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Foreign support firms ride on Indian retail saga
That foreign construction giants sniff an opportunity in the Indian realty sector and are landing here in droves doesn’t make news. What has been an interesting development, of late, is that big-time global retail design, paraphernalia and know-how providers are looking to lend the very-crucial skeletal support system to the Indian retail saga. The size of the Indian retail industry is colossal. It is pegged at Rs 12 lakh crore (Rs 66,000 crore unorganised outlets inclusive) nearly and is expected to triple over the next couple of years. The sector is expected to generate four and half million jobs. No wonder, overseas know-how providers see an ocean of opportunity. For one, the market is now saturated for them in most of the developed countries and secondly, India now has the money but doesn’t know how to use it in a cost-effective manner in over 500 million feet of space that the retail sector may utilise in near future. The Indian juggernaut has just started rolling and global players want to ride on it. Well! So you have architecture service providers, designers, footfall counter machine makers, amusement park equipment sellers, back-end software support system givers and even e-retail catalog designers. All those from abroad who can lend a competitive edge to the retail giants. “Investors in India are looking at newer ideas to stand out. They are looking at architectural marvels and also international concepts. Mall builders are looking at vertical designs and we are getting a lot of queries from India,” says Angela Kreutz from Blocher Blocher Partners. This German firm specialises in architecture and interior design for malls and multiplexes. The company has developed stores in Delhi and Ahmedabad and quite a few are in stages of approval at various places in India. Angela says that they started looking at India nearly a-year-and-a half ago and response is picking up. Not only multiplex. Amusement park concept is also being lapped up by Indian developers. Shuhaib Abdul Rahman from Amusement Services International LLC, a Dubai-based firm, says that trends have undergone a phenomenal change within three-years flat. “The concept is no more of a joint venture now. Indian realtors and retailers can do it all alone. They now have the capacity for capital investment. This implies that India now has the money to build as well as spend (on theme and amusement parks). This was unthinkable till not long ago but now amusement park know-how providers like us are coming all the way from Dubai and are finding takers,” says Rahman. India has made the world sit up and take notice. Take the case of Nisyst, a Bolton (UK)-based firm famous for providing software solution for retail system development. They have opened a full-fledged office in Mumbai seeing country’s buoyant growth graph. “This is the right time to invest. Though I won’t say that Europe is not developing still but size of India is much much more. When we came here we came with an open mind. Now seeing the response we have decided to stay and be a part of the game. And are we getting a positive response from some hardware distributors,” divulges Bob S. Chunilal. Similarly architecture and design firm Lewis and Hickey (L&H), a London based organisation, thinks that the time is right to bring “UK designs to India” as now there are many takers. The firm has worked extensively in the UK, Europe and west Asia and now eyes the Indian retail pie. “Response in India has been good and we have got some interesting leads,” says Dipak Kotecha. He says the growth is steady in housing, healthcare, hotels and tourism. Firms like Manchester-based Photolink Creative have gone a step ahead. David Walter avers that with the coming in of malls and retail outlets, there would grow the need of home shopping as well since the distance between a big retail outlet and a customer may be an impediment. “So we have got down to compilation of home shopping catalogues. “I know it is like jumping the gun today but e-retailing will soon be a reality. Hyper-market e-retailing is a big thing in the UK these days. Mark my words. It will be in India with next two years or so,” Walter prophises. He is designing home shopping catalogs for big-time Indian retail firms and is hopeful of finding customers. “Things are moving in India at a phenomenal pace and so is its middle-class. So will the bandwidth and e-retailing,” he says. Then there are footfall imaging contour providers like Northam-pton based Irisys. The firm develops and manufactures a range of detection products for people counting and monitoring for application in retail. It is keen on lending a technical know how to malls in India. The list is long. So what if regulatory approvals take a lot of time to come about in India? Hardly matters, if there are differences between the state and central government on retail issues. No big deal if the country has the worst infrastructure. Foreign players are willing to take their chances. As we said the Indian retail juggernaut has just started to move for them.
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Elbit Imaging, the largest shopping mall developer in Europe based in the Netherlands, is watching the Indian mall space rather keenly. Being active in India over the last two years, this Dutch firm plans to enhance its footprint in the Indian retail sector. Elbit (Plaza Group) already has five shopping malls under various stages of construction in Indian cities and hopes to get big with developing at least 50 malls in tier II, III ones over the next five to seven years with an investment of nearly Rs 5,000 crore. The company is listed on London Stock Exchange and seeks to move through joint venture mode. “In 1997, my company conducted a survey about the status of retail sector in India. It was nil. There was no growth and rate of interest was as high as 16 per cent. We abandoned the plans. Today, India is witnessing massive macro-economic changes and international retail chains are making a beeline for the country. All within 10 years,” Abraham (Rami) Goren, Executive vice-president, Elbit, told The Tribune on the sidelines of a retail conference. Currently focused on South India, Rami says they will soon be in North. “Haryana, Rajasthan and Punjab all are under active consideration. I can’t tell you when will it be, but it surely will happen,” he disclosed in an interview with The Tribune adding that they will stick to joint venture business model. Another reason for being in India is that Central and Eastern Europe are at near-saturation stage. The market is going to be saturated in the next seven years or so, he says “Among emerging markets, Russian politics is dicey and between India and China , we prefer the former because of its huge English speaking talent pool and an open legal system,” Rami says. He however, is quick to point out the limitations as well. “Land title transfer process, skyrocketing rate of interest, logistics, infrastructure and transportation are important, areas where India certainly lacks,” Rami says.
