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Banking on boom
Stick to building code, directs RBI
Grabbers ‘park’ themselves in Bathinda
TAX tips
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Banking on boom
Most of the banks have recovered their non-performing assets (NPAs) by selling pledged securities in the open market by auctioning them. Banking industry has recovered around Rs 10,000 crore in the last fiscal alone. Banks have, on their websites, listed the properties to be auctioned and those, which are up for sale as well. Besides, newspapers are also flooded with advertisements from various banks. This is necessary before the auction of any property up for sale that enables the bank shorten the recovery time as many debtors are actually willing for settlement. During the last one year, banks have been able to take this bold step as the Securitisation of Financial Assets and Enforcement of Securities Interest Act (Srafesi Act) empowered them to auction the properties attached as collateral in the event of their becoming bad asset. Most of the banks are now concentrating on the loans-against-property business. This is because of the thin margins in the home loans industry. The rate of interest in the home loan is 9 per cent while loan against properties is between 11.25 and 12 per cent. The home loan business is likely to scale down substantially as the margins are under pressure. Low margins in the home loan industry have made the business risky. Indian private banks have spoiled the market by working on wafer-thin margins. May be, that is the reason why the banks have consciously toned down the growth rate and are becoming aggressive in the mortgage loans segment. Meanwhile, the RBI Governor has cautioned commercial banks against rising non-performing assets (NPAs) in their home loan portfolio with the rise in interest rates. The writer is a senior banker
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Stick to building code, directs RBI Wanting to secure the investment of nationalised banks offering home loans and loans for commercial properties, the Reserve Bank of India (RBI) has issued a letter advising banks to check if the buildings adhere to the National Building Code and are safe against natural disasters. The RBI has asked banks to incorporate guidelines of the NBC in their loan policies. The Bureau of Indian Standards (BIS) has formulated a comprehensive building code — the National Building Code (NBC) of India, 2005. This provides guidelines for regulating the construction activity across the country. The code contains all important aspects relevant to safe and orderly building development such as administrative regulations, development control rules and general building requirements; fire safety requirements; stipulations regarding materials, structural design and construction, and plumbing services. The RBI says it is a useful document to ensure that buildings are safe and the bank should ensure the quality of construction of the building the loan is provided for. The circular has been sent to all banks and is important for the earthquake-prone regions. A banker says the letter has come at a time when the region is witnessing a flurry of construction activity and the code ensures that all related aspects of construction are within line and the buildings safe. The NBC serves as a model code for all agencies involved in building construction works be it the PWD, other government construction departments, local bodies or private construction agencies.
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Grabbers ‘park’ themselves in Bathinda
The real estate boom in Punjab may have augured well for private colonisers, property dealers and farmers, but residents of Bathinda have lost 29 public parks to it. The prying eyes of land mafia didn’t even spare small chunks of green belt that served as lungs of the city. These parks are Bathinda’s necessity keeping in view the emission from the thermal plant and rising vehicular pollution. According to sources, 94 parks had been proposed for the city, out of which only 59 were developed, 29 encroached and the rest lie vacant. They say the municipal corporation (MC) is engaged in a legal battle over 34 parks of the city. Sources peg the market price of the encroached parks at Rs 25 crore. Such large-scale illegal encroachment of parks is being attributed to an alleged nexus between MC employees, private builders and politicians. The extent of “connivance” can be gauged from the fact that some encroachers successfully duped unsuspecting buyers into purchasing plots carved out on parks. The localities where parks have been encroached upon include Ajit road, Bibiwala road, Thakur colony, Bhatti road, Aggarwal colony and Vishal nagar. The MC had initially carved out 17 schemes in the city and had earmarked stretches of land ranging from 400 yards to 3,200 yards for developing parks, but reportedly failed to take the possession of the same. A section of people, whose land fell under park site, claimed compensation and then either sold off their plots or went in for illegal construction. Interestingly, the MC also lost a few court cases on illegal encroachment, reportedly due to poor follow up. Nagarik Chetna Manch, a local organisation, brought the matter to the notice of the district administration last month. The Deputy Commissioner then ordered the MC authorities to stop all unauthorised construction immediately.
