Govt. Forms Central Advisory Council for Active and Effective RERA Implementation

A 30-membered Central Advisory Council (CAC) has been set up by the central government of India for counselling on the implementation of the Real Estate (Regulation & Development) Act, 2016. The Minister of State for Housing and Urban Affairs will be the Chairperson of the council. Excepting the chairperson, the council will also have 8 members from the central ministry including Niti Aayog CEO, Secretaries of Ministry of Housing and Urban Affairs, Department of Revenue, Economic Affairs, Department of Industrial Policy and Promotion and Ministry of Corporate Affairs, showed a gazette notification from the Ministry of Housing and Urban Affairs.

This CAC will monitor whether homebuyers have been provided proper protection under the central Act with the proper implementation of RERA across the country. Chairpersons of Maharashtra, Gujarat, Madhya Pradesh, Assam and Karnataka RERA have already there in the council. Standing for the homebuyers’ there will be president of Forum for People’s Collective Efforts and Federation of Apartment Owners’ Association’s Chairman. The council also have representatives of real estate agents and construction workers. As per the notification the chairperson of the council will have the power to incorporate any individual or organization as a technical representative to take part in the meetings of the council.

Abhay Upadhyay, the President of Forum for People's Collective Efforts (FPCE) said, “Homebuyers and their interest are the focal point of RERA and its proper implementation would need constant feedback coming from them. We are thankful to the government of India for recognizing our efforts over the years in getting RERA enacted and thereby protecting the interest of homebuyers.”
There will state governments’ representation in the council as well. The five states that have been included in the council are- Uttar Pradesh, Haryana, Odisha, Tamil Nadu, and National Capital Territory of Delhi. Reportedly, the Managing Director of National Housing Bank (NHB) and CMD of Housing and Urban Development Council (HUDCO) will also be part of the council.

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Valuation Rules Under GST Could Generate Transfer Pricing Friction

The entire domestic business world is now amidst the GST whirl. While this unified tax regime appears as a boon to some of the industries, a portion of them are oppressed by the top-heavy tax burden of this biggest tax reform. ‘Transfer pricing’ (TP) could be another existing cause which would be turning troublesome for the companies in the coming days as per the tax experts.
Transfer price is a price charged by a subsidiary or a division or a company to another. According to the rules that there has to be an ‘arm’s length’ while fixing this price so that it’s neither too low nor too high than the active open market price. So, in case companies are under speculation of tax evasion tax officers have legal right to go over and question them.

Unlike the previous tax regime, Goods and Service Tax offers something called as open market pricing for correlated party transactions. Many of the tax experts feel that at present, the valuation ruled of GST and those for calculating transfer pricing are not integrated and this could advance upcoming tax demands.
For open market pricing for the related party transactions, goods and service, whether global or domestic would now be calculated under specific valuation rules. There is still disorientation regarding the open market pricing, whether the open market pricing will be done on the basis of active TP mechanism or there will be revised, oncoming valuation rules, say tax experts.

There is so definite description of this open market pricing. It needs to be condensed at first place. Much as the current GST rules provide that where recipient unit is entitled for full credit, the value established in the in the invoice will be accounted to be open market value. Now the confusion is how to take in time-based delicacies of the transaction specific indirect taxes with the annualized pricing income tax decisions?

Transfer pricing disputes deal with the annual profit calculation of the MNCs and how they have been reconstructed their parent companies. Meanwhile many firms are dead against of this revised transfer pricing rule and have challenged this calculation in the courts as well.
Tax experts indicate that indirect taxes are greatly time-based. Thus, the time of supply is really crucial for the entire calculation and the input figures have similar importance too. On the other hand direct taxes are based on principle of aggregation. The calculation of which is mainly figured out on the due date of the annual tax return. Many of the experts suggest that this is basically heading towards the same focal point through two different set of rules. The bold points of GST is apparent, the fine clauses are yet to be revealed.

