Features, Benefits & Advantages of Real Estate Bill, 2013 – THE REAL ESTATE(REGULATION AND DEVELOPMENT) BILL, 2013


The Union Government has proposed to bring in a Real Estate Bill to Protect the Interest of the Consumers and Promote Fair Play in Real Estate Transactions and approved THE REAL ESTATE(REGULATION AND DEVELOPMENT) BILL, 2013

The Objectives of the Bill is to provide for a uniform regulatory environment, to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector.

With the liberalization of the economy, conscious encouragement was given to the growth of the private sector in real estate sector and especially in construction, with a great deal of success, and the sector today is estimated to contribute substantially to the Country’s GDP.

But currently the real estate and housing sector is largely unregulated and opaque, with consumers often unable to procure complete information, or enforce accountability against builders and developers in the absence of effective regulation.

The proposed legislation would ensure greater accountability towards consumers, and to significantly reduce frauds and aims at restoring confidence of the general public in the real estate sector; by instituting transparency and accountability in real estate and housing transactions which in turn will enable the sector to access capital and financial markets essential for its long term growth. The Bill is also expected to promote regulated and orderly growth through efficiency, professionalism and standardization. It seeks to ensure consumer protection, without adding another stage in the procedure for sanctions, he added.

It contains elaborate provisions dealing with registration of real estate projects and registration of real estate agents with the Real Estate Regulatory Authority; functions and duties of promoters; functions and duties of real estate agents; rights and duties of allottees; establishment of Real Estate Regulatory Authority; establishment of Central Advisory Council; establishment of Real Estate Appellate Tribunal; offences and penalties; Finance, Accounts, Audits and Reports; etc.

Benefits and Advantages of Real Estate Bill, 2013

The Bill proposes to regulate transactions in the real estate sector and is in pursuance of the powers under Entries 6, 7 and 46 of the Concurrent List of the Constitution, which deals with Transfer of Property, Registration of Deeds and Documents, and Contracts. The draft Bill has been prepared after detailed deliberations with the State Governments and concerned Central Government Ministries, and after having suitably incorporated the suggestions received from them.

  •     The Bill will bring about standardization in the sector leading to healthy and orderly growth of the industry through introduction of definitions such as ‘apartment’, ‘common areas’, ‘carpet area’, ‘advertisement’, ‘real estate project’, ‘prospectus’ etc. Introduction of the concept of using only ‘carpet area’ for sale which has till now been ambiguously sold as super area, super built up area etc., will curb unfair trade practices.
  •     The Bill like other sectors such as telecom, electricity, banking, securities, insurance etc. provides for specialized regulation and enforcement which includes both curative and preventive measures, with powers to enforce specific performance, not available under the consumer laws. The Authority has powers to give directions for specific performance powers to impose penalty for non-registration of projects including imprisonment for continuous violation upto 3 yrs and impose penalty in case of other contraventions.
  •    The Bill proposes to register real estate agents which have hitherto been un-regulated, with clear responsibilities and functions, thereby leading to money trail and curbing money laundering. This clause has been added on the recommendations of the Department of Revenue, Ministry of Finance.
  •    The Bill aims to ensure consumer protection, by making it mandatory for promoters to register all projects, prior to sale; and only after having received all approvals from development/municipal authorities thereby protecting buyer investments.
  •     The Bill will promote transparency and fair and ethical business practices, relating to transactions, through disclosure of project details and contractual obligations vis-à-vis the project and the buyer,  promoting informed choice for the buyers. This will substantially reduce the power asymmetry prevalent in real estate transactions.
  •    The Bill seeks to establish a regulatory oversight mechanism, through Real Estate Authority(s) and Appellate Tribunal in the States, to enforce accountability norms for the promoter buyer and the real estate agents.
  •    The Bill will infuse professionalism and promote planned development of the real estate sector through the promotional role of the Regulatory Authority.
  •    The Bill makes it mandatory upon the promoters to deposit  70% or such lesser per cent as notified by the Appropriate Government to cover the construction cost of the project of funds received by the Promoter in a separate bank account, for purposes of ensuring timely completion of projects to be used only for that project, which shall help in timely completion of projects, and prevent fund diversion.
  •    The Bill provides for a speedy and specialized adjudication mechanism to settle disputes between the promoter, buyer and real estate agents, thereby de-clogging the civil courts and consumer forums, from disputes in the real estate sector.
  •    The Bill will catalyze domestic and foreign investment into the sector, thereby contributing to enhanced activity, and increase in GDP growth.

