the guiding factors of SARFAESI Act. Proceedings also begin when the account of the borrower is considered as a NPA (i.e. when the EMI is not paid by the borrower). In this case, lenders issue a 60-day notice to the borrower. This notice is usually a reminder to the defaulter stating the issue of not paying EMI for three months consecutively.

In case the defaulter is non-responsive even during the notice period, the bank goes ahead with the sale of the mortgaged property of the borrower. During this period, the borrower can resolve the issue or raise an objection to the notice.

HAVE YOU DOWNLOADED THE TIMES PROPERTY APP YET?

Since Times Property has always been a pioneer in using the latest technology, in the advertising realm too, we have taken a major step to ensure a reader-friendly experience.

Download the Times Property App and take a visual tour of the projects by:

HIRANANDANI CONSTRUCTIONS

This ad in the current edition is embedded with the AR feature.

This application will support both, the Android as well as IOS system.

For downloading the app:
STEP 1 Go to the app store and search for Times Property App;

STEP 2 Download the app and install it;

STEP 3 On the app, swipe down to initiate camera for the AR experience. Scan the ad or the logo (called the marker) to initiate augmentation (which can be a video or walkthrough). Markers are visual cues, which trigger the display of the virtual information.

 

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Be the first to comment - What do you think?  Posted by admin - July 21, 2018 at 7:15 pm

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SMALL SIZE, RIGHT PRICE

With sales velocity pacing upwards in the last few quarters for compact housing projects, the demand-supply chain seems to be finally working in tandem with each other.
Read on…

Small is the new big – is a phrase that has become increasingly popular in the past couple of years, particularly in the real estate market. In fact, the need for housing has gained momentum lately due to an increased population density across our urban centres and a growing trend towards rural to urban migration.

Hence, on the back of this trend and the prevailing market sentiment, apartment sizes in the Indian metros are definitely shrinking as developers increasingly deploy compact homes that are affordably priced. Incidentally, the demand for such houses is currently the highest.

“In theory, reduction in the size of a house results in the reduction of the price point at which it is sold. And a lower price point means many a ‘fence-sitter’ will opt to buy the home. Therefore, developers are increasingly focusing on developing projects, which offer compact homes to the potential buyers,” says Niranjan Hiranandani, president, National Real Estate Development Council (NAREDCO).

RISING ON THE POPULARITY CHARTS:

The Indian ethos still encourages everybody to invest in real estate. Hence, even today it is a priority for most of us. However, post the global financial crisis, not only has the world market not recovered completely, but also the Indian market, particularly, the real estate sector, has not shown a big spike. Against this backdrop, there has been a series of initiatives undertaken by both, the developer fraternity as well as the government to boost the sector.

“Most developers have understood the pulse of the market and have realised that creating the right-sized homes is the key to ensuring sales velocity as it meets the demand of the customers while creating value for the end-user. Furthermore, the thrust of the government towards accomplishing its ‘Housing for All’ agenda with a clear policy focus on the affordable housing segment, has resulted in a growth in the number of affordable housing developments across centres. In short, compact homes are creating the right buzz in the market – as these are projects where the ticket size of the house is directly proportional to the price of the home,” says Ramesh Nair, chairman, CII Real Estate Conclave 2018.

Also, with millennials increasingly focusing on building a varied asset class, they are eyeing the realty market as they would rather spend their monthly income on paying off the EMI than hefty rents. “Compact housing provides locational connectivity, affordability, ease of maintenance and meets the demand of younger urban professionals. Also, developers are offering innovative designs in these units to ensure that they are aesthetically appealing while addressing the daily needs of the dweller. From mezzanine lofts that double up as a study to a folding Murphy bed; wall panels that can extend into dining tables to mirrors creating an illusion of space, developers are investing in making units lively in their appeal so that compact homes turn out to be the perfect combination of aesthetics and affordability,” mentions Shubika Bilkha, director, The Real Estate Management Institute (REMI).

FINANCIAL EDGE:

On the back of the various incentives rolled out to developers and buyers of affordable housing by the government, which is fully intent on meeting its ‘Housing for All by 2022’ agenda, banks readily provide home loans for compact housing buyers. Besides, many finance companies have a loan bandwidth from Rs 5 lakh to Rs 40 lakh and the target audience varies from drivers and domestic servants to youngsters who have started fresh in their career, who wish to tap into the growing affordable market segment.

Under the Pradhan Mantri Awas Yojna (PMAY) too, one gets the additional benefit of a subsidy amount of Rs 2.68 lakh (condition the size of the house is below 1100 sq ft) from the central government if the overall family income is below Rs 18 lakh, with the investment being the family’s first home purchase).

“Prices have stagnated in the last couple of years and it is not going to drop any further looking at the current market trends. Also, the realty segment today is being driven by end-users and not investors wherein the focus is on synchronisation between one’s income and the house price. And with compact housing showing significant movement, the way forward for developers would be to scientifically plan projects where the ticket size of an apartment will hold the key,” says Dr Samantak Das, chief economist & national director, Research, Knight Frank India.

THE DEMANDSUPPLY DYNAMICS:
According to a recent report released by ANAROCK Property Consultants, the trend of shrinking apartment sizes is prevalent across property markets:

• The average size of new properties in NCR was 1,853 sq ft in March 2018, which dropped to 1,323 sq ft in the month of April;

• Bengaluru too followed this trend with property sizes shrinking from 1,300 sq ft in March to 1,160 sq ft in April. In fact, if we consider the trend at an annual level, it emerges that flat sizes in Bengaluru’s new projects reduced from 1,478 sq ft in 2017 to around 1,334 sq ft in 2018;

• Other cities like Pune, Hyderabad, NCR and Kolkata also followed suit with average sizes of properties seeing a downward trend over the last two years.

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GOODBYE PLASTIC!

Adhering to Maharashtra’s plastic ban initiative, premium trains from Mumbai to Delhi will begin serving meals in bagasse ware

The railways have started manufacturing bagasse packaging to serve food aboard premium trains along the Mumbai-Delhi route, such as Rajdhani and Shatabdi. The idea is to transition completely to bagasse in phases and liberate the railways from plastic that is strewn across the seats and floors of long-distance trains.

As per railway officials, an average of 1.5 tonne of garbage is retrieved from trains coming into the city. “Almost 90 per cent of this garbage is plastic, which includes food packets that passengers order while aboard the train.” The railways hopes that by introducing biodegradable food packets, they will be able to tackle this menace. “Currently, our food packets, including plates and cups are made of either thermocol or plastic. Hence, if we transition to biodegradable materials, we can safely dispose into BMC dustbins,” say officials.

The State of Maharashtra decided to ban plastic in its territory beginning June 23 this year and the move has been welcomed by most government authorities. But the initiative by the railways, namely the Indian Railways Catering & Tourism Corporation (IRCTC) who provide the food in these trains has just scratched the surface. IRCTC general manager (West Zone, Mumbai) says, “Right now, we have planned only for the trains from Delhi to Mumbai but eventually the bagasse packaging will be introduced in trains that will be going from Mumbai to Delhi as well.”

DID YOUR KNOW?

The Central and Western railways have almost 100 long-distance trains entering the city every day, with each train bringing their share of garbage.

WHY BAGASSE?

