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7 Things You Need to Know Before Investing in Real Estate

Buying real estate is not an easy ordeal. When it comes to investing money in real estate we need to focus on a lot of factors. Middle class families have to consider a lot of parameters when it comes to investing huge sums of money in any market.As its not common but for many of us, it’s exceedingly easy to lose focus, make bad decisions and get sidetracked along the way (often times, without even knowing it).

These past few weeks I have asked a lot of real estate agents for their input in regards to the issue of taking this huge decision of purchasing a real estate property.My aim was to compile a short list of the most important factors one should consider while buying a property.These are the ones that kept coming in almost all of my conversations with the real estate agents.

1. Don’t let your emotions play with you.

Most of the time when buying a home or a property, people listen to their heart more than actually thinking about it logically, which is perfectly fine when it is the place where you will be living for many years of your life. But don’t let your emotions affect your decision when buying your first investment property. Think of it as purely a business investment and logically negotiate to get the best possible price.
Remember, the lower the price you get for a property, the better the odds that you will earn a higher profit from it.

2. Do your research.

Whenever you are looking into a property you need to do proper research before making a bid on it. Make sure that the property is situated in a location that has proper facilities and basic amenities so that if you hope to sell or rent it, you will reach to the returns you are expecting and that it will appeal to the market.

3. Secure a down payment.

You are going to require at least 20% down payment for buying your first real estate property. This down payment can be more or less depending on the locality and availability of the property. Other than that you need to keep in check that you need extra cash for renovation, repair or development of the property you wish to acquire. You need to check your income and secure a loan if need according to your expenses.

4. Calculate expenses and profits beforehand.

People say those who have an eye for detail always do good. OK, not always, but there is no harm in being a little precautious and considering every detail beforehand. Start with calculating the money that you already have and what you can borrow before buying your first property. Next, calculate how much it would cost to renovate or develop your house. Also, keep in mind the operation costs. Finally, estimate the price if you are going to list your property for and cut out the expenses to get a rough estimate of the profit you stand to make. Honestly speaking, you may not even hit half of the estimated profit, but this calculation is necessary to keep yourself in the safe zone.

5. Choose your Property Wisely start with Low Cost.

Even if you are ready to invest lakhs and lakhs in your first property, it is always a good idea to go for properties that lie in the lower- to mid-range price brackets. Some experts suggest the house that doesn’t cost you more than ₹ 40,00,000. Don’t forget, you will need to spend more money on renovation or development.
Furthermore, since it is your first investment property, keeping your investment as low as possible will help you stay in the safe zone.

6. Pay your debts.

As a new investor buying their first investment property, you might need to consider the loan options — one shouldn’t be carrying debts as their investment portfolio. You must clear all of your debts, student loans, medical bills, etc., before starting out in real estate.

7. Consider Home loan options.

There are a large number of options available when it comes to collecting funds to purchase your first property. Choosing the right option that could make a positive difference to your financial situation requires a lot of research.
Different Home loan options come with different benefits, and the best possible option depends on your situation. However, you need to consider features such as which loan option is giving you the freedom of EMI and which is offering the lowest interest rates.

Pradhan Mantri Awas Yojana (PMAY)

PMAY

With the mission of “Housing for All”, Government of India started the Pradhan Mantri Awas Yojana (PMAY). However, there are many doubts for loan seekers like who is eligible for Pradhan Mantri Awas Yojana (PMAY)? What is the eligibility to apply under Pradhan Mantri Awas Yojana (PMAY)?

In this post, let me clear all those doubts by discussing about who is eligible for Pradhan Mantri Awas Yojana (PMAY).

Schemes under Pradhan Mantri Awas Yojana (PMAY)

Currently, there are three schemes under which you can apply for Pradhan Mantri Awas Yojana (PMAY). They are as below.

  • EWS (Economically Weaker Sections)/LIG (Low Income Group)
  • CLSS (MIG-I)
  • CLSS (MIG-II)

Who is eligible for Pradhan Mantri Awas Yojana (PMAY)?

Now let us discuss the eligibility of the applicant for Pradhan Mantri Awas Yojana (PMAY) under each such scheme separately.

