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Fair to all - 28 March, 2009. Times Property (Times of India)

The government needs to have better safeguards in place for the real estate buyer

Iread this quote recently “Opinions are like wrist watches; everyone’s watch shows a different time from others. But everyone believes that their time is correct.” I guess we are now in a phase where we are pondering more on what’s it going be like going ahead. Most people in the industry share the opinion that after the ‘correction’, the property prices have stabilised and that there is demand. And I agree!
After correction of almost 20 to 25% prices seem to have stabilised for now! New bookings are being offered (via full page advertisements) at attractive rates and schemes. But some conversions are still sluggish in spite of all the effort made by developers.
Now I don’t think there a demand issue here, it’s simply an affordability issue. If the developer is feeling the heat, so is the consumer, since his future income source is uncertain too. If he is not sure of when and where his next cheque is going to come from and how it’s going to be for him for the next few years, he will be unable to commit.
The Non Resident Indian should be a better target for sellers. Since the Rupee has weakened and prices have corrected it puts them in an advantageous position. For them I feel investment with a long term view (seven to eight years) or for actual use the deals offered, seem to be attractive.
Various developers in the outskirts of Mumbai seem to be offering tempting deals. What seems to be a little off is the luxury and lifestyle tag that they are putting to them. I hope for the sake of the consumer, that they get what they are promised and on time.
This is where I strongly feel the stamp duty and registration fees should be working for the consumer. The government must safeguard the consumer’s interest if they are interested in a piece of the pie during property transactions.
If you are buying with your tax (@33%) paid money and paying a further levy called Stamp Duty (@5%) and Registration (approx @1% now) then effectively one has paid 39% to the Government.
Personally I have no issues paying taxes, but your money should work for you and not the system. Especially stamp duty payment and process should almost be like an affidavit from the developer stating his commitments and time lines backed by a ‘Real estate regulatory body’ (like SEBI for the stock market) to protect consumer interest.
Typically a developer agreement, if you read one, safeguards all his interests including penalties, interest etc if the purchaser does not pay on time. There are cancellation clauses as well if the purchaser is unable to pay. Which is all fair, but how does the consumer safeguard his interest?
I feel with market sentiments changing, the consumer will manage to dictate terms. But to get the government to listen to you is a task.
I strongly feel that such payments made to government should be conditional and nationwide. This is not a Mumbai (city) or state issue. Consumer interest should be a national issue. Even the government employee at some stage is a buyer or an investor into a property.
The municipal taxes on rent are a major issue. This is beyond double taxation on the same income. What jurisdiction does Municipality have on ‘income’? If a recipient is paying 33% tax on the income generated via rent, is that not enough? On commercial properties an additional service tax of 10.30% makes it almost 43%. After this the government feels justified that the municipality too can scout around for their pound of flesh. I don’t really care much for the new rateable system which might be

introduced or the current ridiculous system, I am saying this is wrong and one cannot be taxed and double taxed on the same income and in the same breath I say again: the municipality has no jurisdiction on one’s income. They can collect their regular municipal property taxes but should keep off rental income, unless for some reason the income tax department says they won’t tax the recipient and the municipality can.

One can only hope better sense prevails in policy making and we can have a fair and acceptable taxation methods that benefits both the consumer and the government.