Commercial rents, property prices stabilise

Quashing of the Rent Act notification by the Supreme Court is a tears & cheers event for landlords and tenants, respectively, says Rajmeet Singh

The burgeoning real estate prices in the city have started to stabilise in wake the quashing of the Rent Act notification by the Supreme Court. Bringing misery to the landlords and cheers to hundreds of tenants, the pronouncement has adversely affected the property transactions.

The decision has, however, boosted the business activity. Enquiries reveal that traders have started investing and renovating their shops.

An interesting outcome of the judgment has been the reaction of that the traders who were paying less than Rs 1500 as rent. “ On realising that the Damocles Sword of the Rent Act was no more hanging over their head, many tenant traders, who earlier preferred not to increase their rent beyond Rs 1,500 for the fear being covered by the Rent Act are now voluntarily increasing their rent,” said Mr J.S.Kalra, general secretary of the Chandigarh Beopar Mandal.

Players in the real estate business reveal that the worst hit have been the investors and speculators, who had entered into advance agreements in the past few months, anticipating that outcome of the Special Leave Petition (SLP) in the apex court would result in property boom.

After the decision of the Chandigarh Administration to amend the East Punjab Urban Rent Restriction Act, 1949, the property rents had skyrocketed. But quashing of the Rent Act notification has reversed the trend, feel market observers.

Mr Arvind Jain, president, Commercial Tenant Association, said that they had waged the legal battle with the support of the traders and other tenants as well as various landlords and ultimately succeeded in their goal. “The apex court has held that the Chandigarh Administration has no power to issue such a notification under Section 3 of the Rent Act. The decision has given substantial relief to the traders and saved their livelihood from the hands of ill-willed landlords and property mafia”, said he added.

Apex court questions passing of the Rent Act notification

Quoting the operative part of the judgment, the Chandigarh Tenants Association (CTA) said the apex court had observed that, “The legislative objective and policy indisputably must be considered having regard to the preamble and other core provisions of the Act. Section 3 although is part of the Act, but the same can not be said to contain an in-built policy so as to empower the Administrator to do all such things which can be done by the legislature itself”.

Alleging that the Administration “unauthorisedly” used legislative powers in amending the Rent Act notification, the Commercial Tenant Association (CTA) has threatened to challenge all such notifications, which have changed the entire objective of the Capital of Punjab (Development and Regulation) Act, 1952.

Bangalore overtakes London

Bangalore has overtaken London in the demand for commercial space while in India it leads in demand for housing

Hot on property demand, especially for commercial space, Bangalore has overtaken London and emerged second in the world after Tokyo with demand for commercial property shooting up to 10 million sq ft a day.

Tokyo leads the world with the demand put at about 12.5 million sq ft, Mr K Balakrishna Hegde, president of the Karnataka Ownership Apartments Promoters Association (KOAPA), told newsmen here. He said for residential space, Bangalore led rest of the country with the total annual demand being 35 million sq ft.

He said work was currently on construction of 140,000 dwelling units (flats) in the city that would be completed over the next two to two and a half years with the annual offtake being around 30,000 units. The annual growth was estimated at 30 per cent.

The city had over 400 builders of whom 100 were members of KOAPA, celebrating its silver jubilee this year.

He said with the increasing level of salaries and over 100,000 jobs created, Bangalore had seen a tremendous increase in affordability levels of different incomes. The affordable bracket for a majority of the city population, which was in the range of Rs 15 to Rs 20 lakh four years ago, today ranged between Rs 25 and Rs 30 lakh. Similarly the bid segment bracket hovered between Rs 30 to Rs 60 lakh.

He said KOAPA would hold a two-day realty show from in November offering around 18,000 units from 32 developers with a total cost of Rs 5000 crore. The total area that would be made available over the next two years from these builders was around 20 million sq ft. — UNI

Big firms, foreign realtors enter North market
Ruchika M. Khanna

The real estate boom in North India has caught the attention of not just big Indian players, but also realtors from abroad. With property prices in the region matching those of cities abroad, the boom is likely to continue.

Despite sceptics warning against a bubble burst in Punjab, Haryana, Chandigarh and its periphery where land prices have sky-rocketed in the past couple of years, entry of big players like Tata Housing Development Company, Yash Birla Group Infrastructure Company and London-based developers Johal International, proves otherwise. Seeing high growth potential in this region, especially around Chandigarh, these three companies have decided to set shop in Chandigarh, Delhi, Gurgaon and Amritsar.