# Eligibility of Pradhan Mantri Awas Yojana (PMAY) under EWS/LIG Scheme

  • You/your family/household should not own a pucca house in any parts of the country either in his name or any of his family member’s name
  • One adult female membership is mandatory in the property ownership.
  • The property should be co-owned by a female member of the family. However, this condition will not be made mandatory in cases of construction of house on an existing plot or extension/renovation of existing Kuccha/Semi-pucca house.
  • Location of the property should fall under all statutory towns as per 2011 census and their adjacent planning area (updated by the government from time to time).
  • Here, family means husband, wife, unmarried sons and/or unmarried daughters.
  • Whoever applying under EWS scheme must have an annual income up to Rs.3 lakhs.
  • Whoever applying under EWS scheme must have an annual income between Rs.3 lakhs to Rs.6 lakhs.
  • The scheme will be for the period of 17th June 2015 to 31st March 2022.
  • The carpet area of the house under these Schemes should up to 30 sq. mts. for EWS beneficiaries and upto 60 sq. mts. for LIG beneficiaries.
  • Meaning of Carpet Area-The net usable floor area of an apartment, excluding the area covered by the external walls, but includes the area covered by internal partition walls of the apartment.
  •  This scheme is available for housing loans availed for acquisition/construction of house and repair/extension of Kucha/Semi Pucca house.
  • The maximum term of the loan is 20 years.
  • The maximum age limit is 70 years of age, at the end of the repayment period.
  • In the event of default in repayment of the loan by the borrower/beneficiary to the Bank and the loan becoming
    Non Performing Assets(NPA), the Bank will proceed for recovery of dues through such measures as considered
    appropriate, including foreclosure of the property. In all such cases, the amount of the recoveries will be
    charged to the subsidy amount on a proportionate basis(in proportion to the loan outstanding and subsidy
    disbursed).

# Eligibility of Pradhan Mantri Awas Yojana (PMAY) under CLSS (MIG-I) Scheme

  • You must not own a pucca house either in his/her name or in the name of any member of his/her family in any part of India.
  • You must not have availed any central/state assistance under any housing scheme from Government of India ever.
  • Adult female membership ownership in property is desirable.
  • Location of the property should fall under all statutory towns as per 2011 census and or adjacent planning area (updated by government time to time).
  • The credit linked subsidy @ 4% will be available for loan amount up to Rs.9 lakhs in case of MIG-I. However, the Banks can sanction Home Loans more than Rs.9 lakhs but the subsidy will be restricted to Rs. 9 lakhs only.
  • Loan tenure is 20 years. However, Banks can sanction loans for a maximum tenor of 30 years but the loan has to be repaid before the borrower attains the age of 70 years.
  • You are eligible to apply for MIG-I if your annual income is from Rs 6,00,001 to Rs. 12 lakhs.
  • Here, family means husband, wife, unmarried sons and/or unmarried daughters.
  • An adult earning member (irrespective of marital status) can be treated as a separate household and can avail subsidy independently.
  • In case of married couple, either of the spouses or both together in joint ownership will be eligible for a single house subject to income eligibility of the household under the scheme.
  • The carpet area of house under this Scheme should be up to 120 sq. mts. (1292 sq ft) for MIG-I beneficiaries.
  • Meaning of Carpet Area-The net usable floor area of an apartment, excluding the area covered by the external walls, but includes the area covered by internal partition walls of the apartment.
  • Special loan offers of banks like SBI MaxGain will not be eligible for this scheme.
  • All loans accounts under the Scheme will be linked to Aadhaar.
  • Applicable in case of Repair and Renovation.
  • Total deduction from Gross income, including proposed EMI on Home Loan, not to exceed 50% of the Gross
    Income. Net take home pay should not be less than 50% of the Gross Income of the applicant/s for loan limit
    up to Rs.10 Lacs. For a loan over Rs.10 Lacs, total deduction from Income, including EMI on proposed home loan not to exceed 60% of the Gross Income of the applicant.
  • In the event of default in repayment of the loan by the borrower/beneficiary to the Bank and the loan becoming
    Non Performing Assets(NPA), the Bank will proceed for recovery of dues through such measures as considered
    appropriate, including foreclosure of the property. In all such cases, the amount of the recoveries will be
    charged to the subsidy amount on a proportionate basis(in proportion to the loan outstanding and subsidy
    disbursed).

