Wednesday, 17 September 2014

Mumbai Property investment

Apartment, Commercial, Industrial
In India real estate agent business is not as organise as UK. Often property address and selling prices are not mentioned at Estate agents office or on website. Most work is after meeting agents it is done on confidential basis. Some property websites are 

Disparity / contrast is more apparent in housing sector. Antila house of Mukesh Ambani, industrialist is 27 floor building with gym, swimming pool, helicopter pad is in densely populated area of Tardeo in South Mumbai which still has lots of low rise buildings and chawls. 
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Can NRI purchase property in India? NRI (Non Resident Indian) and a Person of Indian Origin (PIO) can purchase any number of residential or commercial properties in India but not allowed to buy any agricultural land.

Home Loans: The loans to be granted to NRIs shall be on the same basis and criteria as those are applicable in case of resident Indians. Repayment of the home loan: The loan can also be serviced out of the funds lying in his credit in any of the banking accounts like his NRE/ NRO account, FCNR deposits. The RBI even permits the rental incomes received on such property to be used for the purpose of servicing of the EMIs.

Registration of property: It would cost approximately 12% to register a flat. Stamp duty 6%, Registration fee 1.5%, Service tax 4.5%, plus GST etc. This will be in addition to buying price plus development cost of facilities charged by builder. The registration value of property is decided by authorities and can't be registered below that amount.


Transaction Cost in Mumbai: Buyer pays- Stamp Duty 5% - 8%, Registration Fees 1% , Legal Fees 1.50% buyer pays, Estate Agent’s Commission 1% - 2% (+12.50% VAT). Total Costs paid by buyer 8.625% - 12.75%.  Seller pays- Estate Agent’s Commission 1% - 2% (+12.50% VAT). Total Costs paid by seller 1.125% - 2.25%. So the total cost of buying and selling property works out as 9.75% - 15%


Capital gains assessment: For taxation use date of allotment to calculate capital gains. If sold under 24 month there is no relief in paying tax on short term gain. Over 24 months read tax saving options below. Capital gains on transfer of property has always been a reason for dispute between taxpayers and authorities. While the Income Tax Act (I-T Act) mentions that the period of holding determines the amount of tax payable, it does not specify from when the period of holding starts. Does it start from the date of allotment or from the day the sale deed is signed or when a property is registered? The starting date for the holding period also continues to be a matter of litigation because of different rulings from high courts. A holding period of 24 months is crucial for a person to be able to claim tax benefits associated with long-term capital gains. In the more recent case of ‘Jaimal K Shah, Mumbai Vs Department Of Income Tax’ decided on 19 April, 2012, the Bombay Tribunal has held that an under-construction flat booked with a builder, under a letter of allotment or an agreement to sale, only represents the right to acquire a flat and if such right is sold after a holding period of more than 24 months, it becomes a long-term capital asset. However, when the possession of flat is taken, the holding period would once again commence from the date of possession.

Capital gains tax: Though investment in property can give good returns, it can also mean a hefty tax outgo. Irrespective of how the property has been acquired. For tax calculation person what amount was paid in foreign currency does not matter, it is purely selling price minus purchase price plus allowable expense.

Saving Tax:  You cannot avoid tax on short-term (3 years) capital gains, however, you can claim deductions to lower the tax liability on long-term (Any profit booked after three years of buying the property is considered a long-term) gains. To save tax government policies are there to reinvest and gain tax relief. It is called Capital Gains Account Scheme (CGAS).
And the options are:

Roll gain amount by Buying a Flat/house: Houses are a popular investment option. Long-term capital gains from selling a house get tax exemption if they are invested in buying or building a new house. The new house has to be bought one year before the transfer of the first house or within two years after the sale. The deduction allowed is equal to the actual investment or the capital gain, whichever is lower. If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. When you buy a plot to build a house, the cost of land is included in the construction cost. Even buying an under-construction property entitles you to tax deduction provided its construction is completed within three years of the transfer of the first property. If you do not want to lock the entire proceeds in a residential property, you can invest the capital gain in specified bonds.

