HP ban halts proxy tourism projects

Realtors pursuing business under the garb of hospitality projects are in a soup, observes Ambika Sharma

The recent ban on new projects of value exceeding Rs 25 lakh instituted by the state high court in the Greater Kasauli area, may have baffled realtors but has put an end to the maddening influx of investors in this pristine hill station.

The petitioner, Mr Baljit Malik, who is an active environmentalist, residing at Kasauli, believes the ban would help contain haphazard expansion. He asserts that the area is a fragile ecological zone and indiscriminate construction adversely affects ecology. With construction coming up at every nook and corner, including nullahs, the natural course of water has been put at risk. While this would endanger habitations lying downstream of the nullahs during rains, it is surprising how permission was accorded,” he questions.

Further, limited potable water, which is unable to meet the requirements of even the locals, would bear the maximum shortage if so many projects are allowed, he argues.

The ban has upset the realtors immensely. Since a number of tourism projects are in various stages of seeking clearances, these sudden orders have offset their plans. A project to construct a nine-hole golf course encompassing other luxuries like studio apartments, floated by Noida-based builder, has been especially hit. A number of similar projects, planned in the vicinity of Kasauli, would also have to wait now.

A section of realtors while decrying the ban said: “It was unfair to limit Kasauli to a privileged few. The fact that planned development would cause no harm to the ecology, a complete ban would, on the other hand, put on hold all growth. Even shortage of water can be met with by binding the builders to contribute to the community. They can be allowed to explore the underground water sources and made liable to supply water to the locals in the vicinity.”

The locals echoed ambivalent views on this recent order with some supporting and others opposing it. It has, however, been observed that despite the existence of various norms to check mushrooming of illegal structures, well-heeled managed to bypass them with impunity. It was this failure of regulatory mechanism, for which PIL was filed in the high court.

The area had become the most coveted haunt of real estate dealers with demand for owing a house or a tourism resort reaching its peak. With little land available, the value had skyrocketed. Among those vying to own property here include prominent politicians from Delhi, neighbouring Punjab and Haryana as well as from within Himachal. Not only have various regulatory measures put forth by the government to save the fragile ecology proved futile, the very Act (HP Land Reforms and Tenancy Act) has been misused in a number of cases.

For instance, with a view to streamline the proliferating construction activity here, the Town and Country Planning (TCP) Department had worked out a developmental plan way back in the ’90s. This had initially included the fast developing areas of Chabbal and Jagjitnagar, lying in the precincts of Kasauli. These areas were, however, soon excluded from the planning area as the influential builders residing here wielded pressure on the government. This area has since then seen unbridled commercialisation with a number of tourism projects and palatial houses coming up.

Even the Kimmughat-Chakki-Ka-Mor road saw flats coming up touching villages like Dochi, which fall right below the sensitive radar installation of the Indian Army. So much was the influence of these powerful builders that even a Defence of Works Act, 1903, notification, enforced in the sensitive Air Force Station’s precincts was allowed to lapse. This notification had banned all construction activity within a specified distance from the defence area. The lapse of this notification emboldened realtors to erect multi-storey apartments barely meters away from the Air Force Station.

A recent survey conducted by the state Tourism Department further proves how the real estate business is being pursued in the garb of tourism projects. As many as 10 such projects have been detected by the department, which had not pursued their tourism business despite availing permission for it in the Kasauli area. Each such project has to seek permission under the Section 118 of the H.P Land Reforms and Tenancy Act for ensuing use of a particular land for tourism purpose. Instead of tourism, it was the real estate business, which was found to be the end use. Ideally, an essentiality certificate issued by the department bounds an investor to complete his project within two years. But this condition was being flagrantly violated here in about a dozen cases.

Taking a tough posture on the issue, Tourism Minister G.S. Bali has already said that he would cancel all such permissions. Since the matter pertained to violation of the aforesaid Act, it could enable the government to vest such properties with it, if violation was proved.