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Real estate funds scout for elusive right projects
A
construction boom and fast growing retail market are fuelling development of over 500 malls in India by 2009 but private equity and real estate funds are still struggling to find the right projects. Funds are seeking projects with the right retail mix, size and strategy but are meeting instead with developers with unrealistic growth plans, dubious title deeds and unknown retailers with unhealthy balance sheets. “It is a scary situation at the moment. One has to be very careful if it comes to shopping malls,” says Alex Hayim, director at privately-run REIT Property Management, which is yet to invest in a mall despite being in India for over two years. While India’s organised retail — just 3 per cent of the total industry now — is expected to grow 40 per cent a year to $22 billion by 2010, developers have set ambitious targets to add retail space in malls, dwarfing plans in other Asian cities. While 103 malls are planned in Delhi and surrounding areas by 2009, Shanghai and Beijing will together see 56 malls coming up, estimates by property consultancy Cushman & Wakefield indicate. “Picking up the right opportunity becomes a big question mark,” says Rajneesh Mahajan, national head-retail, Cushman & Wakefield. “It’s about the developer’s ability to construct and then run those operations efficiently.” Real estate funds, hoping for a larger play in India’s market after restrictions were placed on bank funding on projects, see value in townships, commercial and residential projects, but are frustrated by many start-up problems that plague the sector. Malls come with new challenges, inheriting typical real estate problems — lack of transparency, restrictive regulations and valuation differentials — and retail’s teething problems. Curbs on foreign retailers’ entry has also hurt projects. “There are not enough international retailers that these funds recognise,” says Anuj Puri, country head, Jones Lang Lasalle Meghraj. “Among Indian retailers, the bigger ones still have healthy balance sheets, but smaller ones don’t.” Lack of parking, inferior surroundings and poor construction quality characterise Indian malls. Over 90 per cent of current and planned shopping malls fall below international standards on specification and design, says a Jones Lang Lasalle report. Funds are also questioning the way these malls are managed. “Today, there aren’t enough highly professional mall management companies as overseas. As a result, they wonder who will do promotions and get in additional footfalls,” says Puri, adding proven track records help investment decisions. Funds are also not keen on developers who sell out space for a quick return instead of adopting the leasing-out model used internationally. Property executives believe the real problem lies in the lack of understanding and coordination between investors and mall developers. The solution is to combine technical expertise of specialists with the developers’ local knowledge, they say. There is real value in mall projects, says Ramesh Jogani, managing director at IndiaReit Fund Advisors, which has invested in a mall, but only as part of a township project. “A mall could double its value in 4-5 years. Apart from lease rentals, you can sell out to a strategic investor at a later date, when there is a surge in value,” he says. “If the tenant profile is strong, location is good, footfall is good, everyone makes money,” says REIT Property’s Hayim. “It’s an asset which can go up in value, there’s no doubt about that.”
— PTI
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Malls get Arabian touch
In a market already flush with domestic players, companies from the Arab world are also drawing up plans to construct huge shopping malls in India to cash in on the fast-growing retail and real estate sectors of the country.
Emaar MGF, a joint venture between Dubai-based Emaar Properties and India's MGF Development is planning to invest about Rs 50,000 crore on development of real estate projects in the country over the next four to five years.
Besides massive investment for developing various retail, hospitality, IT parks and SEZ projects, the company is also aiming to construct the country's largest mall.
"We are planning to build the largest mall in India which is on the drawing board stage as of now," Emaar MGF executive vice-chairman and managing director Shravan Gupta said.
An announcement on the launch of largest mall in India is likely within the next few months, Gupta said."The mall will have the same flavour as the Dubai Mall that has 3.77 million sq ft of retail space as well as the largest walk through aquarium in the world," he added.
With 65-70 per cent of Emaar MGFs land bank of about 10,000 acre at par with major realty players DLF and Unitech being in the northern part of the country, the upcoming mall is most likely to be built in the Delhi NCR region, which has emerged as one of the fastest growing place for malls.
The company is also planning to replicate some of the ambitious projects taken up by its Dubai-based partner Emaar Properties, which is constructing a $20-billion Downtown Burj Dubai development, comprising of Burj Dubai – stated to be the world's tallest tower when completed in 2008 and The Dubai Mall - world's largest entertainment and shopping mall.
