Real Estate Property Discussion by Rapid Realtors, Delhi (2026)

20/02/2017

The story of India’s real estate resale market
In addition to large unsold inventory with developers across the major Indian cities, there is a very active resale or secondary market.

The realty sector in India has been tepid for past few years with low transaction volumes and stagnant price level. Weak economic scenario, perceived high price level and lack of consumer confidence in the developers with respect to project completion led to transaction volumes reducing drastically. The demonetization scheme by the Indian government had also put pressure on the market.

In addition to large unsold inventory with developers across the major Indian cities, there is a very active resale or secondary market. Indian realty market has reached a stage where inventory sold by developers in new projects is coming back into the market in large numbers.

Let’s understand the secondary market across major Indian cities and its impact on the overall realty market.

Resale segment across cities

Magicbricks assessment of actively traded properties shows that resale segment forms sizeable component of the market. Southern cities such as Hyderabad, Bengaluru and Chennai show a reverse trend. Fresh booking options here are more than double of resale options. Scenario in case of Mumbai Metropolitan Region (MMR) is more balanced out.
The graph below shows the city wise breakup of resale and fresh booking options (New Property) on Magicbricks for each city.
The story of India’s real estate resale market

Markets which historically have had high investor to end-user ratio (like
Gurgaon and Noida) have corresponding much higher percentage of ‘Resale’ options. Correspondingly, South Indian cities have had high end-user participation and this reflects in the ratio of ‘New’ and ‘Resale’ options.

Consumer is wary of delivery risk
Magicbricks research shows that consumer are willing to pay more for ready-to-move (RM) options as compared to under-construction (UC) properties. They’re willing to pay a premium on completed projects rather than expose themselves to delivery risk as project delays lead to additional financial burden. This preference is reflected in the price differential between UC and RM properties. A deeper study shows that at a pan India level, RM properties command an average 7% premium over UC properties.
This also means that RM properties, whether in the primary or secondary market, have higher probability of transaction as compared to fresh bookings. The graph below shows the spread of properties by construction status as well as nature of transaction (New versus Resale).
The story of India’s real estate resale marketMarket impact…

On Price

• As more investors look to exit the market, the resale segment will continue to put downward pressure on price in these cities – both for existing projects and new launches

• Many investors are simply looking for an opportunity to exit a stagnant market. Under such circumstances, the sellers are likely to be more flexible with their pricing. This means buyers have RM options available in resale market at rates which might be lower than quoted rate by the developer

• As long as significant number of such options are available in the resale market, the prices in the primary market will remain under pressure

• Impact on price will be more in case if cities like Gurgaon and Noida with high number of resale options than Bengaluru or Hyderabad. In case of latter, the price will continue to be determined by demand-supply dynamics in the primary market

On Inventory

• High number of resale options also aggravate the problem of unsold inventory as these options compete with the unsold inventory

• Large number of resale options in RM projects take the demand away from UC projects. One set of inventory is getting sold multiple times while another set with the developers remains unsold

Transaction activity in the resale segment gives depth to the primary segment. It allows investors to book profit and unlock their capital. However, in present scenario where transaction activity is low and consumers are looking for ready-to-move options, the resale segment is likely to do better than the primary market and continue to put pressure on the primary market. Given the large percentage of resale properties available in the market, this situation is likely to persist in short to medium term.

02/11/2016

*Investors are safe now: Builder will pay 10.9% interest for delayed possession*

The Union government notified rules on Monday to implement the Real Estate Regulation Act (RERA), which will enable buyers who have invested in real estate projects - including existing ones -to secure interest at 10.9% per annum for delayed possession.

In case a buyer is seeking a refund, they will now be entitled to a refund on the entire payment at the same rate, and the builder will have to repay the amount within 45 days of a claim being made. The interest rate has been fixed at 2 percentage points above the SBI's marginal cost of funds (the current benchmark lending rate for banks).

Now that the rules have been notified, every builder will have to register with the state regulator. The final rules specify that developers of ongoing projects will also have to deposit 70% of the funds collected, but which have remained unused, into a separate bank account within three months of applying for registration.

This is a major change from the draft rules, where this provision was absent, and is aimed at providing security to buyers and ensuring that construction is completed without the builder transferring the funds to another project. To address the problems being faced by buyers, some of whom have been waiting for their homes for up to 10 years, the rules also stipulate that the developers of ongoing projects specify the scheduled completion date while registering the project with the regulator.

The rules spell trouble for developers who have diverted funds collected from buyers, because, under the new law, the regulator would be obliged to issue judgments within 60 days of complaints being filed.

The rules also make it mandatory for a buyer to pay the interest at the same rate of 10.9% on the dues raised by developers. This will come as a major relief for buyers who have to currently shell out upwards of 15% interest for delayed payments.

The rules will be applicable to the Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, an official release said. In a statement, the Union urban development ministry said it was working on similar rules for Delhi. The rules, it is learnt, will be notified in November.

