EMAAR - MAJOR ISSUES OF BUYERS

Emerald Hills Owners Welfare Association

KULDEEP KUMAR KOHLI

PRESIDENT

1. H.E. Mohamed Ali Rashed Alabbar,

Chairman,

Emaar Properties

PO Box 9440, Dubai, UAE

info@emaar.ae

2. Mr. Hussain Ahmad Dhaen AL Quemzi,

Vice Chairman,

Emaar Properties

Dubai

info@emaar.ae

Respected His Excellences,

At the very outset I wish to put on record the hard work being put in by Ms. Namita Mehta and the other heads from the legal and finance team in trying to meet the expectation of different buyers on different issues and many of the buyers from our Group, who were agreeable to the fresh offer of Emaar, in the process, have signed fresh agreements,  though the relief granted by Emaar was far below our expectation and the gains made by Emaar by holding the delivery of the flats/plots much beyond the date promised in the BBA.

We are aware of His Excellency  Mohamed Alabbar being  an Emirati billionaire and the founder and Chairman of Emaar Properties, one of the largest real estate development companies in the world with annual revenue of $4.2 billion and a market cap of over $20 billion, known for developing the world's tallest building Burj Khalifa and the world's largest mall Dubai Mall, which are part of Emaar's 500-acre flagship mega-development Downtown Dubai, as well as The Tower at Dubai Creek Harbour, set to be over 3,000 feet tall upon completion in 2020, the 2,000-seat Dubai Opera, Dubai Marina, the world's biggest man-made marina, Emirates Hills, regarded as "the Beverly Hills of Dubai", and King Abdullah Economic City, established with King Abdullah of Saudi Arabia as one of the largest private developments in the region spanning 64 square miles.

His Excellency, we are also aware of the H.E being top adviser to the Ruler of Dubai and Vice President and Prime Minister of the United Arab Emirates, Sheikh Mohammed bin Rashid Al Maktoum, and His Excellency having formerly served as the founding Director General of the Dubai Department of Economic Development

The creation of such a huge empire has only been possible because of the moral principles and the social values that are being followed by the Respected Promoters of the Group and the employees or in short is because of following the “Business Ethics” such as providing quality goods and services at reasonable prices to its customers, avoiding  adulteration, misleading advertisements and other unfair malpractices and also following proper business policies and practices such as corporate governance, corporate social responsibilities.

I as the President of Emerald Hills Owners Welfare Association on behalf of owners of different Emaar Projects in India wish to convey to you His Excellency that THE BUYERS OF FLATS/PLOTS/COMMERCIAL SPACE IN YOUR PROJECTS are too disturbed with few of the practices being followed in respect of your projects in India which do not appear to be, in line with the business ethics  of the Group, which most likely is not within your knowledge and hence deserves an immediate indulgence at your end in resolving the same. I bring to your notice that these defaults have already dented the image of Emaar via media/television , but then we are also confident that H.E. would initiate the needful resolutions which would help recover the brand image of Emaar.

We are very confident of your being aware of the recent change in the environment in India in favour of the buyers through various judgements being announced by the Honourable Supreme Court and the Honourable National Consumer Dispute Redressal Commission and the evolution of the RERA (Real Estate Regulatory Authority).

The major issues which need your immediate indulgence and kind intervention are the following:

1. HVAT

2. GST

3. COMPENSATION TO THE BUYERS WHO BOUGHT IN RESALE WITHIN ONE YEAR OF THE ORIGINAL PURCHASE

4. COMPENSATION TO THE BUYERS WHO BOUGHT IN RESALE AFTER ONE YEAR OF THE ORIGINAL PURCHASE.

5. COMPENSATION TO THE BUYERS WHO SIGNED AN AGREEMENT WITH YOU WHERE THE DATE OF START OF CONSTUCTION IS NOT SPECIFIED.

6. COMPENSATION TO THE BUYERS WHO HAVE ALREADY TAKEN POSSESSION OF THE FLAT BUT HAVE NOT BEEN GIVEN ANY COMPENSATION UNDER THE PRETEXT OF SOME DELAY IN PAYMENT OF INSTALMENT.

