NRI Taxation

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NRI Taxation

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By MUDRA

Tax filing season has arrived in India and all are getting ready with their documents and financial details for the same. However, every NRI’s has one question in Mind whenever tax season is nearby, ‘Do I need to file taxes in India as well?’.

In light of the new developments, it has become a must for all of us to clearly understand our tax liabilities and abide by them accordingly. Things become more confusing in case you are a non-resident and are not well-versed with the latest provisions.

To remove these worries, we’ve gone ahead and taken the time to put together a quick but useful FAQ series, under our TAX-IMPACT Programme to guide and assist our fellow Indians Staying abroad on understanding the basic of Indian Income Tax and Tax Filing.

“In light of the new developments, it has become a must for all of us to clearly understand our tax liabilities and abide by them accordingly. ” 

FAQ’s on Indian Income Tax Filing for NRIs. Series 

1. When and why Should an NRI File Tax Returns in India?

 Though non-resident Indians (NRIs) earn their living abroad, they are obligated to file returns in India (for AY 2019-20) when:

  • They have Gross Total income in India that exceeds the basic exemption limit which is INR 2, 50,000/- p.a.
  • they have Short Term or Long Term Capital Gains from any investments or assets , even when gains are less than 2,50,000 p.a.
  • They have to claim TDS refunds arising from NRO Savings & fixed deposits interests etc.
  • They have to carry forward losses to future years.

Note : Many taxpayers believe that if they have paid their taxes (through TDS/Advance Tax etc), so they have no further obligation. However, even if you have paid the taxes still you have to file the ITR in case the above mentioned conditions are met.

2. What all Incomes are Taxable in India for an NRI?
 

An NRI has to pay tax on any income that accrues or arises in India or is received in India. This usually includes rental income from property owned in India, income from capital gains, interest income (except Interest from an NRE & FCNR account ) etc. earned in  India.

3. What is the last date of Filing the tax returns in India? 

The Last date of filling a return is declared every year, and it is usually 31st July for Individual. The due date for filing ITR for Assessment Year 2019-20 is 31st July 2019.

4. What will happen when I have taxable Income, but do not file my income tax return?

Having taxable income and not filing income tax return can put you in trouble with the Income Tax. Yes, if a person who is required to furnish a return of income and fails to do so within time prescribed then he/she will have to pay interest on tax due along with Late Filing Fees and penalty. Also legal action can also be initiated.

5. What if I miss the Due Date?

In case the taxpayer misses the due date to file his return, he can file a belated return. A belated return can be filed either by the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. For the current assessment year, a belated return can be filed any time before 31st March 2020 if the assesses fails to file his return on or before 31st July 2019.  You cannot file Tax Return once the Relevant AY ends.

6. ) Do NRIs Have to Pay Advance Tax?

As an NRI, if your tax liability exceeds Rs 10,000 in a financial year, you are required to pay advance tax. In case you fail to do so, you will have to pay an interest on the outstanding liability under Section 234B and Section 234C of the I-T Act.8.)

Few other Important Pointers:

a.)    Please ensure that you have your latest details (contact Number and E-mail id and address etc.) updated in the Income Tax Records. This ensures that any communication received from IT is not missed.   

b.)    You should have your Income Tax site login details, like user id and password. 

c.)    Quoting of Aadhar card number not mandatory for NRIs in their return. 

d.)    NRIs having total income above Rs 50 lakhs in India are required to report the cost of certain assets (movable as well as immovable) located in India only and the corresponding liabilities under the schedule of assets and liabilities. 

e.)    Non-residents are not required to report their assets and financial interests outside India. 

 

Why This Is The Right Time To Invest In Chennai

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Why This Is The Right Time To Invest In Chennai

By EVENTE CLINIC

In the first term NDA government has taken a lot of real estate initiatives ranging from passing the RERA Bill in 2016, implementation of the Goods and Services Tax (GST), providing interest subsidy for affordable houses under Pradhan Mantri  Awas Yojana under the “Housing for All” scheme of the government and Benami Transactions (Prohibition) Act, Insolvency and Bankruptcy Code etc.

