Model Tenancy Act – 11-month rent agreement in Tamil Nadu

Coming soon, 11-month rent agreement in Tamil Nadu

Realty, Real estate, Investment

Image used for representational purpose.

CHENNAI: Your rental agreement is set to undergo a sea change after Tamil Nadu implements the Centre’s Model Tenancy Act. Changes include the mandatory registration of all rental agreements over 11 months in period or `50,000 in value, advance amount to be limited to three months and tenant’s right to continue possession of the property after lease period to be limited to six months.

The rental agreements now cite the more than five-decade-old Tamil Nadu Building (Lease and Rent) Control Act, 1960, which will change once the new Act is brought in. As land — and thus rent — is a State subject, the central Act is a draft; it is up to individual States to adopt it. However, by making it a mandatory condition for obtaining funds for ‘Housing for All’ Mission under the Pradhan Mantri Awas Yojana, the Centre has managed to convince States, including Tamil Nadu to come on board.
The new Act has some key changes when compared to the existing State Act. Under the Model Tenancy Act, it is mandatory that all rental agreements that have a period exceeding 11 months or are valued at over `50,000 must be registered with the Registration Department under the provisions of Indian Registration Act.

The new Act is considered to be more beneficial for the landlords. Under the old Rent Control Act, there was no tenure for tenancy and evicting a tenant was highly restrictive. Previously, the stress was on the tenant’s right to occupation. However, in the new legislation, this right to possession is limited to only six months after the lease period.
This would prevent the misuse, including usurpation of property, of the earlier Act, said sources. Officials point out there are several cases where tenants refuse to vacate the premises, which then become aged, ill-maintained, and on the verge of crashing.

In another feature, if the landlord takes possession of the premises to undertake repair or reconstruction, the re-entry of the tenant is on the basis of a mutually-agreed new tenancy agreement. Earlier, the premises had to be offered to the same tenant.
Also, the new Act has the provision to renew rent at periodic intervals.
In one of the features advantageous for tenants, the new Act restricts the advance amount that landlords can collect up to three months’ rent. However, it is another matter that this is decided arbitrarily by the landlord, with some charging as much as 12 months’ rent as advance. Though the old Act limits advance to just one month, it is at least three months’ rent at all metros and other cities in India.

The earlier Act which was passed to regulate rents also gave powers to the government to take properties on fair rent, even against the wish of the property owner, if it was in the interest of the State. But senior officials feel the provisions are outdated for the present scenario, where a robust real estate sector is now supplying sufficient housing stock.
A big challenge for the regulator was to calculate ‘fair rent’ to be charged by the landlord. The fixing of rent depends on the land value, and there was a chance that it could be exploited by the landlord by charging exorbitant rent. The new Act will regulate rent as per the contract and safeguard tenants from extreme escalation due to rise in land value.

Sources indicated that all provisions of the Model Tenancy Act have to be covered by the lease agreement to be entered between the landlord and the tenant.
Meanwhile, the rent courts functioning under the provisions of Tamil Nadu Buildings (Lease and Rent control) Act, 1960, may be continued in the Model Tenancy Act, too, by re-designating them to function under the new act in order to save the loss of revenue to the government.

Source Indian Express

Rent from residential premises may be exempted from GST | 360 Property Management

Govt seeks powers to levy GST on all rental income

HIGHLIGHTS

  • GST unlikely to be impoised on individuals renting out homes
  • Currently, service tax is levied on rental income from commercial property only
  • GST rate on housing is expected to be pegged at 18%

Rent from residential premises may be exempted from GST.

Rent from residential premises may be exempted from GST.
The government is arming itself with powers to levy goods and services tax (GST) on all rental income but is unlikely to impose the tax on individuals renting out homes. Currently, service tax is levied on rental income from commercial property, but not levied on residential property.

The Central GST (CGST) Bill — one of the four legislations introduced in Parliament — provides that any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

Waman Parkhi, a senior tax consultant at KPMG, however, said that in the final rules, the government may exempt residential rental income from GST. The government has introduced the bill which will be followed by detailed rules where exceptions and exemptions are likely to be built in, he said. If the existing system of not taxing rental incomes from residential property under service tax has to be continued, then the same provision of exemption has to be introduced in GST too.

“Any law has to be read with the rules. It should not be seen in isolation,” said MS Mani, senior director at Deloitte. He said that at best the government can impose GST on residential property taken on rent by companies, which can then use it as a tax credit. In any case, GST kicks in at Rs 20 lakh and only some residential property fetches that kind of annual rent.
GST, which is likely to be rolled out from July 1, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services. A senior urban development ministry officer clarified that GST will not lead to any additional tax on end-users. He said finance ministry has already accepted it inprinciple.GST rate on housing is expected to be pegged at 18% with a final decision expected to be announced over next few weeks. Developers and tax experts said this rate will be acceptable to all the stakeholders as it will not lead to any increase in the final price of property. CREDAI president Getamber Anand said that at present the levy is around 12% of project cost paid as excise and Vat. In addition, at the time of sale, buyers pay around 6% of the price as service tax and Vat. So, the total net outgo is around 18%.

At present, while levying service tax on constructed house, an abatement of 60% of the total value is allowed to exclude the value of land and other goods such as bricks, cement and other material from the ambit of service tax. But under the new regime, a consultant said, this would not be required.

Affordable housing is exempted from service tax. To pass on current benefits to buyers, Parkhi said that GST on the ready to move-in houses in the affordable segment will have to be pegged at zero. The GST Bill has also clearly defined that the tax will not be levied on sale and purchase of immovable property like land, house and other real estate assets, which are not under construction.

Demonetisation slows down Chennai real estate sales

This fourth quarter saw a slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.
This fourth quarter saw a slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.
CHENNAI: The fourth quarter of the calendar year is usually the most hectic time when it comes to real estate sales in Chennai. With the festive season, fat Diwali bonuses, the auspicious day of Dhanteras, real estate developers usually see a lot of prospective home buyers queuing up.

This fourth quarter, however, saw a massive slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.

In Q4 of 2016, only 757 units were sold compared to 1,673 units in the same period the previous year. Number of project launches in the city fell to 58 from 93 in the year ago period.

“Demonetisation has definitely impacted sales in Chennai. The cash crunch along with cyclone Vardah were a downer when it came to people taking decisions on property,” said Sridhar Srinivasan, managing director, Chennai, Cushman & Wakefield.

However, this is part of an overall trend in Chennai real estate market, which got exacerbated with the cash ban. For instance, the fourth quarter of 2013 saw a high of 2,554 units being sold. After which there has been a decline to 1,629 units in 2014 to 1,673 in 2015.

However, Cushman & Wakefield expects the phenomena to be temporary and won’t last beyond the new two quarters.

As to the “cash” or “black money” component of real estate sales, Srinivasan said this has not impacted mid-segment sales. “Middle-level housing units have seen a high impact. The high-end and luxury segment, which use a higher component of cheque vs cash, saw lesser impact. We are expecting this trend to continue for the next two-three quarter,” he said.

Mid-level housing units saw a 21% dip to 662 units in the fourth quarter of 2016, compared to 840 sold units in the comparable quarter last year. High-end units, however, saw sales nearly double to 91 in Q4, from 49 in the year-ago.
Another reason as to why transactions are being hit is because of stamp duty and registration fee that need to be paid at offices. Given the role of the “cash” component in property deed clearances, demonetisation has definitely thrown a wrench in the works.
For the full-year, the number of projects in 2016 dipped 24% to 57 from 75 last year. The number of housing units also dipped 21% to 6,419 from 8,174.

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