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Monday, April 15, 2002, Chandigarh,
India  
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Better
days ahead for real estate
Dedication
paid me dividends
Indian
Hotels a long-term bet |
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Raising
money a challenge for IDBI
Electrical
goods wait for govt notification
HUF
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Better days ahead for real estate The real estate prices are bound to ride over the ascending curve of the price graph. Reeling under the sluggish market conditions for the past more than six years, there is nothing to stop the trade in attaining its position of upward trend in the very near future. Signs of improvements are clearly visible over the span of last few months. Stupendous performance in the agriculture sector that has already improved the economic growth to 6.3 per cent in the third quarter of 2001-02 as compared to 3.4 per cent in the corresponding period last year along with the favourable conditions created by the budgetary provisions, strategically incorporated to revive the country’s economy. Main emphasise being on agriculture and food economy reforms, enhance public and private investment in infrastructure, strengthen the financial sector and capital market and deepen structural reforms and regenerate industrial growth, the results have started pouring in slowly. The financing, insurance, real estate and business services have posted a growth of double digit of 10 per cent during the third quarter as compared to only 2.1 per cent in the corresponding period of previous year. The construction sector, one of the major organs of the real estate sector and being the second largest employment generator after the agriculture, which, if properly taken care of, unaffected by the global slowdown, have the potentiality of generating large-scale employment opportunities — directly as well as indirectly. Besides involving a large number of skilled and unskilled labour directly, more unlimited number of job opportunities could be generated in the core sectors such as steel, cement etc and over 250 ancillary industries such as bricks, electrical, sanitary and hardware etc, directly related to the construction sector. The employment opportunities enhance the purchasing power of the people thus helping in boosting the economy of the country to a great extent. The provisions in the current budget have taken due care of the real estate sector. By abolishing the provision contained in chapter XX-C to obtain 37(I) before transferring immovable properties in the specified areas at values exceeding specified limits, the Finance Minister has really given a great relief to sector beside obstructing a big channel of corruption as there were vast discretionary powers with the income tax officials under the above said provision of the act to acquire the undervalued properties. Long awaited reforms in the real estate sector such as rationalisation of stamp duty regime, reformed rent laws, repealing of Urban Land Ceiling Acts, revision of bylaws to streamline the approval process for construction of buildings/development of sites, simplification of legal and procedural framework for change of land use from agriculture to non agriculture purposes have also been included in the Budget provisions. A special Urban Reform Incentive Fund (URIF) with an initial allocation of Rs 500 crore to provide reformed linked assistance to
incentives the state has been proposed to be set up by the Finance Minister in the current budget. Positive and constructive initiatives by the States in the direction of reforming deserve to be taken on priority. The 2001 census shows that urban population in India is now about 285 million, greater than the total population of the United States. The number of cities with a population more than 10 lakh each has increased from 23 in 1991 to 35 in 2001. With this kind of growth in urban population and dilapidated state of affairs in the most of our towns and cities how can we expect to act these towns as engines of growth? For better living conditions and healthy environments for the citizens, reforms, can no longer be afforded to be delayed. For the desired results and to ensure that the benefits of the steps taken reach the common man, the Union Government is urged to set up a follow up department to oversee that these reforming steps are duly executed in letter and spirit by the states in accordance with the budgetary provisions. Housing sector though has been taken care of very well by the Finance Minister yet a provision of 100 per cent tax holiday under section 80 IB, applicable for the housing projects, approved by the local authorities before 31.03.2001 and completed before 31.3.2003, developed by an undertaking over a land minimum of one acre and having each dwelling unit of maximum covered area not more than 1000 sq feet in Delhi and 1500’ in other cities was expected to be extended further for a least next five years. The tax rebate was instrumental in attracting private investors to invest in the housing projects in the suburbs of big cities thus relieving the population pressure of the metros and other big cities in a big way besides providing affordable housing accommodation to the low budget buyers. No doubt employment generation through these projects shall also be an added advantage. Extending the provision further for a minimum of five years may be considered while reviewing the budget proposals. Going by the prevailing favourable conditions such as availability of easy housing loans floated in competition by nationalised/MNCs/banks and other financial institutions, availability of plenty of affordable/transferable housing accommodation around the cities, the intending purchasers are advised to go for a bargain of their choice before the market picks up to beyond-reach situation.
