Tag Archives: Indian Commercial Real Estate

Tenants of commercial properties must pay 18% GST on their electricity bills.

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The Central Board of Indirect Taxes and Customs released a circular on Tuesday regarding the applicability of GST on the reimbursement of electricity charges that airport operators, mall operators, and real estate companies receive from their lessees or tenants.

The government explained that tenants, especially those renting commercial properties, must pay 18% Goods and Services Tax (GST) on electricity charges if the supply coincides with the rental of immovable property and facility maintenance. However, the power billed on an actual basis by real estate owners or malls, which act as discus agents, will not be subject to any GST. 

The Central Board of Indirect Taxes and Customs (CBLC) released a circular on Tuesday about the applicability of GST on the reimbursement of electricity charges that airport operators, mall operators, and real estate companies receive from their lessees or tenants.

It clarifies that providing electricity in conjunction with the rental of real estate or the upkeep of buildings, as the situation may dictate, constitutes a composite supply and is subject to the appropriate taxation, the statement read. 

“The leasing of real estate and grounds maintenance is the primary supply; the provision of electricity is incidental,” the statement reads. “The GST rate on renting immovable property or maintaining premises would be applicable even if electricity happens separately,” the document said.

It also stated explicitly that homeowners in housing societies would not be subject to GST. The resident welfare associations (RWAs), real estate developers acting as pure agents, or real estate owners provide the electricity; it will not be included in the price they pay. “Furthermore, they will appear to be acting as pure agents for this supply where they charge for electricity on an actual basis, that is, they charge the same amount for electricity that the State Electricity Boards or DISCOMs collect from their lessees or occupants,” the statement went on. 

Expert opinions on this clarification vary. “The real estate industry is concerned about the CBIC’s most recent clarification. This clarification applies GST to electricity charges, regardless of whether they are provided separately or in conjunction with real estate. Although there are some exceptions, such as when property owners recover electricity costs on an actual basis or act as pure agents,” according to Saurabh Agarwal, a partner at the consulting firm EY. 

In his view, “The implications of this clarification remain a concern in cases where real estate companies convert high tension lines to low tension lines and charge higher rates due to transmission loss.” “Going forward, landlords may factor in the GST cost on electricity when determining lease rental amounts, which could increase the rental cost,” he continued. 

But MS Mani, a partner at Deloitte India, thought it was for businesspeople. “This will help the recipients of such composite supplies who were uncertain about their eligibility for input tax credits (ITC), in addition to ensuring uniformity of procedures throughout the real estate industry,” he said regarding the clarification on electricity charges recovered as part of a composite supply. 

Commercial real estate increased by 7% in India’s main Tier-1 cities.

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According to a PropWquity study, the supply of commercial real estate in India’s major Tier-1 cities increased by 7% in the third quarter of 2023 to an overall total of 14.61 million square feet. The government’s proactive efforts to support the IT industry through infrastructure improvements and tax breaks are responsible for this growth. With about 35% of the new supply, Hyderabad was the best performer overall. Bengaluru came in second with 25% of the new supply. A notable 20% increase in net occupancy occurred during the same period, going from 10.30 million square feet (in Msft) in Q2 CY’23 to 12.31 million square feet (in Msft) in Q3 CY’23. In contrast, gross occupancy increased by a meager 2% from Q3 2023 to Q2 2023. This significant increase in occupancy is evidence of the market’s dynamism and the high demand for commercial real estate at the time. 

Companies and businesses have been growing their operations, demonstrating the industry’s dynamism and room for growth. With a 9% YoY increase in new supply, MMR has the highest net occupancy among the Tier 1 cities. In contrast, because of the excess supply from prior quarters and high rental prices in this one, the Delhi-NCR area has seen a significant decline in the construction of new properties, with a 65% decrease compared to the previous year. As a result, Delhi NCR now only makes up 7% of the supply of new real estate in Tier-1 cities. The higher net occupancy in this quarter is the main reason for the sharp increase in rental rates in Delhi-NCR, which have increased YoY by 17% and QoQ by 45%. Due mainly to leasing initiatives by Citi Bank and Teleperformance, Gurugram’s Sector-18 and Noida Expressway rank among the top micro-markets in the Delhi NCR according to occupancy levels. 

India’s market for commercial real estate is expanding rapidly, providing companies with dynamic spaces that adapt to their changing needs. The supply of commercial real estate has increased by 7% in tier-1 cities, suggesting a bright future for the industry. We can not wait to take part in this thrilling adventure. With the festive season approaching, strong demographics, a boost in business confidence, and government initiatives in high-value industries like infrastructure and manufacturing, the current wave in Indian commercial real estate is predicted to continue for the upcoming quarter. 

