Frequently Asked Questions In Real Estate 2024

       •  What is RERA?

The Real Estate Regulatory Authority (RERA) was passed in 2016 by the Indian Parliament. According to the RERA Act, every state is entitled to establish its own RERA authority to ensure transparency and serve the interests of buyers, sellers, and builders. RERA authorities record every real estate transaction to save customers from fraud and other issues.

According to RERA, you should not deal with any project not registered under RERA or any real estate consultant not registered under RERA.

       •  What is stamp duty?

Stamp Duty is a kind of TAX imposed by the state government on selling a property under Section 3 of the Indian Stamp Act, 1899. It ensures the property’s validity and legalizes it.

It serves as proof to the government that the property is transferred or sold in the current owner’s name and generates some government revenue, like taxes.

The stamp duty rates vary from state to state and city to city. For example, in Noida, the stamp duty is 5 percent of the total value of property. For your respective state, you can check on Google.

       •  What is leasehold vs. freehold?

Some people have some misconceptions that the government can snatch your leasehold property anytime it wants, but it is a big lie. The only difference between leasehold and freehold property is its nature. In a leasehold property, the property is leased for 99 years and then renewed that lease again after 99 years; it's just a process. 

In leasehold property, it is easier for the authority to initiate development plans, for example, Noida; why Noida is so developed? Because in a leasehold, the authority can decide on planned development, and before constructing anything, it is essential to get the plans passed and authorized.

In freehold, you can do anything with your land, and you don’t have to renew it after 99 years, like in Faridabad and Delhi. But then development becomes hard.

       •  What is a pre-leased property?

Pre leased property refers to a purchase of a property that already has tenants. Investors mostly buy these properties. These properties already have tenants, and rental can be earned from the first day; you don't have to find tenants. 

       •  How do you calculate ROI on property?

Calculating ROI (Return on Investment) on a property involves comparing the profit you make from the property to the total investment investment you made. Here’s how you do it:

       1.  Determine the Total Investment: This includes the purchase price of the property, closing costs, renovation costs, and any other expenses related to acquiring the property.
       2.  Calculate the Annual Rental Income: If the property is rented out, calculate the total rental income you receive annually.
       3.  Subtract Annual Operating Expenses:  Property management fees, maintenance, property taxes, insurance, utilities, etc.
       4.  Calculate the Net Annual Income: Subtract the annual operating expenses from the yearly rental income.
       5.  Determine the Total ROI: Use the formula:

Example:

       •  Purchase Price: 50 lakh
       •  Closing and Renovation Costs: 5 lakh
       •  Total Investment: 55 lakh
       •  Annual Rental Income: 6 lakh
       •  Annual Operating Expenses: 1.5 lakh
       •  Net Annual Income: 6 lakh - 1.5 lakh = 4.5 lakh

ROI = (4.5 lakh55 lakh)×100≈8.18%

The ROI in this example is approximately 8.18%.

       •  How does GST apply to real estate?

There is no GST on real estate if you are purchasing ready-to-move property. The GST only applies if the property is under construction. There is 12 percent GST On commercial property, 5 percent on Residential, and 18 percent on other charges. For houses under the affordable housing scheme or PMAY, the GST is only 1 percent.

       •  What affects property resale value?

The location, demand and supply, construction quality, renovation, parking, and density affect the property's resale value. Suppose a property is in a good location, has been renovated, and is of good quality. The resale value would be good, but in most cases, it is less than the fresh property.

       •  How do you verify property documents?

When buying property, it’s important to check several key documents. The title deed proves you own the property and shows it's clear of legal problems. The mother deed lists all previous owners. An encumbrance certificate confirms there are no debts or legal issues.

A sale agreement should match the property’s actual status. Check tax receipts for ownership and unpaid taxes. If buying land, ensure the layout is approved. A possession certificate details payment and handover dates. You might also need a No Objection Certificate (NOC), Power of Attorney, or a Joint Development Agreement.

       •  How do you invest in commercial real estate?

To invest in commercial real estate, you must be aware of the commercial market as it is complex and requires deep understanding. An experienced real estate consultant like Commercial Noida can help you find your dream commercial with excellent returns. Doing it independently until you are into real estate would trap you in fraud.

       •  What are the tax benefits for homebuyers?

When you take a home loan, you can save on taxes based on different things, like how much you borrowed, the interest rate, and your tax bracket. For most people, there are two main ways to get tax benefits. 

First, under Section 24 of the Income Tax Act, you can deduct up to Rs 2 lakh from your taxable income for the interest you pay on your home loan. If you paid interest on your loan, you can subtract that amount when calculating your taxes, which helps lower the total tax you owe.

Second, under Section 80C, you can claim a deduction of up to Rs 1.5 lakh on the money you pay towards the principal amount of the loan. The principal is the actual amount you borrowed, not the interest. So, if you are paying off the principal amount of your home loan, you can also save on your taxes here.

For a comprehensive understanding, refer to this blog: Tax benefits on real estate.

       •  What is the impact of metro connectivity on property value?

Metro connectivity is a primary means of transportation in metro cities. So, if your property is near a metro station, it serves as a convenient spot for commuters and thus helps increase demand and leads to price appreciation.

       •  How do you find the best location for Investment?

To reduce risks in real estate investing, it's essential to do thorough research. Start by analysing the market and rental properties, looking at prices and potential rent. Hire professionals like Realty Dart for property inspections to identify issues and ensure the property is worth the Investment. 

Screen potential tenants carefully by checking their backgrounds to find reliable individuals who will pay rent on time and maintain the property. Finally, learn about the local market trends, such as property value changes and neighbourhood characteristics. This knowledge will help you make informed decisions and protect your Investment effectively.