Mr Narinder Singh Johal of Johal International, London, says, “We propose to buy commercial properties in Delhi and Gurgaon, besides consolidated chunks of agricultural land near Chandigarh, Patiala and Jalandhar”. Johal International is a leading London-based realty firm with business interests in San Francisco, USA and Vancouver, Canada, besides most of the cities in UK.

Asked why the company was looking towards National Capital Region (NCR) and Punjab, he said that North India could no longer be ignored considering its high growth potential. “The property prices in Chandigarh are almost similar to the prices on the outskirts of London. For example, a 250-sq yard house in a posh sector in Chandigarh is available for Rs 1.50 crore while a house on the outskirts of London is available between £ 200,000-£ 250,000 pound (approx Rs 1.50 crore),” he says.

Meanwhile, Tata Housing Development Company, which already has projects in Mumbai, Goa, Cochin, Pune, Bangalore and Delhi, is also eyeing the Delhi and Chandigarh realty market to expand its operations. Sources say that the company plans to construct both residential and commercial projects here. It is in final stages of negotiations for acquiring 70 acres of land near Chandigarh to set up a housing project.

The Yash Birla Group Infrastructure Company is also coming up with housing projects in Ambala, Mohali and Chandigarh. While its residential complexes will be spread over an area of 25 acres, the township will be built on 100-acre land.

Unique shopping complex in Srinagar
Ehsan Fazili

While shopping malls by private firms are coming up haphazardly in many peripheral areas of Srinagar, the Srinagar Development Authority (SDA) has taken a lead by constructing a unique shopping complex in the heart of this capital city. This unique Sangarmal Shopping Complex, spread over an area of 64 kanal, is being constructed by the government agency, SDA. It is coming up at the Maulana Azad Link road facing the sprawling playgrounds of the century-old Sri Pratap College.

“This is the first shopping mall in the capital that will be having escalators and basement parking,” said Mir Naseem, vice-chairman of the Srinagar Development Authority. It will also be having round-the-clock power and water supply.

The construction of the mall started in 2004. It will be completed in four phases. The first phase, estimated to cost approximately Rs 15 crore, would be completed by July next year.

About 70 per cent of the work on the first phase has been completed and the applications from interested parties are being invited by the end of next month, officials at the SDA disclosed. In the first phase 38 shops are being constructed, including 10 in the basement exclusively for a craft bazaar, While 66 shops are the ground floor, there would also be space for 10 offices.

However, there is a word of caution for the applicants that they would have to start their business within six months “without any deviations” or changing the line. “This is to avoid any misuse of the space by the investors,” say the officials.

The first phase in two blocks has been exclusively marked for 10 shops in the basement for Kashmir handicrafts. This would be on the pattern of Palika Bazaar in New Delhi, according to Mr Abdul Aziz, deputy director of the SDA. It would be equipped with round-the-clock power supply. There is also a mechanism to ensure daylight into the basement, the official said.

The first and second floors of this first phase would be made on the pattern of indigenous Kashmiri architecture with wooden ‘khtamband’ ceilings, finished devri square-shaped stones on the walls and ‘maharaja’-type bricks. “This has been done to ensure that it reflects the traditional architectural style of the state,” said Sheikh Javed Ahmad, engineer at the site.

The main plaza, after completion, will have four escalators and a basement parking, which are unique features in the Kashmir environs, say the officials. The basement, with a heating system, will have a parking space for over 80 vehicles, while the ground floor will be having food courts. The first floor will be having shops for different trades. The second and third floors will be having office space and restaurants. The complex also has space for an amusement park for children and an open-air theatre.

There would be separate parking slot for Sangarmal Shopping Complex over an area of 13 kanal across the M A Link road. This would be linked to the shopping complex through a subway. Some of the structures, mostly government houses in the vicinity, are also being removed to give it a better look.

HP retention policy violates town planning Act
Rakesh Lohumi

The Himachal Pradesh Government has recently submitted a Rs 3,300-crore plan for the rejuvenation of Shimla, aptly called the “Queen of Hills” under the Jawahar Lal Nehru Urban Renewal Mission. But surprisingly it has come out with a retention policy as well to help regularise all unauthorised structures, which will spell doom for the capital town. The policy has been brought in violation of the Town and Country Planning Act.

Rejuvenation and degeneration cannot go together. Unregulated construction in recent years has taken a heavy toll on the once picturesque hill station, which has become a veritable concrete jungle. It has not only put an unbearable strain on the civic infrastructure but also ruined the aesthetic charm of hill station. Moreover, the municipal corporation has been finding it difficult to provide even basic services like water, sewerage etc. as most of the new buildings have encroached upon the mandatory setbacks, essential for laying water and sewerage pipes.

