Hi all,

I have bought an apartment at 34 lakhs for 1200 sft at Bannerghatta wth amenities and after much delay(3 years) finally the possession has started and current price is 60 lakhs for 1200 sft.As I moved to north bangalore in the mean time and interested to buy any good villa around 70 lakhs.

1.Would it be wise to hold the apartment only for rent purpose where it can fetch about 16000 per month.

2.Does the apartment value depreciate overtime. What rate can I expect after 8 years.

3.builder asking me to register at guidance value 30 lakhs and If I want to resale ex for 70 lakhs how much tax would i be paying.(Can we ask builder we will register at current market rate i.e 60 lakhs I know wud attract more registration charges is it worth)

4.Please advice which is better

a)Should I resale it within 1 month for 60 lakhs.
b)Should I register the property and resale(new) within 1 year if price appreciates ( I dont want to sound greedy but If i get any villa in that range)
c)Should I register, rent and resale after 8 years when i am moving out of bangalore.

The hard lesson learnt is first time buyers please be away from prelaunch projects and buy your dream home where it is ready to occupy or where possession in couple of months.

As of now 4b is looking good . Thanks for reading and looking forward to hear from iref members.
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  • Just got to know that Capital gains tax (20%) is exempt if we are buying home(villa/flat/plot&construction) within 2 years.

    Members still waiting for ur valuable suggestions or perception if you had to decide.

    Thanks,
    Yar
    CommentQuote
  • Do some google and get your answers

    Hi Yar,
    Some basics before giving u any suggestions.

    1) Date of purchase of a property is Date of Registration (lets call it Purchase date) and not the date of agreement.

    2) If difference between selling date and purchase date is less than 3 Years then gain is called short term gain and taxes would be as per your tax slab.

    3) If property is sold after completion of 3 years from the date of purchase, then the capital gain is called Long term capital gain from house/flat sale. And this gain is taxable @10% ( OR @20% with indexation in consideration ).
    Do google and find the detail of above.


    4) Money earned from long term capital gain of the properly sale is not taxable if the money is using in building/buying new property within 2 years of sale of the property. do some google for more clarification.

    Now coming to your case. You must know below things:

    a) If you don't register the property, you don't sell it. It is builder who is selling it.:D

    b) Builder will never register it at higher prices as there will be mismatch with other flat owners. So don't try for than and you won't get anything.


    Here are following ways of doing it:
    c ) Get property registered on your name, give it for rent and after 3 years sell it and buy some other property from long term capital gain money (as in case 4) and save all taxes.

    OR

    d) Get property registered on your name and find a buyer and sell it to him.
    Get sort term capital gain and pay income tax at 33%.

    OR

    e) Let the builder get some buyer and sell it to him. You can get excess money from the new buyer. in this case builder will arrange everything and may ask some 1- 1.5 lacs as settlement charges.
    OR

    f) Find one buyer and get him to the builder and follow as in (e).
    OR

    there are many more ........ But running on rent is disastrous......

    Had renting been good idea...just think... all builders would have been renting out all the flats ( and not selling out) :bab (59):


    You may follow below:
    How to save tax on your capital gains while selling a house - Economic Times



    Disclaimer: I am not a broker/catalyst/agent/....etc. and I don't have any interest in your property

    Regards,
    Sumitra Nanda
    CommentQuote
  • What happens of capital gains tax in case e/f ?

    "e) Let the builder get some buyer and sell it to him. You can get excess money from the new buyer. in this case builder will arrange everything and may ask some 1- 1.5 lacs as settlement charges.
    OR

    f) Find one buyer and get him to the builder and follow as in (e).
    OR"
    CommentQuote
  • Both cases you pay tax.. unless the buyer pays in cash for the excess amount.

    Originally Posted by zhakaas
    What happens of capital gains tax in case e/f ?

    "e) Let the builder get some buyer and sell it to him. You can get excess money from the new buyer. in this case builder will arrange everything and may ask some 1- 1.5 lacs as settlement charges.
    OR

    f) Find one buyer and get him to the builder and follow as in (e).
    OR"
    CommentQuote
  • Some changes

    Originally Posted by sumitrananda
    Hi Yar,

    1) Date of purchase of a property is Date of Registration (lets call it Purchase date) and not the date of agreement.
    ---Correct

    2) If difference between selling date and purchase date is less than 3 Years then gain is called short term gain and taxes would be as per your tax slab.

