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An interesting article to read about Service Tax. While some Chennai based builders are collecting the same and some are not. There is always a confusion on buyers mind whether they should pay or not.

Read on and decide for yourself

Construction of residential complex was brought under service tax w.e.f.01.06.2005. Doubts have arisen regarding the applicability of service tax in a case where developer / builder/promoter enters into an agreement, with the ultimate owner for selling a dwelling unit in a residential complex at any stage of construction (or even prior to that) and who makes construction linked payment. The ‘Construction of Complex’ service has been defined under Section 65 (105)(zzzh) of the Finance Act as “any service provided or to be provided to any person, by any other person, in relation to construction of a complex”. The ‘Construction of Complex’ includes construction of a ‘new residential complex’. For this purpose, ‘residential complex’ means any complex of a building or buildings, having more than twelve residential units. A complex constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex intended for personal use as residence by such person has been excluded from the ambit of service tax.

2. A view has been expressed that once an agreement of sale is entered into with the buyer for a unit in a residential complex, he becomes the owner of the residential unit and subsequent activity of a builder for construction of residential unit is a service of ‘construction of residential complex’ to the customer and hence service tax would be applicable to it. A contrary view has been expressed arguing that where a buyer makes construction linked payment after entering into agreement to sell, the nature of transaction is not a service but that of a sale. Where a buyer enters into an agreement to get a fully constructed residential unit, the transaction of sale is completed only after complete construction of the residential unit. Till the completion of the construction activity, the property belongs to the builder or promoter and any service provided by him towards construction is in the nature of self service. It has also been argued that even if it is taken that service is provided to the customer, a single residential unit bought by the individual customer would not fall in the definition of ‘residential complex’ as defined for the purposes of levy of service tax and hence construction of it would not attract service tax.

3. The matter has been examined by the Board. Generally, the initial agreement between the promoters / builders / developers and the ultimate owner is in the nature of ‘agreement to sell’. Such a case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of ‘self-service’ and consequently would not attract service tax. Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of ‘residential complex’. However, in both these situations, if services of any person like contractor, designer or a similar service provider are received, then such a person would be liable to pay service tax.

4. All pending cases may be disposed of accordingly. Any decision by the Advance Ruling Authority in a specific case, which is contrary to the foregoing views, would have limited application to that case only. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned.

(Gautam Bhattacharya)
Commissioner (Service Tax)

CBEC, New Delh
http://www.servicetax.gov.in/st-cirmainpg.htm

Emaar MGF, a joint venture between Emaar of Dubai and MGF of India and a leading real estate development company, expanded its presence in Chennai with the launch of The Avenues on Tuesday. Wilson Mathews, Head, Sales (South), Emaar MGF, said ‘The Avenues’ was part of Esplanade, one of the largest residential projects (14 acres) at Tondiarpet in north Chennai. The ultra-modern 2 and 3 bedroom apartments ranging from 1,424 sq. ft to 1,715 sq. ft. at Esplanade (phase I) are nearing completion. Out of 16 towers in phase I, 12 are nearing completion and 300 apartments are being handed over. Work is in progress in the remaining four towers.

Mr. Mathews said there was compelling market demand for apartments in the mid-segment residential market. The Avenues (phase II of Esplanade) was targeted at the growing mid-segment market with a price tag of Rs. 29 lakh a unit. The apartments comprise six towers and 200 plus apartments with two and three bedrooms, range from 975 sq. ft to 1,450 sq. ft. He said The Avenues was the only project in north Chennai that has a club house of about 6,000 sq. ft. with a gym, swimming pool and other facilities. It was scheduled to be completed by 2012.

Source – Economic Times

India, Jan. 31 — In India, owning a house is still a distant dream for a vast majority of the population.

In fact despite the current economic boom and increase in salary levels, relatively a very low percentage of the overall population owns a house property. Interest deduction on housing loan and deduction for repayment of principal amount of the housing loan under the Income-tax Act, 1961 have indeed encouraged many individuals to take housing loan and buy a house property.

Many a time, a small relief under the tax law could have far-reaching impact in many identified as well as non-identified areas; housing loan deduction is one of these.

Individuals

It is pertinent to note that ease in availability of housing loan for individuals has been one of the key reasons for individuals, especially salaried employees, to invest in house property.

Till a few decades back, a person used to buy a house property generally towards the middle of his career. Many a time it would be even close to retirement age, by when he had accumulated a large amount of funds.

