924 projects may be blacklisted in Karnataka by RERA


THE KARNATAKA RERA AUTHORITY MAY IN ALL LIKELIHOOD BLACKLIST AS MANY AS 924 PROJECTS in KARNATAKA, 90% of the projects are located in and around Bangalore.

According to Urban Development and Housing Minister U.T. Khader, these projects were identified for not having registered under RERA and were issued the notice. “Since they did not respond, we will blacklist them,” he told presspersons.

RERA issued1,626  to developers/project heads for allegedly flouting RERA norms and in  604 cases the developers gave satisfactory responses and some projects have even been approved.

He said officials were checking brochures and paper advertisements to keep an eye on more projects not complying with the RERA norms. The urban local bodies have been asked to list out projects as soon as plan approvals are given and are scrutinising the projects.

Even then, it is noticed that innumerable illegal construction is progressing within the city limits and the BBMP is turning a blind eye and have not taken any legal action on such projects.

There is one simpler way to restrict such illegal constructions is by BLOCKING THE HOME LOAN from all the NBFC and financial institutions.

Secondly, initiating legal recovery of the loan lent.

Thirdly, withdrawal of Income Tax Benefits for the illegal and unauthorised buildings.

and Finally, the katha cannot be legally issued to such illegal and unauthorised buildings, which will discourage the sellers/agents/builders not to flout the norms as they may not be able to register the property in the jurisdictional Sub-Registrar office.

CENTER`S DIRECTIVES ON RERA DILUTION


RERA-Rules cannot be diluted-Center to States

The Ministry of Housing and Urban Affairs has asked the states to amend or formulate rules of the Act in consonance with the spirit of the central Act. “Right from the beginning, we have been telling all the states not to dilute the Act.

In a report tabled in Parliament earlier this month, the committee on subordinate legislation, headed by BJP MP Dilipkumar Mansukhlal Gandhi, has asked the state governments to take all possible remedial measures to ensure that ongoing projects are brought under the ambit of the Act so as to extend the stipulated benefits of the RERA to home buyers.

The committee has directed the ministry to ask the state governments to amend or formulate the rules under RERA in such a way that there is no ambiguity regarding the definition of “ongoing projects.”

Haryana and Uttar Pradesh have decided to keep outside the purview of the RERA projects that have been issued, or applied for, occupancy certificates. This is a significant difference from the central RERA notified on May 1 this year that had completion certificates as the benchmark for exemption.

 

 

 

MahaRERA order- builder told to return Rs 26L to consumer


The Maharashtra Real Estate Regulatory Authority (MahaRERA) on Wednesday asked a builder in Mumbai to return an advance amount of Rs 26.15 lakh to a consumer -the first such order since the real estate law came into effect in the state on May 1.

The deadline for registering all ongoing projects in the state with MahaRERA ended on July 31. Since then, the authority has registered over 13,000 projects -the highest in the country.
The authority has so far received more than 98 complaints. On Wednesday, it issued its first order in a case registered by the consumer from Khar against the developer for the project in Virar (West).

MahaRera authorities said the complainant had booked the flat in 2012-13 and was assured by the developer that the project would be completed in 2016.
The case was filed as the complainant wanted to cancel the project and the builder to reimburse the signing amount as the building was not completed, the authorities added. The complainant approached RERA authorities and the order was issued in his favour, an official said.

The complainant said that he was happy with the RERA authorities for resolving the case fast. “We are extremely happy that MahaRERA ruled in our favour and the developer immediately issued the cheque following the order,“ said the complainant, who was present at the MahaRERA office with his spouse. The consultant had filed the complaint on the MahaRERA website by paying Rs 5,000.
RERA authorities said the builder agreed to pay the money to the complainant after three hearings by the MahaRERA authorities. “Consent terms were filed by both the parties and the developer agreed to return the amount. accordingly, he got the cheque. The complaint was heard before adjudicating officer B D Kapadanis.
He added that this was first decision taken after MahaRERA was constituted and the maiden order was a proconsumer one. The order issued by MahaRERA stated that the parties have amicably settled the dispute and filed their consent terms.
Mumbai Grahak Panchayat (MGP) chairperson Shirish Deshpande said they were expecting more consumers to register their grievances against developers registered with MahaRERA.“We have to wait and watch,“ he added.
Credai-Maharashta president Shantilal Kataria said the builders’ response to get registered with MahaRERA was encouraging. “At least 17 lakh residential units, over 1 lakh commercial units and above 2 lakh plots have been registered with MahaRERA.This is among the highest in India. We expect more developers to register soon,“ he said.