Made from leftover
sugarcane, bagasse is
flexible and thick
enough to hold food.
Unlike paper products,
this material can also
hold liquid food;
Bagasse is easily
available in India as
the sugarcane crop re-
quires tropical condi-
tions;
The decomposition
process of this material
is natural. Unlike paper
products that release
methane, bagasse de-
composes organically.

IT’S OFFICIAL

In a statement to Times Property, IRCTC says, “We have launched environment-friendly bagasse-based food packaging on a trial basis on eight select Shatabdis and Rajdhanis originating from New Delhi. IRCTC reaffirms its commitment to a cleaner and greener India and hence, will gradually introduce bagasse products, which are the fibrous remains after extracting sugarcane juice, for serving meals to passengers in all the Rajdhani, Shatabdi and Duronto trains. Bagasse is used to make disposable cutlery and containers in which meals will be served. Proper collection and disposal system through composting will ensure environmental sustainability.”

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TRASH ON TRACK

About 2 lakh tonne of garbage is dumped daily along the railway tracks in Mumbai and this official data holds a mirror to the city’s appalling culture of dumping waste in public spaces

If you are among those who carelessly dispose the packaging of your snack from the train window, stop and think again. You are contributing to around 2 lakh tonne of waste, muck and garbage that the railways is losing sleep over, due to the entailing efforts required to clean it up.

The railways in Mumbai are as important as the oxygen we breathe, due to the city’s unique network of suburbs. Railway officials have been asking commuters to work on their civic sense but the Mumbaikar just isn’t listening. In fact, officials from both the central and the western railway say that the efforts put in towards cleaning up the garbage is almost the same as running the services.

Last year, the Western Railway (WR) sent a proposal to the Railway Board in Delhi, asking permission to impose a fine of Rs 500 on a commuter littering on railway property. But the proposal is still stuck in limbo due to the logistical difficulties of the plan.

The Central Railway (CR) recently asked the Brihanmumbai Municipal Corporation (BMC) to deploy clean-up marshals who are empowered to impose a fine of upto Rs 100 on individuals caught littering and spitting along the railway lines. However, this plan too is under consideration.

CR chief public relations officer Sunil Udasi says, “We have been cleaning up the muck that accumulates along our lines. It is quite a task for us; when we go back to the same space where we have worked, almost half or even all of our work is undone by people who come and dump garbage there again.” He further adds that the biggest challenge is the physical effort needed to clear the garbage off the tracks (due to the nature of the current infrastructure of the railway line), “We have been trying to get the JCB cranes into small and tight spaces next to the railway line where the garbage is dumped. Then we have to make sure that there is separate electricity provided to them in order to actually work there.”

A regular traveller from Mumbai to Nagpur, Jacob Sathe

(68) says, “I am not saying the railways is not doing their work. In fact, there are a lot of machines on the station through which they try to keep the stations clean. But I feel that people have become even more uncivilised.”

REALITY CHECK
WR chief public relations officer Ravinder Bhakar says, “It takes almost all departments in the night to contribute towards picking up the garbage. We would like to appeal to Mumbaikars to do their bit, by not throwing their personal trash from a running train.”

WHAT IS MUCK?
Muck is not only garbage but also comprises human waste as many slum dwellers tend to use railway tracks for defecation. It takes both the central and western railway 5 ‘muck special trains’ every night to clean up the mess Mumbai makes.

Be the first to comment - What do you think?  Posted by admin - at 7:03 pm

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PETS AND THE CITY

Have a pet at home? Are you aware of your civic rights and duties as a pet owner?

The joy of being a pet guardian should not be discomforting for those around you. When you make the conscious decision to welcome a four-legged friend into your home, it is essential to ensure that you abide by the rules and be a responsible citizen as well, because the luxury of having a pet also comes with the responsibility of being a good citizen.

WHAT ARE YOUR CIVIC RIGHTS AND RESPONSIBILITIES AS A PET OWNER?

According to the revised guidelines for pet owners by The Animal Welfare Board of India, which operates under the Ministry of Environment, Forest and Climate Change,

A pet is akin to a perennial toddler and therefore deserves the same attention throughout its life.

Pet owners are advised to ensure that their pets are not a source of nuisance to others. In doing so, they may, however, distinguish between reasonable and unreasonable, lawful and unlawful claims as to their pets being a source of nuisance; however, no amount of pressure should lead to abandonment of a pet animal. Doing so is a violation of law.

Pet owners are advised to either clean up when the pet defecates in public premises or participate in other solutions to maintain cleanliness.

For instance, you can have designated pet corners in the complex/park where pets can be trained/encouraged to relieve themselves; a corner can be designated where pet poop can be collected and composted.

Although barking is a dog’s natural way of communication, it is crucial that the barking isn’t causing a lot of noise for the neighbours.

The pet owner should make sure that their pet is clean, healthy and vaccinated.

Leashing of pets in public places is advisable; this assures passersby that they are safe and makes their walk comfortable. Leashing also ensures the safety of the pet.

Meet Ashar, Emergency Response Coordinator – PETA India and Animal Welfare Officer (H), Animal Welfare Board of India – Government of India says, “Domesticated animals like dogs and cats who we bring into our homes are living, breathing, thinking, feeling individuals who have needs specific to their species and who absolutely must be considered as family members. Wild animals, on the other hand, like fish and birds are inadequate to be kept inside homes. They have needs like flying and swimming long distances that we cannot meet. Animals are not inanimate objects to be bought and sold or discarded at our whims. Because there are too many dogs and cats and not enough good homes, and since pet shops and breeders are notorious for keeping animals in horrid conditions, it is advisable that you adopt a pet from an animal shelter or the street if you have the time, patience and the resources to look after the pet.”

LEGAL EYE

The Animal Birth Control (Dogs) Rules, 2001 framed under the Prevention of Cruelty to Animals Act, 1960, provides that – “The owner of pet dogs shall be responsible for the controlled breeding, immunisation, sterilisation and licensing in accordance with these rules and the law at the time being in force within a specified local area.”

Animal guardians from Mumbai, Thane and Navi Mumbai and other municipal corporations which provide a license for keeping dogs as companion animals must obtain such a license from their ward office/dog control cell.

The same is to be renewed every year. This is important because the license also helps confirm the dog is yours in case of theft or dispute.

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SAVE THE RAINWATER REVOLUTION

Rainwater harvesting is our only hope in the face of impending water scarcity. A few experts offer solutions on recharging wells and installing rainwater harvesting units at home. Read on…

It’s magical when it rains after a hot summer and the earth laps it up. Nature has its way of recharging the groundwater table every monsoon. But, do we allow it free rein?

By concreting roads, pavements and open spaces, we are doing gross injustice to this natural process causing most of this precious resource to drain into the sewers. There’s abundant scope to harness the rain, recharge wells, store rainwater and use it for drinking and our daily needs. All it takes is an action plan for Rainwater Harvesting (RWH) on a war footing.

REINING IN THE RAIN

PREP BEFORE CONSTRUCTION:

If you pre-plan the RWH system before constructing your house, you can aesthetically design/camouflage/ showcase the RWH elements. The RWH unit usually requires a number of pipes, which act as collectors and direct the collected water to the harvest zone. The route needs filters, which improve the quality of water collected. Today, people are aware of the advantages of RWH systems and look forward to installing them. This, fuelled by mandatory norms by the government, has created good demand; hence, professional companies have invested into this area and are offering it as a complete solution.