7. COMPENSATION TO THE BUYERS WHO MADE ALL PAYMENTS ON TIME AND HAVE TAKEN THE POSSESSION BUT HAVE NOT BEEN GIVEN ANY COMPENSATION OR HAVE BEEN GIVEN TOO LOW A COMPENSATION

1.  H VAT

Emaar has already recovered the VAT amount due by the allottees in the sale price of the allotted units. Any and all future liability arising from Emaar’s incorrect assessment of the tax amount is not the liability of the allottees. The Allottees are not liable for Emaar’s further tax liabilities in the matter beyond what has been paid under the sale price. Furthermore it is provided that even if you had opted for the Rule 49A scheme, you are barred by the rule, specifically at Rule 49A (2)(v)&(vi) to collect the tax amount paid or issue tax invoice from the buyers.

The fact that the company had challenged the assessment/demand notices, raised by the authorities on account of levy of Haryana Value Added Tax HVAT on the construction of the units was never intimated to the buyers at the time of booking the flats in May 2009 and was not even mentioned in the Builder Buyer Agreement, which clearly implies that the cost of 3.87% of the total consideration due towards HVAT was already included in the cost  at which the flat was offered to the buyer.

You have subsequently opted for the amnesty scheme and paid 1% HVAT and hence the amount of 3.87% minus 1.05% now paid needs to be refunded to our members who have bought your property as the said amount of 3.87% is already included in the sale price. Additionally from some buyers an additional 1.05% was collected against the HVAT-amnesty-scheme and this also needs to be refunded.

2. GST

His Excellency, the overall tax liability on home has been reduced after the implementation of Goods & Services Tax, 2017 whereas the benefit so accruing is not being passed to the buyers by your branches in India. The law on the issue is very clear and despite this clarity on law position, if any builder resorts to such practice, the same can be deemed to be profiteering under section 171 of GST law which is illegal.

The  position of Government of India on GST is as under :

• The CBEC and States have taken cognisance of many buyer complaints that in view of the works contract Service Tax rate under GST at 12% in respect of under construction flats, complex etc., those who have booked flats and made part payment before 1^st July, 2017, are being asked to bear higher tax incidence for payments made after 1^st July, 2017. The government has reiterated that this is against the GST law, as explained below.

• Construction of flats, complex, buildings have a lower incidence of GST as compared to a plethora of Central and State Indirect Taxes suffered by them under the earlier regime.

• Central Excise Duty was earlier payable on most construction material @ 12.5%. It was higher in case of cement. In addition, VAT was also payable on construction material @ 12.5% to 14.5% in most of the States. In addition, construction material also earlier suffered Entry Tax levied by the States. Input Tax Credit of the above taxes was not allowed for payment of Service Tax. Credit of these taxes was also not available for payment of VAT on construction of flats etc. under composition scheme. Thus, there was cascading of input taxes on constructed flats etc.

• As a result, incidence of Central Excise Duty, VAT, Entry Tax, etc. on construction material was earlier being borne by the builders, which they passed on to the customers as part of the price of flats charged from them. This was not visible to the customer as it formed a part of the cost of the flat.

• The earlier headline rate of Service Tax on construction of flats, residences, offices etc. was 4.5%. Over and above this, VAT @ 1% under composition scheme was also charged. The buyer only looked at the headline rate of 5.5%. In other Cities/States, where VAT was being levied under the composition scheme @ 2% or above, the headline rate visible to the customer was above 6.5%. What the customer did not see is the embedded taxes on account of cascading and sticking of input taxes in the cost of the flat etc.

• The situation has changed under GST. Under GST, full input credit is available for offsetting the headline rate of 12%. As a result, the input taxes embedded in the flat will not (& should not) form a part of the cost of the flat. The input credits should take care of the headline rate of 12% and it is for this reason that refund of overflow of Input Tax Credits to the builder has been disallowed.

• The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/ instalments. It is, therefore, expected from Emaar that in the flats under construction, they should not ask customers to pay higher amount of instalments inclusive of all taxes to be received after imposition of GST.