 

DEMONETISATION AND ITS EFFECTS ON REAL ESTATE IN SOUTH INDIA


The debate on the demonetisation success is not as expected by the citizens and the press, but certainly, it has demoralised and demolished 75% of BLACK MONEY in the real estate market of Bangalore.

75% of the end users(sites or apartments) are loaners!!!! ( borrowers) and the RERA bombed all irregular, illegal and violators (builders) and their criminal designs.

The first buyers ( from the original landlords ) are now making payments through cheques/dd and neft to the agriculturists and all the Misc expenses are accounted for by paying income tax and GST.

There is a drastic change in the behaviour, attitude and transaction in REAL ESTATE.  Many builders and agents are unable to register themselves with RERA.

Hope, market will stabilise with decent, dignified and honest builders, but it comes with a PRICE.  Honesty and Trust come with a PRICE.  

Buy or pay for RERA approved projects and transact only with GENUINE Agents ( check their background for criminal cases in the police station and in the courts ) for the purchase or sale of any property, anywhere.

Never trust sweet talk in real estate business.  Posh Offices, Sweet looking attenders and their projects just by photos, More important by internet reviews (most of them are manipulated) and references.  Check thoroughly before you pay the token advance.

RERA-KARNATAKA-900+PROJECTS REGISTERED


The developers, builders, and agents have registered over 900 projects with the regulator and over 300 agents have registered on the last day.  It is said over 100000 apartments either under construction or incomplete or yet to begin are in and around Bangalore and the registration might be to the tune of about 15000 to 20000 units.

There are more agents/brokers than the actual builders and developers across the state but, 300 of them officially registered with the authority by submitting the mandatory documents.

It is safe and better to transact or do business with the registered agents or brokers for the purchase of the property.

DO NOT MAKE PAYMENT TO THE AGENTS OR THE BROKERS OR THE MARKETING AGENCIES FOR THE PURCHASE OF THE PROPERTY.  THE SALE CONSIDERATION OR ADVANCE OR TOKEN AMOUNT MUST BE PAID DIRECTLY TO THE OWNERS OF THE PROPERTY AND NOT TO THE AGENTS/BROKERS OR MARKETING AGENCIES.

THE SALE CONSIDERATION OR ADVANCE OR TOKEN AMOUNT MUST BE PAID DIRECTLY TO THE OWNERS OF THE PROPERTY AND NOT TO THE AGENTS/BROKERS OR MARKETING AGENCIES.

ANY AMOUNT PAYABLE OR PAID MUST BE THROUGH An NON NEGOTIABLE AND ACCOUNT PAYEE CHEQUE ONLY AND OBTAIN THE RECEIPT FROM THE OWNER OR THROUGH NEFT/RTGS ONLINE MONEY TRANSFER AND OBTAIN A RECEIPT FOR CONFIRMATION.

Karnataka Buyers to challenge exclusion of ongoing home projects in RERA


 

All India chapter of Fight for RERA has decided to file a petition in the Supreme Court over the dilution of rules by various states, including Karnataka. The Karnataka chapter is planning to challenge separately the state cabinet decision.

The Karnataka Fight for RERA chapter is planning to challenge the exclusion separately.

 

KARNATAKA GOVERNMENT EXEMPTS ON GOING PROJECTS FROM RERA !!!!!


As expected, the state Government has exempted all the ongoing projects from the ambit of the RERA.

The builders are happy and the hapless victims, the buyers are grinding their teeth, but helpless as the Government of Karnataka is ready to notify the RERA soon.

RERA WILL BE NOTIFIED SOON BY KARNATAKA


The cabinet took the decision to notify the RERA soon and is a boon for the purchaser as well as law abiding builders.  The illegal builders may not be able to build and sell.  Hope this will bring in a new era in the construction industry and the purchasers are benefited by this law.

RERA NOTIFICATION IN KARNATAKA AND THE IMPLEMENTATION OF GST AND ITS EFFECTS ON THE REALTY SECTOR IN KARNATAKA


The Government of Karnataka was deliberating and discussing the important issues and points of RERA, which had been notified by the Center and other states, but, will be notifying it soon without much MODIFICATION/CHANGE/ALTERATION.