MINIMAL COST:

You can lead the collected water into a harvest pit or around a borewell. It depends on the collection area, which essentially is the roof. The run off from the surrounding surface area can also be led into the same harvest pit. So, you can begin with one RWH pit, which is about two feet in diameter and 10 feet deep, filled with gravel, sand and material, which will help absorb and retain water, and then percolate down slowly into the earth. The cost of a RWH system for a medium sized house is Rs 22,000 to 25,000.

RECHARGE, RESTORE

SWIFT SOLUTIONS:

There are two ways that the authorities can work towards recharging the groundwater.

1 Clean and desilt lakes. A freshly desilted lake can recharge upto 20 litres per sq m per day. A lake like Bengaluru’s Jakkur with a 50-hectare water spread can actually recharge 10 million litres of water per day;

2 Make recharge wells and incentivise them at the household level. Recharge wells are typically three feet in diameter and 20 ft deep, lined with precast concrete rings and can pick both, rooftop rainwater and water from clean storm drains and send it to the aquifer at sometimes 10,000 litres an hour.

RWH TECHNIQUES:

Rain barrel: Connect rooftop drain pipes to a HDPE tank. Thereafter, tie a piece of cloth at the end of the pipe as a filter.

Sump tank: Rainwater filters are available in the market. Connect them to the rainwater downpipes and lead them into an existing/newly built sump tank.

Recharge wells/existing wells: Connect rooftop rainwater pipes to an existing well or a new recharge well (typically three feet in diameter and 20 feet deep).

Recharge borewells: If you have a defunct borewell, connect rooftop rainwater pipes through a filter to the defunct borewell casing and recharging the aquifer.

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CHECK BEFORE BUYING A RESALE PROPERTY

CHECK BEFORE BUYING A RESALE PROPERTY

Buying an old property could be trickier than buying a new one. Here is a checklist to be kept in mind

Investing in a property or buying a property is no joke, as people put in their lifetime’s saving in it. While buying an old property, there are more than usual questions that are to be asked to oneself.

Here is a checklist that should be considered before buying an old property:

LEGALITY: Ensure that there are no other claimants to the property. Check whether the property has joint ownership, and if yes, ensure that all coowners have authorised the sale. Seeking the property titles along with original documents will help in knowing if the existing owner has bought the property on resale. In case, any of the documents from the chain of titles is not stamped as regulated, the banks might refuse to offer a loan for the purchase of a resale property. This is one of the most important points that is to be considered while doing any such transaction. Although it is extremely time-consuming, it’s still worth investing time into.

DUES, IF ANY: Ask yourself, is it a disputed property? One should make sure that the property is free of all legal dues at the time it is being sold in resale. Copy of the title documents including the sale deed in case it is a third of fourth resale in the name of the present seller should be sought.

A CHECKLIST FOR RESALE PROPERTIES:

One might also have difficulty in seeking a loan if the resale property is older than 10 years; Receipts of payments made to the developer and builder buyer agreement are needed; A possession letter from the developer to the original allottee is a must to buy a resale property; To find out the exact reason behind selling the property is extremely important.

ATTENTION: FIRST-TIME HOME BUYERS

HERE’S A QUICK GUIDE TO HELP YOU THROUGH THE CUMBERSOME TECHNICALITIES OF ACQUIRING A HOME LOAN

Today, buying your own home is not only a basic need, but also brings along a sense of pride, achievement, freedom and security. Deciding to buy a home is one of the biggest steps one can take in life and, for most of us, it’ll be one of the biggest investment decisions. So, it’s imperative to make sure it is done wisely as there are many things to take into account when you buy a home. The most important thing is deciding what you want. This includes the kind of home you are looking for, its location, amenities, and surroundings among others.

Once sure, strive for a good credit rating as lenders will be more than happy to sanction you a loan if you show them a good credit history in terms of not being overburdened by credit card bills, mortgages and other loans. Club all your incomes (your spouse’s earnings, additional perks, rent, agricultural proceeds and any other revenue earned by your family) to move to a higher eligibility bracket and get the best deal.

THE HOME LOAN GUIDE

Often, acquiring a home loan becomes a tedious task due to a lack of information and a bad credit history. Make sure you have no bad loans when you apply for one.

THE FIRST BUY

Buying one’s first property is not only an important financial decision, but also has a lot of emotional value. Therefore, choose wisely and invest well.

DOCUMENTS REQUIRED:

A broad list of documents required by Housing Finance Institutions (HFIs) is detailed below (it may vary depending on the creditor and background of the debtor).

INCOME DOCUMENTS: Income proof, salary certificate, IT returns, bank statements, etc;

PERSONAL DOCUMENTS: ID and age proofs like PAN card/ Aadhar card/ election card/ passport/ driving license, etc;

RESIDENCE PROOF: Residence proof like recent telephone bill/ electricity bill/ property tax receipt/ bank account passbook/ statement for the previous six months;

BUSINESS PROOF: Businessmen/ industrialists need to furnish business address proof.

WORK EXPERIENCE PROOF: Select banks clamp in a condition of the loan applicant possessing a given amount of experience in the current company;

LEGAL DOCUMENTS: There are many legal documents that need to be furnished to acquire home loan. Make sure you have all those handy;

A copy of the offer letter issued by the HFI;

Title documents of the property, which include: duly registered sale agreement; receipts of your own contribution; allotment letter; registration receipt; etc;

Land documents indicating ownership: possession letter; lease agreement; mortgage deed (if the HFI opts for a registered mortgage);

NOC from the developer, society or development authority;

Personal guarantees, if required;

Documents for alternate or additional security;

Post dated cheques for the EMIs, etc.

ACT OF LABOUR

The Real Estate Regulation Act (RERA) will go a long way in protecting the rights of home-buyers

Purchasing a home is one of the major financial decisions that you take in your life. Hence, if you are planning to invest lifetime of your savings in real estate, then one of the most common advice one will get from experts is to be diligent while choosing a builder. Being diligent means taking notice of the builder’s previous projects, quality of service provided, compliance with the plan, etc.

But unfortunately, the real estate sector was plagued with fraudulent builders and fly-by-night operators, which led to many of the buyers being cheated and losing their hard-earned money. In fact, they used to indulge in malparactices and fool the buyers. All such activities led to the downfall of the realty sector with consequences being felt far and wide.

Instances of buyers being cheated had become rampant and were on the rise. In fact, builders promised to complete the project on time, but they delayed the construction even after making full and final payments. They even misrepresented the building plan with wrong measurements and usage of sub-standard materials – in addition to not providing agreed quality of products for construction while indulging in all sort of fraudulent activity.

All these instances led to a need of a real estate regulator in order to protect home-buyers and bring about transparency between realtors, real estate agents and buyers’ therefore; The Real Estate (Regulation and Development) Act, 2016 (RERA) was formulated by the government of India and every state had to implement it in full earnestness form May 1, 2017.

The Real Estate Bill was published in the Official Gazette on March 26, 2016 by the central government. And the bill may be considered as model law because ‘land’ being a state matter, the states are given flexibility to modify/add their own set of rules. While a majortiy of the states have notified the Act, the rest are in the process of implementation.