Under the Town and Country Planning Act only 10 per cent deviation from the approved building plans is allowed. The provision is made to take care of minor deviations, which usually creep in while constructing structures on hill slopes. However, under the latest retention policy even totally unauthorised structures will be regularised and that too floor-wise for which there is no provision under the law.

The retention policy allows 50 per cent deviation, including setbacks, to enable regularisation of structures having up to five storeys. Not only this, under this policy illegal structures will be regularised even in restricted areas.

In fact the policy has been tailor-made to reward the rich and influential. It is for the first time that the benefits of the retention policy have been extended even to the colonisers. In many cases where a person has built more than one unauthorised structure all of them will be regularised.

Normally, the landlords built structures four to eight times outside their bonafide requirement. With a minimal 10 per cent deviation they could have a covered area five to eight times the requirement. However, with a 50 per cent deviation they could build eight to 20 times of the requirement. The permissible floor area ratio of 150 per cent has virtually been raised to 400 per cent. The setback in front has been reduced to 1.5 m from 3m and on sides it will be less than 75 cm, which means that there will be hardly any space between adjoining structures. This will disrupt the entire planning procedure for providing basic civic amenities to such a large population. Besides the loss of heritage will be irreparable as well as living in poorly ventilated houses where sun rays could not reach will in the long run affect the health of the occupants.

Interestingly about 40 per cent of the built-up area is lying vacant in the Katchi Ghati, Pantha Ghati, Totu, Puabo and new Shimla where most of the unauthorised structures have come up. There are few takers for haphazardly built structures most of which do not even have a proper pedestrian approach what to speak of road connectivity. The administration will be a hapless onlooker in case of disasters as it will not be possible to organise any rescue operation because of lack of proper approach to the buildings. As multi-storeyed buildings have been virtually been built one over the other on steep slopes, one weak structure could spell doom.

Moreover, regularising excess storeys is fraught with dangers, as most of these structures have been built on weak foundations, which may not be able to withstand the load of so many storeys. Moreover, the region is prone to earthquakes and falls in the seismic zone IV.

The law-abiding people, who constructed houses in accordance with the bylaws, are feeling cheated. In case the government does not have the political will to demolish the illegal structures, it should be vested in the state and sold through auction to raise funds for providing the basic civic amenities rather than rewarding those who have made a mockery of the law. The Congress government, it seems, has not learnt any lesson from the follies of the previous BJP government, which also came out with similar policies on the eve of the polls and paid the penalty.

If the government is going to regularise all illegal structures than should scrap the Town and Country Planning Act and wind up the department concerned.

DEVELOPER SPEAK
A dream with a view
Maneesh Chhibber

Having made a mark for himself by taking the family-owned businesses to new heights, Manjit Singh today wants to realise his dream of building the region’s first township which has, among other things, a lake, a helipad, a golf course, shopping arcades and a multiplex.

With the Punjab Government recently approving two mega projects floated by his company - Sikandar Group of Companies, this dream may soon turn into reality. The total cost of his ambitious projects: a cool Rs 2000 crore.

When these projects are completed, Mohali may well be the first Punjab town where a housing-cum-commercial project will boast of a five star hotel with its own private helipad!

Sikandar Group of Companies first became famous when it came out with a chappati-making machine that can churn out 20,000-25,000 chappatis every hour. Such was the success that the machine achieved that it has been exported to many countries in the Middle East and Sri Lanka.

“For a long time we had been thinking of entering the real estate sector in a big way. But due to the company’s growth in the sectors in which we were already present, we put our plans on hold. But, when we saw outsiders coming and getting permission to set up mega housing projects in Punjab, we decided we had waited enough,” says Mr Manjit Singh, Managing Director, Sikandar Group of Companies.

Also on the anvil in the upcoming projects are mega housing townships, two shopping malls-cum multiplexes, an IT park, group-housing complexes, recreational and health centers and a school.

For these ambitious plans, the company has already acquired a major portion of the over 350 acres of land in Mohali-Kharar belt and Zirakpur

Manpreet Singh says, “We wish to offer the best of all worlds to our patrons. We are shortly going to tie up with a foreign group for this purpose. As for the money, some funds would be raised from internal accruals and debt. With the government’ go-ahead, we will now speed up work on the two upcoming townships, one each at Mohali and Kharar. Multi-brand retail chain Shoppers’ Stop would be the primary anchor of the project.”

