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Five
circular issued on property taxes in the last two years introducing a
new slab structure based on location on a per square feet basis
irrespective of the actual rent received. All have them have been
withdrawn;
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Property taxes are charged on Rateable value, which is determined as
per section 154 of The Bombay Municipal Corporation Act, 1988.
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To
arrive at the Rateable value, the reasonable annual rent expected has
to be determined;
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The
circulars were an attempt to help determine the rateable value of
premises given on rent or leave & license basis;
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One
of the reasons these circulars did not achieve the objective was that
the circular did not have the force of law and it would be therefore
be much easier to amend section 154 of the law itself;
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The
rates of property taxes in Mumbai have been on rise. For example, in
1936, the total taxes for both residential as well as non-residential
premises were 18.25%. Today the rate of taxes for residential premises
can be as high as 83.5%, while for non-residential premises it is
112.5%;
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Further, if there is no water meter, then water tax and sewerage tax
is payable. Beside these, repair cess is also applicable depending on
various factors, in case the building is old.
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On
self occupied premises a notional rent is fixed for determining the
rateable value, which is not very high.
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However for rented premises including leave & license the net rate of
taxes can works out to about 40% to 60% of the rent/license fee
depending on various factors.
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Thus, there still remains an element of ambiguity that needs to be
resolved.
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The
BMC has ambitious plan to stop illegal construction in the city…
(Listed on 7.1.2003)
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Following the recent controversy about illegal construction, BMC is
intending to have compulsory registration of builders;
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If
any of their construction is found to violating BMC’s numerous laws,
then the builder gets de-registered and will not get any clearance for
any of the future constructions.
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However, the BMC has not framed any rules about the registration and
if and when it comes through, it will take a long time to be
operational. As the industry experts say the solution is not
addressing the problem, but to understand the issues involved to
understand the problem in basics.
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According to BMC figures, about 5% of residential buildings in Mumbai
do not have occupancy certificates, which means that in these
buildings people cannot stay because the builder would have violated
one BMC regulation or other.
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But
the fact is that people are staying and these buildings still stand,
in violation of rules and regulation. The builders most of whom are
fly-by-night operators have made their money and are not bothered
about flat buyers. The question is – How will then one have more
licenses?
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The
experts have a different opinion to this problem. According to them it
the authorities should ensure that existing rules are stringently
enforced rather than enforcing new rules
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One
of the suggestions is if housing finance companies do not just look at
the repayment capacity of the borrower but also the legal status of
the property. Today, consumers blindly go in for projects, which are
approved by the well-known Housing Finance Institutions. The project
should be evaluated in totality in terms of clearance of land titles,
clearances from BMC, etc.
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Another suggestion is an external agency or a regulatory body to
monitor it, e.g. National House Building Council (NHBC) in UK, which
has set criteria for registering builders and developers. It maintains
a register of builders and developers who satisfy set criteria
business and in case of builders their technical ability. At present
there are 17,700 builders registered with NHBC, who built almost 85%
of the new homes built in UK every year. Once registered, builders are
required to build in accordance with NHBC standards;
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Another piece of thought of experts says existing bodies like
Maharashtra Chamber of Housing Industry (MCHI) & Confederation of Real
Estate Developers Association of India (CREDAI) can actively
participate in regulating building activity. They can act as mediators
for problems between the clients and the builders.
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At
the end of the day, experts believe, one additional license or
registration will only mean one more avenue for corruption &
malpractices. It is better if the industry, along with the market,
forces help eliminate the wheat from the chaff.
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Latest Non-Occupancy charges 10% of service
charges
(Listed on 28.1.2003)
The Maharashtra Government has rescinded
its earlier order dated 9th March 1995, which had fixed Non Occupancy
Charges at one time payment of service charges. The new order issued on
1st August 2001 (which is published in the Marathi Section of this
issue) Stipulates that the Non-Occupancy Charges should not exceed 10%
of the service charges (excluding Municipal corporation / Municipalities
taxes) The new rates have come in force from 1st August - 2001.
