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V Nagarajan: New regulations for developing real estate projects in Karnataka state
August 06, 2017
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I have invested in plotted development project in Bengaluru, Karnataka state, India.  But the project is yet to be completed. As the new regulation has come into force, will the land development is also covered under the legislation?  Please clarify. Shashank, Dubai.
The RERA which came into force on May 1, 2017 in India, demands compulsory registration of all the residential projects under the regulatory act for plot sizes that are more than 500 sqm.  It is also applicable to certain ongoing, under construction projects including land development.

The Karnataka government has notified the Real Estate Regulatory (Regulation and Development) Act on July 10 and launched a portal on July 24 for builders and agents to register themselves and their projects. Builders are expected to disclose project related information including project plan, layout, and government approvals related information.  In a nutshell, RERA aims to protect the interest of investors in real estate.

I have inherited land from my relative and do not have any intention of selling.  Is gift tax payable now?  When does the tax liability arises? Sunil, Sharjah
Merely on inheriting property, no tax formalities have to be complied with, though it is advisable to inform the municipal authority.  There is no liability to pay income tax merely on inheriting property. The income tax liability arises only when the inherited property is sold.

I am planning to mortgage certain properties to raise short-term funds in India.  Is there any approval required in this regard from any authorities? Abhishek, Dubai.
NRI/PIO can mortgage immovable property to an authorised dealer/housing finance institution in India without the need to go to Reserve Bank of India for approval.  You can also mortgage to a party abroad, but with prior approval of Reserve Bank of India. 

Notes:

Realty Investment

In a survey conducted to ascertain the motive behind investing in properties among resident Indians, 64 per cent have made the decision for their end-use and only 36 per cent targeted it for investment.  On the contrary, what is worth observing is that 93% of NRI respondents are willing to buy property for investment purpose over a meagre 7% who were interested for end-use.

According to QuikrHomes survey, overall 59% participants have shown inclination towards buying property for end-use purpose.  Overall, 32% of the participants expect up to 10% annual return from their real estate investment. Considering the current market situation, annual returns in the range of 9-14% are relatively healthy. It is interesting to note that respondents in all Tier 3 cities along with Pune & Hyderabad markets continue to remain too optimistic about the high return on investment. This may also be due to the fact that the prevailing prices in these cities are relatively lesser than their other metro counterparts. 

Warehousing Sector

The warehousing sector in India has already seen CAGR of 20% from 2014 to 2017, fuelled by economic revival, growth of its e-commerce and the third party logistics industries as well as implementation of GST. The existing stock has a potential to grow at an even faster rate going forward, at least until 2022. Investment in infrastructure is also expected to play a significant role, as large planned investments such as MMLPs, dedicated freight corridors (DFC), etc., in road, rails, ports and airways across emerging India will bolster trade and, consequently, warehousing demand.

Direct real estate transaction volumes in Asia-Pacific’s industrial sector totalled $13.8 billion in 2016, based on data from Real Capital Analytics (RCA). The sector accounted for about 12% of the region’s total volumes between 2011 and 2016.  Although India and emerging Southeast Asia accounted for less than 3% of volumes in these transactions, the potential for growth is phenomenal. This is already evident in some of the recent investment trends in H12017, which has accounted for nearly $2 billion in a phased manner in the coming years, according to JLL survey.

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The author is a business analyst
covering Indian property markets

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