The second term for the NDA is great news for the real estate market. An investor should be looking to grab on the opportunity to enter the market at the right time. In this article, we are going to look at one of the most promising cities in the country to invest in – Chennai.

Here are the top 5 reasons to invest in Chennai –

The Demand – The demand for housing is increasing with time and it is because of the migration of people from other parts of India. Many people get jobs and they are arriving in Chennai. So, these people are in need of housing and the real estate market is benefited because of this migration process.

Infrastructure development – In recent times, Chennai has witnessed amazing infrastructural and even commercial developments. And this kind of developments directly influenced the real estate market and it created a huge demand among the people.

Less risk – Chennai has registered significant growth in the last two decades, but it is still to achieve its full potential. If experts are to be believed, if you invest in Chennai’s real estate now, your money will be safe and you can continue to get good returns over the next 5-10 years.

As a real estate investor, you should always gun for the maximum yield from the investment. The rental demand for residential apartments in Locations like OMR, Porur and GST Road in Chennai is huge because this catchment area is surrounded by a lot of IT Parks and Big companies and people are actively looking for a lifestyle apartment on rent -Rajesh Srinivasan, Deputy General Manager – Marketing, DRA HOMES.

Easy to sell – The property market in Chennai is not just huge, but it is also very fluid. A lot many people know about the potential of Chennai’s real estate market, which is why properties in the city keep changing hands unlike the other cities in India. When you want to sell your property in Chennai, rest assured that there won’t be any dearth of potential buyers.

“In the coming years, Chennai’s development will not just be quantitative; rather, it will be qualitative as well. ” 

Diversification – It’s anchored by the automobile, software services, hardware manufacturing, healthcare, and financial services industries. This diverse economic base is ably supported by the Chennai port, which is the second largest in India and a key facilitator for import-export of goods. Presence of a vibrant economy creates ample job opportunities and leads to massive real estate development in the city.

In the coming years, Chennai’s development will not just be quantitative; rather, it will be qualitative as well. A number of infrastructure development and city beautification projects have been announced such as monorail project, new metro routes, renovation of lakes and water bodies, widening of roads, upgrade of sewage and water supply lines, etc. All and all, it is one of the best places to buy property in India.

If you are looking for some great projects in Chennai, our team of experts can help you find one. You can write to us at Support@eventeclinic.com.sg or call us at 97547616

Real Estate Investment in Holiday Homes

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Real Estate Investment in Holiday Homes

By EVENTE CLINIC

As per the last data received, in 2017, India earned an income of $27 billion from foreign tourist arrivals and was ranked 40th among 136 economies across the world in the Travel & Tourism Competitiveness Index, jumping 12 places higher from the earlier 52nd position.

For the same reason, the percentage of second home buyers has increased in the past decade.

In this article, we will see the advantages this segment offers to buyers investing in holiday homes. Also, we will see what all things you need to keep in mind before making such an investment.

People have always been investing in second homes in India, what has changed in the recent times is that people are now shifting their focus to something that offers more personal value, like a holiday home, which allows them to enjoy the additional benefit of a weekend holiday at an owned place. Moreover, such properties also offer the option of renting it out and earning income from the tourism potential of the investment destination.

The average age of people buying real estate is 35-38 years as per a recent study by HDFC. It also shows people in 20s as well as 60s invest in real estate. We all make mistakes and that is how we learn in most of the cases but making a mistake in real estate investment could cost you heavily. If you are planning to invest in real estate, make sure you continue reading.

“The average age of people buying real estate is 35-38 years as per a recent study by HDFC. It also shows people in 20s as well as 60s invest in real estate.” 

First and the foremost thing to keep in mind before buying a holiday home is – buy or invest in a holiday home only if your financial status allows you and after proper evaluation of all the related pros and cons.