In fact, Maharashtra is among the first states to implement RERA and set-up a regulatory authority. And in the time to come, both buyers and developers will only benefit from this regulatory body as it will help regain the trust of the buyers back, which the market had lost due to fraudulent and inconsistent practices.

THE SEARCH FOR YOUR DREAM HOME ENDS HERE!

If you have been scouting for your dream abode, the 15th edition of the Times Property Home Fair 2017, held on 11-12th November 2017, at Hall 7 in Bombay Exhibition Center, NSE Complex, Goregaon east, Western Express Highway, is a great place to be. Showcasing the best home options from all over Mumbai, Virar, Thane and beyond, the expo is a onestop-shop where a plethora of properties will be displayed under one roof.

Over 100 leading developers are participating in the grand event, which will attract over 5,000 prospective buyers, over two days. By virtue of its strategic location to the international and domestic airports, excellent connectivity via the Western Express Highway, well-developed infrastructure, shopping and entertainment options, also the presence of many MNCs and corporate offices—the expo should be your one-stop destination.

With the change in the consumer behaviour pattern, this target audience is inclined to invest in property for personal usage or investment across various markets.

Also, leading developers will be displaying projects from the western suburbs, central suburbs, Pune, Thane, Vapi, Valsad, Khardi with many more banks and financial institutions offering lucrative funding options. Therefore, don’t miss this chance to own your dream abode and visit the show today!

MUMBAI RESIDENTIAL PROPERTY PRICE INDEX

REALTY TERMS DECODED

 

Some real estate terms in practice could also confuse buyers. Here we simplify them for you.

CARPET AREA is the area within the walls of an apartment that is for the exclusive use of the buyer. Normally in large societies, with many common amenities, the carpet area could be as less as just 2/3rd of the built-up area.

BUILT-UP AREA includes the carpet area and thickness of external walls, internal walls, lobbies and corridors, basements, atriums, etc.

SUPER BUILT-UP AREA

includes common amenities, such as the area of lift shafts, lobby, and corridor, proportionately divided among all flats. Common usable areas such as a swimming pool, garden and club house, may also be included. Per square foot rate quoted by the developer is typically applied on the super built-up area. BSP is Basic Sale Price of the apartment that the builder advertises and more often than not there are other add-on charges like PLC, floor charges, car parking, club charges, electricity connections, etc.

PLC is Preferential Location Charges that the apartment commands and normally parkfacing, pool-facing and other visually attractive views command better premium compared to less attractive views like road-facing apartments.

Be the first to comment - What do you think?  Posted by admin - November 16, 2017 at 10:20 am

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Co-op society might go into re-development

Unstamped flat agreement no bar for redevelopment benefits

 

Non-payment of stamp duty on flat purchase document and non-registration thereof cannot in any manner affect your entitlement to a new unit under a redevelopment project.
A residential property was purchased in Mumbai in 1985. The sale deed is on a Rs5 stamp paper. Does that mean stamp duty is already paid on that property or stamp duty is not yet paid? In case the flat is not registered, is it mandatory to register the flat purchased from the builder in 1985? The co-op society might go into re-development. If the property is not registered what will be the legal consequences? Can that property be re-sold without registration?
—Akbarali Beddingwala
You have stated that property was purchased in 1985 but you have not stated the date of purchase.

With effect from December 10, 1985, where in case of an agreement to sell an immovable property, the possession thereof is transferred or agreed to be transferred to the purchaser, before the execution or at the time of execution or after the execution of such agreement, then such an agreement to sell is deemed as conveyance and stamp duty thereon is leviable accordingly.

Before the said date, agreement to sell was not considered as deemed conveyance and therefore such agreement was liable to stamp duty as applicable to a normal agreement, which was Rs5 at that time.

Vested views have been expressed time and again that even such agreements were liable to stamp duty on market value at that time and therefore now need to be cured by payment of deficient stamp duty with other consequential payments.

However, non-payment of stamp duty on such an agreement cannot invite any consequences and therefore there is no infirmity in such agreement. You have used the term “sale deed” in your query.

A sale deed is a conveyance and therefore before December 10, 1985 also, it required stamp duty on conveyance of immovable property.

Whether you purchased flat before or after 1985, title in an immovable property cannot be transferred without registration of the document transferring the title. However, in case of a unit in a co-operative housing society, if the flat has already been transferred in your name, then you have a good title despite non-registration of the document of purchase.

Society cannot insist for registration of your document of purchase. Non-registration does not invite any penal provisions.

Non-payment of stamp duty on flat purchase document and non-registration thereof cannot in any manner affect your entitlement to a new unit and other benefits under a redevelopment project.

There is no bar on sale of a flat in the above circumstances. However, if your document of purchase was liable to stamp duty, the buyer would definitely consider such defect while buying your flat and may obtain suitable writing and indemnity from you or may require you to remove the defect by paying stamp duty with interest.

 

Builders are facing a dilemma over 1% VAT

Whether sale of under construction flat is a sale of immovable property or is a works contract is a bone of contention between the builders and revenue authorities for indirect taxation including value added tax (“vat”). Since around the year 2005 Central and State governments have been tempted to take a view that when a builder sells an under construction unit, then in respect of such sale the builder thereafter becomes a works contactor.
Conceptually and commercially, the analogy is not logical at all as such transaction is of sale of immovable property and not that of works contract. On such and other reasons like constitutionally, sale of immovable property does not come within the taxing purview of the State governments, in a writ petition by the MCHI, a stay has been granted by the Bombay High Court granting relief to its members from payment of vat subject to some procedural compliances. In view of pending writ petition, applicability of vat to such transactions is yet to be decided.

In the meantime, in the recent State budget, Maharashtra Government has attempted to lure builders by providing a composition scheme to tax them at 1% of the value of the unit in respect of sales of under construction units along with land or interest underlying the land. In pursuance of such enactment, a notification dated 09 07 2010 has also been issued. Value of the unit for this purpose would mean sale price as stated in the agreement for sale or stamp duty valuation whichever is higher. Agreements registered on or after 01 04 2010 are eligible for the Scheme.

In this background, it is for a particular builder to decide whether to opt for this 1% scheme and pay vat accordingly in respect of agreements registered on or after 01 04 2010. For the earlier transactions, earlier provisions including the earlier composition scheme of 5% would apply. Logically, by accepting 1% taxation, the builder would have to accept the proposition in law that he is a works contractor in respect of such transactions. Although the State Government has offered to charge only at 1% tax but it is not necessary that the same incentive rate would continue in future also. Many controversial taxes have made their easy entry with lesser rates initially followed by increased rates.

However, as a flat purchaser, if a builder decides to pay tax, even in protest then certainly he will be entitled to recover the same from you unless otherwise agreed in your contract. As a flat purchaser you are not entitled to contend that since vat is not applicable on sale of under construction flats therefore you will not pay the same.

 

Rules for removal of chairman from committee

Our society has elected managing committee of members in August 2010. Now, due to disputes and other problems, five committee members want to remove the chairman
Our society has elected managing committee of members in August 2010. Now, due to disputes and other problems, five committee members want to remove the chairman. They are also demanding re-election of the entire committee or they will resign and reduce committee to minority. Will our committee be valid then? Tenure of our committee is 5 years which is found to be quite long.
In the context of your query, chairman, secretary or treasurer can be removed by a no-confidence motion in a special meeting of the committee called and presided by the Registrar or under delegated authority by an assistant registrar or an officer above his rank.
The notice for such meeting will have to be given by one-third members of the committee and motion of no confidence is to be passed by three-fourth members present at such meeting. Attendance at such meeting will have to be two-third of the committee members.