Invest in Govt. Bonds: These bonds are issued by the Rural Electrification Corporation and the NationalHighways Authority of India. The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable. You can invest a maximum of Rs 50 lakh during a financial year in these bonds. The locking period is 3 years and interest paid is 6%.

Capital Gains Bank Deposit: Deposit the capital gain in an account opened under the ‘Capital Gains Account Scheme’ with any public sector bank if it has not been fully utilised for purchase or construction of a new property. This has to done before the deadline for filing the return. The deposited money can be used only to buy or construct a residential house within the prescribed time frame. Failure to do so will lead to taxation of the unutilised amount as long-term capital gain after three years of the sale of the first property. The interest rates paid on these accounts are the same as those on regular savings and term deposits. You will have to pay tax on the interest earned as it accrues in your account, but it cannot be withdrawn. You will have to attach the proof of the deposit with your return. If the deposited amount is not used fully to buy/construct a new house, the remainder will be treated as capital gain at the end of three years from the date of the sale of the original asset.

Repatriation of the sale proceeds: Moreover you are allowed to remit back the money to the extent foreign exchange was used for the purpose of buying of the property and servicing of the loan. In addition one can remit an amount equal to USD One Million every year from your NRO account.

Inheritance & Gifts: Sale of a property that is inherited or accepted as a gift will also attract capital gain/loss provisions even though you haven't spent any money to acquire it. In such a case, capital gains will be computed on the basis of the cost to the previous owner, indexed to the year of purchase. In cases where the property has been inherited, the cost to the original owner (or fair market value of the property) will be considered as the cost of acquisition for computing capital gains.

Can foreign nationals (not of Indian origin) buy property: It is illegal for foreign nationals to own property in India unless they satisfy the residency requirement of 183 days in a financial year (a tourist visa lasts for 180 days). It is also illegal to buy property on a tourist visa. Moreover property cannot be purchased jointly in the name of one eligible person with one non-eligible person. That means a non-resident Indian (NRI) or foreign national of Indian origin (PIO) cannot buy a property jointly with a foreigner

Company structures are not satisfactory work-arounds.
However, a foreign national resident in India does not require approval of RBI to purchase any immovable property in India. This is because once he is a resident in India, he gets the rights like any other resident. This freedom is however not available to citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan.

Leases are different, too. “Ineligible persons” (e.g. foreign nationals of non-Indian origin and also citizens of certain countries specified above) can acquire residential (not commercial) accommodation on lease not exceeding five years without any RBI permission. However, much property has been ‘sold’ to foreigners, particularly in Goa, where prices are cheap and developers are plentiful, on 5 year leases. The buyers won´t get title to the property until they can obtain residency, which is what most of them intend to do eventually. But they may be disappointed - increasingly new visas explicitly forbid foreigners from staying in India more than 180 days consecutively. (see article in the Britishe xpats forum).  

To purchase property, it is important for the buyer to hire a real estate attorney to protect his/her interests during the transaction. Once the property has been chosen, and a price has been negotiated with the seller, the attorney draws up an Agreement of Sale. Upon signing, the buyer normally pays a deposit of 10% to 20% of the purchase price. The lawyer then conducts due diligence and the buyer obtains the title documents from the seller. The whole process of registering property requires five procedures, which can be completed in around 44 days.
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Investing in Land is a very different ballgame. A plot must have a clear title and be demarcated properly. investing in a plot of sufficient dimensions and the right kind of authorised usage criteria for the area can become attractive to developers from the residential, retail, office and hospitality sectors. As an area attains more market drivers and begins to saturate, plots increase in value manifold. Also, land is cheap in most cases and represents a very good capital investment.

Land Registry document (7/12): Land registration papers are known as 7/12.  

