The Most Interesting Investment with the Best Interest

One of the most globally recognized sectors, the Real Estate in India is the second largest employer after agriculture. The real estate sector involves around four major sub-sectors – Housing, Retail, Hospitality and Commercial. The growth of this sector is well integrated by several factors, geographical conditions, weather, transportation and connection with other cities and places. The growth of real estate also enhances employment, educational facilities, hospital, shopping malls, accommodations and self-employment.

It is also expected that this sector attracts more non-resident Indians (NRIs) investments in both short term and long term. Bengaluru I is the most desirable property investment destination for NRIs. As the investors are not only observant to the real estate’s hubs like Delhi, Gurgaon, Faridabad, Noida, Mumbai, Pune, Goa, Ahmedabad, Chennai, Kolkata and Hyderabad, other cities and places are also evolving with the new plans and trending smart cities. The constant growth of real estate sector is focusing on places like Surat, Jaipur, Raipur, Lucknow, Indore and other developing cities into high demands to be residential or commercial, considering the surrounding factors of the place.

In few years, India has witnessed new developing trends in various sectors and industries. The growth of sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space in recent times. Bengaluru has recorded the highest new office-space absorption for the past few years. This commercial sector can highly influence the residential and retail demand in that particular place. Housing contributes averaging 15-18 per cent in GDP which is inclusive of residential and consumption spending.

Tech Meets Real Estate Industry

The recent tech-enabled real estate which is speedily viable to make India one of the fastest originating realty tech harbours in the world. The compelling realty tech is all set to revolutionize the sector with their innovative approach. Be it in consultancy, sale-purchase, investment, after sale services or any other plot related assistance, tech start-ups have agitated the primary real estate market and reformed the business. The simple property search, legal aid, safe possessions and purchase accessible made it possible to expand in the market. Registering on the website, the buyers can get a virtual property viewing sitting at home. It’s difficult to visit ten projects prior to making a final call to invest into one. But the virtual display can show a number of various projects in no time and you can shortlist them by viewing as many times as possible. Introducing rent or lease activities online has also proved to be beneficial for the migrants to settle in the new city. This way they can search for any homestead or apartment in different cities.

Reaction on the New Taxation

The Goods and Services Tax (GST) is a great booster for the industry. GST will seek to restore buyer and investor interest by bringing more transparency in the taxation. The sector is ready to improve the prices that are likely to drop around 1-3 per cent. Previously, the taxation was too convoluted for the buyers who were liable to pay taxes depending on the construction status of the property and the state where it is located. The total tax amount was divided into value added tax, service tax, stamp duty and registration charges on investing an under-construction property and for the completed property, the tax applicable were stamp duty and registration charge. Moreover VAT, stamp duty and registration charges were state levies so each state stated its figures on their own. Service tax was charged on the stage of construction by the central government.  So the calculation of taxes was very tedious in the earlier regime, GST charges all under-construction properties at 12 per cent of the property value excluding stamp duty and registration charges. No indirect tax is applicable on sale of ‘ready-to-move-in’ properties hence the tax will not apply to those. The biggest outcome of GST is the simple tax that applies to the overall purchase price.

Earlier, VAT and Service Tax are used to account for nearly 9 per cent of the property value. Since that will be lower by the GST applied to the sector, the price reduction benefit is enjoyable by the buyer and the builder.  The developers were also charged for the Central Excise Duty, VAT and entry taxes collected by the state on construction material costs. Further, They had to pay a 15 per cent  tax on services like labour, architect fees, approval charges, legal charges, etc. which was eventually transferred to the buyer.  However, under the new simpler tax system, reduced cost of logistics will result in reducing expenses hence increasing the profit margins.