If 5 out of 9 members of the committee resign, the strength of the committee would reduce to minority and apparently, functioning of the committee becomes questionable. However, the apprehensions about the validity of the committee are ill conceived. It is true that to transact business at a committee meeting, members present should form quorum agenda. However, such requirement of quorum would not be applicable for the purposes of filling in vacancies caused by death, resignation, disqualification or removal of committee members. Period of office of a co-opted member, would be
co-terminus with tenure of the committee, which in your case is 5 years from the date of election. Tenure of the committee can be reduced by an amendment to the byelaws.

Redevelopment panel can be formed within a society

As redevelopment, being a subject to be taken with utmost precaution and involves the ability to understand complex legal, taxation and construction aspects, the managing committee or the general body of the society can take a decision to form a redevelopment committee.
In the process of redevelopment of our property, can we form a separate redevelopment committee and how it can function in a co-operative housing society along with the managing committee?
As redevelopment, being a subject to be taken with utmost precaution and involves the ability to understand complex legal, taxation and construction aspects, the managing committee or the general body of the society can take a decision to form a redevelopment committee. The powers and functions of the committee can be decided by a concerned resolution of the managing committee or general body as the case may be.
But in any case, formation of such a committee will have to be authorised by the general body. The minutes of the meetings of the redevelopment committee should be separately recorded. The committee will report to the general body or the managing committee depending on by whom it has been formed.

Our society has sizeable amounts invested as sinking fund and other funds. Is it possible to collect proportionate amounts from the new flat purchasers in the redevelopment scheme? Whether a flat of an existing member sold after redevelopment would attract short-term or long-term capital gains?
It is possible to stipulate in the redevelopment agreement for collection of proportionate contribution from the incoming members. However, to ensure such collection, the documentation will have to provide strict terms and conditions detailing consequences for defaults to ensure that the funds reach the society. Not admitting the flat purchasers as members of the society may not be a workable solution. A reconstructed flat (after redevelopment) would attract long term capital gains if the earlier flat was acquired before 36 months of the date of sale.

Under the model bye laws, the member who has purchased a car parking space from the builder can sell the same. How to implement this bye law?
The model bye laws are only in the form of suggestions. Even when the bye laws are adopted by the society, the same are not tenable in law if they run contrary to the provisions of the prevailing laws. The position of law with reference to Maharashtra Ownership Flats Act, 1963, is settled by various court decisions that a car parking space including a stilt parking space cannot be sold by a builder or a promoter. In view of such a legal position, the bye-laws providing for sale of car parking spaces are void in law.

 

Society is not a beneficial party in sale/ transfer of flats and membership rights

Contribution from members received by the society towards cost of land and building(s) and other amenities will be covered by the concept of mutuality and therefore, will not be an income in the hands of the society.
We have taken a plot of land on lease in the name of the society. Now we are constructing flats and shops. There are investors also, who transferred their investments for profit. Flats are of different sizes and members would pay extra amounts for different kinds of amenities and car parking facilities. Our turnover is a few crores of rupees. Can we make profits? How would these activities attract tax?

Contribution from members received by the society towards cost of land and building(s) and other amenities will be covered by the concept of mutuality and therefore, will not be an income in the hands of the society.

Even though profit is made by the society, tax would not be attracted because of the application of concept of mutuality. A more pertinent question for you should be what will the society do of such profits.

When a member sells his residential flat and transfers his membership rights in the society, under Income-Tax Act, 1961, such transaction would be on account of such member and therefore, the tax implications would arise upon such member.

The society is not a beneficial party in respect of the sale consideration in transactions involving sale and transfer of flats and membership rights.

The society would be receiving transfer premium in respect of such transactions. Such transfer premium will also get covered by the concept of mutuality. To the extent the society collects such transfer premium from the members and within the framework of its byelaws, such transfer premium would not be taxable in the hands of the society.

So far as payments to contractors and sub-contractors are concerned, the same would be subject to the provisions of tax deduction at source under Section 194C of the of Income-Tax Act, 1961.

 

Succession of property of Hindus dying intestate

How can one utilise a TDR for construction purposes?

We are two brothers and four sisters, all married. The last sister married in 1984. My father has made a house out of his earnings in Visakhapatnam in 1987. He did not make any will and he expired in 2006. My mother is also no more. Now, what is the status if we have to share the property among ourselves? Do we come under the definition of a Hindu Undivided Family (HUF) and are we called a joint Hindu family governed by the Mitakshara law? What would happen if one of the married sons or daughters had died leaving children before the death of father or mother? We are Hindus.
—CV Nageswar Rao, Visakhapatnam
Since your father expired intestate in 2006 and left inter alia a house property and as it transpires that your father was a Hindu at the time of his death, the succession in your case would be governed by the provisions of Hindu Succession Act, 1956.

A property can become HUF property in various ways and one of them is that an ancestral property becomes HUF property. In your case since your father acquired the subject property out of his own earnings, therefore, the same is not a HUF property. On the death of your father, if he was survived by his wife then the widow along with the sons and daughters became equal co-owners of the house property.

Thereafter when the mother died, assuming without leaving a valid will, then the co-ownership share of the mother would get distributed to all the sons and daughters. In case your mother had pre-deceased your father, then obviously, the property would be shared between the sons and daughters.

Before the death of father or mother, if a son had died leaving behind a widow and/or children in his branch, then in such a case, the share of such pre-deceased son would be distributed among his widow and his children equally. Before the death of father or mother, if a daughter had died leaving behind widow and/or children in her branch, then in such a case, the share of such pre-deceased daughter would be distributed amongst her children equally.

How can one utilise a TDR for construction purposes?
For utilisation of transferable development right (TDR), a proposal has to be submitted in the prescribed form to the building proposal department of Mumbai Municipal Corporation giving details of the development rights certificate (DRC) to be utilised, details of the plot upon which to be utilised along with proposed building plans, etc. A holder of DRC who desires to use the floor space index (FSI) certified therein on a particular plot of land, shall attach to his application for development permission, valid DRC to the extent required. The proposals are approved on merits like any other building construction proposal and subject to DC regulations.
The DRC may be used on one or more plot or plots of land whether vacant or already developed by putting up a new construction or by constructing additional storeys subjects to guidelines provided under the development control regulations.

 

Limited liability pact may work better for development

Taxation of a development agreement or redevelopment agreement would depend upon the terms & conditions contained therein.
I want to give my land and existing structure under a development agreement. However, because of income tax implications, I am advised to enter into a partnership or joint development agreement with the developer. What is your view on it?
Taxation of a development agreement or redevelopment agreement would depend upon the terms & conditions contained therein. In general, to the extent of transfer of development rights, the cost of acquisition whereof is nil, should not attract any income tax implications.
However, VAT & service tax implications would also have to be analysed with reference to the contents of the development agreement. As far as forming a partnership is concerned, it involves law of agency with the result that actions and inactions of a partner can bind the firm and other partners also with unlimited liabilities and consequently every partner’s personal assets and properties can also be subjected to such liability and can be attached.