Here are some of the benefits of buying holiday homes –

  1. It is a dual purpose property – Buying a holiday rental home has one clear advantage: It can serve dual purposes. You can use it as a second home and spend your own holidays there with your family and friends, and then rent it out to guests for the rest of the year. Buying an investment property for the sole purpose of renting it out long-term does not give you this option.
  2. Rental income – You will be renting out your second home to guests when you aren’t using it. You’ll be making money without having to necessarily buy an “investment” property. After all, your holiday home is your second home. It just happens to make money on the side.
  3. The appreciation – A second home is a real estate property, and real estate generally appreciates in value over time. When you are ready to sell your holiday rental property, you can usually sell it at a higher price and cash in on the profit. The best part is that you don’t have to do anything to enjoy this benefit. Natural real estate appreciation will take care of it.
  4. The risk factor – Investing in holiday rental exposes you to lower risk than other types of real estate investment. First, holiday homes are in top tourist destinations, so you can attract lots of guests, reach high occupancy rates, and charge a high nightly rate. One way to reduce your risk even further is to choose a location and a property that works as either a traditional, long-term rental or as a short-term rental.

Investing in a holiday rental home is an easy entry point to real estate investment that provides endless opportunities to learn and carries lower risk than other options. But if you are a beginner real estate investor, you might be wondering how to go about the whole process of buying a vacation home as an investment property. Talk to our consults for guidance.

There are three more important factors for successful holiday home investment – location, location, location. When buying a vacation rental home, choose places where other travellers – besides you and your family and friends – would enjoy.

For Delhi-NCR, the most popular locations are located in clusters around Mehrauli, Bijwasan, Rajokri, and Chattarpur. For Mumbai residents, some of the preferred destinations are Lonavala, Alibaug, Karjat, and Goa.

Talk to our experts to know the best area to invest in for you.

Generation wise mistakes, Home buyers usually make!!!

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Generation wise mistakes, Home buyers usually make!!!

By EVENTE CLINIC

Real Estate is one of the biggest industries in India. Every quarter millions of people fulfill their dream of owning a house, not every deal that happens is a good deal. Many homebuyers make mistakes while buying a house. In this article, we will highlight some of the mistakes people from various age groups make while investing in Real Estate.

The average age of people buying real estate is 35-38 years as per a recent study by HDFC. It also shows people in 20s as well as 60s invest in real estate. We all make mistakes and that is how we learn in most of the cases but making a mistake in real estate investment could cost you heavily. If you are planning to invest in real estate, make sure you continue reading.

“Once future is ignored, they end up selling and they do it under duress instead of planning ahead the first time, so there’s a lot of money lost there.”, says Namrata Pandey, Managing Director, Evente Clinic.

Investment Mistakes in your 20s

People buying home in the 20s are usually the ones who have just started earning. They have limited cash for down payments and also low starting salary for EMI. When they settle for low EMI with minimal down payments, which is the only option which they have, without realizing they are putting themselves in deep trouble. The effective price in such a case goes way beyond the appreciation of property.

Investment Mistakes in your 30s

The most common mistake that people in 30s make is not thinking about the future. They do not consider a future family when they’re standing in a luxurious 3 BHK flat with beautiful surrounding and access to a rooftop pool. 

“Once future is ignored, they end up selling and they do it under duress instead of planning ahead the first time, so there’s a lot of money lost there.” says Namrata Pandey, MD Evente Clinic. If you plan on having a family, it’s important to consider that when you’re home shopping, even if you’re currently single.

Investment Mistakes in your 40’s and 50’s

By this age, people tend to have more money, which leads to overestimating your budget and buying a house you can’t afford. One way to avoid this is to figure out your lifestyle comfort 

level and your future money flowing options.

You may be able to afford a 1cr bungalow but that does not mean you go ahead and buy one. If you’re married and both you and your spouse are working, figure out whether or not you can afford the EMIs if one of you gets laid off. Even experienced homebuyers can make the mistake of spending at their limit, which can mean making sacrifices that they weren’t prepared to make.