Close relations such as the member's
Father, Mother, Sister, Brother, Son, Daughter, Son-in-law,
Daughter-in-law, Brother-in-law, Sadu (husband of Wife's sister),
Grandson, Grand Daughter and any other relations recognized by the
society continue to be exempted from payment of Non-Occupancy charges as
before.
This order is applicable to all
Co-operative Housing Societies in the State, residential and Commercial
and shops.
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A recent circular has made
it mandatory to provide the Completion Certificate or Occupation
Certificate while lodging re-sale property documents for registration.
(Listed on
4.2.2003)
For first sale
transaction, flat buyers will have to provide the Intimation of
Disapproval (I.O.D.) and Commencement Certificate, while the documents
for re-sale transaction would entail an Occupation Certificate or
Commencement Certificate. In the absence of these supporting documents,
the document would not be lodged for registration by the office staff at
the Sub-Registrar’s office.
The real problem was in re-sale cases because in case of the 3rd or 4th
sale, accessing the Occupation Certificate or Commencement Certificate
would be extremely difficult for the new buyer. Will any builder
entertain such a request from a person who is not his customer, for a
building that was constructed and handed over more than two decades ago?
The problem gets compounded by the fact that a housing society will not
provide these documents to a new buyer until he becomes a member and he
cannot become member until the document is registered.
Housing industry experts feel that this has been done in response to the
uproar over unauthorized buildings being constructed in Mumbai. The BMC
authorities have identified many such buildings and steps to take action
against them or regularize them are in progress.
With thousands of buildings, which do not have Occupation Certificates,
the middle-class flat purchaser is the one who suffers the most, for no
fault of his. In some cases, the water line is also obtained on
humanitarian grounds. Banks and financial institutions are reluctant to
give loans if the sale document is not registered.
The intentions behind issuing the circular is no doubt good, since the
aim is to ensure that only legal and valid structures are recognized,
but enforcing the same definitely involves practical issues which need
to be resolved. The authorities need to understand that the ground
realities are quite different and they might need to reconsider this
decision.
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Budget
2003 and the Housing industry...
(Listed on
8.3.2003)
Interest deduction of Rs. 1,50,000 for housing loans has been
retained.
Tax exemption has been accorded to housing construction projects and
the benefits of Section 10(23)(g) have been extended to investments in
companies, which will construct houses.
The 80 I (A), i.e. tax free to the projects which are completed up
to March 31, 2003, is now extended up to March 31, 2005, will give a
impetus to the housing industry
Further, the ministry is examining additional incentives for slum
upgradation, sewerage system laying and also greenfield housing
projects.
There are other measures taken too, which will boost the property
market like:
§
FM’s announcement
of One Crore houses with public and private
partnership ;
§
The Bombay Port Trust
(BPT), Railway lines, Defence surplus land, are likely to be developed under joint partnership i.e., between the
developer and the government ;
§
Rs. 60,000 Crores
support for infrastructure, resulting in pick up of suburbs and
reduction of time spent in commuting;
§
Mumbai airports will
be developed to meet the international standards.
§
This will also
encourage FDI in Mumbai.
As all coins have two sides, some negatives that will have the
affect bearing on housing sector are (1) increase in the price of
cement due to hike in excise duties, (2) no clarification or ease in
procedures to attract FDI for housing projects & (3) no mention of
rationalization of stamp duties.
The housing finance boom has been due to factors such as, low real
estate prices making investment very economical, houses for
middle-income group have become affordable, and progressive tax
exemption on interest paid for housing loans.
Infrastructure status given to the housing finance companies will
also pave the way for large housing projects in future.
Overall, Jaswant Singh’s budget means – Now, go get your dream home!!
