360 degrees Real Estate Services: August 2019

Legal Options For A Home Buyer Who Is Forced To Take Possession In A Project Without OC

9:00 AM

Legal Options For A Home Buyer Who Is Forced To Take Possession In A Project Without OC

Irrespective of their size, brand and reputation, several developers offer possession of homes even when the projects are yet to receive an occupation certificate (OC) - a document that states a building is fit for habitation. Growing impatience among buyers and perennial delays to get the documentation work done at public offices, are the prime reasons why even big builders resort to such illegal acts. What should a buyer, who is aware that taking possession of a unit sans the building getting an OC is not only illegal (your ownership of the property becomes questionable; you risk eviction, face penalty and can be denied utilities) but highly unsafe (the building might have structural or operational flaws) do when a developer arm-twists them into accepting possession of such a flat? There have been several instances in the recent past where builders have forced property possession on homebuyers without the latter willing to do so in the absence of project OCs. Amrapali, Jaypee, Unitech, etc., have done so. Here are some of the options available to such an aggrieved home buyer.

Approach RERA
Under the provisions of the realty law, developers are obliged to obtain an OC before handing the unit over to buyers. Offering possession in a project for which, the application for an OC is still being processed is a breach of the real estate law and a buyer has every right to move the Real Estate Regulatory Authority (RERA) in his state to seek relief.

Note that all buildings that are yet to receive an OC, would be considered as under-construction. So, your plea would certainly be admitted in case your state has an operational RERA. Authorities in some states including Maharashtra and Haryana have also shown their willingness to offer relief in cases where a project is too small to fit under the purview of the law.

In case your state is yet to have a fully-operational real estate authority ─ West Bengal, for instance, has entered into a legal tussle to enact its own version of the central law and is far from having an authority that could work as yet ─ there are other platforms you could approach.

Move The Consumer Court
Recently, the Maharashtra State Consumer Dispute Redressal Commission offered relief to a Titwala-based homebuyer who was pressed into taking possession of the flat without OC. State laws give consumer forums the authority to take up the matter and provide relief to the aggrieved party. Since the state commission works through a three-tier system, a consumer has to first move to the district level court and then approach the state and the national forums if he is not satisfied with the orders of the lower courts. Value of the property also determines whether or not you can approach the apex body directly.

Lodge An FIR
A homebuyer could lodge an FIR against the builder under Section 405 of the Indian Penal Code (IPC), which deals with 'criminal breach of trust.' Following this, an arrest warrant could be issued against the developer and he could be tried in court.

“In case the police refused to lodge the complaint, the homebuyer can also seek relief from the court under Section 156(3) of the IPC which authorises courts to direct the police to lodge an FIR,” points out Prabhanshu Mishra, a Lucknow-based criminal lawyer.

- by Sunita Mishra

Source : PropTiger

Agreement for Sale

Agreement for Sale Versus Sale Deed : Main Differences

2:38 PM

What Is The Difference Between Agreement Of Sale And Sale Deed?

An agreement for sale of an immovable property is not the same as a sale deed for the same property. We look at the differences that home buyers and sellers should be aware of, from a legal standpoint.

While buying a property, people enter into an agreement with the seller. The form and format of the agreement may be different. It may either be an agreement for sale or it may be a sale deed. People generally do not understand the difference between these two documents and treat both as synonymous. However, it is not so.

What is an agreement for sale?

An agreement for sale, is an agreement to sell a property in future. This agreement specifies the terms and conditions, under which the property in question will be transferred. The Transfer of Property Act, 1882, which regulates the matters dealing with the sale and transfer of house property, defines the contract for sale or an agreement for sale as under:

“A contract for the sale of immovable property, is a contract that a sale of such property shall take place on the terms settled between the parties” – Section 54. Section 54 further provides that “It does not, of itself, create any interest in or charge on such property.”

From the above definition, it becomes amply clear that an agreement for sale contains a promise to transfer a property in question in future, on satisfaction of certain terms and conditions. So, this agreement itself does not create any rights or interest in the property, for the proposed buyer.

What the sales agreement creates, is a right for the purchaser to purchase the property in question on satisfaction of certain conditions. Likewise, the seller also gets the right to receive the consideration from the buyer on complying with his part of the terms and conditions.

In case of failure of the seller to sell or hand over possession of the property to the buyer, the buyer gets a right of specific performance, under the provisions of the Specific Relief Act, 1963. A similar right is available to the seller under the agreement, for seeking specific performance from the buyer.