During the last three years tax department has been working on resolving this transfer pricing matter. To avoid future transfer pricing glitch the tax department has been signing Advance Pricing Agreements (APA) with several MNCs. An APA is basically a contract between the taxpayer (mostly MNCs) and the tax authority CBDT in India, where the transfer pricing process is established.  The methodology of tax calculation could be then used for an agreed time period on the taxpayer’s upcoming global transactions. However, the transfer pricing is limited in MNCs dealings as of now, in future domestic transactions might attract indirect taxes as well.

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Festive Real Estate Offers Are Just Gimmicks or These Even Decrease The Cost of Property?

Festive season brings the shower of offers for the homebuyers to ease their property investment. Sundry of offers like free, car, no GST, no EMI till the possession, several payback schemes and the list goes on for luring the buyers’ interest to real estate sector. Some people think that this is nothing but the marketing strategy of the promoters to sell out unsold inventories throughout the year in order to take the real estate sale upward. Definitely builders are incumbent upon high debt cost for unsold units. Thus, they offer a series of discounts to attract buyers towards real estate ventures.

Before running after the catch, we advise you to go through the offers minutely. These discounts can be divided into four major categories. 1. Cash related discounts. 2. Non-cash discounts. 3. Rewarding scheme or 4. Waive off GST.  Do these offers really bring down the cost of property or not, let’s delve into that.

Cash discounts- Let’s assume you want to buy property in Kolkata during this Diwali, as builder is currently offering 5-6 lac cash discount against your selected residential unit, which is worth of 60 lac. What happens is you understand these offers, while not having the knowledge of the monetary value of these offers. Usually, these offers remain valid for limited period of time and these offers directly reduce the cost of ownership of the end-users. But, in most of the cases promoters elevate the base price and then offer the discount which indicates rushing after the attractive discount is not really gainful. Thus, it’s advisable that you need to check the circle rate before jumping into conclusion. Cash discount is profitable only when the developer hasn’t increased the base price for last 6-12 months.

Flattering rewards- During the festive season developers offer a lot of freebies on property purchase. But are these really free? The overall cost of these complimentary offers is ultimately included in the property price. Mostly, these products are of inferior quality and developers don’t guarantee these free offered products. However, investing in real estate will return you the best market returns against your lay out.

Easy payment plans- Flexible payment plans are another festive discounts offered by the developers. The objective behind such payment schemes is to aim the liquidity of the buyers. But practically people who opt for these payment plans end up paying extra amount than those who make the full payment. One should always check this payment plans are either time- bound where the remaining amount to be paid within mentioned tenure or it’s possession-bound where the balance payment to be paid during the time of the possession. Some developers also offer interest subvention plan where they pay interest during the construction phase. This scheme also offers higher basic price. Through these schemes developers raise fund at a lower cost (4-7%) than that of borrowing from financial institutions.

GST waivers- GST is waived from those properties which have got occupancy certificates. Don’t get mislead by any offers whereas the original offer can cut your cost. There is straight discount of 12% on OC-ready projects. Only investing in under construction projects attract GST charges. Pre-OC price attract GST and Post-OC price will be the either the same or a little less.

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After CREDAI Amrapali Homebuyers Now Move to NBCC, HUDCO

Amrapali projects seem to be the biggest troublemaker in property purchase history. Around 6000 homebuyers of Amrapali properties have asked the Uttar Pradhesh Government not to involve builders’ body CREDAI in the completion of the under construction projects and demanded assurances for the guideline to complete the rest of the productions.

An eight-member committal from various Amrapali projects met UP urban housing minister Suresh Khanna and proposed the government to bring state-run firms such as National Buildings Construction Corporation (NBCC) and Housing and Urban Development Corporation (HUDCO) to take over all the projects of Amrapali.

Mr. Rahul Kashyap from Amrapali Dream Valley project, an attendant member of the following meeting claimed, "It (CREDAI) itself is a builder lobby and has not even taken a single action in favour of homebuyers so far."

A three member panel constituted by the UP government to rack up this builder-buyer spat that had declared co-developers’ participation in the completion of the major unfinished projects.  Again the Builders body Confederation of Real Estate Developers' Associations of India (CREDAI) also suggested to het members or non-members to show up as investors or co-developers.