Interestingly, domestic realty giant DLF also has plans to set up the country's largest mall in Gurgaon with nearly 40 lakh square feet of shopping area.Designed by Jerde Partnership, an international firm of architects, DLF's The Mall of India will come up on 32.87 acre of land.
Not to be left behind, another UAE-based realty-to-retail conglomerate Emke Group, which runs supermarket and hypermarket brand Lulu, is also understood to be planning to construct a 1.2 million square feet mall in Kochi,
Kerala.
Lulu, the flagship retail chain brand of Indian-owned conglomerate, is likely to be the mall's anchor store with a 200,000 square foot hypermarket, while it will lease out space for over a hundred international and regional brands as well as a food court.The construction is expected to start soon ahead of a scheduled opening in 2009.
Emke is also understood be conducting feasibility studies for rolling out malls throughout the country, especially the southern metro cities of Chennai, Bangalore and
Hyderabad.
Seeing robust growth opportunities in India, Dubai-based Emaar Properties has lined up various other ambitious projects for the country, from where it is aiming to generate about 25 per cent of its total revenue.
"We are aiming to generate over 60-70 per cent of our revenues from our international market exposures by 2010, out of which about 25 per cent is expected to be mobilised from India mainly through real estate developments," Emaar Properties Chief Financial Officer Amit Jain said.
Elaborating on Emaar's growth drivers in foreign markets Jain said: "We have moved into developing markets which have extremely high growth rates and are experiencing changes in the lifestyles."
Currently, Emaar generates 79 per cent of its revenues from Dubai from where it is planning to reach to the various corners of the world.
— PTI
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Taxes hit multiplexes, says study The movie multiplex industry in the country is facing a slow death due to outdated laws and high entertainment tax, despite the fact that Indians are movie crazy and Bollywood produces largest number of films globally, says a study. "The archaic laws governing regulation of cinema and a highly burdensome tax regime are posing a serious challenge to the multiplex industry which contributes 70 per cent of all film revenues, leading to closure of cinema theatres and shutting out investment," a Ficci statement said. India is among the highly under-screened countries in the world with only about 12 screens per million in comparison to 117 screens per million in the US, There is thus an estimated shortfall of an estimated 40,000 screens in the country, it said. The major areas of concern for the multiplex industry include legal and regulatory issues and high entertainment tax, the chamber added. “Despite being a country that is the highest film producer in the world and with the highest number of film admissions in the world, we also have the dubious distinction of being the highest 'entertainment taxed' country in the world,” it said. In order to make the industry globally competitive, Ficci has called for capping the entertainment tax at 16 percent across India. It said most other industries in India pay a 16 per cent excise duty and services pay a 15 per cent service tax. Cinemas, on the other hand pay 40 per cent- 100 per cent entertainment tax on their ticket revenues; 12.5 per cent sales tax / VAT on their F&B revenues; 12.36 per cent service tax on their advertising revenues; 12.5 per cent VAT on their distributor payouts (disputed); 12.36 per cent service tax on their property rentals; a plethora of other minor taxes like show tax, property tax, advertising tax; and if there is any profit left after all this, a 35 per cent income tax on that. Further, cinemas are not allowed to set-off taxes paid on their costs, against taxes paid against their revenues. The body has called for standardisation and modernisation of cinema regulations under a uniform code that would be applicable across the country coupled with the removal of all pricing restrictions. It has also said that the industry, due to archaic laws, has been registering losses and losing its competitive edge. It has recommended making the laws simpler and standard for the entire sector. Single-window clearance of licensing, computerised ticketing and creation of a new cinema code also forms a part of measures recommended to the government.