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Budget
proposal to reduce stamp duty rates (Listed
on 03.04.2003)
Last
week’s budget announcements for Maharashtra state included the
first step towards rationalizing stamp duty rates, with the finance
minister proposing a reduction by 1% to 2% on various slabs.
Although
this step is too little and too late, it is however a step in right
direction, which would have positive effect on the property market
if it is extended gradually each year.
This
move has benefited not just the prospective flat buyers, but also
removed one of the biggest stumbling blocks in the path of obtaining
funding from the Center for developing infrastructure in
Maharashtra.
The
Urban Incentive Fund has been out of bounds for the state precisely
because of its refusal to fall in line with the Center on issues
like stamp duty and registration. However, while the current
announcement will help Maharashtra to score brownie points, it will
need to do much more in terms of rationalizing both of them, before
it gains access to the Fund.
Regardless
of reduction in stamp duty rates, as long as they are linked to the
rates prescribed in the Stamp Duty Ready Reckoner, flat buyers are
still going to be burdened with a high entry-level barrier.
The
budget announcements had a sting in the tail too; in form of an
increase in Registration charges form Rs. 20000 to Rs. 30000.
This
move is being seen as ‘…giving with one hand and taking back
from the other’.
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Northern
suburbs : preferred destination for corporates (Listed
on 11.09.2003)
Availability
of ample space at competitive prices has prompted corporates to
shift towards suburban Mumbai. In today's world, Bandra-Kurla Complex,
Andheri-Kurla Road, Goregaon-Malad belt in the suburbs are preferred
as business locations than south Mumbai, Nariman point in particular.
Most
MNC's find relocating to suburbs as cost effective and convenient,
which was again strengthened by the new amendment in the Rent Control
Act, that resulted in a substantial hike of property taxes payable
on office premises in South Mumbai.
The
MCHI research reveals that in the new millennium, areas closer to
the airport attract more investment and thus adds to the trend.
The
shift of the CBD in the western suburbs is justified as construction
of several flyovers across major traffic intersections on the western
express highway have reduced the traveling time.
The
CBD areas of South Mumbai are now left only with fond memories of
their days of glory.
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Laws
preserving CRZ stop reconstruction activity (Listed
on 12.09.2003)
Broken
concrete slabs, exposed brick walls and balconies form the landscape
near the coastal regulation zone (CRZ), an area representing prime
real estate in central and south Mumbai.
The
BMC committee on dilapidated buildings reveals that there are 19,000
dilapidated buildings in the coastal regulation zone areas of the
island city stretching from Dadar in central Mumbai to Charni Road
of south Mumbai
Builders
are interested in reconstructing the area provided the FSI is increased
to 2.5 (as recommended by the Sukhtankar committee set up in 1994)
from 1.33 as stated by the Development Control rules for the island
city.
This
is because the builders have to pay heavy premium of Rs.400/- to
Rs.1000/- per sq. ft. to the Municipal Corporation to improve the
neighbourhood.
The
solution as per MCHI is to provide a single window clearance for
the builders. According to them, the reconstruction of the 19000
dying buildings can bring down the price of the real estate in central
Mumbai by atleast 5% to 7%.
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NTC's proposal for mill land (Listed
on 12.09.2003)
Given
the current market trends, it is clearly observed that business
activity is getting scattered to various cities and towns across
the country. To attract business to Mumbai, something special is
required. And if NTC (National Textile Mills) has its way, we might
have another World Trade Centre (WTC) at Dadar, which is strategically
located in Central Mumbai.
Although
the proposal for the development of WTC is at a conceptual stage,
the union government has asked the Indian Trade Organization to
study for its feasibility. The NTC plans to involve private developers
in this project and use the proceeds to pay the dues of the workers.
According
to views of various architects and planners, it is for certain that
WTC is feasible, but only after proper planning. And Dadar being
within the reach of majority of the population, seems to be the
ideal location. It can be stated that any development in Mumbai
city has to be taken in a planned manner with ample open spaces
and recreational areas.
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