Poll on, buyers gone

Already bearing the brunt of global recession, the real estate sector has been hit hard by the ongoing general election. Varinder Singh explains how has it impacted the realty business in Punjab

Construction activity at upcoming big ventures had already got stalled to some extent due to meltdown but now it has come to a full stop as labour was either busy in more lucrative wheat harvesting or was engaged in the poll process. — Amanbir Marvaha A businessman

The realty sector is going through a tough phase. If the aftereffects of global recession were not enough to slowdown the realty juggernaut, real estate transactions have almost come to a standstill across the state as buyers are largely resorting to a policy of ‘wait and watch’ due to the general election.

The ongoing polling process has affected the real estate sector in north India, particularly Punjab, to such an extent that though buyer is present, he is not showing any interest in purchase of commercial, agricultural or any other kind of property across the length and breadth of the segment, as a result property prices have got ‘freezed’. It was a different matter that the market was witnessing transactions at a miniscule level in respect of small residential properties, which were still attracting ‘genuine’ need-based buyer for ‘corrected prices’ in the aftermath of the recession.

Simiarly, work on already floated commercial and other projects in Punjab has either come to a halt as an implication of the ongoing recession, or progress of these projects is suffering, owing to acute shortage of labourers, who are busy in the polling process. “The deadly combination of meltdown and poll process has cast such an adverse shadow on property business that hardly any of the projects are witnessing any progress. Construction work at many malls or other commercial ventures has virtually come to a halt. The biggest effect is that of meltdown but polls have also worked as a second ripple in context of the real estate. There are certain residential and commercial projects in Patiala itself where not a single brick has been laid for more than three months. Same is the case with a couple of projects on the Banur-Chandigarh road,” said Sumrinder Singh, a real estate observer of Patiala.

Harmol Singh, owner of the Jalandhar-based Baba Makhan Shah Lobana Properties and the Silver City Housing Project, opines that market has come to a standstill in the Doaba region also. Doaba was one islandin the state where properties’ transactions went on even in odd times in the past, owing to the belt’s cash-rich NRIs.

“NRIs used to generate a major share of real estate demand in Doaba earlier, but, this time they too are silent owing to the meltdown and ongoing poll exercise. In plain words, present times can easily be described best as the ‘real estate holiday’ period. In fact, the buyer is there but he or she is in a ‘wait and watch’ mode and is even reluctant to go in for small residential properties like five-marla houses or small flats, which till two months ago were selling like hot cakes. Though prices have come down by a meager 15 per cent in case of small urban residential or commercial properties, dwindling prices have touched 30-35 per cent in case of big properties.

“The real estate scene will be clear only after poll outcome. Real estate prices are directly linked to political stability. See the effect of the meltdown and poll. More than 75 per cent of NRI customers have not come this time even to see properties what to talk about their purchase,” says Harmol Singh, predicting that situation might improve after May.

Sources pointed out that 50 per cent real estate transactions in Doaba witnessed direct or indirect investment or intervention of NRIs and the Doaba economy is largely based on the NRI money, which had been flowing until the onset of the sub-prime scam in the US. It was almost a fashion for NRIs to land in Punjab, particularly the Doaba region, between September and March and to shop for properties as per their convenience or affordability.

Amanbir Marvaha, another Jalandhar-based businessman, having interest in property, paints a dull real estate picture in the contemporary scenario. “Malls are going empty. Owners of such units are facing a lot of problems, as tenants are not adhering to rents agreed upon earlier. I have a huge commercial property, but I have not come across a genuine commercial organisation to give it out on rent. Most of those who come to see it say they will decide after the poll. Business has come to a halt as an outcome of the poll,” rued Amanbir Marvaha. He also cited labour shortage as a major factor coming in the way of development projects.

“Construction activity at upcoming big commercial ventures had already got stalled to some extent due to meltdown but now it has come to a full stop as labour was either busy in more lucrative wheat harvesting or was engaged in the poll process,” said Marvaha.