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Banks try to encash festive season
There is slow down in home purchases and fearing slowdown in the loan portfolio, banker and financial institutions are set to cut interest rates on home by 0.5 per cent to 1 percentage point during the coming festival season to acquire new customers. It is likely that existing customer will not be able to gain as banks are not going to change prime lending rates (PLRs). The Bank of Baroda has already reduced the interest rate on housing loans up to 50 basic points, with a hope to generate demand. It has reduced the rates, as growth of housing portfolio was negligible during the first five months of the current financial years. The bank said the new rates would be application to all new housing loan sanctioned on or after September 2007. The State Bank of India (SBI), the country’s largest bank in also considering lowering the interest rates as triggering demand for loans. SBI is likely to announce the reduced rates only for new customers. Banks are concerned that while they have been piling up deposit at high costs, there has been a negligible loan growth in the first five months and moreover half year to end in September and this months will see aggressive leading and rate war on the lending side. The successive interest rate hikes over the last year have significantly slowed retail advance, the main driver of the credit growth in the last three to four years. Even private sector banks are facing the same situation. KV Kamath, ICICI Bank’s MD and CEO recently said the bank would now be taking of low double-digit growth of 10 to 15 per cent in retail while it has seen over 40 per cent during the last three years. There has been drastic slow down in credit growth. The inflation rates that has come down to less that 4 per cent during the current week, have raised banks hopes that they can lower home rates before the festival seasons start. Banks are likely to find a cash reserve ratio (CRR) cut handed out to them this year as a Divali bonus. The CRR was hiked to 7 per cent on August 3. There has been a sign of slow down for the last five months. Banks say they are becoming cautious and choosy and that they are in a consolidation mode. Interest rate hike by 250-350 basis in the last one and half years and the property prices have increased by as mush as 25 percent in the same period has hit the customer double whammy. This has reflected in a 30 to 35 per cent reduction in the number of transactions in new homes. The number of enquiries has also been dropped with builders and with banks. The maximum declined trend has been noticed since the past three to four months. A recent report by Merrill Lynch also said that banks are beginning to shy away from mortgage lending owing to rising rates emergence of stronger corporate growth opportunities. High property prices are the main reason for a slowdown in the housing market since January this year. Although high rate of interest do not contribute much to the cost of the property yet they do compound the problem. The inflow of loan application for home loans has not been up to expectations for the last couple of months. — The writer is a senior banker
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Where commerce overlaps habitat!
The recent J&K High Court’s stay on the construction of a tower by the Reliance Telecom in a residential area, on a PIL, has once again sparked the Jammu Municipal Corporation’s (JMC) age-old agenda of sealing the commercial establishments in residential areas as a part of the Jammu Master Plan 2009. Though the court had directed the Commissioner, JMC, to file a status report as to how many residential houses in Gandhi Nagar alone have been converted into commercial establishments, the J&K’s winter capital Mayor Narinder Singh Jamwal looks at this development with a little hope for introducing a sealing Act to stop commercial activities in the residential areas. “There is neither a political will nor any bureaucratic approach for this bold step,” Jamwal told The Tribune. “Nothing is going to happen before the next year’s Assembly elections,” he maintains. The Mayor says the court’s stay on the construction of a telecom tower and seeking an account of the city’s posh Gandhi Nagar locality is “encouraging for the time being”. Besides, the construction of a huge commercial complex by an investor, near the city railway station, had also been put on stay by the court some time ago. The land, on which the half-constructed complex now stands, had been allotted to a company for guesthouse and not for any commercial activity. Jammu Municipal Commissioner Vinod Sharma, undertaking the task of collecting data pertaining to the commercial establishments in Gandhi Nagar, says he will be submitting the report to the court “within three weeks”. From health centres like VLCC and Personal Point to restaurants, car service stations, brand outlets and media offices, the new Gandhi Nagar, Shastri Nagar, and Nanak Nagar locality have eventually turned into flourishing bazaars with everything available. When asked whether the government was ready for sealing the commercial establishments in the residential areas after adopting legislation in that regard, Sharma says the Jammu Development Authority (JDA) was already on the job of preparing Master Plan 2009. “Nothing concrete has come up in this regard so far,” he says. Looking at the other end, with only 133 regularised shops in Jammu South, the main upcoming commercial and business hub of the city, no major area has so far been identified to shift the commercial units from the residential areas. The MC also agreed to the fact that not a single zonal master plan has been submitted by the JDA authorities. He maintains that these were the tasks of the JDA and not the JMC. “With just 133 shops and only two malls coming up in the city, how can the government think to meet the expectations of the city population which has crossed the 15 lakh mark now,” says Apsara Road Traders Association President Bobby Khullar. The submissions, made to the JMC Commissioner and to the Jammu Development Authority (JDA), by Apsara Road Traders Association (of Gandhi Nagar) and many other traders’ bodies mainly include the demands for regularisation of the old bazaars and markets and also the creation of market complexes at the viable and feasible locations where the affected shopkeepers can be shifted. Gandhi Nagar is presently the most-hunted place for the investors where the property owners are already in agreement with big brand names for the company outlets.