For the last decade or so, this scenario has changed, and many salaried employees have, early in their careers, come forward to buy house property as the equated monthly installments (EMIs) could be easily structured and because of the two important tax benefits available under the income tax laws.

The first is a deduction of upto Rs 1.5 lakh that may be claimed for interest paid on housing loan for a self-occupied house property subject to fulfillment of specified conditions.

The second condition: a deduction up to Rs 1 lakh may be claimed under Section 80C of the Income Tax Act for the repayment of the principal amount of the loan.

Further, the interest deduction on the housing loan could be adjusted against the tax payable on salary income.

Therefore, there is a case to continue and even increase the deduction for interest on housing loan to say Rs 3 lakh in the Budget 2010 and for repayment of housing loan to Rs 2 lakh.

Industry

From the industry’s perspective, construction/realty industry is known to provide direct employment to millions of individuals. Many of these include unskilled labour which is primarily dependent upon construction and related industries for a gainful employment. Further, a boost in construction also leads to employment opportunities in other sectors including cement and steel industries which also contribute to the overall growth and development of the economy.

Government

Even though, there would be a loss to the Government in terms of the direct personal tax collection due to increased deductions, however, this loss in revenue is likely to be off-set by increase in direct as well as indirect tax collection resulting from increase in economic activity in realty and associated industries in near future. In this context following points merit attention.

More employability would ultimately result in more personal tax collection or even otherwise would at least result in more income, savings and consumption wherein a large population including labour would demand goods and services in the market, which in turn would trigger demand of basic goods and services.

Further, increase in activity in the realty, cement, steel and other industries, would result in increased corporate income and thereby increased corporate tax collection. Also, increase in number and volume of financial transactions would also provide stimulus to the banking/financial sector.

source : yahoo

There are signs of revival in the property markets in certain locations

The world and especially India has created history in a manner of speaking by creating the quickest turnaround and reviving markets. Equity, Gold, Silver, and Oil all of which with exception of Gold were at a low around the same time last year are at a new high or managed to sustain at higher levels today. Property rates too after correction witnessed a mini plunge and managed to revive and making a comeback with levels higher than last year’s peak in certain locations.

The second quarter results of this financial year posted by most companies have been encouraging. Insecure non-resident Indians seemed to have been the biggest buyers/ investors. I say insecure because of uncertainties in their current location of economy and their business or job status. Plus panic of some sort that prices are on the rise again and this would be a an opportunity to buy, drove many to conclude deals. A lot of local buying for actual use also took place. All of this mainly happened in new construction or under construction projects

The resale market seems to be stagnating and the seller’s expectation versus buyers offer seems to be a mis-match in almost negotiations. Rental markets too seem sluggish due to oversupply and lack of demand. The mid level expat or executive housing segment seems to have almost disappeared.With signs of revival in economy one can only hope expansion plans bring about hiring in the missing ‘segment’ and in turn revival in rental markets.

The rush to create affordable housing projects seemed to have been the flavour of the last three quarters. What remains to be seen who and how many ‘walk the talk’.With the UPA government having got a second term and talking about slum eradication, slum projects would make better business sense for land acquisition and development. I am no ‘town planner’ but in my opinion priority should be allotted to slum rehab and re-development over society type redevelopment over the next five to seven years.

I think alongside development and redevelopment one needs to stay focussed on the big picture of sustainability, given our ever growing, existing and migrating population and traffic congestion. As for future, a lot would depend on how equity markets fare the remaining two quarters and how liquidity flows. There seems to be no immediate threat to property prices and market, but a lot would depend on how the rental markets fare.

Source – Times Of India.