Company officials say the other upcoming projects are located in Ludhiana, Amritsar and Jalandhar.

“Our motto is to provide luxurious living at an affordable price to every one. And, keeping our track record in mind, we are going to pull out all stops to achieve our target,” claimed Mr Manjit Singh.

TAX tips
Interest on PF loan not deductible expenditure
By S.C. Vasudeva

Q. I am working with a government undertaking and have been posted in Punjab for the time being. I intend to settle down in my native place and have therefore purchased a plot for constructing a residential house. For that purpose I had borrowed a sum of Rs 5 lakh from my provident fund account so as to meet the cost of the plot. Will the interest payable on such borrowing be taken as a part of the actual cost of the plot?

A.S. Singh, Punjab

A. Interest payable on provident fund loan is not a deductible expenditure. This has been so held by Delhi High Court in the case of Vashisht Bhargava vs. ITO (99 ITR 148) (Delhi). This is because the interest payable on provident fund loan is credited to the provident fund account of the borrower i.e. assessee. In view thereof it may not be possible to include such interest as part of the actual cost of the plot.

HUF dissolution

Q. I am the Karta of our HUF comprising my wife and four daughters (six members) assessed since 1973 owning a house. All members wish to dissolve it and sell the house and divide the proceeds (along with the bank balance in HUF account) among the six of us.

What formalities are to be complied with for the dissolution of the HUF.

(i) Is the capital gains tax to be paid out of the HUF amount or respectively by each member on receipt of the proceeds by him/her?

(ii) Can a member invest the proceeds of his/her share in buying a flat/house for himself/herself?

Madan Lal Gupta, New Delhi

A. The answers to your queries are as under:

(i) The dissolution of the HUF would involve a total partition of the HUF property, meaning thereby that all assets of the HUF should be distributed amongst the members of the HUF. For this purpose you will have to draw a Memorandum of Partition (MoP) that would record that an oral partition took place a few days before the date of MoP. Such an MoP would also describe the manner in which the members of HUF have been allotted their shares in the HUF property. MoP should be drawn up in case it is intended to partition immovable property by metes and bounds. In case the partition is intended after the sale of property a Partition Deed evidencing the total partition should be drawn up.

(ii) The capital gain on the sale of HUF property will have to be paid by HUF.

(iii) The members can invest the proceeds of their share in the manner they like after the tax has been paid by the HUF, and a total partition of the HUF property has been effected.

I would suggest that it would be better to sell the HUF property and thereafter distribute the proceeds amongst the members of the HUF on the basis of a Partition Deed, which would describe the manner of distribution of such proceeds. This would avoid the necessity of partitioning the immovable property as it may be difficult to partition the same by metes and bound. You should also obtain an order under Section 171 of the Act recording the total partition to avoid any future complications.

Buy/built house to save CG tax

Q. I made a Long-Term Capital Gain by selling property in March 2006. I would like to know which capital gain bonds are available in the market. I am aware of only NHAI & REC Capital Gains Bonds. But I am told that they are already over subscribed. What is the way out? Any new issue coming up?

Rakesh Kumar, Nabha

A. Your information that the capital gain bonds which were to be issued by the National Highway Authority or the Rural Electrification Corporation Ltd. have already been subscribed and the above entities have stopped taking the subscription towards the bonds is correct. There is no information as yet with regard to a new issue. The other alternative for saving the capital gain tax is to buy or construct a residential house within the prescribed time.

Loan deed on simple paper

Q. My son wants to purchase a small house for Rs 18 lakh. He will spend Rs 8 lakh on simple interest @ 3.5 per cent which is equivalent to saving bank rate. I will give the loan amount either through cheque in his name or deposit the amount in his bank account through bank draft, which he will duly acknowledge. My query is which of the following three will be legally valid.

(1) Should there be a written agreement between my son and I of the loan amount of Rs 10 lakh on a non-judicial stamp paper. If so, what should be the amount of the non-judicial stamp paper.

(2) Can the loan agreement be on a simple plain paper on which court fee stamps are affixed? If so, the amount of court fee stamps.

(3) Can the loan agreement be on a simple plain paper without court fee and the loan amount paid be acknowledged/receipted by my son on the revenue stamp of Re 1 only?