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Lanco township for Hyderabad
Hyderabad, the city of minarets, will become home for the world’s tallest residential building, if plans by the Lanco Group of Industries fructify. The residential towers with 100 floors, christened Signature, are coming up at Manikonda on the city outskirts. It will be part of an ambitious Rs 5,500-crore mega township project being taken up by the company that includes an IT Park, commercial zone, entertainment centre, five-star hotel, shopping malls and residential colony. “Once completed, this will be the tallest residential building in the world. We are awaiting the approval of the International Civil Aviation Organisation at Montreal with regard to the height of the tower,” the CEO of Lanco Hills Technology Park Private Limited (LHTPPL) Pochender Shenigarapu said. The construction of the tower, being designed by the UK-based architects Atkins, will be completed within four years. Lanco Hills Project, billed as one of the largest integrated township projects in Asia, will house a Grand Hyatt 400-room luxury hotel and a 350-room business hotel project of Holiday Inn, apart from 12 towers from IT firms, 15 residential blocks, 16-screen multiplex, club houses and other world-class facilities. Spread over 108-acre site, acquired through competitive bidding process from Andhra Pradesh Industrial Infrastructure Corporation, the project includes an IT Special Economic Zone (SEZ), which will have facility to host 75,000 technology employees with a built-up space of 5.5 million sq. ft. and another 2.5 million sq. ft. in non-SEZ area for IT companies. Located about 1.5 km from the Expressway planned to connect the new international airport at Shamshabad, the venture has generated a lot of interest among multinational companies for both office and residential space, Managing Director of Lanco Infratech Limited G. Venkatesh Babu said. The company has roped in Bangalore-based Mantri Developers, which has picked up 24 per cent equity in the special purpose vehicle for Lanco Hills project. “We are confident that Lanco Hills will change the very skyline of the city with world -class facilities and contemporary architecture. The mega project offers a rich blend of experiences that encompass every conceivable need for modern day living offering convenient access to homes, premium office spaces, entertainment, hotels, leisure and shopping in one place,” the company official said. The project will have a total of 1,500 apartments, with options ranging from 1,850 sq ft to 4,300 sq ft and with three and four bedrooms. A clubhouse will have four home theatres, a swimming pool, a gym and a shopping mall. The company plans to pool the money required to execute the project through multiple options including IPO and loans from financial institutions. The Lanco Group is engaged in the business in core sectors like power, realty, engineering and construction, information technology and manufacturing.
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Elevator industry looks up From
the hand-powered Archimedes's cab on the hemp rope to hydraulic elevators to energy-efficient, environment -friendly elevators, vertical transportation has seen a sea change in the Indian market in terms of high speed, safety and smooth ride as the demand of elevators witnesses a sharp increase over the last few years. "The most important growth driver of elevator business in our industry is urbanisation. The annual GDP growth has remained at a solid 6 to 8 per cent and the elevator market has grown up to 20 per cent on annual basis," says Minna Mars of Kone Corporations, one of the largest elevator companies in India. The elevator industry in India today is approximately 26,000-27,000 elevators per annum. There are players like Mitsubishi, Kone, Schindler among others in the organised sector, and many regional players that constitute the elevator market. “There is, no doubt, that with the changing lifestyle, consumer preference for the elevators has also changed and when a client comes to us for booking, he also enquires about the kind of elevator we provide,” says an executive of a construction company. "With the scarcity of land in major cities, the need is now more than ever before for vertical growth instead of horizontal expansion, one of the key reasons why we see more and more of 20-plus floor buildings coming up across major cities," he further says. "In the last five years, the Indian market has seen some changes. Even tier-2, tier-3 cities are growing and lot of malls and residential apartments are coming up," Mars adds. "Apart from Delhi Metro, Kone is doing a number of projects with private developers like DLF, Synergy, Shriram Group and Hiranandani. India plays a significant role in addition to China, in executing our growth strategy," says Naresh Taneja, Kone India. United Technology Corporations President and Chief Operating Officer, Louis R. Chenevert had told Indian industry leaders at an interactive session organised by Ficci that with a strong construction growth expected to continue in India for the foreseeable future, elevator companies have a bright future. Recently United Technologies Corp. (UTC) has opened the "green" elevator manufacturing facility, which will produce environment-friendly elevator systems. In India, UTC introduced the Gen2 elevators a few years ago, and many leading commercial buildings and shopping malls across the country have opted for green elevators. According to industry reports, at the end of 2006, there were approximately 8.3 million elevator units in operation worldwide, of which 4,05,000 were installed in that year.
— PTI
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GROUND REALITY An essential requirement of a good and liveable house is that the frames (chowkhats) of all doors, windows and ventilators must have straight members without any warping and the shutters should open or close without any effort or sound. If proper seasoning of wood has been done, no unit shall twist and operation of shutters shall be smooth. For twisted frames, replacement is the ultimate remedy. To avoid such an eventuality, be careful about the wood you choose. Here are a few guidelines: Scenario
There are more than a hundred varieties of wood available. It, therefore, has become difficult for a builder to choose the right one. Four primary requirements while choosing wood for doors and windows are that wood should resist termite, should not warp, not be too costly and give good appearance. Though doors and windows made of uPVC, aluminium and wood substitutes like MDF are also being used; wood remains the most preferred, elegant and trusted material. India will take many more years before switching over to PVC, aluminium or other materials.
Wood classification
Timber (or wood) is classified in four categories - a, b, c and d. Teakwood falls under category ‘a’. It has no comparison. Madhya Pradesh teak is the real teak. It is not easily available. Even if available, it is too costly and beyond the reach of well-to-do families. Deodar falls under category ‘b’. Deodar has also become costly and good deodar is hardly available. Ban on cutting of trees in HP and J&K has almost stopped the availability of deodar. Non-coniferous woods or hard woods, other than teak, fall under category ‘c’. This category is under maximum use these days. Coniferous woods other than deodar are soft woods and fall in category ‘d’.