    ----Correct and no relief under S54 exemption can be claimed

    3) If property is sold after completion of 3 years from the date of purchase, then the capital gain is called Long term capital gain from house/flat sale. And this gain is taxable @10% ( OR @20% with indexation in consideration ).
    Do google and find the detail of above.

    --Not possible available only for equity and mutual funds and not for property----

    4) Money earned from long term capital gain of the properly sale is not taxable if the money is using in building/buying new property within 2 years of sale of the property. do some google for more clarification.
    --Within 1 year or construct one in 3 years but put the capital gain money in a account so designated in a nationalised bank---

    Now coming to your case. You must know below things:

    a) If you don't register the property, you don't sell it. It is builder who is selling it.:D

    b) Builder will never register it at higher prices as there will be mismatch with other flat owners. So don't try for than and you won't get anything.


    Here are following ways of doing it:
    c ) Get property registered on your name, give it for rent and after 3 years sell it and buy some other property from long term capital gain money (as in case 4) and save all taxes.

    ---It is the best option if you want out clean and no problems with Tax and remember the interest you have paid to the bank can be added to the purchasing cost to decrease the capital gain---
    OR

    d) Get property registered on your name and find a buyer and sell it to him.
    Get sort term capital gain and pay income tax at 33%.

    OR

    e) Let the builder get some buyer and sell it to him. You can get excess money from the new buyer. in this case builder will arrange everything and may ask some 1- 1.5 lacs as settlement charges.
    OR

    f) Find one buyer and get him to the builder and follow as in (e).
    OR

    there are many more ........ But running on rent is disastrous......

    Had renting been good idea...just think... all builders would have been renting out all the flats ( and not selling out) :bab (59):


    You may follow below:
    How to save tax on your capital gains while selling a house - Economic Times



    Disclaimer: I am not a broker/catalyst/agent/....etc. and I don't have any interest in your property

    Regards,
    Sumitra Nanda
    CommentQuote
  • Sell it Off! That's the best option.
    What does the investor who buys in prelaunch does after completion?
    You need to find a buyer who pays the money in Cash for the profits.
    So if you have bought for 34 lakhs & sells for 60 lakhs then you need to get 26 lakhs in cash to avoid paying any taxes.
    CommentQuote
  • That was not a good advice...
    I don't think you will find many buyers.. If you increase the cash component, you will have to reduce the price.. why would someone pay so much cash and buy when at the same price he can buy on cheque. You do not get loan for cash either..
    Not worth the head ache.. but it is your choice


    Originally Posted by krishna2
    Sell it Off! That's the best option.
    What does the investor who buys in prelaunch does after completion?
    You need to find a buyer who pays the money in Cash for the profits.
    So if you have bought for 34 lakhs & sells for 60 lakhs then you need to get 26 lakhs in cash to avoid paying any taxes.
    CommentQuote
  • Thanks everyone for your valuable suggestions. Planning to register the property, give it for rent and sell it later.

    Was just wondering how do investors sell their flats does it attract short term capital gain tax unless they find buyer (who pays in cash).
    CommentQuote
  • My understanding...
    Investors usually buy in pre launch. Also they dont register the property.
    They pay usually in cash to builder while buying and are saved from registration costs.

    When they sell, they sell it through the builder - becos the registration has not happened, the builder sells it to the next buyer. Builder charges some fees from both parties.

    Since the investor has never registered in his name, he is not the owner and doesnt attract tax

    Originally Posted by yar.2007

    Was just wondering how do investors sell their flats does it attract short term capital gain tax unless they find buyer (who pays in cash).
    CommentQuote
  • Investor shows it as an loan asset in his books. He books some Interest Income and all he needs is a good chartered accountant to not pay any tax on his interest income..

    Primarily he is financing the builder and he gets in at the pre launch stage or even at the time of land buying.. and the builder allots him some apartments as collaterals

    His returns are dependent at the time he exists.. so that is the reason you have this ads screaming "50% of the apartments sold.." Very few flats left" etc..