This notification has very significant effect on the REAL ESTATE market and will bring about transparency and stability in the business.

The most important aspect of this Bill, that the ILLEGAL AND UNAUTHORISED CONSTRUCTIONS will be STOPPED.  Already, the fly by night builders and some VIOLATORS are out of business.  The deviation and violation might be controlled.

The under construction or incomplete projects might also come under this Bill.  The common man will definitely be benefitted by this bill to a great extent.

BUT, AS INDIANS, WE HAVE TO WAIT AND WATCH TO PLUG ANY LOOPHOLES IN THE BILL.

On the otherhand, the half baked and untested GST bill is also implemented from 01-07-2017 and there are various versions of its advantages and disadvantages of this BILL being deliberated and discussed across the country.

But, over all, the GST includes both service tax and the (earlier) VAT.  There is confusion over the benefits and its procedures in the minds of the builders, similarly, AS INDIANS, WE HAVE WAIT AND WATCH.

DO NOT JUMP INTO CONCLUSIONS AND TAKE ANY DECISION NOW.

WAIT FOR SOMETIME, FEW MONTHS TO KNOW THE AFTER EFFECTS OF THESE BILLS.

DRAFT INCOME COMPUTATION AND DISCLOSURE STANDARD ON REAL ESTATE TRANSACTIONS


DRAFT INCOME COMPUTATION AND DISCLOSURE STANDARD ON  REAL ESTATE TRANSACTIONS

MAY 2016

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Draft Income Computation and Disclosure Standard [ICDS] Real Estate Transactions

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of account.

In case of conflict between the provisions of the Income Tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

  1. This Income Computation and Disclosure Standard shall be applicable for determination of income from all forms of transactions in real estate, which refers to land as well as buildings and rights in relation thereto. This will include:
  2. a) Sale of plots of land (including long term sale type leases) without any developments.
  3. b) Sale of plots of land (including long term sale type leases) with development in the form of common facilities.
  4. c) Development and sale of residential and commercial units, row houses, independent houses, with or without an undivided share in land.
  5. d) Acquisition, utilisation and transfer of development rights.
  6. e) Redevelopment of existing buildings and structures.
  7. f) Joint development agreements for any of the above activities.

Definitions

2 (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a) “Fair value” is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction.

(b) “Project” means the smallest group of units, plots or saleable spaces, as the case may be, which are linked with a common set of basic facilities, if any, in such a manner that unless the facilities are made available and functional, these units, plots or saleable spaces cannot be put to their intended effective use. A larger venture shall be split into smaller projects when these basic conditions are fulfilled.

(c) “Project Costs” in relation to a project

  1. shall comprise of :-

(i) Cost of land and cost of development rights – All costs related to the acquisition of land, development rights in the land or property including cost of land, cost of development rights, rehabilitation costs, registration charges, stamp duty, brokerage costs and incidental expenses.

(ii) Borrowing costs – Costs which are incurred directly in relation to a project or which are apportioned to a project in accordance with Income Computation and Disclosure Standard IX relating to Borrowing Costs.

(i) Cost of land and cost of development rights – All costs related to the acquisition of land, development rights in the land or property including cost of land, cost of development rights, rehabilitation costs, registration charges, stamp duty, brokerage costs and incidental expenses. (ii) Borrowing costs – Costs which are incurred directly in relation to a project or which are apportioned to a project in accordance with Income Computation and Disclosure Standard IX relating to Borrowing Costs.

  1. shall exclude costs that cannot be attributed to any project activity or cannot be allocated to a project.

(d) “Project revenues” include revenue on sale of plots, undivided share in land, sale of finished and semi-finished structures, consideration for construction, consideration for amenities and interiors, consideration for parking spaces and sale of development rights.

2(2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act.

Real Estate Projects

3(1) Project revenue and project cost shall be recognised as revenue and cost respectively by reference to the stage of completion of the project on the last date of the previous year for projects where the economic substance is similar to construction contracts. The recognition of revenue and expenses by reference to the stage of completion of a project is referred to as the percentage of completion method.

3(2) Indicators that economic substance of a project is similar to a construction contract are:

(a) The duration of such projects is beyond 12 months and the project commencement date and project completion date fall into different previous years.