The state Tourism Department has now stopped processing such cases pertaining to Kasauli area. The Commissioner of Himachal Pradesh Tourism Development Corporation Tarun Shridhar said: “We have put on hold grant of essentiality certificates to all such projects after receipt of court orders.”

While agreeing to the misuse of such permissions, he asserted that at times land deals were found benami and hence tourism projects could not take off. A survey of all such languishing projects had been conducted and a report has been sent to the government. It essentially involves violation of permission granted by the Revenue Department for land use.

Tourism projects where land has not been put to use within stipulated timeframe

No.	Name of project	Project cost	Proposed infrastructure
1.	Jasmine Motels	Rs 17.44 lakh	23 rooms, restaurant
2.	Missus More Resorts	Rs 95.44 lakh	6 huts, restaurant, fast food
3.	Birds View Country	Rs 59.29 lakh	2 cottages, reception Resorts
4.	Nestor Agro & Export	Rs 250.60 lakh	20 rooms, restaurant, hall
5.	Chander Mukhi Resorts	Rs 129.71 lakh	16 rooms, pool, restaurant, bar
6.	Zoom Resorts	Rs 112 lakh	13 duplex huts, restaurant.
7.	Green Height Resorts	Rs 63.50 lakh	10 rooms, restaurant.
8.	Pinewood Resorts	Rs 37.45 lakh	9 log huts, health club.
9.	Gagan Resorts	Rs 165 lakh	25 rooms, restaurant, bar, disco.
10.	Chandratal Motels	Rs 38.43 lakh	37 rooms, restaurant, pool,
11.	Enzen Enterprises	Rs 70 lakh	10 rooms, restaurant.
12.	Kaithal Resorts	Rs 183.08 lakh	15 rooms, banquet hall

Uneven stamp duty bleeding exchequer

Builders want levy restructured, finds out S. Satyanarayan

An estimated Rs 1,60,000 crore do not get generated into the system due to lack of uniformity in the stamp duty structure on sale of properties in the country. Delhi alone, where an estimated 80 per cent of the properties have not been registered and been bought and sold on Power of Attorney, has failed to bring into the system an estimated Rs 80,000 crore.

Given the circumstances, experts feel that by striking uniformity and bringing the stamp duty to the level of 4 to 5 per cent will lead to a win-win situation for all —state governments, property developers and the buyers or the end users of property.

According to Assocham, which conducts studies at regular interval on the trends in real estate industry, there has been significant improvement in registration of properties wherever the stamp duty is at the level of 5 to 6 per cent.

Significantly, the chamber has also found that in the states where the stamp duty is lower, the pace of real estate development is faster than the state where it is higher.

Although tightening of the noose by the Finance Ministry by making it mandatory to quote PAN numbers in any property transaction has led to increased compliance, still the component of black money in property transactions remain very high and voluntary compliance remains far from expectations.

“It is high time the Centre takes initiative to impress upon all state governments to bring down the stamp duty rates to the level of 4 to 5 per cent and make registration of properties mandatory,” Assocham Secretary General D.S. Rawat told The Tribune.

“Unfortunately, several thousand crores do not get generated into the federal system of the country due to stamp duty evasion or non-registration of properties. So, it would be prudent not only to rationalise but also bring down the stamp duty levy to 4 to 5 per cent to induce voluntary compliance,” he said.

“Wherever the stamp duty is less and registration of property is mandatory the compliance is more thus generating considerable revenue for the exchequer,” he said.

Executive Director of Emgreen Projects Ltd Amol Arora strongly feels that rationalisation of stamp duty structure would turn out to be a win-win situation for all concerned — the government, estate developers and the end users.

“Due to high stamp duty structure, there is generally a tendency from the buyers and sellers to undervalue to property to save on duties. However, if the stamp duty structure is brought down to the level of 4 to 5 per cent there will definitely be more compliance,” Mr Arora said.