The takeaway for buyers in their 40s and 50s is to leave room in the budget for things they aren’t willing to give up—for example, a private school for the kids.

The last phase of buying, 60s and over

Many homeowners in their 60s are retired or getting ready to retire. Many retirees go on vacation, fall in love with a place, and make plans to move. Relocating and buying a home is an expensive process, so be sure to familiarize yourself with the new place before buying, if you fall into this age group. Your vacation home can be your full-time home, but just be sure to factor in all of the costs, before making the move.

Real Estate investments are by and large sensible decisions. You can avoid making these mistakes and become a smart investor. For any Real estate constancy you can always get in touch with us at Evente Clinic. 

Please feel free to write to us at support@eventeclinic.com.sg or you can call us at +65 97547616 and we will be more than happy to help. Our mission is to create Real Estate investment awareness amongst investors. Happy Investing!

Why one should invest in Navi Mumbai?

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Why one should invest in Navi Mumbai?

By EVENTE CLINIC

With real estate prices shooting up in Mumbai, it is not surprising that some of the demand has been shifted to the more affordable township of Navi Mumbai, which is an entry point to the city. It is the next best option to Mumbai, as it is developing rapidly as a commercial and urban area.

There has been a steady rise of 10% in the number of house registrations in Navi Mumbai in the past seven months, compared to the same period last year.

Builders have attributed this to infrastructural developments in the city—the new airport project and the Nerul-Belapur-Kharkopar railway line have been major draws for prospective home buyers. Navi Mumbai is unlike any other planned city in Mumbai. Well-planned infrastructures, wide roads, an abundance of natural landscapes are a few benefits of investing in property in Navi Mumbai.

“The opening of the first phase of the railway line towards Uran has proved to be an icing on the city realty’s cake. More people now are looking towards MMR’s new regions like Ulwe, Khalapur-Khopoli, Neral and Karjat because there will be better road and rail connectivity in the coming years”, says Namrata Pandey, Managing Director, Evente Clinic.

Below are some of the reasons why one should be investing in Navi Mumbai:

  1. Navi Mumbai is comparatively less crowded than any other area in Mumbai. This can be the case because of how well planned the city is.
  2. CIDCO proposed the construction of an international airport in the Kopar-Panvel area of Navi Mumbai. It has allotted 1000 acres of land to rehabilitate those displaced by the project. CIDCO also announced the development of a new township – Navi Mumbai Airport Influence Notified Area (NAINA), close to the airport, on 3000 acres of land. The construction of the international airport has created job opportunities, resulting in a large number of workers settling in the township. The construction has also brought on the development of Navi Mumbai in terms of its infrastructure and aesthetics.
 
  1. The state government’s proposal to build a 22 KM freeway linking Mumbai with Navi Mumbai is another major reason for the township’s popularity. The Mumbai Trans Harbour Link, which is still awaiting approval, would make Navi Mumbai easily accessible to the bustling city of Mumbai. The freeway, on completion, would be India’s longest sea bridge.

  2. Navi Mumbai has a designated Special Economic Zone. It is spread across 13000 hectares. This gives people the opportunity to find many jobs or set up a business there.

5. This level of infrastructure planning is a key factor behind the increased property rates in Navi Mumbai. Many new offices have opened here, including KPOs, BPOs and IT Parks. Not only that, many schools, as well as medical and engineering colleges, has become part of the skyline, thus boosting the rates of property in Navi Mumbai. Companies like Reliance, L&T, Accenture etc have their offices in Navi Mumbai.

6. It has good connectivity to Western and Central Railway. From Navi Mumbai you can easily travel to Kurla as well as Andheri through the local train.

7. Education – Navi Mumbai houses some of the best and finest schools. Airoli, Kharghar, Vashi, Nerul hosts some of the top-ranked Schools of
India.