Ravinder Singh Ravi, a Patiala-based businessman, hoped that market may pick up its earlier pace to some extent after the poll outcome. “Now everyone has set his or her eyes at the poll outcome so that they could invest further in the property once they get a clearer picture of the country’s political scene. It is for the first time that the real estate sector is passing through such testing times when buyer is there but is resisting his or her temptation to buy in a hope that prices might come down further to the lowest ebb,” said Ravi.

Road to prosperity
Kanchan Vasdev

Many realtors in Ludhiana, as a part of their corporate social responsibility, have started to pay close attention to the development of areas surrounding their townships

Colonisers have largely been held responsible for the haphazard growth of cities during recent times. In order to get rid of this blot, several real estate companies are contributing to the development in several areas that were forgotten by government agencies.

Besides developing colonies, they have come up with innovative ideas contributing to the development of certain impossible areas near their colonies. While the need was felt to attract buyers for their colonies, the byproduct in the form of roads and bridges has helped the commoners.

The road alongside Sidhwan canal in Ludhiana has especially been benefited by this approach of colonisers. It used to be in a bad shape all these years until colonies came up alongside and the developers provided a wide double-laned road.

Though the road was not a part of the colonies like Rajgarh and Janpath Estates, these companies constructed a bridge, widened the road and provided with streelights on them. The entire area look like an outlandish project especially when one travels on this road at night.

Till a few years ago, when south of the city was developed alongside Sidhwan canal, residents were wary of buying houses in that area. Since only the road along the canal used to connect it to the city, many accidents were reported during foggy days in winter, many bodies were fished out of the canal as the drivers were not able to anticipate their way.

The residents kept on demanding reflectors and a better road for them to reach their houses. But nothing was done until the owners of Janpath Estates struck with an idea — putting their manpower into use to lay a double-lane road. Not only that they even put reflectors and red eyes on the road so that drivers can anticipate the way in the night.

“We actually had to take permission from the drainage and forest department for carrying out this project. It took us a year to carry on with the paper work. Finally, we spent lakhs of rupees on the road and now it is a smooth ride,” said Mahesh Goel, director of Janpath Estates.

They are now providing the power also to the streetlights, much to the pleasure of scores of villagers who use this road to reach their houses. “For years, this road was in a bad shape. They had always been citing a reason of dampness due to the canal that did not allow the road to be in a good condition. Now, it is different story altogether. It looks like a road to a new world,” said Deepak Kumar, a resident, who bought a house across the canal after the road was developed.

Not to be left behind are the owners of Rajgarh Estates, who decided to build a bridge on the canal for the benefit of residents of their colony.

They took permission from government offices and finally constructed the bridge worth Rs 1.49 crore over the canal.

“The 26-feet wide bridge now provides a direct entry to our colony developed by Bhasin Infrastructure Development Private Limited. Our engineers had to put their brains together to finish the project,” said Col PS Bedi (retd), general manager (marketing), Rajgarh Estates.

“When we developed this colony, we thought what all we would require if we had to stay there. The first thing came into our mind was a good road. We provided it”, he added.

Tax tips
Unoccupied property is not taxable
S.C. Vasudeva

Q. I have a house in Gurgaon which I am not able to occupy because of my job in Delhi. This is largely due to my late working hours. The house in Gurgaon is lying vacant and is not being used except that a caretaker has been appointed to look after the said property. The house in Delhi is a rented house and the company has provided me a furnished accommodation. Is the income from property situated in Gurgaon taxable and requires to be added to my total income?

— RS Behl

A. According to the provisions of Section 23(2)(b) of the Act, in case a taxpayer owns a house property, which cannot actually be occupied due to the fact that owing to his employment or business being carried on at any other place and he has to reside at another place in a building which is not owned by him, the income from such property would be taken as nil, provided such property has not been actually let out during whole of the previous year and no other benefit is derived from the said property by the owner. In view of the above provision, the income from Gurgaon property should be taken as nil.

Permissible deduction up to Rs 30,000

Q. I have a house that is self-occupied. The said house was built by my father and has been inherited by me. It is a very old house, constructed about four decades ago, and requires extensive repair. I intend to borrow from a bank for reconstruction of the house. Will I be able to get the deduction of the interest paid on such a loan against the income from my self-occupied property as well as installments paid toward the repayment of the loan?