Superstition has nothing to do with the innate wish for prosperity and well-being . Indian homes have traditionally been filled with small, symbolic gestures that aim at pleasing oneself and the visitor to the home, and thereby bring more positive energy. With the confluence of multiple cultures, the symbols themselves have multiplied, and it is not unusual for an aum to be juxtaposed with a Feng shui ornament.
Though the practice is on the wane, the tradition of a kolam at the entrance has still got a strong following. Done first thing in the morning, it served multiple purposes – giving the woman of the house the opportunity to breathe in the early morning air, to giving vent to her creativity to feeding the ants with the rice flour used for this purpose. Many homes now have sticker kolams, instead, but the underlying purpose is the same – of indicating prosperity and aesthetic value.
A mirror at the entrance or somewhere where the visitor can see it has become a part of tradition now. The belief being that all bad thoughts will be forgotten when one sees oneself in the mirror and that the mirror itself acts as a shield to reflect back thoughts of envy to the person who directs it to the home. This works the same way as the pumpkin, lemon, or the demon, or even tiny shoes to ward off evil.
A Tulsi plant or Tulsi Madam at the entrance is a distant reality for apartment owners. But, those in independent houses with a lawn certainly can opt for this as it is said to be very powerful. “Apparently , it can ward off insects, and even Brahmahatti Dosham, as Tulsi is said to be Goddess Lakshmi incarnate. Needless to say, watering it regularly and worshipping it can only add to prosperity,” says Gomathi Ramaswamy, a retired SBI official.
An uruli or a bowl of flowers at the entrance is yet another beautiful thing that pleases the senses with colours and fragrance, bringing in good thoughts and feelings. While mavilai (mango leaf) thoranam is part of every function in South India, nowadays, a variety are available in contemporary lasting material. Many like to place Ganesha at the door as he is the remover of obstacles. Many also draw a swastika symbol at the door way. Aum is a powerful symbol and a variety of showpieces come with this symbol.
It is customary to place Tirupathi Lord Venkatachalapathis image at the door-way , though Gomathi suggests that it may be better to place it facing the house. The conch is another auspicious symbol indicating victory. “Once I had bought wallhangings made of shells as gifts during Navarathri. Only later I read that this is very auspicious and equivalent to gold coins as it also represents Goddess Lakshmi,” explains Gomathi. While the cow itself is sacred to Hindus, the image of the wish-fulfilling Kamadhenu is yet another auspicious symbol that many have in their homes. Traditional lamps and kuthuvilakku also add to the beauty of a room, as well as
providing an auspicious ambience. In the modern day, laughing Buddha, the toad, the tortoise and chimes have got added to the long list of icons. As aesthetic tastes develop, so do the beauty of these objects and the variety of materials made to create these symbols. And however modern the outlook, it is inevitable that we can find at least one symbol in the house – be it because one is aware, or because something has been handed down.

Source – Times Of India

Chennai property builders are reconciling to the fact that they have all along been targeting the top-end of the pyramid. From chasing
profits and “windfall gains” which involved high stakes, they have now started focusing on the affordable or the bottom of the pyramid (BoP) segment.

Housing demand in the Chennai Metropolitan Area (CMA) is projected to touch 1.23 million units by 2026 due to natural growth in population. However, current supply is only 60,000 units per annum, Chennai Metropolitan Development Authority (CMDA) member secretary Vikram Kapur said at a CII-Confederation of Real Estate Developers’ Association of India (CREDAI) seminar on housing here on Saturday.

Chennai alone is estimated to have a demand for 30,000 units from the economically weaker section (EWS) or low income group (LIG) dwellers, he said.

The BoP market in housing is huge and untapped, he said, pegging demand for slum rehabilitation dwelling units at 55,000 in three years. Pavement dwellers would need 15,000 units in a year.

At a construction cost of Rs 10,000/sq m, total investment of Rs 2,500 crore per annum is required, he said, noting that annual land requirement is around 70 hectare (assuming multi-storied buildings with floor space index of 3.75 and 1,500 dwelling units/ha).

Assuming TN Housing Board and TN Slum Clearance Board delivers 20% of the projected EWS/LIG housing needs, private developers would still be able to tap the demand for the balance 80,000 units. The state is prepared to provide the land, dovetailing subsidy for civic services under the Central government scheme with interest subsidy for loan, Mr Kapur said, highlighting the scope for private sector participation.

Citing the National Urban Housing and Habitat Policy, 2007, he said it lays special emphasis on the provision of social housing for EWS/LIG categories so that they are fully integrated into the mainstream of ecologically well-balanced urban development.

According to 2001 census, the country’s urban population is 286.1 million, constituting 27.8% of the total, in 55.8 million households, whereas slum population in urban areas, at 61.8 million, is 23.1% of the urban population. It is estimated that Rs 3,61,318 crore investment is required to meet the total housing needs — 26.53 million units for 75 million households, Mr Kapur said.

Earlier, TN housing and urban development department principal secretary Surjit K Chaudhary came down heavily on the builders for running after profits. In the last three decades, they have been catering only to high-end segment and always keen to develop MSB structures. By not developing small properties, they were not attuned to meet the demand that was actually coming from the lower level.

Chennai realty scene has changed a lot since the 70’s and the 80’s While high land cost deterred builders from addressing demand from this section, the additional FSI in the second master plan is aimed at bringing prices down, Mr Chaudhary pointd out.