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Slant along hilly slopes
While containing concrete commercialisation, it is these sloping roofs, which retain the hilly character of the surroundings. The government, according to a recent order, has directed that sloping roofs using slates or the CGI sheets, painted in maroon or green colour, should be erected. Enlisting the benefits, department official Sandeep Sharma explains: “The provision has many advantages. It prevents seepage of water during rain and snowfall. It blends with the natural hilly terrain in the background and bears semblance with the shape of conical trees. Being lighter than the customary concrete or an RCC structure, it is ideal from the seismic point of view. It ensures that the upper-storey is lighter than the lower one, which is a crucial requirement of the buildings in the quake-prone zones. Further, being cheaper in terms of cost of erection and maintenance, it is considered economical.” Rahul Chaturvedi, a leading architecture of the region, while terming it as a positive step said: “It provides thermal insulation and acts as a barrier to check heat gain and loss. Further, the use of wooden material like deodar or kail wood in the false ceiling keeps the house warm during the snowy winters. These roofs are recommended for the construction of water-harvesting structures. They provide perfect arrangement for collecting rain water.” “The most significant advantage of such roofs is the fact that it curbs the creation of an additional storey and hence conforms to hill architecture. This offers an added safeguard as high-rise structures are considered unsafe in the seismic prone zones” says Amit Sood an architect based at Solan. He adds that this provision also cuts down the cost of construction by as much as 20 per cent.
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Plan a garden Architect and horticulturist should map together, suggests Satish Narula
Now when the monsoon has set its foot, it is the busiest month for a gardener. Those who already have a garden are busy multiplying their plants, tending to the damages caused by summer heat and are repotting. However, those who have just moved in to a new place, planning a garden is most important. It is necessary to plan the garden right in the beginning with the construction of the building. In fact, the architect should be asked to sit with the horticulturist at the time of initial planning as at a later stage there is a clash of underground services, overhead features, electric lines and other building features or architectural lines that the owner otherwise wants overtly. The selection of the plants for various locations is done accordingly. A gardening plan should preferably be made on the paper before execution. Normally, after going through the rigours of making a house and after getting ‘exhausted’ both mentally and financially, people tend to visit an horticulture expert for a garden, “that should be cheap and best”. There is no such combination unless you are ready to compromise on the quality. If you want to go in for a water feature in the garden, it would be cheaper to get it constructed while the work is in progress. At that time, you can also plan the laying of underground lines for lighting or outdoor music system. Although there is no reason for accumulation of water in the lawn after rains if proper drainage is provided, yet, it is advisable to give a natural slope towards the exit. In case of big institutional areas, it is better to provide underground pipes with a provision of small sewer opening interconnected. Do not, under any circumstances, go in for ‘grilled’ open drains. For 11 months in a year, these will collect dirty wrappers, plastic bags and sashes or pool rotting water. One must select the plants at the time of planning. The selection of site should be left to the expert, who does so, taking into consideration the potential spread of the species, both above and below ground. Planting is also done keeping in view the direction, sunny side or shade. In the areas, like outside berms, where there is continuous danger of uprooting or digging by various departments, one should try to include those ground cover plants that take no time to refill the gap. Such places should not be planted with big trees. Inside the garden, the features developed with such plants provide an opportunity to change the designs and features after every few months making the landscape dynamic. There are wide ranges of plants available for different needs. Climbers provide privacy, flowering, fragrance and even highlight the architectural lines. Trees provide shade, flowering and fragrance. Shrubs fill in the gap periods when there is no flower in the garden. The ground cover plants provide lead, edging and border. You can use artefacts and statues as garden features. The writer is a senior horticulturist based at Chandigarh.
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Realty prices plateau
With the interest rate hardening and the real estate prices skyrocketing over the past one year, the developers in the metros and small towns are witnessing a slow down in demand for residential and commercial properties. It is another matter, that most of them do not publicly recognise it. Yet, in private, they admit that over the past six months, the demand for properties has substantially declined, forcing a cut in the profit margins. Property dealers admit the prices of properties in Delhi, Gurgaon, Noida, and all major towns like Ludhiana, Chandigarh, Agra and Indore are now slowing down. These had shown an unprecedented increase over the last two years. In fact, a two-bed room flat, which was available in Ghaziabad, Noida, for Rs 10 lakh in 2004, is not now available at Rs 25 lakh now. A few small-time builders, who had taken loans and invested family saving to earn quick bucks, are now finding it hard to sell flats. In fact, in Gurgaon and some pockets of Delhi, the prices have marginally come down by 5 to 10 per cent over the past two months. In the Capital, according to the government records, the number of monthly registration of properties in all zones has dipped by a record 25 per cent as against January, though partly due to demolition drive. The developers admit that a number of buyers have come down, forcing a price revision. Rise in petrol prices and the cost of other commodities has also increased pressure on the monthly budget of the salaried classes, forcing them to postpone purchase of house.