He suggests a step-by-step approach from the government. “Generally the state governments are reluctant to reduce the stamp duty as it is one of the major revenue earner for them… So, step by step reduction formula will help them assess the compliance aspect and move towards further rationalisation,” he said.

Mr Arora also strongly feels that if the stamp duty levy is imposed only on capital appreciation then the compliance would be even more.

Presently, if a developer buys a piece of land worth Rs 10 lakh and constructs a house on it and sells it for Rs 25 lakh, the stamp duty, according to present policy will be on the entire Rs 25 lakh. However, if the policy is amended to levy only duty on capital appreciation, then the levy will only be on Rs 15 lakh.

Recently, the Parliamentary Standing Committee on Finance has also urged the government to impress upon the state governments to bring in rationalised and uniform rates of stamp duty on lines similar to the one that paved the way for arriving at uniform Valued Added Tax (VAT) system in the states.

The Centre is expected to raise the issue of rationalisation in the next meeting of the Standing Committee of State Secretaries of Stamps and Registration, likely to be held shortly.

Houses in Amritsar, malls at Ludhiana
Ruchika M. Khanna

The Chadha group, promoted by liquor baron Ponty Chadha, plans major expansion of real estate business across North India. The group plans to invest Rs 3,000 crore over the next two years to start a number of residential and commercial projects in various cities of Punjab, Uttar Pradesh and Uttaranchal.

Other than the Westend Estate project started in Mohali, the group is in the final stages of land acquisition for setting up a residential project in Amritsar. The group also plans to set up townships in Jalandhar and Ludhiana, besides establishing malls through a separate company — AB Motions — at Ludhiana and Mohali.

Mr Manpreet Singh Chadha, Director, said they shortly plan to start their projects in Indrapuram (National Capital Region), Dehra Dun, Meerut and Bareilly.

“The group has already launched Westend Estate across 150 acres in Mohali, and 50 per cent of the residential sites (flats, plots, and villas) have already been sold out. Since we have hired sports legend, Mr Kapil Dev as the brand ambassador for our residential projects, we will be creating a lot of sports infrastructure in all our projects. Fortynine per cent area, which is supposed to be left as greens, will be used for creating sporting facilities,” he said, while adding that the real estate ventures will be funded through internal accruals and finances from financial institutions.

He said all projects of the Chadha Group would have facilities for entertainment, leisure, and other recreational activities. Additionally, it will also have schools, hospitals, power back up and adequate water supply.

The Rs 2,500-crore Chadha Group is a Delhi-based diversified business conglomerate with interests in real estate — both residential and commercial.

Mall culture knocks at Panipat’s door
Arun Sharma

The historical city of Panipat is set to usher in the mall culture with the opening of one of the five malls with the onset of New Year. Enticed by the revenue to the tune of Rs 6,000 crore generated by the textile industry of the city, including an export of more than Rs 1,800 crore, the mega malls are expecting a huge response as the elite as well as the middle class is dependent on the local markets in the narrow lanes of the old city.

The ongoing process of developing the area as a petrochemical hub and setting up a hi-tech city has added the charm for the real estate agents to invest in this field also.

Even Reliance has chosen the city to launch its retail hyper stores in Haryana.

“Reliance has preferred to launch the hyper stores in Haryana from our mall-cum-multiplex ready to open by February end,” Abhay Jain, Manging Director of Angel Prime mall claims.

The elite class of the city would not only get shopping avenues in the shape of the counters to be opened by the big brands of international repute, but would also get an entertainment source with the opening of multiplexes, six of which would be available to them within the next three months as they had ceased to go to local cinema halls long ago.

With the Mittal Mega Mall ready to be thrown open to public within a few weeks, big names in the world of food chain, garments and luxuries are ready to enter the city.

The upcoming malls would cater to the requirements of upper and upper middle class, which used to visit the Capital that is just one-and-a-half hour drive from Panipat.

Besides Mittal Mega Mall, DAP Angel Prime Mall and Reliance’s retail hyper mall, Raheja Expo Mall, Saraf Mall and Fun City Mall are also expected to come up in the city.