8. In a move that could boost the property market in and around Navi Mumbai’s Kopar Khairane, the Maharashtra government has approved the plan to construct a smart financial-technological hub at Dhirubhai Ambani Knowledge City (DAKC), double the size of Mumbai’s Bandra Kurla Complex. The project will be constructed by Reliance Realty led by Anil Ambani and will house office space for the non-banking financial companies (NBFCs), information technology and services (IT & ITes). 

“The opening of the first phase of the railway line towards Uran has proved to be an icing on the city realty’s cake. More people now are looking towards MMR’s new regions like Ulwe, Khalapur-Khopoli, Neral and Karjat because there will be better road and rail connectivity in the coming years”, says Namrata Pandey, Managing Director, Evente Clinic.

If you are looking to invest in Navi Mumbai, we have some amazing properties to showcase. Get in touch with us for more details. Please feel free to write to us at support@eventeclinic.com.sg or you can call us at +65 97547616 and we will be more than happy to help.

Commercial Property Investment In India

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Commercial Property Investment in India

By EVENTE CLINIC

Commercial property market continued to be buoyant in 2018, led by robust business confidence and bright prospects in the fastest growing economy in the world. This improvement in the business environment has penetrated to several sectors with India’s commercial office sector being a prime benefactor.

The year 2018 saw occupiers opting for large office spaces underlining the increased assurance of occupiers in the office market. Large deals with above 100,000 sq ft space are estimated to have accounted for around half of the gross leasing activity of 47 million sq ft in 2018, as per data from Cushman & Wakefield.

There is a huge amount of private equity capital that wants to enter the market. The demand for grade-A office spaces remains very strong and there is fresh demand for around 34 million square feet getting incorporated into the market every year.

So the entire non-residential site is just a fantastic place for developers, because they have the right occupiers in place who are paying rising rents. If a good commercial project hits the market, it gets occupied in months. During the first nine months of 2018, large office leasing rose 35% to 18.2 million and accounted for 50% of total leasing.

“Investments into India’s commercial real estate have been the highest in 10 years at approximately $2.6 billion during the first three quarters of 2018 and 2019 will only see a rise in the same” says Namrata Pandey Srivastava – Managing Director, Evente Clinic 

Gurgaon, Pune, Navi Mumbai, Chennai and Hyderabad have been the most talked about places for commercial investment. Office rental values in Bengaluru by 2019 end are expected to increase 6.6% and in New Delhi to 6.5%. “Investments into India’s commercial real estate have been the highest in 10 years at approximately $2.6 billion during the first three quarters of 2018 and 2019 will only see a rise in the same” says Namrata Pandey Srivastava – Managing Director, Evente Clinic

Five factors you need to consider when investing in commercial spaces

Location is the king – Location is everything. Commercial properties provide returns through two avenues, rent and capital appreciation. Both are heavily dependent on the location. Look for locations where vacancy is less than 5%.

Demand vs Supply – This is one of the first things a savvy investor has to analyse before committing to buying a commercial property. Every city has different micro-markets. In Bengaluru, there is ORR, Whitefield, Electronic City while in Mumbai you have BKC, Nariman Point and Parel, among others. Look for the one which suits you as an investor.

Quality of tenant – A good tenant can significantly increase the value of commercial property. Looks for bluechip multinational tenants and avoid smaller and unknown companies. Good tenants pay rents on time, pay higher deposits, stay longer and increase the value of the property

Lease structure – Commercial lease structures are very different from residential ones. They are structured as 3+3+3 or 5+5+5 meaning 9-year (or 15-year) lease with escalations every 3 years (or 5 years). They are also one-sided. The tenant can vacate at any time whereas the landlord cannot ask them to leave for the lease period. There should be a lock-in period (generally 3 years) during which the tenant cannot vacate the property. Ensure that as a commercial property owner yoy have that in place

Market rent vs in-place rent – This is a slightly advanced concept that institutional investors use to see how risky the property is. Reach out to us to understand the concept.

Tell us your city for investment and we will reach you with some amazing deals.

The HOME LOAN game!

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The Home Loan Game!