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by Lalit Batra Indian Hotels a long-term bet BSE Sensex gained just 10.33 points for the week to settle at 3,510.90 from the earlier week’s closing at 3,500.57. A positive guidance for the financial year 2002-03 by Infosys Technologies that indicated a recovery in the software major’s business, prompted strength on the bourses last week even though the market remained in a tight trading range. Tech stocks took centre stage after Infosys Technologies came out with a guidance of 17-20 per cent revenue growth for the financial 2002-03. Infosys announced its fourth quarter as well as annual results that were in line with the market expectations. Infosys posted a 16 per cent rise in its net profit to Rs 210.32 crore on 21 per cent higher sales at Rs 680.13 crore for the fourth quarter ended March 31. Earlier in the week, the Infsosys scrip had come under pressure on concerns that the software major might come out with a conservative guidance. Ashok Leyland & Telco in demand Ashok Leyland and Telco remained in demand on expectations of fresh orders for compressed natural gas (CNG) buses from Delhi after the Supreme Court on April 5, 2002, decided not to extend its deadline for conversion of diesel buses to CNG ones and imposed a heavy fine on bus operators who had failed to stick to the January 31 deadline. Ashok Leyland gained 9.2 per cent in the week to Rs 99.60 while Telco surged 6.9 per cent to Rs 136.30. Telco on Thursday announced a 10 per cent jump in its sales turnover to 23,481 units in March, 2002, on the back of strong Indica car sales, which surged 67 per cent to 8,769 in the month. Indian Hotels The global, including Indian, hospitality industry suffered a major shake-up following the September 11 terror attacks in the USA and increase in border tension. This seriously affected the occupancy rates of hotels. The Worldwide downturn resulted in lower revenues and profits. For the third quarter ended December, 2002, Indian Hotels reported a decline of 21 per cent in sales to Rs 131.03 crore. On the operating front, the operating margin fell sharply from 30 per cent to 19.7 per cent primarily due to lower sales. Operating profit was lower by 48 per cent to Rs 25.76 crore. The company has been pushing ahead with its restructuring plans for more than two years now. It started when one of its subsidiaries sold its 715-room luxury hotel Lexington Plaza situated in New York and then a 320-room luxury hotel in Chicago — Executive Plaza. Since then, the company which is caught up in at least 50 cross subsidiaries, has decided to merge these companies by the end of 2003. Besides, it is also working on bringing down its number of subsidiaries to three from seven now. Indian Hotels is re-entering the budget hotel category, which is to give a major fillip to its business. The budget hotels will be under the Gateway brand name and will offer value for money to customers. These
hotel will be premium in class and quality but economical in cost. This is one of the fastest growing sector and will attract better growth rates in the next few years. The company’s stock, which is trading at around Rs 180 level seems to be grossly under-priced as the total market capitalisation of the company, works to Rs 800 crore at this price. It is just the cost of “The
Taj”, which the company owns in
Mumbai.
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by Ashok Kumar Raising money a challenge for IDBI Last week, we took off on the topic of accountability. Now, that’s a non-existent word in the Indian lexicon, by and large. We had zeroed in on AMFI’s proposed certification
of is mutual fund advisers. Take a look at the NAV’s of some well-known equity mutual funds and the story will become self-evident.