Indians third largest buyers in Singapore

An under-construction building is dwarfed by a highrise tower in Singapore. Indians did 425 residential property transactions this year, up from 292 last year and 108 in 2004, — AFP

Indian foreigners have emerged as the third largest group buying homes in Singapore, after traditional investors from Indonesia and Malaysia, who are generally seen as ‘parking’ their money in the residential property here.

Indians did 425 residential property transactions this year, up from 292 last year and 108 in 2004, according to the Urban Redevelopment Authority’s Real Estate Information System.

This year, the Indian buyers were ranked third and above those from the United Kingdom and China. Last year, the Indian buyers were ranked fourth, one above China but behind the third placed UK buyers.

In 2004, the Indians were ranked fifth behind those from the UK and China.

“More Indians are buying as more are working in Singapore and are more familiar with the market, which has seen more launches of prime properties in recent years,” head of a research consultancy at Chesterton International Colin Tan, one of the main property management groups in Singapore, observes.

Singapore’s property is on the upturn after the 1997 Asian financial crisis, with foreigners accounting for 23 per cent of all 16,755 residential property transactions this year, up from 22 per cent of the 15,953 transactions last year and 20 per cent of the 11,068 transactions in 2004.

The recent rebound in the luxury segment of the private properties in Singapore, is to a large part, fuelled by foreign demand, according to a report in the Sunday Times. — UNI

Political gimmick at Nayagaon

Forest Act and no bank loans in the absence of master plan may halt construction, notes Chitleen K. Sethi

The constitution of the Nayagaon Nagar Panchayat is the culmination of a long-standing demand of the residents of the area. But since a large part of the area, falling within the nagar panchayat boundaries was “locked” under the provisions of the various Forest Acts, the constitution of the nagar panchayat is going to remain, at best, a political gimmick without any real benefit reaching the residents.

While the Centre allowed the delisting of these areas from the provisions of the Forest Act, it has not allowed any commercial activity and clearly stated that the area would be used only for agricultural purposes.

The wishes of the Union Ministry of Environment and Forests were upheld by the Department of Forests, Punjab, but the Department of Local Government tried utmost to bulldoze over the rulebook only to have an egg on its face later when it had to revise the notification to include the riders of the Union Ministry.

The revised notification of the Nayagaon Nagar Panchayat leaves only the area of Kansal village free from the provisions of the various Acts. How will the executive officer of the nagar panchayat over-ride these riders to carry out development work in the area is the big question now?

Streamlining illegal construction in the area, construction of roads, augmentation of sewerage and sanitation facilities, drinking water supply and electricity supply are just some of the tasks ahead of the nagar panchayat but will they now do it only for the Kansal residents?

Since the areas falls under the Chandigarh’s periphery, bound by the Punjab New Capital Periphery Controls Act, fresh construction is banned. With a nagar panchayat in place, will construction be allowed only in Kansal?

Also worth noting is the fact that while the Department of Local Government showed a tearing hurry in constituting the nagar panchayat, there is not even a master plan of the area available with the Department of Town and Country Planning. Those undertaking construction in the area will have to wait till the master plan is prepared and notified before building plans are passed. Also, till the building plans are not passed by the competent authority, banks are not going to give loans for construction.

Even with the constitution of the nagar panchayat, the genuine problems of the residents are far from solved. The constitution of the panchayat, however, does stand to benefit a handful of local politicians, a host of private builders and all those who have for years cocked a snook at the rules and have houses in the area constructed illegally but regularised by the government.

The nagar panchayat area, which includes the boundaries of Karoran, Nadah and Kansal villages falls in the Chandigarh’s periphery, bound by the Punjab New Capital Periphery Control Act, 1952. However, this Act did not deter builders and colonisers from flouting various rules and undertaking unbridled construction in the area.