By EVENTE CLINIC

Buying a home in India is a dream of every NRI and with the current property price in the big cities, you need to take a big home loan to get the house of your dreams. Taking a home loan is easier said than done. Most of us have no idea of all the formalities that one needs to fulfill to get a home loan approval.

We might think we have carefully chosen the home loan but in reality, a lot of people make simple mistakes when it comes to their home loans. These simple mistakes can cost you a huge amount of money over your loan tenure.

So in this article, we will discuss some important points each individual should know and do before applying for a home loan.

“I would recommend having a stable solid income. If you are self-employed, have at least two year’s tax returns. Most banks want to see solvent borrowers with steady incomes. So it’s very important to keep your current job.” – Namrata Pandey, Managing Director, Evente Clinic 

Things to Consider

Research – Every bank is offering home loan options, which one to chose? The answer to this is not a simple one. You need to consider various parameters in choosing your bank. There are three crucial factors that formulate a loan – Down payment, EMIs, and Repayment Tenure. Do detailed research on this or you may ask help from the experts.

Choose Suitable EMIs – The equated monthly installment amount depends on you. Banks offer varied EMI options to cater to and suit different needs of the borrowers. EMIs also depend heavily on the down payment you submit at the time of making a house purchase. The bigger the sum of down payment, the lesser the stress of the outstanding amount being converted into EMIs. It is also best to ensure that your chosen EMI amount does not exceed 45% of your total income.

Loan Type – There are two types of home loans based on the interest rate—fixed and floating. As the name suggests, a fixed rate loan is where the interest rate doesn’t change with market fluctuations. Usually, this rate is 1-2.5 percentage points higher than the floating rate home loan. Floating interest loan, on the other hand, varies according to the market conditions. A fixed interest rate may seem more attractive in a high-interest regime, experts advice otherwise for various reasons.

Read the fine print carefully – After all, it is a legal document and therefore often incomprehensible. You may think a ‘default’ is only if you do not pay the EMI. However, there are some banks who define default as when the borrower expires, gets a divorce (in case of joint-loans), or the borrower is/are involved in any civil litigation or criminal offence. Be careful about the add-on charges and penalties. It’s not just the interest that you pay. There are additional charges such as administrative and service charges or processing fees.

Relation between Time and EMI – An increase in the base rates by RBI means the banks will also increase their floating home loan rates. For the borrower, it means a higher EMI. Many people can’t afford such rise if they were already on edge and often request the bank to increase the loan tenure to bring down the monthly outgo. While it can be a temporary relief if you are in a desperate situation, in the long term you actually end up paying more.

Namrata Pandey, MD, Evente Clinic says, “I would recommend having a stable solid income. If you are self-employed, have at least two year’s tax returns. Most banks want to see solvent borrowers with steady incomes. So it’s very important to keep your current job.”

If you are looking for some properties to invest in, you can get in touch with us and we will surely offer you some amazing deals in the place of your choice.

2019 Indian Real Estate Investment Trends and Market Watch!

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2019 Indian Real Estate Investment Trends and Market watch!!

By Evente Clinic

India is the fastest growing economy in the world. Investors from across the globe are ready to put in money in the Indian market.
Even though the Indian real estate industry has not been in a good phase for the past few years, it has shown signs of improvement in the past year.

The question now is – Will the trend continue in a positive direction in 2019?

Indian Real Estate industry hit a massive blow in November 2016 after the demonetization. In 2017, RERA was introduced and the builders found it hard to comply with all the terms and condition of the new law. The Indian Real Estate was going through a change of phase in 2017. The industry stabilized in the year 2018 as both new projects and sales improved in some major cities if not all.

“Even though the Indian real estate industry has not been in a good phase for the past few years, it has shown signs of improvement in the past year”

2018 saw an increase in demand for real estate after a gap of four years, the prices are expected to increase in major cities. Cities like Mumbai, Delhi, Bangalore, and Hyderabad are going through rapid urbanizations and see high migrations from other cities and states. As per number available on some real estate research websites, home sales increased 24 percent during 2018 after fall of 17% in 2016. So if you are looking to invest in real estate or planning to buy a property in some of the major cities, don’t wait for too long.