The Bright Future of the Industry             

The simple taxation is not only a perk for the low price but also the delay in construction has been wiped out. The entry taxes collected by the state during the transportation are excluded, consequently, the crossing with the construction materials inner the states are accelerated.  The decreased rates of interest on housing and business loans give a positive desire for the industry. Mumbai is considered to be the best city in India for commercial real estate investment, expected with returns of 12-19 per cent likely in the next five years, followed by Bengaluru and Delhi-National Capital Region (NCR). The real estate sector in India is expected to attract investments worth US $ 7 billion in 2017, which would rise further to US $ 180 billion by 2020. The growing percentage in India and the greater domestic consumption is driving India’s improvement, implying the middle class to come and demand their suitable housing. As the foreign investors are supplementing for the last three years, it has topped the popularity for yield, something to find in high-priced “gateway cities” leading them to explore more speculative plays and also to enhance.

To culminate as the Real Estate Expert Sahil Kapoor - Executive Director on throws light on GST – “Since the real estate sector shares direct relationship with more than 250 other sectors like steel, cement, transport, financial services, etc. the advantages or disadvantages of GST on all these sectors will have an indirect impact on the real state sector. In my view, GST for the real industry would have both pros and cons depending on the nature of transactions.”

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Understanding - Carpet Area, Built-Up Area & Super Built-Up Area

        

First time home buyers often hear the property agents or realtors repeating the terms and jargons which are very common in the real estate industry, leaving us absolutely clueless.  Nevertheless terms like carpet area, built up area or super built up area normally elude our dominion of anticipation or at least cause some false impression.  

In every residential complex, there are these three different ways of calculating the square foot of the flat area. They may not all seem much distinct but there is in fact a “BIG” difference between them, especially the carpet area and the built up area which as a buyer it is mandate to understand.

Ignorance or half knowledge in this matter can place you in resentful state. Here the brokers or developers can take you on ride. Don’t worry, it is not rocket science, just a little exploration and you will be well-thorough with these terms. So let’s explore these terms in details and understand them well before any visit to home buying.

Carpet Area        

The very basic concept is the Carpet Area. It is nothing but an area that can be in fact covered by a carpet or the floor area of the apartment excluding the thickness of inner walls. Generally, the carpet area is the actual area you get for usage in a housing unit. Hence in case of home search, it is very vital to scrutinize the actual space while taking the decision as that figure will give a clear picture.

Weightage on the carpet area will help you know the usable area in your kitchen, bedroom ad living room, etc. Recently, many developers and builders don’t even speak about the carpet area primarily, and generally charge on the basis of the built-up area or the super built-up area. Carpet area is usually about 70 per cent of the built-up area.

Built-Up Area

To understand the term ‘Built-Up Area’ is simply a combination of “Carpet Area + Wall Area”. By the wall are doesn’t mean the surface area but the thickness of the inner walls of the apartment. This area comprising the walls is about the 20 per cent of the built-up area and entirely changes the viewpoint.

The built-up area also contains other areas sanctioned by the authorities, such as a dry balcony, flower beds, etc. adding up to the 10 per cent of the built-up area. In simple words you are able to use the 70 per cent of the built-up area. To understand more clearly let’s say for e.g. if the built up area is 1000 square feet, it means around 30 per cent  (300 square feet) is really not usable and the actual area you will get to use is only the left 700 square feet.

Super Built-Up Area                                                                   

It is said that Super Built-Up area is the builder’s Best Friend Forever (BFF). It is calculated as ‘Built-Up Area + Common Area”. The common area includes the lift lobby, corridor, etc. and in some cases the builders even take account of amenities such as garden, club houses, pool and so on. The builder or a developer charges you on the basis of the super built-up area which is why it is also known as the ‘Saleable Area’.

Bearing in mind the fact that the developers and the builders customarily price their apartments based on this super built-up area or saleable area, being unaware of this important difference between built-up area and carpet area including other terms leaves one run blind. It is often the tangible usable area much lower than the super built-up area. Some developers/builders take into account the carpet area while charging you, but that can be just in the rarest of the rare cases. About 90 per cent of the builders compute the base cost on the basis of the super built-up area, more the amenities – higher the super built-up area

For the beginners, real estate can be complex to understand but you can amend the practices and rules. You can definitely make a knowledgeable decision when you are aware of the diverse kinds of calculations for the square feet – apparently major but very simple task.

Hope this article clears the confusion that always has been to permeate floor areas and how is it calculated, making it easier for you to decide. Still any questions, feel free to ask us!