The main features of the Draft Bill:-

  • Applicability of the Bill:

The proposed Bill is limited in its applicability to residential real estate i.e. housing and any other independent use ancillary to housing. The two important definitions in this regard are:

“real estate project means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of a colony into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or buildings and includes the development works thereof”

“apartment whether called dwelling unit, flat, premises, suite, tenement, unit or by any other name, means a separate and self-contained part of any immovable property located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for residential  purposes, or for any other type of independent use ancillary to the purpose specified and includes any covered garage, whether or not adjacent to the building in which such apartment is located which has been provided by the promoter for the use of the allottee for parking any vehicle, or as the case may be, for the residence of any domestic help employed in such apartment”

  • Establishment of Real Estate Regulatory Authority:

Establishment of one or more ‘Real Estate Regulatory Authority’ in each State/UT, or one Authority for two or more States/UT, by the Appropriate Government, with specified functions, powers, and responsibilities to exercise oversight of real estate transactions, to appoint adjudicating officers to settle disputes between parties, and to impose penalty and interest;

  • Registration of Real Estate Projects and Registration of Real Estate Agents:

Mandatory registration of real estate projects and real estate agents who intend to sell any immovable property, with the Real Estate Regulatory Authority;

  • Mandatory Public Disclosure of all project details:

Mandatory public disclosure norms for all registered projects, including details of the promoters, project, layout plan, plan of development works, land status, carpet area and number of the apartments booked, status of the statutory approvals and disclosure of proforma agreements, names and addresses of the real estate agents, contractors, architect, structural engineer etc.;

  • Functions and Duties of Promoter:

Duty of promoters towards disclosure of all relevant information and adherence to approved plans and project specifications, obligations regarding veracity of the advertisement for sale or prospectus, responsibility to rectify structural defects, and to refund moneys in cases of default;

  • Compulsory deposit of seventy percent or such lesser percent as notified by the Appropriate Government, to cover the construction cost of the project, of funds received by the Promoter, in a separate bank account:

Provision to compulsorily deposit seventy percent or such lesser percent as notified by the Appropriate Government, of the amounts realized for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank within a period of fifteen days of its realization to cover the cost of construction and shall be used only for that purpose.

  • Functions of Real Estate Agents:

Real estate agents not to facilitate the sale of immovable property which are not registered with the Authority required under the provisions of the Act, obligation to keep, maintain and preserve books of accounts, records and documents, obligation to not involve in any unfair trade practices, obligation to facilitate the possession of documents to allottees as entitled at the time of booking, and to comply with such other functions as specified by Rules made in that regard;

  • Rights and Duties of Allottees:

Right to obtain information relating to the property booked, to know stage-wise time schedule of project completion, claim possession of the apartment or plot or building as per promoter declaration, refund with interest in case of default by the promoter, and after possession entitled to necessary documents and plans. Duty of allottees to make necessary payments and carry out other responsibilities as per the agreement;

  • Functions of Real Estate Regulatory Authority:

The Authority to act as the nodal agency to co-ordinate efforts regarding development of the real estate sector and render necessary advice to the appropriate Government to ensure the growth and promotion of a transparent, efficient and competitive real estate sector;

  • Fast Track Dispute Settlement Mechanism:

Establishment of fast track dispute resolution mechanisms for settlement of disputes, through adjudicating officers (an officer not below the rank of Joint Secretary to the State Government) to be appointed by the Authority, and establishment of an Appellate Tribunal to hear appeals from the orders of the Authority and the adjudicating officer;

  • Establishment of Central Advisory Council:

Establishment of Central Advisory Council to advise the Central Government on matters concerning implementation of the Act, with a mandate to make recommendations on major questions of policy, protection of consumer interest and to foster growth and development of the real estate sector. The Council to have among others, five representatives of State Governments, to be selected by rotation;

  • Establishment of Real Estate Appellate Tribunal:

Establishment of Real Estate Appellate Tribunal, by the appropriate government to hear appeals from the orders or decisions or directions of the Authority and the adjudicating officer.  The Appellate Tribunal is to be headed by a sitting or retired Judge of the High Court with one judicial and one administrative/technical member;

  • Punitive Provisions:

Punitive provisions including de-registration of the project and penalties in case of contravention of the provisions of the Bill or the orders of the Authority or the Tribunal;

  • Power to make Rules and Regulations:

Appropriate Government to have powers to make rules over subjects specified in the Bill, and the Regulatory Authority to have powers to make regulations.

 

 

BUDGET – INTEREST BENEFIT FOR LOWER CATEGORY – TDS FOR HIGHER VALUE HOMES – SERVICE TAX ABATEMENT AT 70% FOR HIGH END APARTMENTS


First Home Buyer will get an additional benefit on Interest limit:

There is an additional deduction available on interest repaid on a loan for a first time house purchase. The benefit has been increased by an additional Rs 1 lakh and this will be over and above the Rs 1.5 lakh limit already available,provided, if the house property price is less than Rs 40 lakh and the loan(availed) is Rs 25 lakh or less. This benefit can be claimed or availed in the next year, if not availed in the first year.

Tax Deducted at Source:

The Finance Minister has proposed 1% TDS for all immovable properties valued over Rs50,00,000/-. The seller of the house property worth Rs 50 lakh or more, will have to ensure a 1% tax deduction at source on the amount of the sale and will have to deposit this with the government. The TDS amount has to be deposited as per the guidelines and obtain a certificate and must be attached or furnished or submitted to the sub-registrar at the time of registration.