The current situation is that what was once envisaged, as an ecologically fragile green belt around City Beautiful is an unplanned concrete jungle now. The weak-kneed Punjab government, instead of taking punitive action against those who undertook constructions, regularised all illegitimate ones in the area. The personal interests of the state’s bureaucrats many of whom own farm houses in the area was also one of the reasons why rules being broken by the powerless majority were “allowed”.

Legal or illegal, the ground reality facing the government is that thousands of people have bought small pieces of land in various colonies here and have built houses. Also, a majority of those who constructed houses in the area knew that what they were doing was illegal and did not deserve any show of leniency but political compulsions led to the regularisation of these constructions.

Due to the inherent illegality of these constructions, residents of the area faced scores of problems in getting water and electricity connections, loans for construction etc. With an eye on the vote bank, some of these problems were ironed out by local politicians and nothing was done to abate the illegal construction, which continues in the area till date.

2006 ROUNDUP
A year of SEZ mania
Sumit Upadhyaya

Even the best of government policies rarely satisfy the intended beneficiaries, especially the vocal corporate sector. So, it is perhaps surprising that the year 2006 saw a scheme over which all business houses — big and small alike — were falling head over heels.

In fact, no policy, programme or legislation, including the SEZ policy of 2000, in recent memory has witnessed such euphoria among India Inc as the Special Economic Zones (SEZ) Act.

This is clearly evident as in less than 10 months more than 600 proposals by private companies envisaging an estimated investment of about Rs 1,00,000 crore within the next two to three years have either been approved or are awaiting government clearance.

The Act, passed in 2005 but operationalised in February this year, not just caught the fancy of the corporate sector — it also led to one of the most eagerly-watched duels over any economic issue within the government in 2006.

While Finance Minister P Chidambaram and his team in North Block repeatedly voiced concern over the revenue loss to exchequer on account of tax sops to SEZs, Commerce Minister Kamal Nath and Commerce Secretary G K Pillai had been the most ardent supporters of the policy.

The tussle over revenue implications intensified when the Reserve Bank and IMF chief economist Raghuram Rajan echoed Mr Chidambaram’s views, while companies and industry chambers strongly supported Mr Nath and Mr Pillai.

The other contentious issue in the scheme related to land acquisition, with farmers, NGOs, various political parties and even Congress President Sonia Gandhi expressing concern over using farm land for industrial purposes.

Just when it looked like the arguments would continue forever, Prime Minister Manmohan Singh laid to rest all doubts about the need for SEZ, although he also accepted the concerns related to acquisition of farmland for non-farm purposes.

“SEZs have come to be accepted as a part of the new policy paradigm we have evolved. I do believe SEZs have a role to accelerate the growth and to generate more employment,” he told industry leaders at a conference in October.

“Concerns have been raised with regard to acquisition of agriculture land. We will take these concerns on board... (but) SEZs have come to stay,” Dr Manmohan Singh declared.

Specifically, the concerns related to only a few projects such as Reliance Industries’ Haryana SEZ and two SEZs in Maharashtra and Reliance Energy’s Dadri SEZ in Uttar Pradesh.

Land related issues were only one of the controversies that the scheme has generated. The biggest difference within the government was over revenue gains or losses.

Mr Chidambaram said the government will lose up to Rs 1,00,000 crore in next few years on account of tax sops to SEZs, while the Commerce Ministry felt these zones could make the exchequer richer by Rs 45,000 crore annually.

Tax sops were not the only point of difference. Finance Ministry favoured a limit on the number of SEZs. Moreover, as SEZs would be foreign territory for customs purpose, Finance Ministry wanted administrative control. But like a shrewd politician, Mr Nath managed to have an upper hand.

Besides, Communications and IT Ministry under Dayanidhi Maran wanted supervision over SEZs for IT and ITeS sectors.

Ministries apart, the SEZ scheme has not found much favour with the RBI and insurance regulator IRDA. The Reserve Bank earlier this year told banks to treat exposure to SEZs as lending to real estate and not infrastructure projects. RBI also said SEZs could lead to uneven economic growth.