# Eligibility of Pradhan Mantri Awas Yojana (PMAY) under CLSS (MIG-II) Scheme

  • You must not own a pucca house either in his/her name or in the name of any member of his/her family in any part of India.
  • You must not have availed any central/state assistance under any housing scheme from Government of India ever.
  • Adult female membership ownership in property is desirable.
  • Location of the property should fall under all statutory towns as per 2011 census and or adjacent planning area (updated by government time to time).
  • The credit linked subsidy @3% for Rs 12 lacs in case of MIG-II. However, the Banks can sanction Home Loans more than Rs.12 lakhs but the subsidy will be restricted to Rs.12 lakhs only.
  • Loan tenure is 20 years. However, Banks can sanction loans for a maximum tenor of 30 years but the loan has to be repaid before the borrower attains the age of 70 years.
  • You are eligible to apply for MIG-II if your annual income is from Rs 12,00,001 to Rs. 18 lakhs.
  • Here, family means husband, wife, unmarried sons and/or unmarried daughters.
  • An adult earning member (irrespective of marital status) can be treated as a separate household and can avail subsidy independently.
  • In case of a married couple, either of the spouses or both together in joint ownership will be eligible for a single house subject to income eligibility of the household under the scheme.
  • The carpet area of house under this Scheme up to 150 sq. mts. (1614 sq ft) for MIG-II beneficiaries.
  • Meaning of Carpet Area-The net usable floor area of an apartment, excluding the area covered by the external walls, but includes the area covered by internal partition walls of the apartment.
  • Special loan offers of banks like SBI MaxGain will not be eligible for this scheme.
  • All loans accounts under the Scheme will be linked to Aadhaar.
  • Applicable in case of Repair and Renovation.
  • Total deduction from Gross income, including proposed EMI on Home Loan, not to exceed 50% of the Gross
    Income. Net take home pay should not be less than 50% of the Gross Income of the applicant/s for loan limit
    up to Rs.10 Lacs. For a loan over Rs.10 Lacs, total deduction from Income, including EMI on proposed home loan not to exceed 60% of the Gross Income of the applicant.
  • In the event of default in repayment of the loan by the borrower/beneficiary to the Bank and the loan becoming
    Non Performing Assets(NPA), the Bank will proceed for recovery of dues through such measures as considered
    appropriate, including foreclosure of the property. In all such cases, the amount of the recoveries will be
    charged to the subsidy amount on a proportionate basis(in proportion to the loan outstanding and subsidy
    disbursed).

credit :

What is the impact of GST on Real Estate

GST – a brief introduction

The Goods and Services Tax (GST)—India’s biggest tax reform post-independence was implemented on 1 July 2017. The new tax regime seeks to transform the Indian economy with its ‘One Nation, One Market, One Tax’ principle by subsuming a host of indirect taxes charged at varied rates by the Centre and states, therefore bringing uniformity in taxation across the country. Its primary objective is to simplify the complex tax structure on the supply of goods and services. While this reform may have certain short-term negative impacts on the economy, it will have long-term benefits for the country

Impact of GST on residential property prices

The new GST rates on residential real estate transactions have been proposed as follows:

  • GST to be charged at 5% without Input Tax Credit (ITC) on residential properties that are not part of the affordable housing segment.
  • GST to be charged at 1% without ITC on residential properties that are included in the affordable housing segment.
  • On all supplies provided on or after 15 November 2017 when the rate of tax was reduced from 28% to 18%.
General Overview

While there is a reduction in the total tax component of inward supplies of materials, there is also a corresponding increase in the tax cost on services received. However, with unrestricted flow of credits available under GST, as compared to restrictions under the earlier regime, developers shall benefit with a higher credit pool and therefore, from the government perspective, be required to pass on such benefits to customers by way of reduced prices. It may also be noted that the GST law requires businesses to mandatory pass on benefits derived from any reduction in the rate of tax or benefits of input tax credit to customers. With regard to the real estate sector, on the one hand, the industry is grappling to determine the actual benefits on account of GST and, on the other hand, there is lack of clarity on haw the benefit, if at all any, has to be computed (the period to be considered, the factors to be considered, etc.). The government has been very aggressive, especially with the real estate sector, to investigate businesses for non-compliance of anti-profiteering provisions. Against this backdrop, businesses should take appropriate steps to evaluate the quantum of benefit to be passed on the methodology for passing on such benefit, if any, to customers. There is a possibility of the market perceiving GST to be a ‘by default’ agent for a price drop for all projects, whereas the actual factor for such price reduction is business and market requirements. The table below provides a comparison of the taxability of various inputs pre and post GST implementation and its likely impact on project costs. Taxability under GST

GST on Construction Services

Construction services also feature taxes that are applicable to various real estate transactions that can be considered as part of how GST on Real Estate is applicable. The following is a snapshot of GST rates applicable to select areas of construction-related services in the real estate sector*:

GST on Key Construction Services
Under construction properties under Credit Linked Subsidy Scheme8%
Under construction properties (excluding those under Credit Linked Subsidy Scheme)12%
Composite supply of works contract for affordable housing12%
Composite supply of works contract to government agencies/local govt. bodies12%
Composite supply of works contract (other than government agencies/local govt. bodies/ affordable housing)18%
Works Contract (other than govt. bodies)18%

 

Conditions for Claiming Input Tax Credit in Real Estate

Subsequent to introduction of GST in real estate, as per GST Act rules input tax credit (ITC) equal to total tax paid may be claimed by real estate developers in the following cases:

  • The claimant can produce a debit note/purchase invoice/tax invoice as proof of GST being deducted.
  • The goods/services (or both) have already been received by the claimant.
  • The ITC claimant has not used the goods/services (or both) received for personal use.
  • All taxes that were due has been paid to the government by the supplier.
  • A valid GST return has been filed by the ITC claimant.

Source : PaisaBazaar