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India Real Estate Queries

26 Mar 2020

Q1. Can the owner of two or more residential and commercial properties on his/her name in Delhi or Mumbai can I avoid capital gain? AD Year 2020

Capital gains can be invested multiple times to buy a new residential house property.

Income Tax allows exemption on the long term capital gain if you invest in a new residential property subject to certain conditions. Recently the Income Tax Appellate Tribunal (ITAT) Delhi has allowed multiple-year exemption u/s 54F for an under construction house. It has held that taxpayers can invest capital gains for the second or third time also towards the same new house property.

Section 54F of the IT Act allows an exemption on capital gain from sale of any property other than a residential house. This exemption is subject to certain conditions which are:

  1. Taxpayers should invest the net sale proceeds of the property in purchase of a new residential house.

  2. The new residential property must be purchased either 1 year before the sale or years after the sale of the property/asset Or the new residential house property must be constructed within 3 years of sale of the property.

  3. Taxpayers should not own more than one residential house on the date of transfer, other than the one bought for claiming exemption under this section.

Q2. When does the Corporation start levying property tax for new flats? AD Year 2020

The formula used for calculating property tax is given below:

Property tax = base value × built-up area × Age factor × type of building × category of use × floor factor.

Property tax in India depends on the location of a property in question, with taxes varying from state to state. Different civic corporations use different methods to calculate tax, but the general overview of such calculations remains the same and is explained below.

An assessment of the property is first carried out by determining the area it is in, occupancy status (whether it is self-occupied or rented out), type of property (residential, commercial or land), amenities provided (car park, rainwater harvesting, store, etc.), year of construction, type of construction (multi-storied/ single floor/ pukka or kutcha structure, etc.), Floor space index and carpeted square area of the property.

Once these parameters are determined the civic agency can use a formula it deems fit to calculate tax. Different agencies use different formulas

Q3. Give a brief account of traditional and innovative financial options for investments in real estate? AD Year 2020

Equity  and debt  instruments are  often no longer used  in the traditional sense;  instead they are structured  to suit the characteristics of each project’s life cycle and asset /receivable cycle; this in effect could be termed  a form of creative and innovative financing. The findings show that sustainable projects are more in existence  in the developed economies because of their usage of creative and innovative financing in executing projects. This study contributes to the field by presenting one of the first studies of its kind focusing on creative and innovative finance as propellant  for sustainable real estate projects. The study recommends more usage of creative and innovative financing in the real estate’s sector in both the developed and emerging economies as a means to provide sustainable projects. It also  developed a “project sustainability funding matrix”, which can be used as a guide by decision makers in financing decisions for sustainable real estate projects. 

Q4. What is the motivation in real estate? AD Year 2020

The word “motivation” comes from the Latin word movere, which means “to move” or to make something happen. In real estate, because you are your own boss, it's key to stay in motion so that you are successful in real estate.