Hardening rates With realty prices rising almost doubling over the past two years, coupled with interest rate on home loans rising from around 8 per cent to 10.5 per cent, the middle -class is finding it difficult to purchase houses. Punjab & Sind Bank Executive Director G.S. Matta says: “ The interest rates are further expected to rise by at least 50 basis points in near future. Since the bank has already met its 25 per cent of total lending to the housing sector, we will be unable to increase loan to this sector.” Some of the banks are already asking the builders to increase their monthly instalments to pre-pay the loans, fearing property prices to burst, or at least slow down over the next six months.
Spoilsport Sensex The directions of the Reserve Bank of India to the banks to be wary of speculative investors in real estate, and not to lend without verifying the government clearances and increasing the risk weight for real estate lending have also pricked the rising balloon of property prices. The bursting of the bubble in the stock exchange market, says property experts, has also contributed to the fall in demand. “A section of investors who had earned lakhs of rupees within months by investing in stocks are diversifying funds in real estate, expecting equally good returns. Now, after the falling of Sensex by around 2,000 points and crash of some stocks, the funds have apparently dried up. Result — a fall in speculative demand,” says a marketing executive working with a leading builder in Delhi. He says the company is now revising investment plans in the metros and now moving to Tier II cities to safeguard investments, where there is enough demand from actual buyers. Some of the foreign institutional investors and big players, who have invested in the real estate mutual funds, are also feeling the pressure, worrying about the slowdown of rising prices.
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No rebate admissible on surrendered apartment By S.C. Vasudeva
Q. I am a Central Government
employee having an annual income of Rs 2,10,000. I have taken a housing
loan of Rs 5,50,000 from HDFC and its EMI is Rs 4,431 per month, which
is being deducted from my wife’s salary, who is also employed and her
income is about Rs 1,50,000 per annum I had taken HBA from my office
for one flat at Panchkula, which I have surrendered and have deposited
the HBA, along with interest thereon, to my employer. 1. Will I get IT
relief on my second housing loan and can my wife also claim IT relief on
the said loan. 2. Do I have to pay EMIs from my salary account to
avail IT relief. 3. My employer refuses to give IT relief, as they
say, I will have to first pay IT and then apply for refund directly. Is
the action in order? Please guide. — Anil Kapoor, Mohali A. The deduction
allowable under Section 80C of the IT Act, 1961, (the Act) is towards the
repayment of amount borrowed for the acquisition or construction of the
residential house property, the income of which is chargeable to tax under the
head ‘income from house property’. Accordingly, in my view you would not be
entitled to a deduction in respect of the repayments towards the second housing
loan, which was taken for acquiring a flat and has been surrendered by you.
As per Section 80C of the Act, the payment for sums specified in that section
should be made by the assessee. Accordingly, it may be difficult to claim
deduction for the amount of repayment of the principal sum under Section 80C of
the Act. However, in case you can prove that the amount was paid by your wife
on your behalf and such amount has been repaid back by you to her, it may be
possible to argue that the amount has been repaid by you. The deduction under
Section 80C of the Act is allowable while computing the salary income. The
employer has not allowed you the deduction as the repayment of loan has not
been made by you. It is, therefore, essential for you to prove that the
repayment has been made by you. In view thereof the stand taken by the
employer, in my opinion is correct. Interest rateQ.
I applied for Rajasthan Housing Board HIG House as joint names (wife and
husband). I am an employee of Rajasthan Vidyut Utpadan Nigam Ltd., and my wife
is a state government employee. 1. The SBBJ Bank is giving 8.5 per cent
interest rate to the state government employee and 9.75 per cent to others.
What would be rate of interest for joint names home loan? 2. For joint names
home loan, who is competent to take home loan deduction rebate from Income Tax
return? As I am ready for 100 per cent repayment of loan, still, do I have to
apply for loan? — Mohal Lal Baweja, Suratgarh A. The answers to your
queries are: The interest rate is to be decided by the institution/authority
giving the loan. Accordingly, if you apply to SBBJ or Rajasthan Government for
grant of joint home loan, the institution/authority would decide the interest
rate. This is not within the powers of the writer of this column to decide.
For the purpose of grant of deduction of interest payment under Section 24 of
the Act and deduction for the repayment of instalments of the borrowed amount
under Section 80C of the Act, normally two aspects should be considered, the
ownership of the house and the payment of interest and instalments by such
owner. If the owner has made the payments towards interest and repayment of the
instalment of loan, the deduction would be allowable to the owner under the
aforesaid provisions of the Act. Rebate for ownersQ.
