PTI | Updated: Jan 9, 2018, 16:01 IST | Times of India
MUMBAI: Even as a lot of thrust is being given to the affordable housing segment, a report has flagged concerns about the growing delinquencies in this segment, which are expected to continue in 2018.
Competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment, a joint report by Moody’s and its domestic affiliate Icra said today.
“While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” Icra’s structured finances head Vibhor Mittal said.
In a note on asset backed securities (ABS) co-written with its parent Moody’s, the report said gross-nonperforming assets in the affordable housing segment have inched up to 1.8 per cent as of September 2017.
The average cum 90+ days past due level for affordable housing was nearly seven times the level observed for traditional housing loan pools, it said.
Going into the reasons for the higher stress in the low ticket size loans, Mittal said, “this would be driven by factors like intensifying competition– resulting in some easing in lending standards — and a higher share of lending to the self-employed segment.”
It can be noted that the Modi government is targeting to ensure that there is a house for all by 2022 and has provided a lot of incentives for the affordable housing segment, including making it as a priority sector lending for banks and huge interest subvention and direct cash subsidy.
However, housing loans continue to be seen as the best performing retail loan asset class in the country, demonstrating low and stable delinquencies over the years, in 2018, it said.
This is possible because of the underlying collateral, which is self-occupied residential property, absence of steep correction in property prices and moderate loan to value ratios, the report said.
Moody’s said the impact of demonetisation and the implementation of the goods and services tax (GST) will lead to higher delinquencies in ABS for loans against property (LAP) to small and medium enterprises.
“Introduction of a GST in July 2017 and demonetization have placed stress on the SME sector,” Icra’s assistant vice- president Dipanshu Rustagi said.
The report also said auto ABS-backed by commercial vehicles loans will remain stable on the back of healthy domestic economic growth.
Icra said the microlending segment is on a “road to resurgence” after the note-ban setback with an increase in repayment rates to 94 per cent in September from the low of 87 per cent seen during December 2016 during the peak of the note-ban move.
From the past few quarters, the real estate markets in India have been going through a phase of massive change.
Kanika Gupta Shori | Retrived on 1st Dec 2017 | Moneycontrol.com
How do you time your entry in any investment channel — whether it is equities or real estate? Is it the juncture when the markets are booming and everyone is joining the fray? Does that make for a sound investment decision? Probably, not!
Most retail investors and homebuyers make this mistake. They buy when the prices are peaking. Naturally the returns are not as expected. Am I right?
Well, I am citing the basic principle of investing here. If you are on board, I would further explain why 2018 should be the year you should enter the real estate market.
From the past few quarters, the real estate market in India has been going through a phase of massive change. The regulatory reforms implemented through frameworks defined under the Real Estate Regulatory Act (RERA), and Goods & Services Tax (GST) to an extent, have led the sector in a certain direction.
It is mandatory for all the real estate projects to be in compliance with the provisions of RERA, which attempts to make sure that projects are delivered in time and the money paid by buyers for certain projects is not squandered for other purposes.
In short, RERA protects consumers’ interests. It will be impossible for fly-by-night operators to be in the market and only the most-committed players will be able to navigate the roadmap. This will benefit both buyers and sellers, in the long term.
It is a buyers’ market
The combination of excess supply, high prices and low consumption has translated into huge inventories across the country. The consumption side has also been impacted by demonetization. Clearly, it is a buyers’ market for now – and for the next few quarters. But not for long!
With RERA in place, developers are now focusing on completing their existing projects. The new home launches, across top eight cities in India, have gone down by more than 75 percent in the third quarter of the current fiscal, as per industry research reports. The overall number of project launches has gone down by more than 40 percent in the first nine months of the current calendar year. These trends imply that the supply side will gradually find some equilibrium with demand, and prices will subsequently start picking up pace.
However, in the present environment, there is a situation of excess supply and property buyers are in a better position to negotiate, and grab a great deal.
As per industry reports, the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) have around 2 lakh and 1.8 lakh unsold units respectively.
Home loan interest rates are at all-time low
The excess liquidity in the banking system have led the RBI rejig the key lending rates. Resultantly, the home loan interest rates that were recorded at around 9.5 percent a year in 2016 have now been floating in the range between 8.3-8.4 percent.
