Buy­ers stay away from un­der con­struc­tion hous­ing projects

Hindustan Times (Chandigarh) - Estates - - ESTATES - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­times.com n

CHANDIGARH: The hous­ing sec­tor is go­ing through ma­jor changes as mar­ket dy­nam­ics ad­just to new le­gal frame­work and tax­a­tion sys­tem for the sec­tor.

In the midst of this ad­just­ment, the un­der-con­struc­tion hous­ing seg­ment has suf­fered the most with more and more home­buy­ers pre­fer­ring com­pleted projects rather newly launched or on­go­ing un­der-con­struc­tion projects.

Re­alty ex­perts say it is skew­ing the hous­ing mar­ket dy­nam­ics dis­cour­ag­ing sup­ply ex­pan­sion.

PAST EX­PE­RI­ENCE

The home­buyer al­ways got bet­ter deals for un­der-con­struc­tion prop­er­ties as the builder needed to raise funds for launch­ing a new project and com­plet­ing it.

But, for many home­buy­ers in­vest­ing in an un­der-con­struc­tion prop­erty has re­sulted in a long wait for get­ting pos­ses­sion.

Some­times the builder even left the project mid­way af­ter tak­ing home­buyer money.

“The home­buyer is still wary of un­der-con­struc­tion projects af­ter her dread­ful ex­pe­ri­ence with such projects in the past. A lot of peo­ple bought in un­der­con­struc­tion projects — many of th­ese by tak­ing home loans while liv­ing on rented ac­com­mo­da­tion. So, they were pay­ing both the home loan equated monthly in­stall­ment and house rent at the same time. In such cir­cum­stances, the most fear­ful for such buy­ers is pos­ses­sion de­lays. But that’s ex­actly what hap­pened with many builders not car­ing to stick to pos­ses­sion dead­lines,” says Col RS Per­har (retd), a Chandigarh-based real es­tate an­a­lyst.

GST FAC­TOR

The goods and ser­vices tax (GST) is levied on un­der-con­struc­tion prop­er­ties. Ef­fec­tively at 12% for seg­ments other than af­ford­able hous­ing, home­buy­ers seek to avoid pay­ing it. This is es­pe­cially the case with builders not pass­ing on the in­put tax credit ben­e­fits to the home­buyer.

One way to avoid pay­ing this ad­di­tional hous­ing own­er­ship cost is not buy an un­der-con­struc­tion house and buy­ers only opt­ing for ready-to-move in prop­er­ties.

Ni­ran­jan Hi­ranan­dani, pres­i­dent of Na­tional Real Es­tate De­vel­op­ment Coun­cil (NAREDCO) “The GST ap­pli­ca­ble on ready pos­ses­sion, oc­cu­pa­tion cer­tifi­cate (OC) re­ceived homes is zero, while on home un­der con­struc­tion, it is levied at 12%. In ef­fect, it cre­ates a sit­u­a­tion where a home seeker feels it is ad­van­ta­geous to wait for the project re­ceiv­ing the OC be­fore mak­ing the pur­chase, as there is a sav­ing of 12% GST. The im­pact is be­ing acutely felt on un­der­con­struc­tion stage sales, in fact it has be­come a new trend – home­buy­ers are opt­ing for such homes where they can save the GST. This has cre­ated a sce­nario in real es­tate where home seekers are giv­ing up the ad­van­tage of ar­bi­trage while buy­ing un­der con­struc­tion homes. For an­other seg­ment of home­buy­ers, book­ing a home at the start of the project of­fered time op­tions in which to spread the pay­ment in­stal­ments, present sce­nario they have to put up the en­tire amount at one go.”

THE RERA IM­PACT

The Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Act 2016 was ex­pected to build-up con­fi­dence among home­buy­ers for the newly launched un­der-con- struc­tion hous­ing projects.

A slew of strin­gent pro­vi­sions, un­der the Act, im­posed on builder re­gard­ing the req­ui­site gov­ern­ment ap­provals, sale agree­ments, funds col­lected from buy­ers for con­struc­tion, pos­ses­sion dead­lines etc are aimed at mak­ing the builder ac­count­able for prom­ises and bring in greater trans­parency in the way builder goes about de­liv­er­ing her project to the buyer.

“Th­ese are early days for the state real es­tate reg­u­la­tory au­thor­i­ties. Some are still at in­cep­tion stage and oth­ers are yet to make fully op­er­a­tional the Rera websites. Also, for the home­buyer, it is an­other way to solve le­gal dis­putes with the builder. But, why to get into le­gal dis­putes with the builder when one can avoid buy­ing an un­der-con­struc­tion prop­erty,” says Hi­man­shu Pant, busi­ness head and se­nior vice pres­i­dent (Pun­jab and Haryana) at An­sal Prop­er­ties & In­fra­struc­ture Ltd.

While the Rera act im­poses strict re­stric­tions and reg­u­la­tions re­gard­ing get­ting of gov­ern­ment ap­provals and com­ple­tion cer­tifi­cates, the on­go­ing un­der-con­struc­tion projects suf­fer be­cause of long pen­dency in get­ting req­ui­site ap­provals and com­ple­tion cer­tifi­cates.

“The Rera ex­er­cises con­trol over the builder and tries to stream­line all pro­cesses at the builder end. But, the new Act has no say over the de­lays caused by the gov­ern­ment agen­cies in giv­ing dif­fer­ent req­ui­site ap­provals. Th­ese gov­ern­ment in­duced de­lays also neg­a­tively im­pact the pos­ses­sion de­liv­ery in un­der-con­struc­tion project, thus mak­ing them less at­trac­tive to the home­buyer,” says Pant.

HT PHOTO

Trend of buy­ers opt­ing against such prop­er­ties is an emerg­ing trend as GST and Rera reg­u­la­tions im­pact buyer de­ci­sions.

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