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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

* Check that property has clear legal titles or not.

* Check that whether the developer has the right to transfer the properties. Has he taken transfer of property approvals from the statutory land development or planning authority or competent authority constituted under the Urban Land Ceiling and Regulation Act and the Income-Tax Act.

* Check that the developer has acquired approvals from the Municipal Corporation, Area Development Authorities, Electricity Boards, Water Supply & Sewage Boards.

* Scrutinize the contract and take help from legal experts before signing.

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A Residential apartment or simply apartment is a self-contained housing unit that occupies only a part of a big building. It may consists of a single bedroom, double bedroom or even more. In most of the commonwealth countries, the term ‘flat’ is used to describe apartments.

The apartment culture has been in the metros and top cities but now it is flourishing in the small and emerging towns. The emergence of the concept of nuclear families has driven this trend. The residents of the apartments have the advantage of community living and other lifestyle facilities, like club-house, swimming pool, gymnasium etc.

Types of Apartments
Apartments can be classified on the basis of size. Studio Apartments, Efficiency, Bedsit and Bachelor style apartments, designed specially for rent purpose, are the smallest size apartments with the lowest rents in a given area. They generally consist of a large room which is the combined living, dining, and bedroom. The kitchen facility is combined with this central room, but the bathroom remains as a separate room.

Apart from these small sized apartments there are one bedroom, two-bedroom, three-bedroom, etc apartments. In one bedroom apartments, one bedroom is a separate room from the rest of the apartment. In bigger sized apartments, there are separate kitchens, dining spaces, living rooms, etc. Small apartments often have only one entrance/exit while large apartments often have two entrances/exits. Depending on location, apartments may be available for rent. The apartments used for this purpose may be furnished or unfurnished.

Factors to Consider Before Buying
Buying an apartment requires you to look in for a lot of searching, examining, etc in order to decide which suits you the most. It must fulfill your needs and requirements. We are giving here some recommendations to follow, which are helpful in purchasing an apartment.

Common Issues
The common concerns of apartment dwellers include:

* Parking Facility: Parking is one of the must have facilities in an apartment. There should be sufficient space to park your cars, bikes, and cycles. There should be proper security for the safety of cars. Be sure that whether you will have to pay extra charges for it or not? Is there any security cameras provided to guard the strangers?

* Water Supply: The water supply facility should be well maintained and the quality of water provided should be good and pure. As it is directly linked to your family health, don’t hesitate at all to enquire the quality of water. You should also see that whether the water supply is totally dependent on the municipal/community supply or they have their own supply facility. Whatever the case, it is always preferable to go for those areas where there is 24 hours water supply.

* Power Facility: The power supply in the apartments should be well equipped and have proper safety. You should enquire that power back-up facility is available or not.

* Lift System: The lift system should be reliable and modernized. There should be enough lifts to cope with the flow of people at busy times. Here also, there must be a generator or power back-up facility to support the lift movement in case of any power failure.

* Maintenance of Common Areas: Find out who will be responsible for maintenance of the common areas. Is there an active body corporate or is there a permanent building manager on-site or on-call at all times? How much body corporate fees you will have to pay?

* Accessibility: Your apartment building should be easily accessible to the shops, cafes, nightclubs, and other such amenities. But remember too much closeness can lead to noise problems as well.

Personal Preferences

* There are some personal preferences, which a person wants in his new apartment.

* Does it have a view and sunlight or is it blocked by other buildings or is it facing the wrong way from the sun?

* You must find out if there are any pending resource consents that will probably affect your apartment block in future, for example, plans to build a high-rise hotel next door.

* Is there a balcony so that you can enjoy the view or afternoon sunshine?

* Are there other facilities in the complex, like a gym and swimming pool?

* You must enquire about your neighbours and find out if noise could be a problem. Are the near-by apartments rented? If so, do the renters constantly change? These type of neighbours could pose a problem.

Inspect The Developer
Most of the apartments are developed by developers so it will be handy to check the background of the developer, the builder, the designer, and the architect. You should check if there have been any problems with their other developments in past. The financial position of the developer should be strong so that he could complete the project on time if the project is under construction. Find out that the developer has the essential resource and building consents before paying anything.

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Combination of Individuality and Community
The most important thing about the row houses are that they provide the facilities of a bungalow (independent house) along with the benefits of a community.

* The facilities of bungalow come in the sense that they are separate and secure. Everything from water to electricity, from parking to gardens, you have your own spaces. You needn’t share some or any of your conveniences or facilities.

* They have also the benefits of a community as a number of row-houses are constructed adjacent to each other and identical rows are formed in parallel to each other. They have common parks, playgrounds, temples, etc, which provide them a place to get-together and spend some time.

Benefits of a Row House

* Row houses are usually two-storied but they may have multi-storied. You can use the floors according to your needs and requirements. In the two-storied houses, the main living area is on the second floor, while the first floor is mainly used for general purposes.

* Row houses are a cross between an apartment and a bungalow. They are cheaper like apartments. But they offer independence like bungalows.

* They have a small garden in-front of each house.

* They offer you more privacy. As you are not a part of the same building so you can ignore your neighbours in a case you don’t want to talk to them.

* If anyone want to sell his house, there are no hinder, like dealing with assorted people like the secretary, treasurer and the chairman.

Cost of Row Houses
The row houses prove a little costlier than the apartments but that extra cost is very much justified as they provide separate environment. According to a study the row houses cost 5-10% more than the apartments. If we talk about privacy and individuality and compare its prices to the bungalows, we find that they cost much less than them.

New Trends in Row-Houses
The latest trends in row houses came in the form of multi-storied buildings. Now most of the row-houses are build in this format to meet the demand of increasing urban population and that too at a low cost.

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