That makes for considerable savings in the EMI costs; enabling people to avail of low-cost home finance, and become a home owner. It is expected that the home loan rates will remain low for the next several quarters and may even come down further.
Considering the average annual rental yields at 5-6 percent, there is not much difference between the costs of rent and owning a home.
Steady revival of interest from global investor fraternity
The implementation of overarching regulatory mechanisms has instilled a much higher level of confidence in the global investor fraternity. The real estate sector is projected to receive Private Equity (PE) investments to the tune of US$4 billion during this fiscal year, as per industry reports.
Not just the PE funds from the US, Canada and Singapore are interested in infusing capital in the sector, but countries such as Japan, China, Qatar, Hong Kong and the Netherlands are also poised to invest in the sector.
At the same time, global sovereign wealth funds—that are otherwise known for their risk-averse, conservative approach—have been increasing their exposure to the market and it proves that the sector is headed in the right direction.
As for property buyers, it is a sign of revival on the cards.
In overall, the current environment presents an opportunity to buy property and make the best out of the coming year.
(The author is COO of Square Yards)
By ZeeBiz WebTeam | Mumbai | Updated: Tue, Nov 14, 2017 04:48 pm
If you are willing to get a home loan in the future, it is extremely important to understand the impact of the Goods and Services Tax (GST) that came into effect on 1 July 2017 in India. GST is a unified indirect tax levied on the consumption, sale and fabrication of all types of goods and services at the domestic level. It is the India’s largest tax reform since independence.
The GST Council has been formed to administer the system. The four tax brackets have been fixed at 5%, 12%, 18% and 28% for various types of commodities and services. The new tax system has a direct impact on home loan seekers and the entire real estate industry in India. Let’s discuss.
Real estate before GST
Property builders and house buyers had to remit multiple central and state levies such as stamp duty, Value-added Tax (VAT), registration tax and service tax. The imposition of these taxes was based on the locality and construction phase of properties. For instance, the buyers of under-construction properties were required to pay the whole gamut of levies. Conversely, registration charges and stamp duty were imposed on the sale of ready-to-move-in properties. Paying several types of taxes was the biggest challenge faced by the stakeholders of the real estate industry. The complicated tax system has led to the disparity in property rates across the nation.
Real estate after GST
The Indian real estate sector comes under the purview of GST, which excludes ready-to-move-in properties and residential schemes sponsored under the Pradhan Mantri Awas Yojana (PMAY). Under-construction properties are taxed at 18% that will be applicable only to 2/3 of the value of the property. The remaining cost of the property is considered the value of the land. Excluding stamp duty and registration charges, the actual tax rate will be 12%. Realtors or property developers can benefit from input tax credits, which ought to be transmitted to customers.
GST impact on home loans
When a home loan is obtained, interest is paid on the principal amount. The interest remitted on the principal amount is considered the cost of the loan. Besides, the loan borrower pays property valuation charges, advocate charges and processing fee. The home loan service was taxed at 15% under the previous tax regime. Currently, it is taxed at 18% and thus, the loan will be expensive by 3%. GST is not applicable to prepayment fee for an MCLR-linked mortgage, but prepayment fee for a fixed rate mortgage is taxed 18% instead of 15%. The borrower is taxed at 18% on any charges recouped by lenders.
The Indian real estate segment has been experiencing significant transformations recently. The new Real Estate Regulation Act (RERA) has addressed the problem of non-transparency. In India, as far as the residential segment is concerned, the implementation of GST is undeniably an affirmative sentiment booster among potential customers. The system may not be helpful in diminishing the prices of properties in the short-term. The simplicity of the system will benefit all the industry stakeholders including property developers and buyers.
GST advantages for property developers
GST has turned out to be a better option from the stance of property developers who had to pay multiple taxes under the previous tax regime. Currently, they are taxed under the unified tax system. As far as building materials are concerned, the new tax system brings no major changes. Let’s consider a few building materials. Under the previous tax system, pillars and iron rods were taxed at 20% that has been reduced to 18% currently. Cement is currently taxed at the highest rate of 28%, which is more than the previous rate. The tax rate on fly ash bricks and sand-lime bricks has been reduced to 5% from 6%. These marginal variations can make a big difference.