Varieties
Madhya Pradesh teakwood, the best wood for use in doors and windows, further has three grades: superior, first and second grade. Being costly, the woods falling under category ‘c’ are coming under use these days. These include champ, hollock, mango, rose wood, sal, white cedar, sheesham, maple, white ash, steam beach, tahli, red oak, white oak, pine, burma teak, ivory coast, rubber wood, red meranty and yellow meranty. There is a large variation in their cost. Among the woods under use, red meranty, yellow meranty, mango teak and pine are cheaper. Next category includes champ, hollock and sheesham. These are followed by red oak, white oak, steam beach, white beach and ivory coast. Next comes white ash, CP teak and maple. Top category includes Burma teak, rosewood and white cedar. Among these woods, only mango, sheesham and CP teak are available in India. All others are mostly imported. Champ, arau are brought in from Malaysia. Ivory Coast comes from Ivory Coast, a country in West Africa. White ash arrives from Denmark. red and yellow meranty are made from 17 species and are brought in from Malaysia. Maple comes from Canada. White Oak and Red Oak are brought in from Australia and the USA. Sal, too, is being imported from Malaysia. Burma Teak comes from Burma. Pine arrives from Denmark, South Africa and New Zealand. Steam beach comes from the USA. Now sheesham is arriving from Nepal too.
Choice of wood
White Cedar is easy to work upon but costly and changes colour with time. Rosewood is beautiful but very costly and not easily available. Sal is very difficult to work upon and doesn’t take a fine polish. Mango is cheaper but is attacked by insects if not treated well. It is also addressed as mango teak. Keeping the cost in view and weighing all other factors, go for hollock, sheesham, imported teak or champ wood. Good hollock is also vanishing now. So choose champ, sheesham or imported teak available these days. Cost varies between Rs 600 per cft and Rs 1,000 per cft depending upon the quality and sizes. Ignore soft woods such as kail, fir and chir. Kail is often used but it is quite soft and warps easily. If you can afford a higher range, choose Ivory Coast.
Quality
Always see that the wood you buy is dark coloured, hard, well-seasoned and chemically treated. It should not contain any sap as it makes wood soft and difficult to work upon. See that there are no knots or cracks in it. This is very important. Don’t get carried away by sales talk. Further see that the grain is reasonably straight. See that the wood is sweet smelling and free from worm holes. These signs can be easily checked by any person. Weight of the wood also indicates variety. Teak and hard woods weigh about 19 kg per cft while sheesham weighs about 22 kg per cft. Weight of soft woods is lesser. Deodar and chir weighs 16 kg per cft. Kail is still lighter. Sal is heaviest, weighing 25 kg per cft All these weights given here are with wood containing 12 per cent moisture.
Wood preservation
Wood is an unstable material undergoing maximum changes with time. So it is always good to cut it to sizes and leave it for drying. However, air-drying is a long process and takes months. Even then it is not sure if wood has dried well. Therefore, get the wood well-seasoned in the kiln. You will never repent this investment.
Seasoning of wood
Check the seasoning kiln yourself. See that it is equipped with steam heating and humidifying arrangements and fans are provided for rapid circulation. Full seasoning process takes 8 to 10 days. Seasoning reduces the moisture content of wood, decreases its weight and increases its strength. Fresh timber may have even 100 per cent moisture while seasoned timber has 8 to 16 per cent moisture. Check moisture content of the wood with moisture meter available with the wood supplier. After seasoning, wood shouldn’t contain more than 8 per cent moisture in sections of 50 mm or lesser thickness. For sections of thickness greater than 50mm, moisture content should not be more than 10 per cent. Ask the kiln seasoning plant to certify that wood has been seasoned as per provisions of IS 1141. He will do that only if the wood has been seasoned well. Always store the seasoned timber under cover and away from sun and rain.
Chemical treatment
One must get the wood treated chemically. Generally, seasoning plants are equipped with chemical treatment plant also. Before treatment, try for cutting of wood to final shape and sizes. Also see that moisture content of wood before treatment is not above 25 per cent in any case. Preservatives used for chemical treatment of wood are oil type, organic solvent type and water-soluble type. Among these, water-soluble type as per IS 10013 are most suitable. Ask for treatment with this preservative.
Preservatives
IS codes prescribe three water soluble preservatives. These are ACC, CCA and CCB. ACC means acid-copper-chrome. CCA means copper-chrome-arsenic and CCB means copper-chrome-boron. Choose CCA. See that the chemical used is of reputed brand. Sarabhai, IDPL, BDH and SDS are some reputed names. On treatment, wood absorbs about 6.5 kg dry weight of this chemical per cum of wood. Chemical treatment is generally done by placing the wood in large cylinders and then charging the cylinders with the chemical. Try to get the wood treated in your presence. Check the chemical, the pressure given inside the cylinder and the duration. Allow the treated wood to dry for a few days before use. If done well, seasoning and chemical treatment of wood will prevent warping and the attack of termite, fungus and insects on it. Go ahead. Happy building!