In this context, the newly introduced form of organisation namely a limited liability partnership may be a better option as it is a combination of limited liability like a company as well as flexibility of partnership. Further, in partnership there will be profit sharing against the ascertained fixed gains in a development agreement.

The partnership or joint venture should be genuine in substance or otherwise name sake or disguised documents may be disregarded by tax authorities as income tax law would proceed on substance rather than nomenclature assigned to a document. A joint venture may become an association of persons.

Can the co-operative society in which I am a member, appoint me as an auditor?
Unlike the Companies Act, 1956, the Maharashtra Co-operative Societies Act, 1960, does not prohibit a member of a co-operative society to be its auditor. Therefore, you can be an auditor in your own society provided that you are not in the managing committee because if you are a part of the management, as an auditor you would be required to report upon your own actions including inactions which cannot be allowed as your independence can be questionable.

A member of my society has given me a document that states he has gifted his flat to his wife. What are the procedures that I should follow as a secretary of the society?
You will have to verify that the gift deed has been properly stamped and registered. The transfer procedure in case of gift would be the same as in the case of sale of a flat. However, there will not be any premium on transfer inter alia for the reason that the transfer is to a family member only.

 

 

Occupation certificate not a must for deemed conveyance

Conveyance executed and property cards not being in the name of society would not be a big issue as the same is an issue of procedural compliances only.
How are feasibility report and conveyance related to redevelopment of society properties? Are occupation certificate and building plan necessary for deemed conveyance?
—Ashok Mhatre
It is desirable that feasibility of redevelopment of a property is determined before a society initiates the process of inviting a developer.

This includes verification of papers and documents including building plans of property, understanding the requirement of perfecting title of the property, estimation of available floor space index (FSI), premium FSI, transfer of development rights FSI, areas constructible by use of FSI and without FSI, etc.
A society which does not have conveyance would not be able to proceed on its own for redevelopment.

Conveyance executed and property cards not being in the name of society would not be a big issue as the same is an issue of procedural compliances only.

It is quite possible that documents like occupation certificate, building plans and other papers and documents, which the builder is bound to provide to the society, have not been provided.
In the absence of such papers and documents also, the right to deemed conveyance cannot be denied by the competent authority.
In fact, deemed conveyance is the remedy provided inter alia for cases of non-cooperating landlords and builders and developers.

Therefore, once the titles of the flats purchasers are established, deemed conveyance would have to be granted.

Competent authority is an administrator of law and cannot provide for the requirements not stated in the law.

I have dividend income from shares and also have other business income and capital gains from sale of shares, some of which were purchased with borrowed funds. We also have to bear securities transaction tax. Some transactions were squared off without taking delivery. What will be the income tax implication?
— Meenakshi V
As far as shares purchased with borrowed funds are concerned, the same may give rise to business income.
Sale of other shares in delivery-based transactions may give rise to capital gains or business income depending upon the frequency of transactions, intention at the time of
purchase, treatment in books of account, disclosure in financial statements, etc.

As far as dividend income is concerned, the same is exempt, whether the shares are held as investments or stock in trade.
It is possible to take a view that borrowed funds utilised for dealing in shares should not attract disallowance on relevant interest although dividend income therefrom is tax-free because in such cases dividend income is incidental and the predominant activity is to earn from dealing in shares.

For the purposes of section 14A, which disallows expenditure incurred to earn tax-free income, all direct and indirect expenses, including administrative, rent etc would have to be considered and if nexus of some expenses to dividend income is established, the same would be disallowable.

Securities transaction tax suffered on purchase and sale of shares to the extent sales of such shares give rise to capital gains, would not be allowable as deduction.

Such tax paid for trading in shares would, however, be allowable as deduction from business income. Transactions settled without actual delivery would be treated as speculation transactions.

Be the first to comment - What do you think?  Posted by admin - February 3, 2016 at 12:07 pm

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‘Society redevelopments do not attract Sec 50C’

Does Section 50C apply to the redevelopment project of a society in view of the recent tribunal decision? Should TDR be purchased in the name of the society? How can the taxation problems be addressed?
—B Manohar
Society redevelopment projects should not attract provisions of Section 50C of the Income Tax Act, 1961, notwithstanding the recent decision of the Income Tax Appellate Tribunal, Mumbai.
One is required to bring out clearly the relevant construction laws, property laws, limited scope of the provisions contained in Section 50C and the issue that only development rights are being transferred.
It is submitted that society redevelopments do not attract provisions of Section 50C as they deal with transfer of land or building, or both, whereas in redevelopments, there is a transfer of development rights only.

Transferable development rights (TDR) purchased in the name of the society would definitely augur well from a safety point of view, but care should be taken to ensure that before vacating the flats, the development right certificate is loaded in the name of the society in the records of the municipal authorities and stamp duty requirements are complied with, as otherwise, the society would face problems at a later stage. Loading of TDR will be subject to Development Control Regulations.
Taxation problems would have to be addressed while documenting the transaction only, as afterwards it would become only a post mortem exercise. From an income-tax point of view, it would be desirable that the taxable entity is an individual rather than the society. This would also reinforce the property rights of the individual members and their locus standi to take up the issues on their own. Documentation should provide protection to the society and the members against service tax and value added tax. Income-tax returns of the society must be filed disclosing complete particulars and bringing out the claim of tax-free incomes in the hands of the society as well as the individual members.

 

Property laws and taxes: Individual agreements necessary in redevelopment

We have entered into redevelopment agreement between the society and developer. We, as the members want individual agreements also but the society has taken a stand that members have only right to occupancy and agreement with the society is sufficient. Can we enforce our right to individual agreements?
– Pramod Bhasin
In the process of redevelopment, execution of individual agreements in respect of each member giving complete description or details of his entitlement to new flat under the scheme of redevelopment is absolutely necessary. Such an agreement will become the member’s title document in respect of the new flat. Such a document would also create a locus standi for enforcement of individual member’s rights.
The view that a member in a co-operative housing society has only right of occupancy is itself a questionable view. De facto, a member is the owner of his flat and his property rights are valuable. In fact, the entire scheme of redevelopment should recognise members as the owners of the property standing in the name of the society.

Such a stand would give proper recognition to the property rights of the members and would also enable in contending that the member being a taxable entity would be entitled to various exemption benefits under Income Tax Act, 1961 available to an individual.

In the context of income tax, as of today, some societies have succeeded in claiming up to tribunal level that on the theory of no cost, no capital gains, their transactions under the development agreements in respect of transferable development rights are not taxable, whereas, some societies have been taxed depending upon structure of the scheme and documentation.

However, all these cases have reached and have been admitted at high court. If the high court confirms the view that transaction of transferable development rights is per se not taxable on application of the principle of no cost, no capital gains.

However, in a possible adverse view that no cost, no capital gains theory is not applicable to such transactions, tax will become payable and if tax becomes payable, the cases in which individual members are the taxable entities will be far better placed than the cases in which societies are held as taxable entities because of various exemption benefits available to an individual.

I have purchased a flat in a cooperative society and due to some disputes, the society is not transferring the same in my name and has been charging non-occupancy charges. What is your opinion on this?
—V Ramprasad
A bonafide purchaser of a flat in a cooperative housing society cannot be levied with non-occupancy charges simply because of any reasons whatsoever, he has not been admitted as a member of the society.