Supreme Court ruling on sale deed and agreement for sale

The sales agreement may or may not result into an actual sale of the property in question. Some of the stamp duty laws, like the Maharashtra Stamp Act, deem an agreement for sale of an immovable property, on the same footing as a proper deed of conveyance and therefore, are subject to the same stamp duty as is applicable on the proper deed of conveyance or sale deed of an immovable property. Due to such deeming provisions, requiring payment of stamp duty on an agreement for sale, people mistakenly perceive an agreement for sale, as a proper sale deed.

The Supreme Court of India in 2012, in the case of Suraj Lamp & Industries (P) Ltd (2) v State of Haryana, while dealing with the validity of sales of immovable properties made through power of attorney, has held as under:

“Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law. We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.”

“Any contract of sale (agreement to sell), which is not a registered deed of conveyance (deed of sale), would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act and will not confer any title, nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of the Transfer of Property Act).”

According to the Transfer of Property Act, an agreement for sale, whether with possession or without possession, is not a conveyance. Section 54 of the Transfer of Property Act enacts that the sale of an immovable property can be made, only by a registered instrument and an agreement for sale does not create any interest or charge on its subject matter.

Consequence of failure to execute a sale deed

As per the Indian Registration Act, 1908, any agreement for transfer of any interest in an immovable property of value more than one hundred rupees, is required to be registered. So, if you have purchased any property under any agreement for sale, without it being followed by a proper sale deed, you do not get any right or interest in the property purported to be transferred under the agreement of sale.

This absolute rule is subject to the exception provided under Section 53A of the Transfer of Property Act. Section 53A provides that where the buyer has obtained possession of the property that is subject matter of the transfer, while fully complying with his part of the obligation under the agreement, the seller shall not be entitled to disturb the possession so granted to the buyer. It may be noted that Section 53A provides a shield to the proposed transferee against the transferor and debars the transferor from disturbing possession of the transferee, but it does not cure the title of the buyer to the property. The ownership of the property still remains with the seller.

So, in the cases where you have purchased any property under a sales agreement and got possession, the title of the property still remains with the developer, unless a sale deed subsequently has been executed and registered under the Indian Registration Act. Thus, it becomes clear that a title in an immovable property can only be transferred by a sale deed. In the absence of a duly stamped and registered sale deed, no right, title or interest in an immoveable property, accrue to the buyer of the property.

- by Balwant Jain

Source : Housing.com

Repo Rate

RBI Reduces Repo Rate By 35 Bps, In 4th Consecutive Cut

3:05 PM

RBI Reduces Repo Rate By 35 Bps, In 4th Consecutive Cut

The Reserve Bank of India (RBI), on August 7, 2019, reduced the repo rate by 35 basis points (bps) to bring it down to 5.4 per cent, a move prompted by low growth and weak inflation. This is the fourth consecutive cut in rates that the banking regulator has resorted to, since the new governor Shaktikanta Das took charge, in December 2018.

Almost 80% of 66 economists who took part in a Reuters poll in July 2019, expected the RBI to cut its benchmark repo rate by 25 basis points to 5.50 per cent, while announcing its third monetary policy review on August 7, 2019. For the uninitiated, repo rate is the rate at which the RBI lends money to scheduled banks. A reduction in repo rate, means banks will be in a better position to offer loans to borrowers at lower interest.

How Does It Help Home Loan Borrowers And The Real Estate Sector?

Several banks have already implemented a reduction in their marginal cost of funds-based lending rates (MCLR), after the RBI started the rate cut spree. The move would bring down the EMIs (equated monthly installments) that home loans borrowers, exiting and new, pay every month. Private lenders HDFC Bank and ICICI Bank have brought down their lending rates to 8.6 per cent, while public lenders State Bank of India and Punjab National bank have brought down the interest rate to 8.4 per cent.

Lower rates may prompt homebuyers to make a move, at a time when the real estate sector is struggling with a plethora of problems. Amid low sales volumes and high inventory, India’s real estate sector is struggling, to get over an ongoing slowdown that has plagued sectorial growth for several years now. Coupled with several other measures that the government has launched to fuel growth in the sector, the rate cut might trigger fresh demand in major property markets.

"The rate cut, along with various other reforms announced recently, is expected to cheer up developers and buyers, says Surendra Hiranandani, chairman and managing director, House of Hiranandani. "The reduction in repo rates in the previous reviews, did not have any significant impact on lending rates. Going forward, it is imperative for banks to reduce the lending rates and ensure that home loan borrowers reap the benefits of this move. Real estate being a highly cost-sensitive sector, demand will only pick up, if the cut is substantial enough, to result in significant cost savings," he adds.