Yogi Adityanath, chief minister of Uttar Pradesh on Tuesday had also asked developers to ensure 50,000 apartments get delivered in the coming three months, ordering Noida, Greater Noida and Yamuna Expressway authorities to make possible the hand over procedure.

Homebuyers of several Amrapali projects has also seek clarification on what will happen to those projects where the construction has just competed to 20-30%  and for those where the construction process has even not started at all.

Hitesh Nakhasi, another Amrapali home buyer said, “We also clarification on the fast process of registries of those flat owners who had received the possession letters but are unable to complete the registration due to heavy dues Amrapali is supposed to pay to the authorities."

A total 13 FIR has been launched against six builders including Amrapali and Supertech. Yet, homebuyers had claimed that no actions had been taken so far against the incriminated people. They also demanded clarification on how would the government co-ordinate with the banks and HFCs for stop calculating EMIs and interests till the time possession will be allotted.

Reportedly Amrapali homebuyers had been on strike since Aug 12. If the outcome of this meeting with government wouldn’t satisfy their need, the buyers are on their toes to take their strike to the higher authority in order to secure their interest. They claimed that they had spent 8 long years with verbal assurance and now they seek everything penned.

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RERA Completes 4 Odd Months Of Market Sluggishness And Investment Confusion

The Real Estate (Regulation and Development) Act, 2016, (RERA), much-awaited real estate reform came into effect in May 1, 2017. After 4 months of its execution, till date it loses out to track buyers’ sentiment. Industry experts pointed out the variable execution of the law by the states as one of the major reasons of slow progress of market recovery.

By far, 23 states and UTs (excluding J & K), have already notified the rules; of them 13 states and 6 UTs have notified rules in the presence of interim regulators. Only four states- Punjab, Maharashtra, Gujarat and Madhya Pradesh have formed permanent RAs. States like- Goa, Himachal Pradesh, Kerala, Telangana, Tripura and West Bengal have confirmed the draft rules, but yet to notify them. Whereas, following the central directions, UP is about to re-notify state RERA norms. North eastern states such as- Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Sikkim are having some constitutional issues over land ownership, which are needed to be scrutinized further.
Seven states have started procession online registration process of real estate projects and agents. The Act says, states can set up respective websites within one year from the framing of state RERA RAs. By then they are allowed to register projects offline.

Mostly states have mended the central Act likewise their own basics. Accordingly, real estate builders, projects and agents are pulling a tail on. Residential realty market in the National Capital Region (NCR) is such an evident example of this display. The reason behind UP and Haryana kept out most of the on-going projects from RERA purview is strong political connects of the builder lobby. Projects that have done with the construction part and have applied for the completion certificate are excused from RERA coverage. This has ended to confusion between the existing buyers and the prospective ones.

To avoid being legal bound most of the developers in Haryana and Gurgaon applied for completion certificates during last year Oct-Nov and got OC within subsequent months. More or less 21000 of such projects were completed in Noida and Gaziabad location during last 6 months and got handed over, whereas common facilities are yet to be developed.
With the introduction of RERA, new project launches have significantly dimmed in the major cities. Sources revealed that new residential launch has dropped by 41% in major cities such as- Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune. Purchase decision gets postponed all over country for delay in RERA execution by the states in true law and spirit. Market expects realty sector to be stabilized within next FY as the central Act is yet to be implemented completely. Execution of RERA will definitely enhance the sale in the coming days and will recover the market from corruption.

The confusion in the market is likely to persist unless all the states are notifying their rules. Again curbing the central Act is not the way to be present in the list. Dilution of RERA will rather fuel the level of turbulence,’’-said, Mr. Mahesh Somani, The Chairman - National RERA Committee, National Association of Realtors India (West Bengal).