I am a retired government employee aged above 73 years. I am a PAN holder and
file IT return every year. I own a house, which is partially self-occupied and
partially rented. My son, who is also a government employee and an income-tax
payee, resides with me in the above house. He claims HRA on the basis of rent
receipts issued to him by me. I approached a bank for a loan of Rs 3 lakh for
repair and renovation of the house. But because banks are reluctant to grant
loans to persons aged above 55 years or so, the bank gave the loan against the
mortgage of the house in the joint names of my son and myself, my son being the
first loanee and me, second. Recently, it was clarified that tax benefits
limited only to interest payment on loan for repair and renovation up to Rs
30,000 can be availed by deducting the interest payment from the income from
house property even if the repair and renovation has been carried out in
respect of a self-occupied property. Under the circumstances, as in my case,
can I claim the benefit in my IT return, my son being ineligible because he has
no income from house property? If so, under what section of the IT Act? If not,
what is the way out? — Joginder Singh, Mohali A. The deduction for the
interest payment can be claimed only if the loan has been obtained by the owner
of the house for the purpose of carrying out the repairs and renovations. The
payment towards the interest is also to be made by the owner so as to claim the
deduction of interest form the income from house property, which is assessable
in his hands. Capital gain taxQ I purchased
a small piece of land for Rs 35,000 in July 1987 and spent Rs 1,20,000 on
construction of shop on the land in 1987 itself. I sold the above for Rs
24,75,000 on April 29, 2005. I purchased a shop in mall for Rs 13 lakh on July
15, 2005. I purchased a flat in June 2006 for Rs 10,71,000, plus Rs 65,000 as
court fees. What will be my capital gain and what will be my capital gain tax
(if any) for 2005-06. — Paul A. The indexed cost of land would be Rs
1,15,967 (Rs 35,000 x 497/150). The long-term capital gain on the piece of land
would be computed after deducting the amount of Rs 1,15,967 from the sale price
of land included in the total sale consideration of Rs 24,75,000. The structure
of the shop being a business asset, the gain arising on such structure shall be
assessable as a short-term gain under Section 50 of the Act. No indexation
would be allowable in respect of the cost of such structure. You will,
therefore, have to bifurcate the sale consideration of Rs 24,75,000 into two
components i.e. towards the sale of land and towards the sale of
structure. The gain arising on sale of land would be exempt if the same is
less or equivalent to the cost of residential flat purchased by you in June
2006. If the same exceeds the cost price plus court fee charges aggregating to
Rs. 11,36,000, the same would be taxable @ 20 per cent plus applicable
surcharge and education cess. The short-term gain on the sale of structure
would be added to your other income and taxed at the normal slab rates. It may
be clarified that the acquisition of another shop would not entitle you to
claim any exemption from the taxability of capital gains. Investing
LTCGQ. I acquired a residential property in 1976. I am selling it
for Rs 45 lakh. However, the sale value assessed by the stamp value authority
is Rs 55 lakh. The fair market value of the property on April 1, 1981, is 2
lakh, which on indexation becomes 10 lakh. Kindly advice: 1 Whether income-tax
will take sale value as Rs 55 lakh or Rs 45 lakh. 2 Whether capital gain tax
is chargeable @ 20 per cent or investment in capital gain bonds is made on the
basis of Rs 55 lakh or Rs 45 lakh after deducting fair market value. 3
Whether to save capital gain tax, I am required to buy residential property
worth Rs 55 lakh or Rs 45 lakh after deducting fair market value. 4 Whether I
can partly invest the capital gain to buy a property, partly to purchase
capital gain bonds and partly pay 20 per cent tax. Whether the investment
after purchase will be considered Rs 55 lakh or Rs 45 lakh. — G.K. Gupta,
Faridabad A. The answers to your queries are: (i) The income tax
authorities will adopt the sale value of Rs 55 lakh as provided under Section
50C of the Act. (ii) The capital gain would also be chargeable on the basis
of Rs 55 lakh. (iii) In accordance with the provisions of Section 54 of the
Act, the long-term capital gain earned on sale of residential house property is
required to be invested within the specified period so as to claim the
exemption from the taxability of such long-term capital gain. (iv) Yes. You
can partly invest the long-term capital gain in the acquisition /construction
of residential house property within the specified period and partly in the
acquisition of capital gain tax saving bonds. You can also decide to pay tax on
part of the amount of long-term capital gain. (v) The investment in any of
the specified heads would be of the actual amount spent by you.
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Not only is the construction industry booming, banks, too, are making most of the boom to recover their bad debts (loans) in the realty sector.
Rising property prices helped the banks get better prices for the properties pledged as securities with them and, therefore, improve the recovery of bad debts. 
Numerous benefits are being tagged to the recent Town and Country Planning (TCP) Department’s order to make sloping roofs a mandatory provision for the buildings coming up in the hills. This stipulation, while reducing the weight of the building, ensures that the design blends with the hill architecture.