(b) Project involves activities similar to construction contracts such as land development, structural engineering, architectural design, construction or activities of similar nature.

(c) While individual units of the project are contracted to be delivered to different buyers these are interdependent upon or interrelated to completion of a number of common activities with or without provision of common facilities.

(d) The construction or development activities form a significant proportion of the project activity.

3(3) In case of a project where the economic substance is not similar to construction contract, revenue shall be recognised in accordance with Income Computation and Disclosure Standard IV relating to Revenue Recognition and provisions of para 3, para 4 and para 5 of the said standard shall apply mutatis mutandis, provided :–

(a) the seller has transferred to the buyer all significant risks and rewards of ownership and the seller retains no effective control of the real estate to a degree usually associated with ownership or the seller has effectively handed over possession of the real estate unit to the buyer forming part of the transaction;

(b) no significant uncertainty exists regarding the amount of consideration that will be derived from the real estate sales;

(c) there is a reasonable certainty that the revenue will be ultimately collected from buyers.

Application of Percentage of Completion Method

4(1) The revenue in respect of a project shall be recognised under the percentage of completion method when:-

(a) the expenditure incurred on construction and development costs is 25 % or more of the construction and development costs;

(b) 25% or more of the saleable project area is secured by contracts or agreements with buyers; and

(c) 10 % or more of the total revenue as per the agreements of sale or any other legally enforceable documents are realised in respect of each of the contracts and it is reasonably certain that the parties to such contracts will comply with the payment terms as defined in the contracts.

4(2) Revenue shall be recognised in respect of such units which satisfy the condition mentioned in para 4(1)(c) with reference to the percentage of completion of the project.

4(3) For applying the percentage of completion method in respect of a project, the provisions of ICDS III on Construction Contract shall apply mutatis mutandis.

Transferable Development Rights

5(1) Transferable Development Rights are acquired in different ways as mentioned here under:

(a) Direct purchase.

(b) Development and construction of built-up area.

(c) Giving up of rights over existing structures or open land.

5(2) When development rights are acquired by way of direct purchase or on development or construction of built-up area, cost of acquisition would be the cost of purchases or amount spent on development or construction of built- up area, respectively. Where development rights are acquired by way of giving up of rights over existing structures or open land, the development rights shall be recorded at fair value of the development rights so acquired.

5(3) When development rights are utilised in a real estate project by a person, the cost of acquisition shall be added to the project costs.

5(4) When development rights are sold or transferred, revenue shall be recognised when both the following conditions are fulfilled:

(a) title to the development rights is transferred to the buyer; and

(b) it is reasonable to expect that the revenue will be ultimately collected.

Transactions with multiple elements

6(2) The consideration received or receivable for the contract shall be allocated to each component on the basis of the fair value of each component.6(1) A person may contract with a buyer to deliver goods or services in addition to the construction or development of real estate. In such cases, the contract consideration shall be split into separately identifiable components including one for the construction and delivery of real estate units.

6(3) The recognition of revenue of each of the components shall be in accordance with provisions of relevant ICDS.

Transitional Provisions

7(1) Project revenue and project costs associated with the real estate project, which commenced on or after 1st day of April, 201X shall be recognised in accordance with the provisions of this standard.

7(2) Project revenue and project costs associated with the real estate project, which commenced on or before the 31st day of March, 201X but not completed by the said date, shall be recognised based on the method regularly followed by the person prior to the previous year beginning on the 1st day of April, 201X.

Disclosure

8(1) A person shall disclose:

(a) the amount of project revenue recognised as revenue in the period;

(b) the methods used to determine the project revenue recognised in the period; and

(c) the method used to determine the stage of completion of the project.

8(2) A person shall also disclose each of the following for projects in progress at the end of the previous year:

(a) the aggregate amount of costs incurred and profits recognised (less recognised losses) to date;

(b) the amount of advances received;

(c) the amount of work in progress and the value of inventories; and

(d) Excess of revenue recognised over actual bills raised (unbilled revenue).