While the concerns were not unfounded, such conflicting positions send a wrong signal to investors. The policy might be fine-tuned, but sceptics should wait for some time. As Mr Pillai says, SEZ scheme requires a year or two to start showing definite results. Indeed, only time will tell! — PTI

Green House
Garden on the rooftop

Apartment culture has redefined horticulture, says Satish Narula

The living and living styles have changed. Multi-flat culture is in. At the same time, the love for the plants has increased manifolds. Horticulture has shifted from ground to the sky and from horizontal to vertical posing a challenge to horticulturists. If you are the one living under such conditions, then let us do some spadework.

Watering is the biggest challenge. Should the scarcity in any way be a constraint? Before that let us learn about another problem related to it — that is, the display space. At times, people erect stands on the outer edges of their balconies and place pots in them. Under such a situation, steel work has to be very strong as the pots, when watered, take weight. Such a display could be a potential danger to those living below. There is always a danger of pots breaking after sometime. Dripping could also be a nuisance for others. Stands closed at the base are ideal. Such stands retain water, thus conserving extra moisture that is needed the most, besides taking care of other problems too. Space permitting, a row or two of the plants could also be kept in the balcony.

Those living on the top floor and having an open terrace enjoy an added advantage. They can make a terrace garden or simply erect a green shade net house to display plants. Under such structures, one can also provide overhead sprinklers with almost negligible cost to keep the plants cool and provide ‘rain’ everyday, which is highly beneficial. For open terrace planting, there are a few things to keep in mind.

The vagaries of the weather are the biggest challenge. To combat it, one can erect artificial fences with bamboo sticks where the wind is felt the most. Such a measure could be supplemented with the display of tall plants of Ficus species. Some fancy pots can also be displayed on high sills. Plants like palms, those of the Ficus species, shrubs like Chandni, Kaner, Plumeria (Gul-e-Chin or Firangipani), Poinsettia, Menia, Francisia (Yesterday, today and tomorrow, which is valued for fragrance and flowers), Furcrea and various climbers can be planted in pots or concrete boxes, with success.

Keeping plants in groups keeps the water requirement low. Moreover, one can fix priorities. Palms would need more frequent watering than those of the Ficus species. Tender plants like Coleus, Aphilandra etc that need water at least once a day should be avoided. You can include some of the hardy Croton species for colour but in that case too keep them under the shade of other tall plants or else they may burn and fade.

On the terrace, you can lay out a lawn. Surprised? Do not be. Yes, you can do it. But for the same, you must give a solid and waterproof base. Grass can be grown even if the soil is merely 10 inches deep. Soil sand manure mixture should however be made as light as possible. This can be done by mixing leaf mould, vermin-compost and peat etc.

Such additions conserve moisture efficiently. Certain plants like various kinds of Durantas, can be used to mark areas. That will give the garden demarcation, neatness and a miniature effect. Inclusion of features like artefacts statues etc can enhance the gardening effect. The base of the lawn could be lined with polythene to stop the leakage through the roof.

Faber bullish

Real estate is a major asset in India and will be a “big scene” in the next 20 to 30 years, says investment guru Marc Faber.

“A major asset class will be real estate in India... real estate will be a big scene...,” Faber said addressing the first of the ‘The Market Visionary Series’ organised by Financial Technologies and Prabhudas Lilladher in New Delhi recently.