Arun Lal, Bathinda

A. The loan to your son should be given by an account payee cheque. It would be better to have a written agreement on a simple paper. Such agreement should be carried out in letter and spirit and your son should make the payment of interest and repayments of loan by an account payee cheque. I may add that it is the substance of the transaction, which is important, and not the form and therefore the transaction should actually be verifiable with the facts on records. You should declare in your tax return that a loan of Rs 10 lakh has been paid to your son with his complete address and Permanent Account Number. On the other hand your son should also declare this fact in his return giving the same particulars about you so that the transaction can be cross-verified.

Capital gain on agriculture land

Q. I have four acres of agricultural land (rural) situated outside limits of Dera Bassi but the land is adjacent to municipal limits. There is only dividing road in-between the farmland and municipal limit. The agricultural land was purchased in 1971 at the rate of approximately Rs 6,000 per acres. Now I intend to sell the same and get the sale price approximately at the rate of 1.5 crore per acre. The Municipal Committee of Dera Bassi is still ‘C’ class city.

Please let me know whether the agricultural land is to be treated as the capital asset or not under Section 2(14) of the Income Tax Act? Whether I can take any benefit of improvement made by converting the land into orchard after 1991?

Jagjit Singh

A. The relevant portion of the notification as issued by the Government of India with regard to the urban areas covered in Patiala district for treating an agricultural land as capital asset are as under:

"(a) Bassi (Pathana) (Patiala district)	Areas falling within: (i) 1 km on either side of Bassi Pathana-Morinda road up to a distance of 4 km from municipal limits on that road; (ii) 1 km on either side of Bassi Pathana-Fatehgarh Sahib road up to a distance of 2 km from municipal limits on that road; (iii) 1 km on either side of Bassi Pathana-Kharar road up to a distance of 2 km from municipal limits on that road.
(b) Mohali (SAS Nagar)	Areas falling within 1 km on either side of Mohali-Kharar road up to a distance of 6 km from municipal limits on that road.
(c) Patiala	Areas up to a distance of 8 km from municipal limits in all directions.”

I may add that the areas specified hereinabove are besides those, which fall within the municipal limits. As the particulars of area given by you are not absolutely clear, I am giving the above parts of the notification so that you can ascertain whether the agricultural land owned by you is covered within the aforesaid areas. If so covered, it will be treated as a capital asset and any gain arising on the sale of such agricultural land would be a capital gain exigible to Capital Gains Tax. You can definitely make the improvement on the agricultural land and convert the same into an orchard. The income there from will still be treated as an agricultural income and the land would remain an agricultural land. The question whether the same would be an urban land will have to be decided on the basis of the details given above.

Farmhouse culture raising land prices
Virender Singh

After Delhi the farmhouse culture is fast gripping the Doaba region of Punjab. Over 400 farmhouses have come up in Jalandhar, Kapurthala and Hoshiarpur districts in last about two years.

What has forced people, particularly, industrialists, businessmen and doctors to go in for small and big farm houses is their growing need for greenery, clean air and natural surroundings.

But this growing passion to invest in farmhouses has fuelled the prices of land around the region from 200 to 500 per cent for past one and one and a half years. For example if an one-acre farm house could be purchased for Rs 20 to Rs 22 lakh a year ago on either the Nakodar road or the Kapurthala road, the price of the same is said to have touched anywhere between Rs 1 and Rs 1.5 crore now.

In Jalandhar district alone, nearly 150 small and big farmhouses (of the size of one acre, five acres and above) have come up during past about one and half year. “Every person with a purchasing capacity wants to own a farm house nowadays. It seems as if a race is going on among businessmen, industrialists and even doctors as to who buys a farmhouse and at which location. Some singers have also developed liking for farmhouses. Hence, we are also thinking of promoting farmhouses the size of four to five kanal in an area of 20-acre land at nearby Khambra village,” said Mr Harmol Singh of Baba Makhan Shah Lubana Property dealers and developers. They are developing an ultra-modern 120-acre South City residential project near Khambra on the outskirts of Jalandhar city.

Apart from businessmen, doctors, other professionals, NRIs and their families are also in the race to buy farmhouses. Since the land is becoming scarce around Jalandhar, they have started moving towards Hoshiarpur, where a couple of singers and NRIs have either established their farm houses on vast chunks of land, with an area ranging from 15 to 30 acres or have locked deals for the same during past about two years in a big way.

Dr Jasbir Dosanjh, a skin specialist based in Jalandhar, has set-up a 14-acre farmhouse at Dehrian village in Hoshiarpur district. “For long I had a passion for a farm land. My dream came true last year when I finally managed to get hold of a farmhouse at Dehrian village,” said Dr Dosanjh.