We had then moved on to take a look at what ails, the IDBI, ostensibly one of India’s premier financial
institutions. For starters, it must be pointed out that the rating agency, Crisil has already down graded the IDBI’s rating due to mounting NPA’s. Moody’s has also changed the foreign currency debt rating of the IDBI to stable from positive. The recent change in ratings by both domestic and international rating agencies is hardly likely to enhance the prospects of its deposit mobilization programme during the current FY. It will be a challenging task for the institution to raise money either from domestic or overseas markets at lower cost, which is perhaps why they have been constrained to offer their bonds at a higher coupon rate their contemporary in the domestic bond sweepstakes. However, the reality bite is that before all that happens, the harsh economic environment will continue to drag down its performance especially when one considers its alarmingly high exposure to sunset industries. More importantly, the IDBI’s worsening financial performance and uncertainty about its plan to transform into a universal bank has adversely impacted its stock’s valuations. Is anyone accountable for the holy mess this once esteemed financial institution now finds itself in? An ‘I
don’t care’ attitude won’t help as it is finally us tax-payers who will have to bear the brunt of the inevitable government bailout. So where do we stand on the capital market front? Disastrous mutual funds, equally disastrous financial institutions and more than a handful of unscrupulous rogues in the markets who are euphemistically referred to as “operators”. If in spite of all this foreign funds reach our shores, surely the Goddess up there has a soft corner for this nation. |
by Pushpa Girimaji Electrical goods wait for govt notification The delay on the part of the government in notifying new quality control orders replacing the old ones issued under the Essential Commodities Act to ensure the safety of certain essential electrical goods has put consumer interest in jeopardy. Keeping in mind the need to protect consumers from sub-standard and hazardous electrical goods, the government had declared certain electrical appliances and accessories such as plugs and sockets, switches and bulbs as essential commodities under Section 2 of the Essential Commodities Act and had brought them under the mandatory ISI quality certification through quality control orders issued under the Act. However, on February 15 this year, the Ministry of Consumer Affairs, through a notification, removed these items, among others, from the list of essential commodities and thereby from the purview of the Essential Commodities Act. Consequent to this, new quality control orders were required to be issued immediately to ensure that these goods continued to be sold only with the mandatory quality certification mark. But two months have already gone by and the new order is yet to be notified by the Ministry of Commerce and Industry. While the General Service Electric Lamps (Quality Control) Order, 1989, had brought bulbs under the compulsory ISI certification, Electric Wires, Cables, Appliances and Accessories (Quality control) Order, 1993 had put plugs, sockets and switches, besides immersion water heaters, electric iron, stoves and radiators under mandatory certification. (Wires and cables were not included in the list, even though the title mentions them). Both the orders were issued under the Essential Commodities Act. It was not as if the government was unaware of the urgent need for notifying new orders. In September last year, at an inter-ministerial meeting convened by it to discuss the reduction in the list of essential commodities, the Department of Consumer Affairs had asked the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, to examine, in consultation with the Bureau of Indian Standards, the possibility of bringing these items under mandatory certification under some other law. The electrical items would be removed from the purview of the Essential Commodities Act only if that were possible, the department had said. And apparently it was only after receiving the green signal from the DIPP that the ministry deleted these items from the list of essential commodities. However, what it did not do was to wait for the new draft order or orders to be ready before effecting the deletion. The DIPP says it is trying its best to issue the order at the earliest, but cannot say when it would be notified. In view of the lifting of quantitative restrictions on imports, there were representations from the industry demanding mandatory quality certification for certain electrical goods (so that it could be extended to imports too) and the department was, therefore, considering expanding the scope of the Order. It was also debating whether to issue the order under the Bureau of Indian Standards Act or the Industrial Development Act. Besides the electrical items which were earlier under mandatory certification, DIPP was considering inclusion of circuit breakers, fuses, self ballasted lamps for general lighting services, and