7/12 document has three main main columns. 
First column contains information on reference number, location, land siz, measurements being 1 Gunta = 1000 sq ft,  40 Guntas = 1 acre, 100 Guntas = 1 Hactor or 2.5 Acres = 1 Hector. 
Middle section will have names of owners below which there will be Pherphar or Mutation entry number, number in circle links to entry by which detailed information can be gained as legal heir or purchased etc. If documents are not up to date, by submitting death certificate names of living sons and daughters can be added. Before selling documents have to be updated. For selling besides 7/12, Pherphar document from Talati office, 9x3 and 9x4 will be required from Thasildar office as well as 54-55 utarey from same office too.
Last column has information on if land was given for cultivation and if cultivator (Kul) under govt rules has entered name on registration document, although generation down new names of Kul family would be added but Kul can not sell land. However owner can only sell with agreement from Kul as what percentage will be paid from sales proceedings to Cultivator (Kul) which can vary as per negotiations. In some cases Cultivator (Kul) can sell land and deposit 50% as owners share  under government scheme to be claimed by owner. Before selling Khand (land tax) has to be paid too. If no Cultivator (Kul) name is mentioned on 7/12 owner can directly sell provided all names are updated.

How to find 7/12 land registered papers onlineAll land registered papers can be found online. Type 7/12 in google search. Click on Mokhypushta link. Choose Kokan. Now type 7/12 number or choose Zilla, Taluka, Village in drop menu. Also enter names. You will get 7/12 document to see names appearing on document.

How to find out if someone has Fraudulently entered name on land registered paper (7/12)? 7/12 (land papers) will have names of owners and a *Number in circle* below name referred as Pherphar or Mutation entry number. These numbers will be linked to Mutation entry document which will show: When name was added. How name was added. What documents were submitted to add name etc. If in doubt write to village Talati office requesting Certified copy of Mutation entry. If name entry proved guilty Criminal proceeding can be started.

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Mumbai property rate/Sq ft (INR) (min / max)
South Mumbai & Western Mumbai- Capital Values Rate/Sq ft (INR) (min / max)
Altamount Road 45000 – 72000, Bombay Central 20500 – 32000, Churchgate 32000 – 50000, Colaba    33000 – 48000, Cuffe Parade 35000 – 71000, Kemps Corner 38000 – 58000, Lower Parel 21000 – 38000, Mahalaxmi      22000 – 42000, Malabar Hills 60000 – 76000, Marine Drive 45000 – 70000, Nariman Point 58000 – 92000, Nepeansea Road 47000 – 75000, Peddar Road 32000 – 56000, Prabhadevi 26000 – 44000, Shivaji Park 18000 – 35000, Walkeshwar 38000 – 70000, Warden Road 35000 – 60000, Worli 27000 – 49000, Andheri East 13000 – 16000, Andheri West 16000 – 19500, Bandra East 18000 – 27000, Bandra West 26000 – 45000, Borivali East    9500 – 12500, Borivali West 11600 – 13500, Goregoan East 11500 – 13000, Goregoan West 12500 – 15500, Kandivali East          10000 – 13000, Kandivali West 11000 – 14000, Khar East   16000 – 21000, Khar West 23000 - 40000, Malad East 11000 – 13000, Malad West 12000 – 15000, Mira Road East 6200 – 7500, Naigon East 3800 – 4100, Santacruz East 13000 – 23500, Santacruz West 22000 – 32000, Vasai 5000 – 6000, Vile Parle East 19000 – 23500, Vile Parle West 22000 – 26000, Virar 4500 - 5500

Central Suburbs- Capital Values Rate/Sq ft (INR) (min / max) 
Ambernath 2750 – 3800/ Badlapur 2600 – 3400, Bhandup 9750 – 13000, Byculla 13000 – 22000, Chembur 10000 – 16500, Dadar 20000 – 32000, Dombivali 5000 – 6000, Ghatkopar East 9500 – 18000, Ghatkopar West 8500 – 13000, Kalyan 4500 – 5500, Kanjurmarg 8500 – 10500, Kings Circle 14000 – 22000, Kurla 9000 – 14000, Mulund 11500 – 14000, Powai 9900 – 16500, Sion 14500 – 22000, Thane 6800 – 12500, Vikhroli 8500 – 12000, Wadala 13500 - 18500

Navi Mumbai- (East)- Capital Values Rate/Sq ft (INR) (min / max) 
Airoli 6500 – 7600, CBD Belapur 5500 – 8000, Kalamboli 3500 – 5000, Kharghar   5800 – 9000, Kopar Khairane 6000 – 7500, Nerul 6000 – 10500, Panvel 3600 – 6400, Sanpada 7000 – 9500, Vashi 8500 - 15500















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