Unstamped document no barrier to redevelopment benefit

My flat was bought by my late husband before December 10, 1985, under an agreement to sell on a stamp paper of Rs5.
Can the society general body meeting delegate power of appointment of statutory auditor to its managing committee?
—Ratan Verma
No. The powers and functions or the agenda prescribed for the annual general meeting or special general meeting under the provisions of the Maharashtra Co-operative Societies Act, 1960, or rules framed thereunder or in the bye laws of the society cannot be delegated to the managing committee or its office bearers and the members at the general body meeting would have to exercise or discharge the same.
My flat was bought by my late husband before December 10, 1985, under an agreement to sell on a stamp paper of Rs5. On his death, I, as a nominee, became member in the society. Now, the flat is going under redevelopment. Do I have to pay stamp duty on my earlier purchase to be eligible for a new flat under redevelopment? Can the society/ developer refuse to recognise my title to the existing flat on non-stamping of the document? —Anju Sharma
When your husband purchased the flat, that is before December 10, 1985, stamp duty on market valuation was not attracted on agreement to sell an immovable property.

Then after, the stamp law in Maharashtra was amended to provide that an agreement to sell an immovable property, in which possession of such property is transferred or agreed to be transferred, is deemed as conveyance and the stamp duty as applicable to conveyance of an immovable property is attracted. Consequently, your agreement to sell having been executed before such amendment was not liable to the stamp duty on market valuation of the flat.

By virtue of ownership of the flat, your husband was a member of the co-operative housing society. On his death, you, as a nominee, became member of the society. Subject to ownership rights being sorted out on the basis of testate or intestate succession upon the death of your husband, unstamped document before December 10, 1985, of your flat will not disentitle you to have new flat in the process of redevelopment envisaged by your society.

My flat is on leave and licence. Do I need to make licensee the nominal member of the co-operative housing society? —Ankita Rai
Model bye laws provide that a member letting the flat shall make the licensee a nominal member in the co-operative housing society. Such provision is also in your interest as once the licensee is made a nominal member, he also comes within the jurisdiction of co-operative authorities and the co-operative court. Nominal member’s name does not get entered on the share certificate and he is not entitled to any property rights whatsoever. Nominal member is not entitled to attend general body meetings of the society nor can he be a part of the managing committee.

Sale of your flat in a family would attract taxes and duties

A scheme of amalgamation is approved by a competent court in terms of exercise of jurisdiction under the Companies Act, 1956.
My brother wants to purchase my property at Thane and wants to avail a housing loan from a bank for such purchase. Will the sale attract capital gains tax? Do we have to take permission of the society for such family transaction? How do stamp duty and registration aspects apply to such a transaction? Will the bank grant a loan for such a transaction within the family?
— Ganesh
You are contemplating a property transaction within the family but absolutely on commercial terms and therefore all the implications under the provisions of the Bombay Stamp Act, 1958, under the Registration Act, 1908 and under the Income Tax Act, 1961 would apply as they apply to such transactions between outsiders.
The stamp duty would be attracted on the sale value stated by you in the agreement for sale or on ready reckoner value, whichever is higher. Although there is concession in respect of stamp duty on gift of an immovable property to a family member, there is no such concession on sale within the family. Registration charges would be attracted on value adopted and assessed or assessable for stamp duty purposes.

For income-tax purposes, to compute capital gains in your hands, the gross value of consideration would be the value as stated in the agreement for sale or the stamp valuation adopted and assessed or assessable, whichever is higher. However, the society transfer premium would not be attracted as the transfer is to a family member.

All forms applicable to a transfer would have to be filled in. The requirement of obtaining a no objection or an approval for transfer of flat in a co-operative housing society has been dispensed with under the model bye laws. The bank or financial institution generally advances loans on evaluation of the proposal based on value of the property and repayment capacity of the borrower over the term of the loan sought.

If the bank or financial institution is convinced on such aspects, then simply because it is a case of transaction within the family should not disentitle your brother to avail the loan.

Is stamp duty payable on transfer of immovable property in a scheme of amalgamation of companies under a court order?
A scheme of amalgamation is approved by a competent court in terms of exercise of jurisdiction under the Companies Act, 1956. Under such a scheme, the property is conveyed from one company to another.

An order of the court approving such a scheme to the extent it provides for conveyance of an immovable property would be subject to stamp duty under section 3 of the Indian Stamp Act, 1899. Statutory definition of the term “conveyance” u/s 2(10) of the Indian Stamp Act, 1899 is an inclusive definition of wide import.

 

Investment in a new house can be from any source

Can I adjust capital gain against purchase of the house? Will I get tax benefit of housing loan interest?
I have sold a depreciated factory and earned capital gain. The factory was owned by me since 1995. Before sale of the factory, I purchased a residential property out of bank loan and my accumulated savings. Can I adjust capital gain against purchase of the house? Will I get tax benefit of housing loan interest?
—Deven C
U/s 50 of the Income Tax Act, 1961, sale of a depreciated asset has given rise to deemed short-term capital gains in your hands. However, since the factory was held by you for more than 36 months and consequently it was a long-term capital asset in your hands, it was possible for you to invest net sale consideration in a residential house and claim exemption of such deemed short term capital gains.
Another issue arising in your query is that you have not used the sale proceeds of the factory for purchase of residential house. In this connection, you will have to submit before the income-tax authorities that for the purposes of section 54F, funds from any source including borrowed funds and accumulated savings can be utilised, as the said section does not specifically require that the sale proceeds be utilised for purchase of the house. At the same time, in your case, you should verify that you have purchased the house
within one year before transfer of factory and you may note that date of transfer for the purpose of the Income Tax Act may not always be the same as the date of sale agreement of the immovable property.

For interest payable on funds borrowed for acquisition of your house, you will be entitled to income tax benefit u/s 24(b) up to an amount of `1,50,000 per year in case the house is self-occupied, but if the house is rented or even notionally rented, the ceiling of `1,50,000 will not apply.

I had deposited a cheque with Rural Electrification Corporation for purchase of capital gains bonds on September 29, 2010 as I was required to invest within six months, expiring on September 30, 2010 after sale of my house. However, I was allotted bonds only on October 27, 2010. Will I get income-tax benefit?
—Toral Mehta
Section 54EC of the Income Tax Act, 1961 requires you to invest capital gains in capital bonds within 6 months of the date of transfer of a long-term capital asset. Under such benevolent provisions, your making the payment within the prescribed time limit would be a sufficient compliance to avail exemption, although legally, the date of allotment of the bonds is the date of acquisition and you will have to hold the bonds for a minimum three years from the date of allotment.

Be the first to comment - What do you think?  Posted by admin - February 2, 2016 at 11:53 am

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Don’t worry about withdrawal of incentives for redevelopment

In the city of Mumbai and suburban areas, floor space index (FSI) incentives have been provided by use of transferable development rights (TDR) and under other schemes for redevelopment of properties.
Our society is contemplating redevelopment. Is it possible that the FSI incentives are withdrawn in the times to come?
In the city of Mumbai and suburban areas, floor space index (FSI) incentives have been provided by use of transferable development rights (TDR) and under other schemes for redevelopment of properties.