energy meters, besides cables and wires in the new order. Bulbs, which were earlier under a separate order would also be included in this. Sub-standard plugs, sockets and switches, besides cables and wires are known to be a major cause of household fires, destroying life and property. In the United States, the Consumer Product Safety Commission estimates that about 75,000 electrical system fires occur annually in American homes, mostly due to damaged or old wiring and over-fused circuitry. Accurate data on accidents, injuries and deaths caused by sub-standard electrical goods in India are not available, but studies have underscored the need for stringent enforcement of quality standards in these goods. In fact the Parliamentary Standing Committee had sometime ago commented on the risk involved in using substandard cables and wires and has recommended in its tenth report that cables and wires be also brought under mandatory certification forthwith. Subsequently in its thirteen report (Action taken report) presented to the Lok Sabha on December 19 last year, the committee had expressed its displeasure at the delay on the part of the government in acting on it. The attempt at standardisation of these electrical items date back to 1976 when the government first notified the Household Electrical Appliances (Quality Control) Order and brought 55 electrical goods under compulsory quality control. The order was to come into effect from November that year, but in October, the government reduced the number of goods in the list to 41 and subsequently in 1981, to 40. Then in 1988, the government passed another order called the Electrical Appliances (quality control) Order. It required only seven essential items out of the 40 to get the ISI seal from the BIS as a pre-condition to sale. However, since switches, plugs and sockets were not under the Essential Commodities Act, the Delhi High Court struck down the applicability of the Order to these three, forcing the government to bring them under the Act in 1991 and issue a fresh order in 1993. |
by R. N. Lakhotia HUF Q: I, my wife and a minor child constitute an HUF. Can I transfer money (by means of gift amount or loans) from the HUF to the member’s individual account? If a loan is taken from HUF by members, can it be interest free? Advice whether HUF can make a gift to any other person. — Ram Lal, Ludhiana Ans: Partial partition of HUF should not be done from the point of tax planning. In case the loan is given to the members of HUF it can be interest-free. The HUF can give gifts to the members of HUF within reasonable limits.
Interest Q: Please refer to your Column “Tax & You” dated 31-1-2002 where you have opined that “interest payment on loan against fixed deposits will be deducted from the gross interest income from the fixed deposits and only the net amount of interest will qualify for deduction u/s 80L. I have discussed this matter with certain counsels as well as Income Tax authorities. The view expressed by you has not been fully endorsed by them. — Dhani Ram, Patiala Ans: The general concept is that the net taxable income is liable to Income-tax. Thus, from the gross amount of interest receivable by you from bank the interest paid to bank would be deductible. What is relevant to be seen is that such deduction of interest on loan should be attributable to such income which is taxable under the Income-tax Law. Thus, in case the bank loan is taken against FDR to purchase relief bonds or to make money available for holidays, then the same would not be deductible from the gross amount of interest income.
Gifted amount Q: During year 2001-02, I gave a gift of Rs 6 lakh to my wife out of retirement benefits. In the form of fixed deposit (first name wife and 2nd name mine). The gifted amount will fetch an interest of Rs 60,000 during 2001-02 and Rs 66,000 during 2002-03. Such interest will, however, continue to be taxed at my hands. But my query is — whether the interest earned by my wife during subsequent years on such interest money say 2002-03 (on Rs 60,000) and year 2003-04 (on Rs 66,000), so on and so forth, will be taxed at her hands, being now her income. — B. D. Dhiman, Mohali Ans: The interest earned by your wife during the subsequent years on the interest money will, however, not to clubbed with your income. However, it is common that the Assessing Officer due to ignorance of the law may try to tax the same in your income. Hence, it is better to invest the money in tax free bonds and securities.
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FII net buyers Honda car Inflation dips Coca-Cola magic SBI stake |
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Ludhiana:
Mr Avtar Singh Dhindsa, (46), a pioneer in large scale flower seed
production in the region, is among the few farmers, who have put the
Punjab agriculture on the international map, through innovative ideas
and dedication, by exporting flower seed worth Rs 3-4 crore annually. A
postgraduate of Punjab Agricultural University (PAU), he is exporting
flower and vegetable seeds to the European and American companies for
the past over one decade.