Mr Rajesh Mayor, a Jalandhar-based sports goods manufacturer, said, “I am also very keen to set-up a farm house at some ideal location around Jalandhar. What I like about living on a farmhouse is the feeling that you are living amidst nature. Since the boom in property continues unabated, a farmhouse is a good bet from investment angle also,” he said.

“About 150 to 200 farmhouses have come up in and around Kapurthala during past one year. People have come up with beautiful English style buildings at their farmhouses. The countryside landscape is undergoing a fast change,” said Mr H.S. Padda, a Kapurthala-based progressive farmer.

Netpick property to check bogus deals
Geetu Vaid

Whether you are a investor looking to buy a property or scouting for a suitable abode, hunting for a good and suitable property and striking a good deal is tough. Frauds, bogus deals, paying exorbitant amount for a worthless property or being handed down a disputed property - the pitfalls are many.

To check these kind of frauds a Ludhiana-based group has come up with a plan to organise the relevant data regarding saleable properties in an area and make it available to customers on the Internet. This information will be available to people at the touch of a button through a chain of 150 dealers connected through a centralised system.

Claiming it to be the first-of-its-kind service in the region Mr Gulshan Kumar, MD, G.K. Estates, says, “We are going to set up a chain of 150 real estate dealers covering almost every village of Ludhiana district. These dealers will be given proper training to prepare and use the database.”

Already 70 to 80 dealers have been finalised in those villages where expansion is likely to take place in the near future.

Most of the people in the property dealing business are not fully qualified and this inadequate knowledge results in frauds and bogus deals. This dealership chain idea will ultimately benefit customers as it check cheatings and frauds and would also fetch them good deals. With over 150 dealers watching the market the chances of getting a ‘raw’ deal will be minimised.

The company will avail of the service of a law officer who will handle the legalities of various sale and purchase deals.

Video recording of the whole area and of the properties that are on sale or are likely to be up for sale would be done and a database of all saleable properties in an area would be made available on computers through a centralised system. Thus the network of dealers would work in cohesion and unison to give the best possible deals to customers.

Complete information on all properties would thus be recorded and documented and would be available on the Net.

“We are going to have our own lease line for 2 lakh computers which will make this information available worldwide. This would be immensely helpful to NRIs wanting to invest in India or Punjab as even a Toronto-based NRI could get authentic information about the available properties in Tanda or even a lesser-known area in the region.

The service is going to star from Ludhiana within the next 10 days,” informed Mr Kumar. He plans to expand this service to other areas in Punjab and North India.

With this the customers will have an option to watch the whole city while sitting at one place thus saving them the botheration of going around different places to get an idea of the prices and to identify a property as per their requirement.

The properties could be identified according to the master plan of the town thus giving valuable advise to investors to go in for area where the prices are going to appreciate due to increased demand.

Disputed properties, however, would not be on Net so customers can be assured of getting genuine deals.

The real estate sector may be thriving but according to Mr Kumar “in today’s context it is not property which appreciates rather it is necessity which makes this appreciation possible. Meaning that only in those areas where there is going to be a need in the years to come will the prices of property really appreciate. So it would be wise for buyers to invest in these areas only rather than buying property just anywhere. The lack of this kind of information has cost many buyers dearly as they have blocked their assets in properties, which are not likely to appreciate. For example in Ludhiana there was a need for around 20,000 flats but over 40,000 flats were made available and as result the market slumped. Hence those who invested in these project hoping to make a quick profit had to face immense losses.”

“Information of this kind is important to investors and this is what we aim to provide so as to educate a common buyer and increase his property IQ through this plan,” he adds.

Dealers too will benefit from this, as there will be up to 10 per cent increase in their business.

Foreign investors eyeing realty market, says Assocham study

Due to massive inflow of FDI, cutthroat competition will emerge between domestic and overseas investors, says S. Satyanarayan

The real estate in India is hotting up with several leading international investors showing keen interest and establishing their presence in domestic real estate business. According to a recent finding the FDIs’ share in real estate is expected to touch 26 per cent by March 2007, triggering a cutthroat competition between the domestic and international players.

The massive flow of FDIs in Indian real estate sector is due to the fact that China’s real estate market has reached its saturation point and foreign investors prefer to invest in freehold land, which is more freely available in India.

A recent Assocham indicates that FDIs’ share in domestic real estate market will shoot up by at least 10 per cent by March 2007 and touch about 26 per cent level from 16 per cent of fiscal 2005-06, in view of the growing interest of global real estate players into the Indian real estate market and the ever-increasing demand of office space, particularly in IT and BPO sectors.