The prevailing incentives under various development control regulations are not so high as to cause apprehension of withdrawal of some of them. Present incentives are just making the redevelopments possible.
One observes that the quantum of incentives provided, over a period of time, have gradually increased for the logical reason that ultimately the government wants to encourage the redevelopments.

What is being questioned by the present municipal commissioner is the kind of manipulations taking place in construction of elevation features free of FSI. Although, these elevation features do not consume FSI and are legally not saleable areas but the in practice, they are being sold as usable areas.

Many of the rules of law do not get implemented because of the supply of housing stock continuing to be far less than the demand. View that the incentives may be withdrawn and thereafter redevelopment propositions may become less attractive is without basis or logic.

‘Apartments can be used for professional services’

We are a partnership firm carrying on profession from a residential flat. We have a number of staff members and are using them in rendering professional services. Can municipal authorities take action against us for change of user?
We are a partnership firm carrying on profession from a residential flat. We have a number of staff members and are using them in rendering professional services. Can municipal authorities take action against us for change of user? Can the society charge us more?
Even though professional services are being rendered with the help of staff, it does not change the analogy that a professional activity is not commercial activity. Since the use of even the entire residential flat for carrying on professional services does not tantamount to change of user, the municipal authorities cannot take any action against you. The society has no power to charge any extra amount, whether there is a change of user or not.

Before the formation of our society, there were many transfers by the original flat purchasers from the builder. The builder had collected transfer fees in respect of such transfers. Can the society claim such money collected by the builder?
A flat booked under construction and the relevant documents having been properly stamped and duly registered gives the flat purchaser an absolute right to sell or otherwise transfer the flat without any permission from the builder. The law does not support collection of transfer fees or no objection fees at the time of such transfers of flats, by original or subsequent purchasers either during construction stage or thereafter, before the society or other housing organisation is formed. However, if such amounts have been paid, one will have to have evidence of such collections. The person who paid such money would only have the locus to demand the same back and to take other legal actions.
Gifts received from which relatives are not taxable?
Section 56(2) of the Income Tax Act, 1961 inter alia provides that sums received without consideration from following relatives are not income:
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).
However, one should note that Section 56(2) provides that amounts and specified properties received from non- relatives, but for the exceptions provided in the said section, are incomes but no where in the Income Tax Act,1961 it is provided that gifts received from relatives are not income and therefore tax free. Therefore, it is not a case that section 56(2) places the gifts from relatives beyond taxing provisions. If gifts are received from specified relatives, the recipient will have to prove genuineness of such gifts with reference to identity of the donor, capacity of the donor, source of funds of the donor, etc.

Sec 50C does not apply to typical society redevelopment

Who is taxable in redevelopment of society — the society or the members? Is redevelopment compensation and rental compensation liable to TDS or not, and does Section 50C apply to redevelopment?

In a redevelopment project, it is better that while conceiving and structuring the scheme and while documenting the transaction, de facto ownership rights of the members are recognised although the property stands in the name of the society. This will give better locus standi to members of their proportionate rights in the redevelopment project. This will also go better with income-tax and other taxes implications as presently although taxability of such projects has been decided in favour of the society, but since all these matters are reaching to high courts, in a possible situation if such transactions are considered taxable by the high court, there will be substantial scope for exemptions if the income is taxed in the hands of individual members rather than in the hands of a society. In any case, provisions of tax deduction at source under the Income-Tax Act, would not apply either to redevelopment compensation or to rental compensation.
Provisions of Section 50C of the Income-Tax Act are attracted on transfer of immoveable properties in the nature of land or building or both held as capital assets and consideration stated in the instrument of transfer is less than the valuation adopted assessed or assemble by stamp duty authorities and the said section in this context in a nutshell provides that in such a case, stamp valuation would be treated as gross consideration for such transfer and accordingly capital gains would be computed on higher side. In a typical society redevelopment, provisions of Section 50C will not apply for the reason that in such a redevelopment, only development rights are transferred and there is no transfer of land or building. In the recent Bombay High Court decision, petitioner had challenged the validity of provisions of Section 50C wherein he failed but applicability of Section 50C to society redevelopment was not decided by the Hon’ble high court.

In contemplation of death, only movable assets can be gifted

A gift in contemplation of death can be made of any movable property which the donor could dispose of under a will. What is a gift in contemplation of death and how to make it? Can one gift his flat in contemplation of death? — S Venkitesh
A gift is said to be made in contemplation of death when the donor is ill and he expects to die shortly and delivers to another person possession of the movable property to be kept by him as gift in case the donor dies of that illness. A gift in contemplation of death can be made of any movable property which the donor could dispose of under a will. It is possible for the donor to resume such a gift before he dies. Further in a case where donor recovers from the illness during which he made the gift then such a gift will not take effect.
Further, if the donor survives the person to whom such gift was made then also such gift does not take place. If such property instead of being given away in contemplation of death is made subject matter of the Will then the bequest under a Will would require executor’s assent to perfect the title of the legatee and will be subject to probate, when applicable. Gifts in contemplation of death can be made only of a movable property. Therefore one can not gift his flat in contemplation of death.

Redevelopment benefit is proportionate to the size of your flat

Society functions by decisions of the majority, but rule of majority cannot be an oppression on minority and the decision of majority has to be within the framework of applicable laws.
Majority of members of our society in redevelopment have agreed to fixed additional areas irrespective of the sizes of our existing flats. We, few members are adversely affected because of our larger sizes of flats. Can the society do so? Whether monies received by us would be taxable as our income or society’s income?
Society functions by decisions of the majority, but rule of majority cannot be an oppression on minority and the decision of majority has to be within the framework of applicable laws.
In a co-operative housing society (CHS) type of organisation, although all members are equal in respect of their membership rights in view of principle of one member one vote but their property rights may be substantially at a variance. Property rights of members in a CHS are with reference to sizes of their respective flats. MOFA, 1963, being a territorial Act, automatically applies to sales of all flats on ownership basis by a builder, developer or promoter and since under MOFA, sale of units in the building is succeeded by conveyance of the underneath and appurtenant land, the builder recovers entire price of the property from sale of flats.

Under such a legal system, therefore, even though each flat purchaser has paid the price for acquisition of his flat, but implicit in the price of each flat is the price of proportionate land.

In redevelopment transaction, whether society is the taxable entity or individual members, would depend upon the manner in which scheme of redevelopment is designed and the documentation of the transaction. Although depending upon the facts of each case, in many cases, redevelopment of properties inter alia of societies have been held non-taxable. But at the same time, in all such cases, appeals filed by the income tax department have been admitted by the Mumbai High Court. Decisions will come after some years.

If the high court confirms non-taxability of redevelopment through TDR-FSI route, things would be fine for societies. But if the high court decides that such redevelopment transactions are taxable, in such an adverse eventuality, if the society is a taxable entity, taxes would have to be paid whereas if a member is a taxable entity then once again due to various exemption sections applicable to individual assesses under the provisions of the Income Tax Act, 1961, the tax liability may come to nil or negligible.

Therefore, a member and not the society as a taxable entity in such transactions, would provide double safety. In the case of Aurovilla CHS Ltd, represented by this writer, Hon’ble Mumbai Tribunal, inter alia held that in respect of corpus fund of Rs 10.26 crore, since the members were the owners of the property, society is not taxable.

 

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