Affordable housing schemes have been kept outside the purview of GST. Needless to say, the unified tax system has been a much-needed reform. Industry experts and tax practitioners in the country have accepted the system that impacts the real estate industry as well. Home loans will be marginally expensive as discussed earlier. The current tax regime has brought transparency and simplicity in the housing loan services and real estate sectors. It is likely to be a boon for all industry participants.
(This article was authoured by Bank Bazaar.)
GST rollout, launch in India: Here are some impact areas on all household budgets right from purchase of a house to furnishing of the house and purchase of other necessities:
Updated: June 30, 2017 2:38 PM | Financial Express
GST rollout, launch in India: Finally, India is on the verge of witnessing a historic change from its current indirect taxation regime to the Goods and Services Tax (GST) regime with effect from 1 July 2017, with a grand ceremony on the night of 30 June 2017. Even though Congress, TMC and some other political parties have decided to boycott the event, it is going be a grand affair with PM Narendra Modi as the star speaker. The event will start at 11 pm on June 30.
GST aims at eliminating the multiplicity of taxes and removing cascading of taxes which leads to a higher tax incidence on customers today. With an intent to curtail the inflation, the Government has taken various measures viz. finalization of rates which are aligned to existing rate structure for most items and introducing an anti-profiteering clause in the GST law.
Here are some impact areas on all household budgets right from purchase of a house to furnishing of the house and purchase of other necessities:
Impact on renovation/construction budget of your house
Currently, in a typical construction contract, contractor’s price includes heavy incidence of Central Excise duty, Entry Tax, Central Sales Tax on material and Service tax on services used in construction which is ultimately passed on to customers in the form of higher prices.
The contactors shall have to pass on the benefits of lower tax burden under the GST regime to the customers by way of reduced prices as the contractors will be eligible for credit of GST paid on the material and services used in construction.
This benefit on account of GST will positively impact the budget on common households.
Impact on interior decorator services
Interior decorator services to get dearer by 3% since GST will be charged at 18% vis-à-vis current Service tax rate of 15%.
Impact on loan processing charges of banks
GST will be applicable on financial services, at 18 per cent vis-à-vis the current Service tax rate of 15%. Be ready to shell out more money as taking loans is going to get expensive.
Also, along with expenditure on upgradation of house, you might also want to invest in latest technology or home furniture. GST will have a bearing on the prices of such goods as well.
Impact on Electronic Appliances
Currently, the average tax incidence on most of the electronic appliances/ items is approximately 25-26% (including CST and other local taxes). GST on household electronic appliance like fridge, washing machine, vacuum cleaner etc. has been fixed at 28% under GST. Likely increase in the tax burden of customer by 2-3%.
Also, electronic segment faces stiff competition with a lot of new players and less established brands who are mostly based in excise-free zones and are awaiting clarity on how the present excise exemption will work, post GST. Therefore, impact on the products of such players may be known only after a few months.
Impact on other items
Common household furniture, mattress to attract higher GST rate of 28%. Positive impact on LEDs and carpets due to a lower GST rate (please see below).
Impact on daily necessities
There should not be any inflationary impact on account of GST on daily necessities as most of the items viz. unprocessed cereals like rice, wheat, essential items like milk, vegetables have been specifically exempt from GST.
All in all, GST should impact the household budgets in a positive manner, not only from a rate perspective but also on pricing of various products, albeit in a long run.
*Rates mentioned above are basis the general rate available for such category of products and for illustrative purposes only. Actual rates may vary depending upon the specifics of a product and state wise VAT rates.
(By Achal Chawla, Tax Partner, EY India. Views expressed are personal)
GST may reduce the cost of houses if it is at a rate below the current applicable taxes that are levied by the central and state governments
Ashwini Kumar Sharma | First Published: Mon, Apr 24 2017. 05 31 PM IST | LiveMint.com
The biggest reform in the indirect tax regime is set to get implemented very soon. Instead of different types of taxes—central, state, local and so on—soon there will be only one tax: the Goods and Services Tax (GST). Like any other sector, real estate will also come under the ambit of GST. However, as of now, there is lack of clarity on various aspects such as whether the rate of GST will remain at par with current applicable taxes and whether affordable or low-cost housing will remain out of the GST’s ambit. Read on to know what impact GST will have on the real estate sector in India.