3. COMPENSATION TO THE BUYERS WHO BOUGHT IN RESALE WITHIN ONE YEAR OF THE ORIGINAL PURCHASE

4. COMPENSATION TO THE BUYERS WHO BOUGHT IN RESALE AFTER ONE YEAR OF THE ORIGINAL PURCHASE.

Excellency, the above two issues No. 3 and 4, are well taken care in the judgment below and this is based on the views expressed by the Honourable Supreme Court  in Haryana Urban Development Authority Vs. Raje Ram, AIR 2009 SC 2030.

CONSUMER CASE NO. 427,430-440 of 2014

Versus

M/s Unitech LTD (Opposite party –OP)

                                     

Para 9. For the reasons stated hereinabove, I am of the considered view that the opposite party should handover possession of the apartments booked by the complainants on or before the last date stipulated in the letter of the opposite party dated 27-05-2015. In the cases of those complainants who are the initial allottees of the apartments or who acquired the same within one year of the initial allotment, the opposite party should also pay compensation to them in the form of simple interest at the rate of 12% per annum with effect from the date of possession stipulated in the agreement till the date on which the possession is actually handed over to them.  The persons who purchased the flats within one year of the initial allotment, ought to be treated at par with the initial allottees, because at least two more years being still available to the opposite party at the time of purchase by them, they could not have anticipated that the builder will not be able to honour its commitment, as regards the stipulated date of delivery of possession.  No separate compensation for the mental agony, harassment and suffering needs to be paid by the opposite party to the complainants.

However, in the case of those complainants who acquire the flats by way of resale more than one year after the initial allotment, the opposite party should pay compensation in the form of simple interest at the rate of 12% per annum with effect from three years from the date of the repurchase till the date on which the possession is delivered to them

5. COMPENSATION TO THE BUYERS WHO SIGNED AN AGREEMENT WITH YOU WHERE THE DATE OF START OF CONSTUCTION IS NOT MENTIONED

During our discussions with your team in Gurgaon, it was agreed to by them that the date of signing the BBA would be taken as the date of construction for grant of compensation but there appears to be some change of mind amongst your senior management in Gurgaon, India and no compensation is being given to them by your office in India.

His Excellency may kindly like to appreciate that this kind of an injustice cannot be meted out to the innocent buyers who have all,  having faith in the brand Emaar,  signed the contract under the impression that the project construction would be started within a reasonable period of a month or two from the date of signing the contract. Hence in all such cases the date of start of construction may kindly be taken as the date of signing the BBA.

6. COMPENSATION TO THE BUYERS WHO HAVE ALREADY TAKEN POSSESSION OF THE FLAT BUT HAVE NOT BEEN GIVEN ANY COMPENSATION UNDER THE PRETEXT OF SOME DELAY IN PAYMENT OF INSTALMENT.

7. COMPENSATION TO THE BUYERS WHO MADE ALL PAYMENTS ON TIME AND HAVE TAKEN THE POSSESSION BUT HAVE NOT BEEN GIVEN ANY COMPENSATION OR HAVE BEEN GIVEN TOO LOW A COMPENSATION

His Excellency, the above category of buyers at point No. 6 & 7, are the biggest sufferers, as they took the possession when offered to them, did not prefer to go in for litigation and have been denied the basic compensation for the delay/offered too less a compensation, though others have been offered more and hence require your kind and personal indulgence on priority to be placed at par with others.

In view of above, we shall be grateful for a quick justice to the buyers on priority on all the issues mentioned above.

His Excellency, it may be difficult for me to hold so many buyers

moving the Honourable Courts and hence an early action at the end of Emaar, under your instructions, shall be highly appreciated.

Thanking you,

Yours faithfully

KULDEEP KUMAR KOHLI

PRESIDENT

Copy to:

Mr. Sanjay Malhotra,

Chief Executive Officer,

Emaar India,

Emaar Business Park,

MG Road, Sikanderpur Chowk,

Sector 28,

Gurugram – 122002

sanjay.malhotra@emaar-india.com

Ms. Namita Mehta

Chief Service Officer,

Emaar MGF Ltd,

Sikandarpur, Gurgaon

Namita.mehta@emaar-india.com;

Mr. Ashish Kabra,

Chief Financial Officer,

Emaar India,

Gurugram – 122002

ashish.kabra@emaar-india.com