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Real estate Hedge Funds And Their Functional Areas

Hedge fund is a pool of money that holds long and short positions for buying and selling equities, introduces arbitrage, trades bonds/currencies/convertible securities/commodities and offshoot products to generate returns at lower-risk. It’s a type of investment vehicle that accumulate capital from multiple sectors and invest the same amount into securities and other investment sectors. Hedge funds are structurally contrasting from mutual funds as these funds are tractable of most risk taking ability and their profit shares are not capped by the regulators. Hedge fund by and large invests in liquidity. Real estate has been added by the hedge fund managers to their list of non-traditional investments.  Real estate hedge funds generally own the asset of investment.

A few details about real estate hedge funding companies 
With more than $5 billion real estate assets and more than $27 billion in total assets Angelo, Gordon & Company is one of the largest real estate hedge funds. The company has records of investing in investment-grade underrated securities.

Blackacre Capital Management LLC is another leading company with different business strategy. The company doesn’t invest in debt securities, rather they purchase luxury hotels and same labelled projects with the objective of further development of these projects.

Cliffwood Partners LLC and The Praedium Group are two other hedge fund companies with separate business procedure. Till 2015, The Praedium Group is a new fund that has recorded profits from the divergences in indexes in the public and private equity real estate market. Cliffwood Partners, one of the earliest real estate hedge funds, has a long-short strategy in the real estate market.

How does a real estate hedge fund work?
Real estate hedge funds invest in the publicly-traded stocks of current real estate companies. Chiefly they invest in REITs (Real Estate Investment Trust). REITs exclusively invest in real estate and get tax exemption for this investment as well. The structure of REITs is quite similar to mutual funds in the sphere of realty. REITs are required to lay out 90% of the income, which is contingent on tax redemption for the REITs investors.

There is another of investment too which is totally different from investing in REITs. Hedge funds invest money through acquisition of the underrated assets at lower rates. These properties are purchased in anywhere on the earth, but for selling it has to maintain a fixed cause of disbursal, which is lack of liquidity on the seller part.

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Leading cement manufacturers are eyeing Binani Cement assets post blooper indication by NCLT

Short while ago, the National Company Law Tribunal, Kolkata made a revelation that an insolvency plea against the Binani Cement filed by the Bank of Baroda. Soon after this news broke, top domestic cement players are busy in finding the shortest route to reach out the in-demand assets of the Brij Binani Group Company, in order to shore up their pan-Indian market presence and bump into a prospective value buy, multiple sources related to uncompleted negotiations on the conditions of the anonymity.
On July 25th, the National Company Law Appellate Tribunal, Kolkata ordered “on the basis of documents filed by the financial creditor (Bank of Baroda) that (the) corporate debtor (Binani Cement) has committed default in making payment of Rs97.7 crore and therefore... the application for initiating corporate insolvency resolution process deserves to be admitted.”

Binani cement is one of the most popular domestic brands in the cement industry. Apart from Binani there are other big-shot cement companies currently ruling the market; they are- Ultratech Cement, Shree Cement, Nirma, Dalmia Bharat and JSW cement. All these companies have got through the lenders and intended preliminary interest in Binani Cements. There is a lot of interest in the company and all these are at premature phases. The complete deal structure will be disclosed once the potential suitors will preserve their strategy-based on the final settlement plan sanctioned by the interim resolution professional and the lenders.

Binani holds a good export potential for the company’s latency in the middle-east along with the sizable mine reserves at the location of their plant. As an outcome, the cost of the production appears to be lesser. Thus, the assets of Binani Cements are attractive to the other major market player. Worthwhile mentioning that the plant location in Rajasthan holds a good access to the market of Gujrat. This is supposed to be another valid reason behind the high interest in the assets. As per the company website, Binani has a global manufacturing capacity of 11.25 million tons per annum (mtpa), with a domestic capacity of 6.25 mtpa with an integrated part of India and China and it has its grinding units in Dubai.

Tracking the cement productivity of the country, in the last one and a half years, most of the cement deals have been clogged in the range of $100-$135 per tonne in terms of enterprise value and have caught the sales capacity ranging between 5 mtpa- 20mtpa. The capacity of usage in north and western regions lies between 70-80% is a healthful number, because pan-India the capacity utilization is lower than 70%. Experts say the reason behind the failure of Binani is affliction in management impotence in setting up a restructuring plan.

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