Reserve Bank of India (RBI) latest notifications regarding finance to housing projects from NBFC’s

Certain important and recent legal developments in this area are set out below.



Conditions on Financing by NBFC



The Reserve Bank of India ("RBI") has notified that while granting finance to housing / development projects, Non Banking Financial Corporation ("NBFCs") should stipulate as a part of the terms and conditions of the finance documents that:



Real Estate/ Property



Certain important and recent legal developments in this area are set out below.



Conditions on Financing by NBFC



The Reserve Bank of India ("RBI") has notified that while granting finance to housing / development projects, Non Banking Financial Corporation ("NBFCs") should stipulate as a part of the terms and conditions of the finance documents that:



(i) The builder / developer / owner / company would disclose in the pamphlets / brochures / advertisements etc., the name(s) of the entity to which the property is mortgaged.



(ii) The builder / developer / owner / company should indicate in the pamphlets / brochures, that they would provide ‘No Objection Certificate' / permission of the mortgagee entity for sale of flats / property, if required.



NBFCs vide the said notification have been advised to ensure compliance with the above stipulations and that the funds should not be released unless the builder / developer / owner /company fulfils the above requirements.



Ministry of Finance Provides Slight Tax Relief to Realtors



The Ministry of Finance ("MoF") has introduced a partial rollback of a budget levy on realtors by announcing that the realtors would pay a 10 per cent service tax on 25 per cent of the value of the built property, including the cost of land, against the budget announcement of 10 per cent tax on 33 per cent of the value of the property. This relief has been provided by enhancing the rate of abatement from 67 per cent to 75 per cent of the gross value, where such value includes the value of the land constructed upon.



A service tax of 10 per cent had been levied on real estate complexes for the first time in this year's budget. The abatement (tax rebate) has been increased to 75 per cent from 67 per cent of the gross value of a property that includes land value. This means that on an apartment, which costs INR 2 million, a buyer can get a service tax relief of INR 16,000, or INR 800 for every 0.1 million paid. Buyers would earlier have ended up paying INR 66,000 as service tax, but now they would pay INR 50,000.



Special Economic Zones



No Objection for Shifting of Units from one Special Economic Zone ("SEZ") to another SEZ



As there are no specific provision under the SEZ Rules, 2006 for shifting of units from one SEZ to another SEZ and no rules prohibiting the shifting of the units, the GOI has in principle no objection for shifting of units from one SEZ to another SEZ. However, all proposals for shifting of units from one SEZ to another must be placed before the board of approval (constituted under the SEZ Act, 2005) for its consideration.



Consolidated Guidelines on Staff Management



The Department of Commerce (SEZ Section), Ministry of Commerce & Industry, GoI, has issued a circular providing consolidated instructions on staff management of GoI and Private SEZ which is applicable with effect from August 16, 2010.





The seven SEZ at Kandla, Santacruz (Mumbai), Noida, Chennai, Cochin, Falta (Kolkata) and Visakhapatnam are administered by GoI. The list of the recruitment rules is consolidated and provided under the said circular covering all aspects of staffing in the concerned zones.



The staffing in private sector SEZ established under the SEZ Act, 2005 is managed in accordance with the instructions issued from time to time by the Department of Commerce and the same have been provided under the circular. The circular provisions for the man power structure; re-structuring of staffing pattern /re-designation of the posts; methodology for filling up the post of assistante development commissioner, section officer (accounts), stenographers grade I, II and III; one time relaxation for filling up of posts in SEZ and the quantum and the modalities for cost recovery of the posts from the developers of notified SEZs under the SEZ Act, 2005. Further, the circular also provides a list of circulars on the said subject which stand withdrawn with effect from August 16, 2010.

For more details contact the Expert Real Estate / Property Attorneys & Lawyers at :

Global Lawyers

Call: 0091 9810153965

Visit : http://www.globallawyers.in