With the Centre notifying the rules, states and UTs are expected to follow suit soon. As per the provisions of the RERA, 2016, the regulatory authorities have to be put in place by April 30, 2017, a day before the full Act is brought into effect. Chandigarh has set up a temporary regulatory authority , which makes it one of the first in India to do so.

01/11/2016

Good News for Buyers

07/08/2016

GST COULD USHER TRANSPARENCY IN REAL ESTATE SECTOR, REDUCE COST OF OWNERSHIP OF HOMES

With the Goods and Services tax, participants in the real estate sector are likely to witness transparency in the functioning of the real estate sector besides reduction in the cost of ownership of homes, particularly if the GST rate is lower than the current rates put together.

However, a homebuyer could end up paying higher tax while buying a home as the same is likely to account for almost 20-22% of the property value as opposed to around 14% at present.

Another downside of the Model GST Law is that input tax credit will not be available in cases where the end product is made using the goods and/or services in an immovable property, other than plant and machinery.

GST is likely to help commercial property developers in a big way, who today are saddled with high costs as no credit is available on construction services used for developing a commercial property which is then rented out. Under the GST regime, commercial property developers in particular can expect smooth flow of credit. Besides, current restriction on construction related credits not being available for offset is expected to be removed. Obviously, this would bring down the project costs in the hands of the developer, which, in turn, should have a positive effect on rentals. However, If the credit restrictions continue, due to higher GST rates, the project cost are only going to get escalated further. Additionally, all business entities, including the trading companies should be able to take credit of the GST paid on the rentals, which in turn should help the developer community in negotiating better rentals.

To sum up, GST appears to be a benefactor for the real estate regime, primarily in light of the expected free flow of credit, which should translate into an increase in margin in the hands of the developer. Whether these benefits will percolate into the end customers / users is to be seen, more so because pricing in this sector is more driven by market forces than on costing principles

13/06/2016

NEW DELHI: The Delhi High Court has said that home buyers cannot be charged service tax on payments made towards purchase of under construction apartments from builders if the total value of the apartment includes the land value.
However, service tax can still be levied on preferential location charges (PLC) that builders charge from buyers.

The court also said that if the developer has already collected service tax, buyers would be refunded the amount with 6% rate of interest by the revenue department of the government of India.

Since the amendment introduced by the Finance Act of 2010, the government charges service tax on buyers of apartments in under construction projects. Service tax is levied only on 25% of the total value of the apartment due to a 75% abatement that is allowed. So at 15% service tax applicable from June 1 this year, the buyer pays service tax of 3.75% on the total value of the apartment.

Vaibhav Gaggar, partner at law firm Gaggar & Associates, said all home buyers will be entitled to seek a refund of service tax component that has been charged. "Developers in-turn will be entitled to seek a refund from the government," he said. He, however, also said that this order is likely to be challenged in the Supreme Court by the government.

Builders point out that they pay service tax for all services such as design, contracting, legal and others while constructing a housing project. They get an offset for this amount through the service tax collected from buyers. Now they will have to treat it as a cost and pass it on to home buyers. "If we are not collecting service tax from buyers, it would mean passing on our service tax burden to buyers," said Ashish Sarin, CEO of Gurgaon-based builder Alpha Corp Development.

The court was hearing a case filed by home buyers Suresh Kumar Bansal and Anuj Goyal against the government of India in which the duo was aggrieved by the levy of service tax on services 'in relation to construction of complex'. They had signed agreements with builder Sethi Buildwell to buy apartments in a group housing project, Sethi Group Max Royal, in Sector 76 of Noida.

Accepting the petitioners' the court said in the June 3 order that "no service tax under Section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the petitioners with the builder".

The petitioners said that agreements entered into by them with the builder are for purchase of immovable property and the Parliament does not have the legislative competence to levy service tax on such transaction. They also said that "the Act and the rules made thereunder do not provide any machinery for computation of value of services, if any, involved in construction of a complex and, therefore, no such tax can be imposed."

Their petition referred to previous circulars issued by the Central Board of Excise and Customs (CBEC) which, according to them, clarified that the taxable service under clause (zzzh) did not cover builders who were developing and selling immovable property.

A circular dated January 29, 2009 says since the agreement between builder and buyer is in the nature of agreement to sell, under the provisions of the Transfer of Property Act, it does not by itself create any interest in or charge on such property.

13/06/2016

Developers get exit route from sick projects in Noida
Three industrial authorities — Noida, Greater Noida and Yamuna Expressway — have approved an exit policy for sick realty projects, a move that will benefit both the builders and homebuyers. The three authorities, in a joint board meeting on Thursday, resolved that realtors who have acquired land for a particular project can surrender it and get their deposit back, if they want out. The policy was announced as realtors owe around Rs25,000 crore in land dues to the authorities. Several developers have failed to deliver projects in Noida and Greater Noida due to financial stress. This has affected nearly one lakh homebuyers In Noida alone who have not got their flats despite paying the full amount. The proposal will be sent to the UP government for ratification.