With a vast young population and majority of population living in rural areas, there will be huge demand for real estate in cities, beaches and mountains where people would like to own a house, he said. — PTI

Buzz on Bourses

Ansals get order from UP

New Delhi: Ansal Properties & Infrastructure Ltd (APIL) has said it has secured a Rs 20,000 crore order for building a hi-tech city on 2,504 acres of land near Greater Noida. A MoU to this effect has been signed between the Government of Uttar Pradesh and a consortium constituting APIL. The city also proposes to have a number of sporting facilities like the Mahesh Bhupathi Tennis Academy, a polo and equestrian club. The township will have about 50 per cent open area consisting of green areas and roads. — UNI

Home decor hub

New Delhi: India’s $3.5 billion home décor industry is all set to have its first exclusive international business hub at Noida, a suburban town of Delhi. International Home Déco Park (IHDP) will be built over five acres of land at a cost of $25 million and will house the top 100 Indian exporters of home décor products. It will become operational in February 2007. It will cover 350,000 sq feet, have a basement space of 60,000 sq feet and will house top 100 Indian exporters of home décor products. — IANS

PHDCCI to hold summit

Chandigarh: PHD Chamber of Commerce and Industry is organising a two-day Conference-cum-Exposition Real Estate and Infrastructure Summit (REIS 2007) here from January 12. The objective of the summit is to identify opportunities in real estate and infrastructure investment in north India and bring the major stakeholders in various segments, including SEZ, housing, malls, technology parks and multiplexes. — PTI

IOC pact for petrol stations

Kolkata: IndianOil Corporation (IOC) and Ansals Group, a leading real estate developer in the country, have signed a memorandum of cooperation (MoC) for setting up petrol stations in the select projects. The MoC was signed by Executive Director (Retail Sales) of IndianOil AMK Sinha and Ansals President (Marketing) Kunal Banerji. Ansal API Ltd is a major real estate developer in the country with a yearly turnover of around Rs 375 crore. Meanwhile, Ansal Housing & Construction Ltd will hold an extraordinary general meeting on December 28, to seek shareholders’ approval for issuing Rs 150 crore shares to institutional investors. — UNI

IVRCL Infra raises Rs 555 cr

Mumbai: IVRCL Infrastructures & Projects has raised about Rs 555 crore through private placement of 1.5 crore shares to institutional buyers. The shares were placed at Rs 370 each through Qualified Institutional Placement, IVRCL informed the Bombay Stock Exchange. The company is the first infrastructure construction company to raise equity through the QIP route. — PTI

Dubai Properties eyes India

Mumbai: Dubai-based property developer, Dubai Properties, is keen to enter into the Indian realty space both through direct investment and joint venture initiative. “We are very much interested to come to India. It is in our mind. But, we are yet to take a final call,” Md. S Binbrek, Chief Officer (Portfolio Management), Dubai Properties said here. Dubai Properties is engaged into development of properties in Dubai alone and is eager to increase its business in the country. — PTI

TAX tips
Two ways to save capital gains tax
By S.C. Vasudeva

Q. I have a residential plot, which was purchased during 1981 for Rs 2 lakh. Now its market price is 15 lakh. I want to dispose it off in 2007-08. Kindly provide me the details of capital gains with income tax liabilities in this regard. Also suggest how the tax on such sale can be avoided.

— Devdhar Mishra, Ludhiana

A. The capital gains on the sale of plot, which was purchased in 1981 will be a long-term capital gains. It will be computed by deducting indexed cost of acquisition and expenditure incurred in connection with the transfer from the sale consideration.

In case the land was purchased before April 1, 1981, the indexed cost of acquisition shall be equal to:

Fair market value of plot as on April 1, 1981, or actual cost i.e. Rs 2 lakh, whichever is higher multiplied by cost inflation index for 2006-07

Cost Inflation Index for 1981-82 i.e. 100

The capital gains so computed shall be taxed @ 20 per cent plus surcharge @ 10 per cent (if total income exceeds Rs.10 lakh) plus education cess @ 2 per cent.

The capital gains tax can be saved in two ways:

1. Section 54EC i.e. by investing the capital gain in bonds redeemable after three years, which are issued by NHAI or REC. The investment should be made within six months of the date of the transfer. The exemption shall be granted under these provisions of the amount of capital gain if the amount of investments in 54EC bonds is not less than the amount of capital gain. In case the investment in such bonds is less than the amount of capital gain, the exemption shall be of so much of the amount as bears to the whole of the capital gain, the same proportion as the cost of acquisition of the aforesaid bonds bears to the whole of the capital gain.