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TAX tips Unutilised sale proceeds not taxable in hands of heirs if seller dies
Q. My father had sold a plot of land in December 2006 as he was interested in constructing/buying a residential house. He had deposited the sale proceeds of the plot which was a long-term capital asset in a bank under the capital gains scheme. Unfortunately, he could not construct or buy a residential house within the prescribed period because of his unfortunate demise. What would be the position with regard to the amount deposited in the bank under the above scheme? — Raj Singh, Gurdaspur A. Ordinarily, if the amount so deposited is not utilised within the stipulated period then the amount not utilised is treated as a long-term capital gain of the previous year in which the period of three years from the date of transfer of the original asset expires. However, if the assessee dies before the expiry of stipulated period for purchasing / constructing a residential house and later on the unutilised amount is refunded to the legal heirs, the amount so refunded cannot be taxed in the hands of the deceased. The amount is not taxable in the hands of the legal heirs also as the unutilised portion of a deposit does not partake the character of income in their hands but is only a part of the estate devolving upon them (Circular No. 743 dated May 6, 1996). IT rebate Q. I have applied for allotment of flat in a housing colony being developed by a land development agency of the state government. Am I eligible for IT exemption on account of payment of installment towards the purchase of flat? — D.K. Gupta, Malerkotla A. In accordance with the provisions of section 80C (2) of the Income-tax Act, 1961 (the Act), a deduction is allowable where the payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis. Such deduction is allowable within the overall limit of Rs 1 lakh provided by the said section. On the basis of facts given in the query you should be entitled to the deduction of the instalments paid towards the acquisition of the flat which is to be allotted to you by the state agency engaged in the construction and sale of residential flats. Acquisition Q. I understand that capital gain on the compulsory acquisition of urban agricultural land is exempt from tax. Will you be kind enough to let me know what the requirements are in this regard? — Rajinder Singh, Barnala A. Capital gain on compulsory acquisition of urban agriculture land is exempt if the following conditions are satisfied: (a) The assessee is an individual or a Hindu undivided family. (b) He or it owns an agriculture land situated in urban area mentioned in Section 2(14)(iii)(a)(b) of the Act. (c) There is transfer of the agriculture land by way of compulsory acquisition or the consideration for transfer is approved or determined by the Central Government or Reserve Bank of India. (d) The agriculture land was used by the assessee (and/or his parents if the land was owned by an individual) for agricultural purposes during 2 years immediately prior to the date of transfer. (e) The asset may be long-term capital asset or short-term capital asset. (f) Capital gain arises from compensation (and/or additional compensation) or consideration which is received by the assessee after March 31, 2004. Sale within 3 years Q. I have sold my residential house in 2005 and had purchased another one immediately thereafter, thus claiming the exemption from taxability of capital gain arising on the sale of the first house. The new house purchased by me is not suitable and I intend selling the same also very soon. What are the consequences if the same is sold within a period of three years of the date of the acquisition of the said house? — S.D. Sharma, Nawanshahr A. If the new residential property is transferred within a period of three years from the date of its acquisition (or completion of construction), the amount of exemption given earlier would be taken back. In such a case the capital gain on the transfer of new residential property will be calculated as under: Sale consideration of the new residential property – X Less: cost of acquisition (original cost of acquisition of the new residential property minus the exemption given/availed earlier in respect of capital gain) – Y Short term capital gain X – Y The capital gain arising on such sale being a short term capital gain would be aggregated with your other income if any, and taxed at the normal slab rates.
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Forfeited amount
Q. I have entered into an agreement to sell for my residential house which is a long-term capital asset. In terms of the agreement to sell I have received a sum of Rs 1 lakh as earnest money. The sale deed was to be executed by the end of June 2007. However, the purchaser is not coming forward and has been trying to avoid the payment of final consideration and take the possession of the house. I have the right to forfeit the amount which I intend doing. I have already given a notice for this purpose. Please, let me know what would be the treatment of such forfeited amount. — K.K.
Goel, Sangrur A. In computing the cost of acquisition, where any capital asset was, on any previous occasion, subject to the negotiation for its transfer, any advance or other money received and forfeited by the assessee in respect of such negotiation, is required to be deducted from the cost for which the asset were acquired or its fair market value as the case may be. Accordingly, the amount of Rs 1 lakh which you intend forfeiting will be deducted from the cost of your residential house as and when the capital gain is to be computed on its subsequent sale.
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QVC to invest in Gurgaon
New Delhi: Bangalore-based real estate firm QVC Realty plans to invest Rs 2,500 crore over the next three to four years to develop two townships of 100 acre each in Gurgaon and is looking at more projects in southern states of the country. “We have acquired 200 acre land in Gurgaon for developing two townships of 100 acre each. The estimated investment in these two projects would be about Rs 2,500 crore,” company’s founder and CEO Prakash Gurbaxani said.