In the past couple of years, the builders are focusing more on the affordable house and the same trend will continue this year. Many developers plan to build affordable housing, with residential units in the price range of INR 15–30 lacs. More affordable housing will be available for a big part of the population.

If we talk of problems, the ongoing liquidity crisis in non-banking finance companies and the crumbling of sector giants, including Amrapali and Unitech, would keep realty giving a hard time in a year when the country will go through the general elections. If the results of the election go as per market sentiments, we can see major growth in the Indian economy in all sectors for the remaining months of the year.

The commercial projects will continue to outperform the home-based real estate market even this year. As per Namrata Pandey Srivastava, MD Event Clinic, Demand in office and retail sectors will continue to beat supplies, leading to lower vacancies and higher rental yields in 2019-20. Private equity participation is quite high in commercial assets, which lends more shine to this space.

The private equity is predicted to see a rise in the upcoming years. 2019 will prove to be a nurturing year for FDI investments in India.

A report on the state of NRI investments in the Indian real estate sector says NRI investments in Indian real estate has already doubled from $5bn in 2014 to $10.2bn in 2018. This growth is largely driven by five cities – Mumbai, Pune, Bangalore, Gurugram, and Noida.

The dollar has gained more than 10% compared to Indian Rupees in the past couple of quarter. Even the other major currencies are stronger now, which means NRIs find this time perfect to invest their money in Indian Real Estate market. The other reason why most of the builders are now targeting the NRI client is Indian real estate more affordable and regulations like RERA that have led to increased transparency.

There are some major real estate showcases and events happening in this year so investors should keep a tight watch on them but overall the real estate market looks positive and this is an ideal time to enter the market for all type of investors.

 

Great News for Residential Real Estate buyer – GST rate reduced!

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GST Rate Reduced!

Great news for residential real estate buyers! 

By Evente Clinic

Last year in December, experts were of opinion there will be a reduction in GST rate early this year. The speculation has come true; the GST Council has slashed tax rates for houses in both affordable and non-affordable segments. The news is a big relief for a real estate buyer since the rate of real estate properties would be reduced. The meeting held on 24th February, the all-powerful council took note of the recommendations from the ministerial group on real estate to approve tax cuts for the sector.

This was the 33rd GST Council meeting, in which Finance Minister Arun Jaitley and his state counterparts agreed to bring GST rate on under-construction properties in normal category down to 5 percent. Currently, the GST is levied at 12 percent on payments made for under-construction properties or ready-to-move-in flats where completion certificate has not been issued at the time of sale.

The GST Council has also reduced GST rate for affordable housing to 1 percent from the earlier 8 percent. The new tax rates will come into effect from April 1, 2019.

 

“This will be a major step in our efforts to give a boom to the real estate sector and making housing affordable for the middle class, neo-middle class and aspirational class.-Finance Minister Arun Jaitley”

However, Goods and Services Tax (GST) is not levied on real estate properties for which completion certificate has been issued at the time of sale.

For developers, notable information is that they will not be able to claim the Input Tax Credit (ITC) after the tax rate cut for the real estate sector. This will make the issue of developers not passing on the benefits of ITC to homebuyers will become irrelevant.

Also, unutilized ITC, which used to be added to the end cost of the project, will now be removed to make prices more affordable for the homebuyer, the Ministry of Finance said in a statement.

The GST Council also decided that intermediate tax on development rights, such as TDR, JDA, lease, FSI shall be exempted only for such residential property on which GST is payable.

As per the experts, even a small increase in sales on the back of reduced GST will give some relief to developers funding issues by catalyzing sales to some degree. To that extent, developers will see some improvement in their balance sheets.

If you are looking to buy a home in the near future, reach out to us with your questions and we will help you with answers