Significant changes made in the draft ICDS on Real Estate transactions

vis-à-vis

Guidance Note on Real Estate transactions issued by the ICAI

The draft ICDS on Real Estate Transactions is based on Guidance Note on Accounting for Real Estate Transactions issued by the ICAI. While recommending the ICDS, the Committee suggested the following significant changes in the Guidance Note:

(i) Definition of project – As per the Guidance Note, the set of units which are connected by a common set of amenities will constitute a single project. To bring certainty in this matter, the Committee recommends use of term ‘Basic facilities’ in place of common amenities. This would ensure restricting the definition of the term Project to the smallest possible group of units. Accordingly, the revenue will be required to be recognised on such smallest group of units without linking the same to peripheral common amenities like club-house, entertainment, sports, gymnasiums, health club, restaurants etc,.

(ii) Definition of project cost – The Guidance Note contains illustrative list of items to be included, allocated or excluded in the project cost. Consistent with the framework of ICDS, the illustrations have been excluded in the standard while retaining the main principle that costs that cannot be attributed to any project activity or allocated to project shall be excluded from project cost. This is also consistent with ICDS III relating to Construction Contracts.

(iii) Real estate projects – As per the Guidance Note, the revenue in respect of real estate projects is required to be recognised based on principles of either AS 9 or AS 7 depending on the economic substance of the project. The Guidance Note further provides that in cases where economic substance of the project is in the nature of construction contract, the revenue is required to be recognised as per percentage of completion method (POCM) in accordance of AS 7. The proposed ICDS retains the same principles for recognition of revenue and cost without usage of illustrative language of the Guidance Note to provide simplicity and certainty.

(iv) Application of POCM for Real estate projects – The Guidance Note in para 5.3 contains four conditions to be satisfied for recognition of revenue including the condition of obtaining all critical approvals. Since the recognition of revenue under other conditions is deferred up to incurrence of 25% of construction and development cost (which does not include land cost), the condition in respect of obtaining critical approval is not found by the Committee to be very relevant for recognition of revenue under ICDS in view of the newly enacted ‘The Real Estate (Regulation and Development) Act, 2016’ (RERA). All other conditions have been retained in the proposed ICDS.

Further, the Guidance note permits all methods for determination of stage of completion like cost incurred, survey of work done, technical estimation, etc,. The Guidance Note however puts a cap on recognition of revenue based on stage of completion determined with reference to project cost incurred. In order to make it consistent with the provisions of ICDS III relating to Construction contract, the proposed ICDS does not provide for capping the recognition of revenue based on stage of completion determined with reference to project cost incurred.

(v) Transferable Development Rights (TDRs) – In case of acquisition of TDRs, the Guidance Note provides that where development rights are acquired by way of giving up of rights over existing structures or open land, the development rights shall be recorded at the fair market value or net book value. To bring certainty and consistency with other ICDSs, the Committee recommends that in this situation, the development rights shall be recorded at the fair value of the development rights so acquired.

 

The effects of NGT order on lakes and raja kaluve


Ignorance is Bliss: For un approved, illegal, unauthorised, green belt, DC Converted sites owners and fake katha property owners across the state, are a happy lot, as long as they are Ignorant about the prevailing laws.

There are innumerable layouts formed in Green Belt, Agricultural Zone, amidst Raja Kaluve, Encroaching the lake and on Gomala Land in Bangalore rural and urban districts.  The State Government has demarcated the Bannergatta National Park`s Eco Sensitive zones and over 30 villages and the layouts are affected by the order.

It is presumed that there are over 1,00,000 revenue sites, DC Converted sites (both legal and illegal) which are abetting the lakes, raja kaluves, kalu daari and bandi daari. 

Even, the BMRDA approved layouts in and around Anekal Taluk, where a large number of lakes are encroached and the sites near the border or the boundary of the lakes are affected by the NGT Order.  One such case is in Rajapura Village.

The incomplete projects by DLF, Hiranandani and others in Hulimavu on Begur Road, which has a large chunk of Raja Kaluve and secondary drains, might be badly affected as the project is still under litigation and had not been completed and the plan had been modified/altered/amended.  Another builders project at seethramayyana kere in Bangalore East might also be affected.  A leading builder`s project near kaikondarahally-ambalipura-kasavanahally-lakes will definitely be affected, as the residential complex is just 100 feet from the boundary wall of the lake, which had been enhanced to 250 feet, as it still incomplete and had not obtained OCCUPANCY CERTIFICATE.

As per the RERA, any project/building/apartment, which has not obtained the OCCUPANCY CERTIFICATE from the competent authority is considered as INCOMPLETE and will be affected by the Act.