— PTI
Parsvnath in Hyderabad
New Delhi: Real estate developer Parsvnath Developers has lined up Rs 245 crore to construct a commercial complex and a five star hotel in Hyderabad. The company, which performed the ground-breaking ceremony of the project, would develop the commercial complex and hotel over the next three years. “The estimated cost of the project is Rs 245 crore, which includes land and construction cost,” Parsvnath Chairman Pradeep Jain said.
— PTI
Indiareit to launch mega fund
Mumbai: Buoyed by the booming realty sector, real estate fund Indiareit is planning to come out with a $500 million fund, its second overseas fund, by the end of the current year to invest in properties in Mumbai, Bangalore, Pune and Hyderabad. “The fund will have a green-shoe option of $200-250 million,” Indiareit Fund Advisors’ Managing Director and CEO Ramesh Jogani said here. Indiareit expects both individual and financial institutions, including insurance and private equity players from the US, Europe, West Asia, Japan and South-East Asian countries, to investments in the fund.
— PTI
Essel to pump in Rs 800 cr
New Delhi: Essel Group-promoted cinema exhibition and realty business, E-City Ventures, would invest Rs 800 crore to set up 1,500 screens across the country by 2011. E-City Ventures operates Fun Cinemas, E-City Digital Cinema and retail property management E-City Property and Management Services among others. The company would invest Rs 500 crore in Fun Cinemas to set up 300 screens across India, E-City Ventures CEO Atul Goel said.
— PTI
Karma plans villas in Goa
New Delhi: Diversifying into the booming Indian real estate sector, Indonesia-based resort chain operator Karma Developments plans to develop villas in Goa. The company proposes to develop 30 villas and is looking for 16,000 square metre of land at a single location in south Goa, Karma Developments Assistant Director (sales and marketing) Mike Farrell-Evans said. He, however, did not disclose the proposed investment saying that it would depend upon factors like land prices.
— PTI
String to double headcount
Chennai: Mortgage process outsourcing firm String Real Estate Information Services has said it plans to double headcount by December 2007. The global mortgage process outsourcing industry is growing and the company would double its work force to meet the demand, company Founder Prashant Kothari said here.
— PTI
Rosebys shops in India
New Delhi: UK-based retail chain Rosebys is entering the country with an interesting concept of “home in the bag.” It plans to open 100 franchisee retail stores in three years at an investment of Rs 125 crore. Rosebys was acquired by home textile maker Gujarat Heavy Chemicals Limited (GHCL) in June last. Apart from Rosebys, the company has acquired four home textiles companies during the last two years. They include three companies in the US - Dan River, Best Manufacturing Group and HW Baker. Sanjay Dalmia, chairman of GHCL said the plan was to develop a vertically integrated home textiles capability encompassing all aspects of product delivery, from raw material to retail. “We are starting with home furnishings, but will also have artefacts, furniture, cutlery and all other goods minus food items in our stores,” he said.
— TNS
3i India’s infrastructure fund
Mumbai: Private equity and venture capital firm 3i Group Plc has announced $250 million investment to establish $1 billion 3i India Infrastructure Fund. The fund will invest primarily in power, ports, airports and road projects in early-stage and mature infrastructure operations. The fund is the first being established within the framework of the strategic partnership agreement announced by 3i and the India Infrastructure Finance Company Ltd last April.
— PTI
IVRCL, Lootah ink pact
New Delhi: IVRCL Infrastructure & Projects Ltd has forayed into West Asia through an agreement with Dubai-based diversified business group SS Lootah. “It’s a generic MoU with Lootah Group for mutual cooperation in the markets we operate,” IVRCL Deputy Director S. Ramachandran said here. IVRCL would foray into the UAE by forming a project-specific joint venture, he said, adding the joint venture would bid for projects in power transmission and water sectors.
— PTI
Ansal pact with IL&FS
Mumbai: Real estate firm Ansal Properties & Infrastructure Ltd said it has signed an agreement with IL&FS Investment Managers to develop two projects in Gurgaon, near Delhi, for $125 million. The projects include a township and a special economic zone, Ansal said in a statement.
— Reuters
Orchid pacts for China, S. Africa
New Delhi: Concept Hospitality Ltd, known for Orchid brand of hotels, has signed management contracts for two properties in China and one in South Africa as it seeks to expand horizons in the overseas market. “The agreements are for managing two hotels in China and one hotel in South Africa, which are likely to become operational in next two years,” KP Kannampilly, one of the promoters of Concept Hospitality, said. Mumbai-based CHL manages the Uppals Orchid Ecotel hotel chain in India with the Uppal Group. The two new properties will together add about 1,000 rooms to its portfolio.
— PTI
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