“The government is willing to do much more but it has to be a practical proposition,” he said, noting that the onus is on the developers to reverse the slump that the sector witnessed every three to four years.

Credai TN president Prakash Challa shared the view the builders were targeting the top-end of the pyramid. But this was due to demand arising from a certain section. The CMDA continues to be busy sanctioning plans but ignoring urban planning. Though infrastructure follows development, it is high time, stakeholders work together to revive the real estate sector.

Source – Economic Times

Appaswamy Real Estates has struck a deal with the Rakindo Group to jointly develop large-sized residential projects in the key
locations of Kotturpuram and Pallikarnai in Chennai. The projects, coming up on 110 grounds (1 ground = 2400 sq ft), is estimated to have a sale value of Rs 250 crore.

Though the land-owner and the developer did not divulge on the deal details as far as price is concerned, industry trackers ET spoke to peg the 30-ground Kotturpuram property at Rs 60-crore and that of Pallikarnai (80 grounds) at Rs 40-crore.

Rakindo Group is making its debut in India with its $1.5 billion integrated township project in Coimbatore. Construction activity has been on for a while now. According to a senior Rakindo official, integrated township is its forte.

But as development in central business districts is not its core competence, the group decided to partner with Appaswamy Real Estates, its MD Prasad Koneru told ET.

Incidentally, both the properties were purchased recently after long drawn negotiations but it is gleaned from the market that the deal between Appaswamy Real Estates and Rakindo Group was struck last month. The Kotturpuram property was purchased from a Christian association, while the other land parcel in Pallikarnai was bought from an individual.

It is learnt that the Locke Road Kotturpuram property is located next to Kottur Villa, a property developed by Appaswamy Real Estates, and is in the vicinity of Adyar villa area, belonging to Spic CMD A C Muthiah. The Pallikarnai land parcel is situated a kilometre away from Kamakoti hospital on the Medavakkam-Velachery road.

When contacted, Appaswamy COO T S S Krishnan confirmed that the deal was concluded about a month ago. There is a proposal to develop multi-storied buildings over 5.30 lakh sq ft in Pallikarnai and 1.25 lakh sq ft in Kotturpuram. Of the total 6.55 lakh sq ft built area, Rakindo is to get a share of 2.6 lakh sq ft built up area.

Two special purpose vehicles would be floated to execute the projects, he said.

Rakindo Group is a joint venture between Rakeen, a joint stock company promoted by the government of Ras-Al-Khaimah, UAE and the Trimex Group, India. The property development and master planning company has been designing and developing properties and resorts in the Middle East, China, India and Europe.

Source – email forward

For those planning to take a loan to buy their house, there is good news. Several banks have slashed home loan rates recently. Bank of India has come up with a festive offer called Star Home Loan, which can be availed till December 31. For a loan of up to Rs 50 lakh, the rate of interest will be 8.50 per cent in the first year and 9.25 per cent in the second. For loans of Rs 5 lakh-1.5 crore, the interest in the first year will be 9.75 per cent and 10.50 in the second. From the third year, the then floating rate of the bank will be applicable in both the cases. Union Bank of India has launched a special festive offer on home and auto loans. As per the offer, for home loans up to Rs 50 lakh, the bank will charge a fixed rate of 8.50 per cent for the first three years. From the fourth year, the interest will be a floating rate linked to the benchmark prime lending rate of the bank for all tenures. The bank has also reduced rates for car loans by 75-100 bps, depending on the tenure.

Says R.K. Nikra, chief manager, “The offer will be effective from September 1 September till October 31.” A few days before the UBI offer, ICICI Bank launched a special offer for all new home loans. As per the new offer, the bank will charge an interest rate of 8.75 per cent for loans up to Rs 20 lakh. For loans of Rs 20 lakh-50 lakh, the new interest rate is 9.25 per cent. Borrowing above Rs 50 lakh will attract 9.75 per cent interest rate. Effective from August 20, the scheme is available only for a limited period of time, said an ICICI spokesperson. Apart from the special offer, ICICI Bank’s home loan interest rates are in the range of 9.25-11 per cent.

Both theses offers came within weeks of the State Bank of India (SBI) cutting rates by 50-75 bps on high-value home loans. Earlier, SBI had launched a new home loan scheme offering 8 per cent for 1-5 years, depending on the amount, with zero processing fees, as against an average of about 10 per cent charged by others. Among other players who have cut home loan rates are Punjab National Bank housing finance majors LIC Housing Finance and HDFC.

Source – email forward