Service Tax:

As per the new proposal, The Service Tax for the new apartments(high end) either 2000 Square feet of CARPET AREA or the VALUE IS ABOVE Rs1,00,00,000/-, the abatement is 70%, which was uniform at 75% in the preceding year.

It means that the high end apartments will have to pay additional service tax on 5%.

Details:

 

Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)

This amendment will take effect from 1st June, 2013.

There is a statutory requirement under section 1 39A of the Income-tax Act read with rule 11 4B of the Income-tax Rules, 1962 to quote Permanent Account Number (PAN) in documents pertaining to purchase or sale of immovable property for value of Rs.5 lakh or more. However, the information furnished to the department in Annual Information Returns by the Registrar or Sub-Registrar indicate that a majority of the purchasers or sellers of immovable properties, valued at Rs.30 lakh or more, during the financial year 2011-12 did not quote or quoted invalid PAN in the documents relating to transfer of the property.

Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to have a reporting mechanism of transactions in the real estate sector and also to collect tax at the earliest point of time, it is proposed to insert a new section 194-IA to provide that every transferee, at the time of making payment or crediting of any sum as consideration for transfer of immovable property (other than agricultural land) to a resident transferor, shall deduct tax, at the rate of 1% of such sum.

In order to reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakh rupees.

Changes in Service Tax – High end apartments

This will come into effect from March 1, 2013.

Subject: Union Budget 2013: Changes in Service Tax-reg.

The service tax changes in Budget 2013 are largely guided by the objectives to provide a stable tax regime and improve voluntary compliance. The important changes are as follows:

A. Legislative changes

Following changes are being made in the Finance Act, 1994:

C. Abatement

5. The abatement available under S. No 12 of notification 26/2012-ST dated June 20, 2012 for construction of a complex, building, civil structures etc. is being reduced from the existing 75% to 70% for construction other than residential properties having a carpet area up to 2000 sq ft or where the amount charged is less than Rs. 1 crore.

 

TAX BENEFITS OF INVESTMENT IN RESIDENTIAL UNIT

This amendment will take effect from 1st April, 2014

Income tax benefit

A new section 80EE, has been proposed in the Direct Tax, which provides an additional exemption of Up to Rs. 1 lakh against the interest payable.

The proposed new section 80EE seeks to provide that in computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section,

  • interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.
  • It is further provided that the deduction under the proposed section shall not exceed one lakh rupees
  • and shall be allowed in computing the total income of the individual for the assessment year beginning on 1st April, 2014
  • and in a case where the interest payable for the previous year relevant to the said assessment year is less than one lakh rupees, the balance amount shall be allowed in the assessment year beginning on 1st April, 2015.

It is also provided that the deduction shall be subject to the following conditions:-

(i)  the loan is sanctioned by the financial institution during the period beginning on 1st April, 2013 and ending on 31st March, 2014;

(ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed twenty-five lakh rupees;

(iii)  the value of the residential house property does not exceed forty lakh rupees;

(iv)  the assesse  does not own any residential house property on the date of sanction of the loan.

It is also provided that where a deduction under this section is allowed for any assessment year, in respect of interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provisions of the Income-tax Act for the same or any other assessment year.

It is also proposed to define the term “financial institution”.

This amendment will take effect from 1st April, 2014 and accordingly apply in relation to the assessment year 2014-15 and subsequent assessment year.

 

MAINTENANCE- MUSLIM WOMEN


Delhi High Court directed to pay maintenance to his former wife- : The Delhi High Court has rejected a Muslim man’s plea that he could not be forced to pay maintenance to his former wife under the domestic violence law as it did not apply to Muslims. Justice Rajiv Sahai Endlaw, in an order given June 15, dismissed his claim that his ex-wife’s plea for maintenance could not be entertained as it was filed after their divorce.

The court told Nadeem to pay Rs.8,000 per month as interim maintenance to his ex-wife, with effect from March 2011. The court refused to grant stay on its earlier order directing him to pay her maintenance.

Nadeem failed to satisfy the court by citing judgments from different high courts.”No case for granting interim stay is made out,” the court said. Nadeem submitted before the court that the Protection of Women from Domestic Violence Act, 2005, Section 23 (power to grant interim and ex-parte order) regarding maintenance would not be applicable to Muslims owing to Sections 3 and 4 of the Muslim Women (Protection of Rights on Divorce) Act, 1986.

He contended that after their divorce, he and his wife could not be said to be in a domestic relationship as defined under the domestic violence law. The judge also gave its finding that the Muslim women act would not come in the way of applicability of the provisions of the domestic violence act on Muslims.”

However, the said aspect also requires further consideration,” said the court, issuing notice to the Delhi government seeking its response by July 18.