The overseas investments will also be funding major players in Indian SEZs and increasing number of shopping malls that will naturally fatten their share in real estate market, according to the findings of the ‘Study on Future of Real Estate Investment in India’.

It says that currently, real estate market is growing @ 30 per cent per annum and offering maximum returns to investors. The domestic real estate market, which is presently estimated at $ 16 billion, will increase by over three and a half times and touch $ 60 billion by 2010.

The study forecasts that of estimated $ 60 billion future market size of real estate business in India, the share of foreign investments will be within the range of $ 25-28 billion by 2010.

According to Assocham president Anil K Agarwal, leading international investors like Royal Indian Raj International, Blackstone Group, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property Investors, Lee Kim Tah Holdings, Salim group, Morgan Stanley and GE Commercial Finance Real Estate are showing keen interest and establishing their presence in domestic real estate business.

The study also indicates that office property market in India will witness a further boom. There is a great demand for modern office buildings in India. In the past two years, the capital value of the commercial office spaces has increased by 40 per cent.

The requirement for office spaces alone will grow to over 19 million sq ft in 2006-07 from 4 million sq ft in 1999-2000. Approximately 75 per cent of the demand will alone from the IT and BPO sectors. By 2010, the sector alone would require 200 million sq ft of space in major metros.

The chamber also holds that the number of malls in Kolkata, Mumbai, Bangalore, New Delhi, Hyderabad and Pune will grow to 300 in numbers by 2010 as against their present strength of 50. In terms of total area, there was 12.40 million square feet of mall space available in these cities.

The SEZs is the new destination for real estate investors. Of the around 150 approved SEZs, 85 are in the IT/ITEs area and 10 to 15 in the electronics area. The real estate developers are developing nearly 130 SEZs, constituting 50 per cent of the total SEZ area. However, the manufacturing and engineering sector has a mere 17 SEZs in the approved category based in Haryana, Punjab, Karnataka, Maharashtra, Andhra and Gujarat.

According to Assocham, IT SEZ would be developed and made operational within a period of six months from the date of notification. Thus over 130 approved IT sector SEZs would immediately result into an investment of $ 9 BN to $12 BN resulting into massive employment generation.

Companies	Overseas real estate investors plan (IN USD)
Royal Indian Raj International	2.9 billion
Blackstone Group	1.0 billion
Goldman Sachs	1.0 billion
Emmar Properties	800 million
Pegasus Realty	150 million
Citigroup Property Investors	125 million
Lee Kim Tah Holdings	115 million
Salim Group	100 million
GE Commercial Finance Real Estate	63 million

Mal(l)amaal

With several multi-storeyed residential projects in the offing, many malls and multiplexes are mushrooming in Faridabad, says Bijendra Ahlawat

A view of an upcoming mall in Faridabad. — Photo by Rakesh Kashyap

With the realty sector booming in the NCR region, Faridabad is not lagging behind. While over a dozen of sectors, covering hundreds of acres of land in the eastern belt, have been earmarked for the development of high-rise multi-storeyed residential buildings, the builders have not forgotten the need for multiplexes and the shopping malls in this premier industrial township. Haryana Urban Development Authority (HUDA) has allotted 35 sites for the constructions of malls and multiplexes for which work has already begun for some of the projects. The city has two multiplexes at present while work on many others has been going on. HUDA has already sold at least 10 plots for this purpose in the recent past.

“The skyline of Faridabad is certainly going to change in the next few years and with a large number of shopping malls and multiplexes in pipeline the shopping pattern and the needs of the residents are in for a complete changeover,” claims a real estate agent based in Sector 15-A here. He said though only two multiplexes have been in existence at present but these had been overflowing with the people, especially the youth, who find the malls suitable not only for shopping but also for an outing or just roaming in the evening.

He said the directions of the High Court to seal the illegal shops and commercial establishments in the residential sectors and the pending closure of Sector 7 and 10 markets could prove a major incentive for the mall culture. Some big retail companies have already started selling items of domestic and daily use, which also include the fruit and vegetables at very competitive and attractive rates. He said many families, who used to shop in the traditional market of the NIT, Old Faridabad at Sectors 7 and 10 markets, had now switched over to the retail markets of the two multiplexes here.

Recently a company, which had started the second multiplex here about two years ago, announced that it would come up with a five-star hotel in the next four years, besides a residential complex across the Agra canal. There has been no such hotel in the city so far. A site earmarked by the HUDA in Sector 2 here, too, has not found any takers so far.