13/06/2016

Residential plots in Noida to now cost 14% more
A joint board meeting of the three development authorities in Gautam Budh Nagar--Noida, Greater Noida and Yamuna expressway --has decided to increase the land allotment rates in Noida by 14.19% across all categories except commercial. The hike has been implemented with immediate effect. In Noida, the hike in allotment rates means that residential properties have become dearer by at least Rs 11,550 per square metre in ` A ' category sectors like 14,14A, 15, 15A, 17A and 44 and by Rs 4,200 per sq m in `E' category sectors like 102,115 and 158. In the institutional category for IT ITES properties in Noida sectors 1, 16A and 24, buyers will have to shell out Rs 50,700 per sq m now. For plots falling in the Phase I, II and III industrial areas of Noida, the allotment rates for plots up to 4,000 meters have now been fixed at Rs 30,614, Rs 10,893 and Rs 11,293 per sq m, respectively .

13/06/2016

Relief For Buyers Of Under-Construction Flats
The Delhi High Court has ruled that no service tax can be levied in respect of the agreements entered into between buyers and builders for flats in an under-construction building in a housing project. A bench of Justices S Muralidhar and Vibhu Bakhru however noted that service tax could be levied on amount charged by the builders for preferential location of the flat, saying it was based on the preferences of customers and amounted to value addition. The order came on petitions filed by several persons who had entered into separate agreements with M/s Sethi Buildwell Pvt Ltd to buy flats in a multi-storeyed group housing project developed by the builder in Sector 76 in Noida in Uttar Pradesh. The petitioners had moved the court against the levy of service tax on services in relation to construction of the complex as defined under the Finance Act 1994 as well as the levy of service tax on preferential location charges. The bench said the government shall examine whether the builder in this case has collected any service tax from the petitioners and if such amount has been deposited with it, the money shall be refunded to them with 6 per cent interest.

23/05/2016

Officials to scrutinise
As per this Friday’s Hindustan Times, The Greater Noida authority on Thursday said it is planning department would look into realty firm Supertech Group’s construction in sector Omicron-1 following allegations that 1,009 flats were built without the required approval. The matter pertains to Supertech’s residential project Super tech Czar that was launched in 2006. The Greater Noida authority had allotted 20 acres of land to the company. “After receiving a complaint, we issued a notice on April 11 to the Supertech Group asking them to submit a reply to allegations of violation of layout map in residential project. The Supertech Group has submitted its reply against our notice. Planning department team will scrutinize the building and realty firm’s reply within 30 days,” said PC Gupta additional chief executive officer (ACEO) of the Greater Noida authority. As per the complaint, the builder constructed 1,853 flats, but the company had permission to build just 844. In another block of the same project, the builder constructed 92 flats though they had permission only for 52.

23/05/2016

Celebrities endorse, developers falter on housing promises
Recently Buyers of Amrapali Platinum and Amrapali Zodiac protest against the delay in issuance of occupation certificate by the builder. Amrapali group is not the only realty firm which signed a celebrity — Mahendra Singh Dhoni — to popularise its brand and then failed to live up to buyers’ expectations. Many real estate developers in Delhi NCR, who failed to meet project delivery deadlines, have been known to rope in cricketers and Bollywood stars to endorse their projects. Shah Rukh Khan, Priyanka Chopra, Deepika Padukone, Kareena Kapoor, Maria Sharapova, Michael Schumacher, Rishi and Neetu Kapoor, Kangana Ranaut, MS Dhoni, Boman Irani, Anupam Kher are some of the well-known celebrities who were roped in to endorse realty projects that missed delivery deadlines. One such realty fir m is Vigneshwara Developers endorsed by Bollywood actor Anupam Kher (who played the victim of a real estate fraud in the movie Khosla Ka Ghosla). The group duped 850 homebuyers of 450 crore. “It became a rat race among budding realtors of Delhi NCR to hire celebrities to sell houses. But I do not think it helps in selling flats,” says Gitambar Anand, CMD of ATS Builders and president of the confederation of real estate developers association of India (CREDAI).

23/05/2016

Nod for Metro extension to Indirapuram
The Ghaziabad Development Authority (GDA) on Tuesday cleared a proposal to ask Delhi Metro to prepare a detailed project report for extending Noida’s under-construction Sector 62 Metro line to Indirapuram in Ghaziabad. Mohan Nagar has been proposed as a major station in the route from Dilshad Garden to New bus stand in Ghaziabad. The extension will allow residents to board the metro without having to cross the busy NH-24. The project is estimated to cost 250 crore. Under the plan, the authority wants to extend the proposed Indirapuram metro line towards Kanawani, Vasundhara and Mohan Nagar. Similarly, they have proposed extending the 2.57-km Anand Vihar to Vaishali metro line over Link Road towards Vasundhara and and Mohan Nagar. Mohan Nagar has already been proposed as a major station in the under-construction 9.41- km metro route from Dilshad Garden to New bus stand in Ghaziabad. The officials said that they had requested DMRC to open the Dilshad Garden-New bus stand metro stations in a phased manner.

Real Estate Property Discussion by Rapid Realtors

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