2. Section 54F: If you do not have more than one house in your name at the time of transfer of plot, then you can invest the net consideration for purchasing or constructing a residential house. The net consideration in relation to transfer means the sale consideration as reduced by the expenditure incurred wholly and exclusively in connection with such transfer. The investment can be made for purchase of a residential house within a period of one year before or two years of the date on which transfer took place or for construction of a residential house within three years of the date of transfer. In case full amount of net consideration is not invested the capital gain shall be exempted to the extent of the amount as the amount invested in the acquisition or construction of the house bears to net consideration.

UN employees

Q. I am working for United Nations and my income from United Nations is exempt from tax. But still I want to fill up my return, so what should I do. I had bought two plots of land in India and planning to invest more in India. Can I buy a car on 100 per cent cash?

— Amarjit Singh

A. The income received by the employees of the United Nations is exempt from tax. If you would like to file your IT Return, you can download the return form from the site www.incometaxindia.gov.in. In return you should disclose the investment made by you in India so that no difficulty arises as and when you intend to construct the same or dispose of the plots. The car can be bought by payment in cash but you will have to give your Permanent Account Number (PAN) as the purchaser of high value items is required to give the information about the Permanent Account Number to the seller.

Ancestral land

Q. I am a senior citizen. Recently, I sold some of my ancestral agricultural land for Rs 20 lakh. Would there be any tax liability on this amount? If yes, then how much?

— S.K. Baweja

A. As per the provisions of the Income Tax Act, 1961, (the Act), agricultural land which is not an urban agricultural land i.e. does not fall within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board is not a capital asset. Further any agricultural land situated in any area which is beyond the distance specified by the Centre from the local limits of municipality or cantonment board etc; referred to above, is also not a capital asset. Accordingly, the capital gain earned on the sale of agricultural land, which does not fall in the above category, would not be chargeable to tax. You need to determine whether the land, which has been sold by you, is within the area as aforesaid to ascertain the taxability of the capital gain. The amount of tax liability can be determined after this basic fact is ascertained and the details with regard to the year of acquisition, cost of acquisition and sale price are available.

Tax exemption

Q. I purchased a house in July 2002 for Rs 4 lakh. I have purchased another house in January 2005 for Rs 7,50,000. I sold the first house in August 2005 for Rs 4,90,000. Please advise me whether I will be eligible for capital gain on the sale of first house as I have sold the first house after three years from the date of its purchase and within one year from the date of transfer I have purchased second house.

— Sher Singh

A. On the basis of facts explained in the query you should be entitled to the exemption from payment of capital gain tax on the capital gain earned on the sale of first house. You seem to fulfill the condition prescribed under Section 54 of the Act, which enable an assessee to claim such exemption.

Stamp duty

Q. I purchased a shop for Rs 4,10,000 in May 2004. However, the Registrar issued a notice as to why circle rate not be charged. On that basis the value should have been Rs 5,00,000. The stamp duty was paid accordingly. I sold this shop for Rs 5,30,000 in November, 2006, but the value adopted as per the latest circle rates was Rs 6,25,000. Beside this, I have an interest income of Rs. 60,000. I want to know what will be my short-term capital gain and tax liability on my total income, including short-term capital gain.

— Tej Pal, Jagadhri

A. The short-term capital gain will be computed by adding to the cost of the shop (Rs 4,10,000), the stamp duty charges paid on the acquisition of the shop.

The above amount will be deducted from the value adopted by stamp valuation authority i.e. 6,25,000 in accordance with the provisions of Section 50C of the Act. The stamp duty on the sale of shop has not been considered on the presumption that the said duty should have been paid by the buyer. The balance amount would be the capital gain.

It is not possible to compute the short-term capital gain as well as tax liability, as the figure of stamp duty has not been indicated in the query.