There was a small shift in the number of open positions from Q2 2023 to Q3 2024 in the Top Tier-1 cities of India. There are 152.32 million square feet of vacant space overall in these cities as of Q3 2023. The most unsold stock is found in Hyderabad and Bengaluru, at 43%, and MMR, at 15%. This pattern illustrates how the Indian real estate market has changed over time, driven by several variables, including the current state of the economy, the dynamic interplay between supply and demand, and the changing needs of businesses. The commercial real estate market is formed by these factors taken together. Although the marginal increase in vacancy levels is promising, major players in the industry must stay vigilant and flexible to adeptly navigate the continually shifting landscape of the commercial real estate sector. 

Loan for Commercial Property

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If you need money, your commercial property could be worth a lot to you as credit. You could use it as security to obtain a loan for commercial real estate. Find out more about this credit by reading this blog. 

What is a loan for commercial property? 

You can get money by using commercial real estate you already own as security through a financial product called a commercial property loan. It is an option to increase the amount of capital available for business growth or purchase new equipment. 

Typically, you can get a loan for up to 60-70% of the value of your property. Additionally, this credit option has enticing interest rates and no restrictions on final use. The application process is fast and hassle-free. To meet the particular requirements of each business, some lenders also offer tailored loan solutions. 

Qualification Standards for Commercial Property Loans 

There is a financial product available for independent contractors. They fall into the following categories: 

Types Examples 
Independent Professionals Chartered accountants, architects, company secretaries, lawyers, medical professionals, and consultants 
Non-professional Self-Employed (SENP)Traders, Manufacturers, Commission Agents, Contactors, etc. 

The requirements for qualifying for a loan against commercial property will differ between loan providers. However, a few of the typical ones are listed below: 

Residency Indian 
Age Minimum 25 years to Maximum 75 years (when the loan matures) 
Income Some lenders evaluate the business and fund it without needing proof of income. The applicant must have a reliable source of income; it must demonstrate this by submitting pertinent income documentation. 

As a result, before requesting the loan, you and the co-applicant (if any) must confirm that these conditions are satisfied. 

Required Documentation for a Commercial Property Loan 

In the same way, the eligibility criteria will vary among lenders, and the documents required to apply for a loan against commercial property will also differ. Before starting the application process, you should note them. 

Below is a list of some of the general ones: 

  • Address and Identity Verification: A passport, Aadhaar card, voter ID, PAN card, driver’s license, or any other government-issued document that meets the criteria for KYC. 
  • Income Evidence: Account statements for savings and current accounts, copies of ITRs with CA attestations, computations of personal and business income, balance sheets, and P&L statements for the last three years
  • Property Records: Copies of all relevant documents about your commercial property, including the buyer agreement, title deeds, prior chain of title (in the event of a resale), and any other relevant documents. 
  • Other crucial documents include passport-sized photos of the applicants and any co-applicants, checks to pay processing fees to the loan provider, business profiles, partnership deeds, etc.  

How to Submit an Application for a Commercial Property Loan

You can apply for a commercial property loan online by following the instructions below: 

Step 1: Access the website of your preferred lender. 

Step 2: Visit the section for loan applicants. 

Step 3: Provide the information as prompted. 

Step 4: Apply. 

You can apply offline by visiting the bank or agent. Once your application process is complete, a representative from the lender’s end will contact you to process and approve your loan application. 

Final Remarks 

A commercial property loan can be a great way to build credit and meet your company’s financial needs. 

Blackstone and KKR looks up for Indian Commercial Real Estate

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India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), writes Reuters. UB Holdings, controlled by liquor baron Vijay Mallya, is part of the UB Group that owns majority of United Spirits and United Breweries, apart from debt-laden carrier Kingfisher Airlines, which is looking for funds to continue operations, writes Reuters.

Reuters – India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), the Times of India newspaper reported on Tuesday citing unnamed banking sources.

 

The UB Tower in Bangalore, which Mallya is looking to sell, is occupied by companies like Apple, Citibank, and Yahoo, the report said. A UB Group spokesman, quoting Mallya, denied the company was in talks to sell the real estate space, the paper reported. Prakash Mirpuri, a UB spokesman, told Reuters there was no plan to sell UB Towers. He, however, could not immediately confirm whether other real estate assets from UB Holdings were up for sale. A Blackstone spokesman declined to comment, while KKR could not be immediately reached by Reuters on Tuesday, which is a local holiday in India. UB Holdings and the private equity players are considering a sale-and-lease-back model, with UB having the right to buy the property back after a specified period, the report said.