Guide to Finance

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Commercial Property On Rent

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The budget proposal of 2007-2008 states that service tax will now be levied on the rent received from the leasing of commercial properties at 12.36%. The imposition of this tax is a step towards broadening the scope of service tax, and imposing extra taxes on real estate. The flip side of the coin reveals a benefit, which is enhanced transparency in the transactions made during the buying and selling of properties.



Commercial property includes offices, shops; business centers malls, cold storages, warehouses, and any other premises that are used for a commercial or business purpose. Investors purchasing property on a fixed return basis will witness a drop in their returns. As per the agreements that are signed at the time of renting a property between the developers and the renters, any future tax liability will have to borne by the tenant. However, in certain cases no clause regarded such additional taxes is included, which may lead to disputes and litigation in future.

This increase in service tax is nothing short of a punch in the face for individuals who have either already given or taken the premises on rent, or those who are planning to do so in future. Whether the service tax is to be put up with by the licensor or licensee depends on the prevailing market conditions.

The scarcity of commercial space, the rise in real estate costs in the last couple of years, and now a whopping 12.36% tax addition are backbreaking. A recourse being considered is to seek legal help. However, the government too seems to be sending mixed signals. On one hand, the builders are being encouraged to develop more and more infrastructure facilities, while hiking the input costs, which will have to be ultimately borne by the consumer.

The 12.36% service tax will entail extra operating expenses and squeezing margins, knocking out the retail sector in India. Multiplexes will perhaps be hit worst as approximately 8% of their total revenues already go into paying rentals.

Real estate prices are increasingly going up and it is no more practical for developers to do business in many places. This is because if more properties are under construction and they have to bring down their margins, no retailer would be willing to take it up at extra costs. Such a severe rule as the 12.6% service tax being levied by the Central Government can put strains on the flourishing Real estate sector in India.

Furthermore, the other consequences of imposing service tax may include further inflation of property prices. Hence, the focus of the government must be on how to reduce or sustain the property prices at the existing levels.
Commercial Property On Rent
Till now Energy Performance Certificates were mandatory for residential properties. However, a new legislation which will come into effect in April 2008 would require commercial buildings which are up for rent or sale and have a floor area exceeding 500sqm to get the Energy Performance Certificate of their property. The legislation would come onto full force by October 2008 since all commercial establishments would be required by law to obtain a certificate. Every prospective buyer of the commercial building should have access to the Energy Performance Certificate of the building which should be handed over to the owner once the sale of the property is through. In case of rented properties, the new as well existing tenants would be required to be given access to the Energy Performance Certificates of the property.

Why we require them

EPC is needed to check homes that endanger the environment by consuming energy and emitting harmful greenhouse gases into the air. It is even true for commercial establishments and buildings. The increasing environmental hazard posed to the environment by commercial buildings is the reason for the introduction of the legislation. The commercial property Energy Performance Certificates would be helpful in rating the commercial property and would like the Energy Performance Certificates issued for houses, propose steps which would help in improving the rating. Since the certificates are only in the offing, the indications are that Energy Performance Certificates might be similar but may differ slightly from those issued to residential properties. Apart from helping reduce carbon emissions, commercial property Energy Performance Certificates would help businesses in a positive way by helping them cut costs by suggesting ways to save on energy bills.

Whom to approach for commercial property EPC

Energy Performance Certificates can be issued only by accredited assessors. Your best bet would be to approach Wilbourn Associates who offer professionals who can assess your property, whichever kind it is, and then have it evaluated for its Energy Performance Certificates.

The chartered environmental surveyors, Wilbourn Associates also offer other services to their clients such as providing environmental impact assessments, environmental impairment insurance and helping them iron out property management issues and conducting asbestos surveys on sites. Not only is the company involved in assessing the contamination of sites, it is also actively involved in providing help and advice and in actually cleaning up contaminated sites.

For any help regarding these and similar issues, the professional help offered by Wilbourn Associates can be sought by accessing their official website www.environmental-surveyors.com. The site also lists the other services offered by the company and provides useful articles which might help you tackle land contamination and assessment related problems.
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About Author
Both Properties Mls & Jason Gardner are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Properties Mls has sinced written about articles on various topics from Health, Finances and Mortgage. For more information on Real Estate Agents, MLS visit Source:. Properties Mls's top article generates over 1220000 views. to your Favourites.

Jason Gardner has sinced written about articles on various topics from Environment, Mergers and Real Estate. Jason Gardner is a well known author who writes articles for Wilbourn Associates, the UK's leading resource for Chartered Environmental Land Consultants, provider of. Jason Gardner's top article generates over 27100 views. to your Favourites.
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