When you buy an under-construction house, service tax is levied on a certain percentage of the total value of the property, which is considered the cost of construction. Cost of land is excluded from service tax. To do this, income tax provisions allow abatement to the tune of 75% on under-construction properties costing less than Rs1 crore; hence, service tax is calculated on 25% of the gross value. And, 70% abatement is allowed for properties costing more than Rs1 crore: service tax is levied on 30% of the value.
Given that service tax of 15% is charged only on the construction cost, the effective rate on the entire value of a property costing below Rs1 crore is 3.75% (i.e., 15% * 25% of the property value), and for a property above Rs1 crore, the effective rate is 4.5% (15% * 30% of the property value). Thus, if you buy a property at Rs80 lakh, you will have to pay Rs3 lakh (3.75% of Rs80 lakh) as service tax. And, if the property was Rs1.6 crore, service tax would be Rs7.2 lakh (4.5% of Rs1.6 crore). Once GST gets implemented, “Payment of service tax on the properties under construction does not arise. It will be replaced with GST,” said Kunal Wadhwa, partner-indirect taxes, PwC. Besides that, “Existing abatements under the service tax laws are also to be done away with post implementation of GST,” added Wadhwa. So, it is likely that tax will be charged on the actual construction value.
However, the concern is whether the GST rate would be higher than the prevailing service tax rate or lower. “It is expected to remain around 12% or lower than 15% (the current applicable service tax rate). It will not be on the higher side at around 18%,” said Abhishek Rastogi, partner, Khaitan & Co. If the GST rate remains on the lower side, it will bring down the overall cost of houses.
Value added Tax
Some states like Haryana and Delhi also charge value added tax (VAT) on under-construction properties, which is again borne by a homebuyer. However, once GST gets implemented “the current composition schemes for developers under VAT laws of respective states would come to an end,” said Naveen Wadhwa, deputy general manager, Taxmann.com. VAT is a state subject and varies between 1% and 5% of the property value. However, “There is a lot of litigation going forward on this account,” said Nangia. There are many contentious issues for both developers and homebuyers regarding VAT. Some cases have also reached the apex court. Once GST gets implemented “it will simplify tax structure and reduce the scope for litigation, however this may increase the cost of real estate in states that never had VAT,” said Nangia.
A homebuyer has to pay stamp duty to get the property registered. Even after GST, “Stamp duty will continue, as GST will not subsume stamp duty levied by government,” said Wadhwa.
Stamp duty is calculated as a percentage of the agreed value of the property, or the circle rate (the minimum price on which a property can be transacted, which is decided by the government), whichever is greater. In addition to stamp duty, typically 1% of the value of a property is charged as registration fee for registration of property documents (sale deed). In some states, if a property is bought in the name of a woman, the stamp duty levied is lower. For instance, in Delhi, properties registered in the name of women attract 4% stamp duty, compared to 6% otherwise. However, in case of joint ownership, where the property is bought jointly in the name of a man and a woman, buyers have to pay stamp duty of 5%, in case of Delhi.
In some states, stamp duty also depends on the region in which a sale deed is executed. For instance, in Haryana a man is required to pay 8% stamp duty in urban areas and 6% in rural areas, while women have to pay 6% in urban areas and 4% in rural areas.
“The Task Force on Goods and Services Tax recommended in the Thirteenth Finance Commission that real estate sector should be integrated into the GST framework by subsuming the stamp duty on immovable properties levied by the states, to facilitate input credit and eliminate the cascading effect,” said Nangia.
But “due to political and economic considerations, stamp duty—which is a good contributor of revenue to state government—is not subsumed in the GST framework for the time being,” added Nangia.
As of now, taxes and duties can increase the cost of property by 15-18% for homebuyers. After GST gets implemented, whether the cost of houses will come down or increase, will depend on the rate at which GST is charged and whether there will be any abatement or not.
GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services
PTI | Updated: March 28, 2017, 18:29 IST | ET Realty
Home loan EMIs of under-construction houses, renting & land leasing to attract GST from July 1. Come July 1 and leasing of land, renting of buildings as well as EMIs paid for purchase of under-construction houses will start attracting the Goods and Services Tax.
Sale of land and buildings will be however out of the purview of GST, the new indirect tax regime. Such transactions will continue to attract the stamp duty, according to the legislations Finance Minister Arun Jaitley introduced in the Lok Sabha yesterday for approval.
Electricity has also been kept out of the GST ambit.
GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services.
The Central GST (CGST) bill — one of the four legislations introduced, states that any lease, tenancy, easement, licence to occupy land will be considered as supply of service.
Also, any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services as per the CGST bill.
The GST bills provide that sale of land and, sale of building except the sale of under construction building will nether be treated as a supply of goods not a supply of services. Thus GST can’t be levied in those supplies.
‘Goods’ in earlier drafts of the bills were defined as every kind of movable property other than money and securities but includes actionable claim. ‘Services’ were defined as anything other than goods. It was thought that GST may be levied on supply of immovable property such as Land or building apart from levy of stamp duty.
But the bills presented in Parliament have now clarified this position.
Tax experts said that currently service tax is levied on rents paid for commercial and industrial units, although it is exempt for residential units.
Deloitte Haskins Sells LLP Senior Director M S Mani said: “While service tax is applicable at present on sale of under construction apartments, it is levied on a lower value as abatement allowed. The abatement is ostensibly to take care of the value of the land involved in the construction of apartments”.
He said the GST Rules, which will come up for discussion in the Council meeting on March 31, would help ascertain whether a lower rate of GST is proposed for such transactions or whether a similar abatement procedure would be prescribed.
“This would also be dependent on the rate fixation committee which is expected to finalise its recommendations in April,” Mani said.
Experts said service tax is currently levied on payments made for under-construction residential houses after providing abatement, which brings down the effective rate from 18 per cent to around 6 per cent.
“The government is trying its best to make GST litigation free. The bills very clearly specify that GST would be charged on any lease of land or letting out of the building or construction of a complex, building, civil structure or a part thereof, where whole or any part of consideration has been received before issuance of completion certificate or its first occupation,” Nangia & Co Director Rajat Mohan said.
Experts said the GST subsumes central levies like excise and service tax and local levies like VAT, entertainment tax, luxury tax. However, it does not subsume Electricity Duty.
Since the GST Constitution Amendment Act does not provide for subsuming ‘electricity duty’ under GST, it will continue to be levied by the respective state governments.
Certain states like Delhi exempt residential properties from electricity duty but levy it on commercial and industrial units.
Source : https://goo.gl/0mRlKH
NDTV Profit Team | Last Updated: February 08, 2016 11:45 (IST)
It is that time of the year, when the salaried class starts praying for incremental tax concessions in the annual budget. Analysts, however, say that the government should focus on increasing the tax net instead of announcing new income tax concessions.
That’s because only 3 per cent of over 1 billion people in the country are estimated to pay income tax. Those who earn Rs. 21,000 and more (per month) have to pay taxes, but many small businesses, professionals (such as doctors and lawyers) and rich farmers do not pay taxes.
Tax evasion is not limited to smaller tax payers, analysts say. The number of people who declare annual income of over Rs. 1 crore is abysmally low at just around 50,000 in the country, they added.
“The number of income tax payers in India is woefully small, and the prosperity the country has achieved post reforms, do not reflect in number of taxpayers… We have to devise systems so that we can be able to bring tax avoiding population within the tax net,” said Yashwant Sinha, former finance minister.
According to Mr Sinha, the government has taken “baby steps” by announcing several measures on cash transactions, which could add 30-40 lakhs more tax payers per year.
The Goods and Services Tax (GST), however, could be a big step in bringing more people in the tax net, he added.
“If you had GST for instance, that will help… You will not have a separate sales tax, separate services tax, and a separate excise duty, etc. and you will have income tax. So, people in this country will be paying only two kinds of taxes… If a person is paying a certain amount of excise or service tax and he is not paying income tax, we can easily net him in income tax by finding this out,” Mr Sinha said.
Source : http://goo.gl/eS9Ay9