    These investors are HNI's.. normally brokers, other builders and politicians..

    That is one of the reasons, prices can fall during elections as politicians are desperate to liquidate .. even if the market is stagnant..


    Originally Posted by yar.2007
    Thanks everyone for your valuable suggestions. Planning to register the property, give it for rent and sell it later.

    Was just wondering how do investors sell their flats does it attract short term capital gain tax unless they find buyer (who pays in cash).
    CommentQuote
  • @Honest you mean to say that any investor who has not registered doesnt attract tax which is contrary from sumitra , sharpj experts please confirm.

    Lets consider a scenario where
    Investor is selling a new RTM flat through the builder to buyer X for 60 lakhs and X registers at guidance value for 30 lakhs where X availed loan from private bank where it is funding 80% of 60 lakhs. Lets assume no cash transaction in this case what is the tax paid and who is entitled to pay tax.




    Originally Posted by honest
    My understanding...
    Investors usually buy in pre launch. Also they dont register the property.
    They pay usually in cash to builder while buying and are saved from registration costs.

    When they sell, they sell it through the builder - becos the registration has not happened, the builder sells it to the next buyer. Builder charges some fees from both parties.

    Since the investor has never registered in his name, he is not the owner and doesnt attract tax
    CommentQuote
  • Apartment prices have become exorbitant with projects launching above 5000 psft near hebbal donno people keep screaming Real estate buble will burst but can we expect some reality check on the prices and affordability.
    CommentQuote
  • You are business of construction or lending money.. then you are not taxed under Income from CG..

    Builders show apartment as current asset and not capital asset..

    --------------

    In the scenario below, the Investor is realizing his loan along with the interest income and it will be taxed under the appropriate head.. on Revenue from business, which can be offset by expenses.. and needs a good CA to manage..



    Originally Posted by yar.2007
    @Honest you mean to say that any investor who has not registered doesnt attract tax which is contrary from sumitra , sharpj experts please confirm.

    Lets consider a scenario where
    Investor is selling a new RTM flat through the builder to buyer X for 60 lakhs and X registers at guidance value for 30 lakhs where X availed loan from private bank where it is funding 80% of 60 lakhs. Lets assume no cash transaction in this case what is the tax paid and who is entitled to pay tax.
    CommentQuote
  • yar 2007

    While Sumita and Sharpj have answered most of the technical questions for the capital gains. Here are some actual on the ground details.

    The capital gains is payable by the person who has booked an apartment.. From an tax perspective, you are the owner of the apartment since you have sale agreement with the builder. And in this case, short term capital gains @30.6% is payable since this will be added to your other income and taxed at the highest slab.

    This is assuming you are accepting cheques and declaring the amounts.

    In reality, this is not so easy (if it was - all of us would be booking apts and selling them - no need to work). First thing, read the sale agreement. That will have such tough clauses that if you exit, you will need to pay transfer fees etc. And by the way, someone said Rs 25-50 per sft as transfer fees. Guys - this is charged by brokers.. not builders. Why should the builder take so much pain to go through approvals, put money and then get returns of 50% or thereabouts when you are supposedly getting 60% just putting money. The builder charges Rs 200 per sft or 5% of the sale value. You can check the agreement for the details.

    Finding buyers is the next step. Whatever people may say, a person who has funds or access to funds can negotiate in this market. No longer a sellers market. And there will be more "investors" in your building who will be willing to exit for far less than your price.

    Also I see a lot of excel gurus out here. The situation on the ground is different from excel sheets. If you are calculating your return, include interest costs, opportunity costs and all costs on the project. Only then can you calculate the return. People happily forget to include their out of pocket expenses and tend to show a higher return. Sell if you can - but dont expect spectacular returns. After all the guy buying is also calculating his returns

    Lastly, renting out is the worst option. Again there will guys in your building who will give for 40-50% less rent than your quoted amount. Also the moment a new tenant comes in, he starts checking with neighbours on rates. Then he starts to threaten to move unless the rent is reduced. The cycle repeats every 11 months. This is all part of the game.
    CommentQuote