According to Mr J.S. Ahlawat, Administrator, HUDA here, the department had reserved at least 35 sites for malls of which many had been sold. He said with a large number of residential sectors by private builders coming up, the number of malls and multiplexes was certain to shoot up in the next few years.

The proposed Commonwealth games, ongoing work on providing Expressways on Eastern as well on the Western side of the district and the boom in business and economy was sure to provide the boost to the real estate sector and could have remarkable changes on the lifestyle as well’.

Admitting that as many as 20 commercial plots of the HUDA in Sector 20-A and 20-B here had been held up due to legal and other problems, he said the demand of land for commercial and business use had been strong. ‘The development of the proposed industrial model township and a special economic zone (SEZ) in the region could give a further boost to the growth, claimed another property agent.

He also added that work on the Badarpur flyover was going on quickly and with a plan to widen the NH-2 with ample flyovers on busy crossings, the city seems to have topped the priority list of the real estate companies and business houses for development.

“The rates of the items sold in a mall or multiplex could be on higher side and unaffordable for many at preset, but these could be scaled down considerably in near future as more of such hypermarkets or malls come up. Then the companies would be forced to offer the things on competitive rates to attract buyers and customers,” claimed a builder.

Space in most of the upcoming malls in the city had already been leased out, as the rentals here had been on lower side in comparison to neighbouring Delhi, Noida, Gurgaon or Ghaziabad in the region, said a property dealer.

Indian realty firm generates £ 180m from London IPO

Domestic realty firm Ishaan Real Estate Plc has said it raised £ 180 million (over Rs 1,500 crore) with the successful completion of its initial public offering on the London Stock Exchange.

The company said the IPO of 180 million ordinary shares has been priced at £ 1 per share and conditional dealings in the shares have begun.

The shares would be admitted for trading on LSE’s Alternative Investment Market (AIM). Unconditional trading began on November 24, after which almost 100 per cent of Ishaan’s issued ordinary share capital will be freely tradable.

A part of K Raheja Group, Ishaan is a real estate investment company and plans to invest in Indian real estate development projects located in the southern and western parts of the country — such as Hyderabad, Mumbai, Bangalore and Pune.

Ishan Chairman Ian Henderson said: “We are delighted that Ishaan’s IPO has successfully priced and we are especially pleased with the significant level of interest shown by investors.” “This is a sign of great confidence in the quality and development prospects of our planned investment portfolio. We look forward to creating value for all our shareholders and providing an opportunity to participate in the exciting potential of the Indian real estate market,” he added. — PTI

Hiranandani plans $ 750m share sale

Hiranandani Constructions, the developer of the world’s tallest residential building, plans to raise $ 750 million selling shares next month in the biggest offering by an Indian developer on the London Stock Exchange, bankers with knowledge of the plan said.

Hiranandani plans to raise between $ 500 million and $ 750 million selling shares in a property investment firm on the London Stock Exchange’s Alternative Investment Market, the two bankers said.

HSBC Holdings Plc and Bear Stearns Cos will arrange the offering, the bankers said.

The sale will give overseas investors access to India’s growing realty market, with the $ 775 billion economy poised to expand 8 per cent for the fourth year.

Mumbai-based Hiranandani joins Indian developers, including K Raheja Corp and West Pioneer Properties Ltd, in turning to London’s AIM, where rules are less stringent than other exchanges. — Bloomberg

Realty firms eye stock market with over $5 billion IPO plans

On the heels of huge success of Parsvnath Developers’ public issue that generated demand for over Rs 60,000 crore worth shares, domestic real estate firms are planning to raise nearly Rs 22,500 crore through their public offerings.

The presence of Indian property sector has been negligible on the Dalal Street so far with a handful of listed realty firms accounting for less than 1 per cent of the country’s overall stock market capitalisation.

However, it could be a different scenario altogether with more than a dozen companies finalising their plans to hit the capital market.

Out of these, at least five companies are likely to hit the market with their IPOs on the domestic or international stock exchanges before the end of this fiscal year, which could generate a collective amount of Rs 18,000 crore (over $ 4 billion).

Besides, two already listed real estate firms — Unitech and Ansal Properties — are believed to be mulling over plans to raise further capital from the international markets or through the follow-on public offerings (FPOs).

Investment bankers close to the developments said that the two companies could collectively generate over $ 1 billion (Rs 4,500 crore) from the domestic or international markets, which would take the combined total proceeds for the sector to Rs 22,500 crore (over $ 5 billion). — PTI