Data available with propTiger.com shows that home sales in the top nine property markets, declined by 11 per cent in the quarter ending June of FY20. Real estate developers were also sitting on an inventory stock consisting of over 4 lakh unsold units in these markets, at a time when the builders in the country are under tremendous pressure owing to a liquidity crunch.

- by PropTiger

Source : Housing.Com

Rental Income

Taxation of rent received and deductions available

3:05 PM

Taxation of rent received and deductions available

While income tax laws prescribe certain taxes on a person, who receives any rent from a property which he has let out, the tax payer is also allowed to claim certain deductions out of such income. We examine the legal provisions

Taxation of rent received

The Income Tax Act of India has a specific head of income, titled ‘Income from house property’, to tax the rent received by an owner of a property.

So, any rent received with respect to a property that is let out, is taxable under this head. Rent received with respect to a residential house, as well as commercial property, is taxable under this head. Even the rent received for letting out your factory building or rent received on land appurtenant to the building, is taxable under this head.

The property is taxable on the basis of its annual value. The annual value of a property, is determined on the basis of whichever is higher: the rent actually received by the property or the amount of rent for which the property can reasonably be expected to be let out.

So, if you let out a property for a nominal amount, the amount to be considered for taxation of such property, would be the market rent and not the rent that you have received. Likewise, if the actual rent received by you for your property is higher than the market rent, the rent actually received/receivable by you, will be considered for taxation purpose. Please note that the rental income becomes taxable in your hand on accrual basis and not on receipt basis.

It is only the owner, who is taxed for rent received. Hence, if you sublet any property that you have taken on rent, the amount received would become taxable under the head ‘Income from other sources’. Even the rent received by a person who has encroached on a property, would become taxable under this head. The ownership for this purpose is broadly defined and even covers cases where you have received possession of a property in part performance of an agreement and where the legal title of the goods may not have been transferred in your name. Even when an individual gifts the property to one’s spouse, except under an agreement to live apart, he shall continue to be treated as an owner of the property and taxed accordingly, even though he may not have received the actual rent for such property. Similarly, even if the property is gifted to a minor, the donor parent shall continue to be taxed for such property.

Deductions from rent received

It is not that the gross rent received becomes taxable.

From the rent received/receivable for the property, you are allowed to deduct the municipal taxes payable for the property. As the rent is taxable on accrual basis, the law allows you to claim deduction for the rent which you have not been able to realise, subject to the fulfilment of certain conditions. After deducting the above two items, what you get is the annual value, from which you are allowed a standard deduction of 30% of the annual value, to cover the expense for repairs, etc.

Please note that the deduction of 30% is a standard deduction, irrespective of whether you have actually incurred any expenditure for repairs or renovation for the property, during the year under review.

In case you have borrowed any money for the purpose of purchase, construction, repair/renovation of the property, you are also allowed to claim deduction for the interest payable on money so borrowed. The money can be borrowed from any person and not necessarily as a home loan. Presently, there is no restriction on the amount of interest, which you can claim against your rental income.

However there is a ceiling of Rs two lakhs, for loss under the head ‘Income from house property’, which can be set off against your other income, likes salary, business income or capital gains. Any loss under this head, beyond Rs two lakhs, is allowed to be carried forward for set off, during eight subsequent years. This provision adversely affects people who borrow money to buy a property and let it out, as rental values are generally around three to four per cent of the capital value, whereas the rate of interest on such loans is around nine per cent. As home loans are usually taken for longer periods, the situation of loss under this head, will normally continue for longer periods and the excess interest beyond Rs two lakhs will, effectively, be lost forever.

- by Balwant Jain | Housing.Com
(The author is a tax and investment expert, with 35 years’ experience)

Pages

Legal Options For A Home Buyer Who Is Forced To Take Possession In A Project Without OC

Agreement for Sale Versus Sale Deed : Main Differences

RBI Reduces Repo Rate By 35 Bps, In 4th Consecutive Cut

Taxation of rent received and deductions available

While income tax laws prescribe certain taxes on a person, who receives any rent from a property which he has let out, the tax payer is also allowed to claim certain deductions out of such income. We examine the legal provisions

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Legal Options For A Home Buyer Who Is Forced To Take Possession In A Project Without OC

Agreement for Sale Versus Sale Deed : Main Differences

RBI Reduces Repo Rate By 35 Bps, In 4th Consecutive Cut

Taxation of rent received and deductions available

While income tax laws prescribe certain taxes on a person, who receives any rent from a property which he has let out, the tax payer is also allowed to claim certain deductions out of such income. We examine the legal provisions

recent posts

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