— Shashi Bhushan

A. According to the provisions of Section 24 of the Income-tax Act, 1961, the income chargeable under head ‘income from house property’ is required to be computed after allowing, apart from other deductions, the deduction towards interest payable in respect of the amount borrowed for the acquisition, construction, repair, renewal or reconstruction of the house. The permissible deduction for the interest for borrowed amount for repair, renewal or reconstruction is limited to Rs 30,000. You would, thus, be able to get a deduction to the extent of Rs 30,000 against the income from house property.

The deduction in respect of the payment made towards repayment of the loan is allowable under Section 80C of the Act, in case the residential house property has been purchased or constructed with the borrowed funds against which the repayment is being made. No deduction is thus allowable in case the amount is paid towards the repayment of loan raised for the repair/reconstruction of the house.

Only owner can avail tax concession

Q. We have a joint family property where my grandfather, father and brothers live together. The residential house is owned by my grandfather. I am interested in reconstructing the said property by utilising proceeds of tax-free bonds, which are maturing this year. Will I be entitled to any tax concession in respect of amounts so invested on the reconstruction of house?

— AK Srivastava

A. The tax concession is allowed to an owner of the property. Since your grandfather owns the property, you would not be entitled to Income-tax concession under the provisions of the Act. The only way out would be that the property is gifted to you and you become the owner of the said property. This will enable you to get the deduction for interest to the extent of Rs 30,000 payable on the amount borrowed for the reconstruction of the house.

Acquisition of property

Q. What is meant by cost of acquisition of a property? Further, I am told that for computing the capital gains, the law requires that in case the property has been received as a gift from someone or has been inherited from the parents, the cost to the previous owner is considered for computing the capital gains. What is meant by cost to the previous owner?

— Raj Narain

A. The cost of acquisition of a property is the value for which it was acquired. The expenditure of capital nature incurred for acquiring the title to the property is includible in the cost of acquisition. For example, interest paid on monies borrowed to purchase asset is part of the cost of the property.

According to the provisions of Section 49(1) of the Act, the cost to the previous owner is deemed to be the cost of acquisition to the assessee where the capital asset became the property of the assessee under any mode of the transfer described hereunder:

Acquisition of property on any distribution of assets on the total or partial partition of a Hindu undivided family;

• Acquisition of property under a gift or will;

Acquisition of property by a Hindu undivided family where one of its members has converted his self-acquired property into joint family property after December 31, 1969.

Execute a gift deed

Q. I am a medical specialist, having my own hospital. There is an ancestral agricultural land in my village in the name of my father (75), aunt (71), and my father’s uncle (85). Under family settlement, this land comes under my share. These above mentioned persons want to gift it to me. Or in other words, they want to register it in my name. What is the best economical option? Are there any tax liabilities on both sides? What is a family settlement deed? Also, what is a gift deed? How much stamp duty is required?

— Dr Baljit Singh Natt

A. A family settlement deed is normally entered between the family members so as to settle a dispute with regard to certain property matters. It is also entered into between the family members so as to avoid the likelihood of a dispute regarding property matters. The facts given in the query indicate that there is no dispute and all the members of the family are interested in registering the ancestral agricultural land in your name. In this situation, it would be appropriate to execute a gift deed in your favour. The gift deed, in this case, will have to be on a stamp paper, the value of which would be based on the market value of the agricultural land proposed to be gifted to you. The gift deed will have to be registered with the Sub-Registrar in accordance with the provisions of the Registration Act, 1908.

This column appears weekly. The writer can be contacted at sc@scvasudeva.com

Hope floats for realty
Vinod Behl

With property developers shifting their focus towards affordable housing and timely completion of projects, and the Home Ministry bringing in provisions for safeguarding the interests of property consumers, things have started to shape up in the real estate sector

The last few months have seen a lot of volatility in the property market, especially in the residential real estate segment, due to a combination of various factors, including exorbitant prices, high interest rates, over leveraging by developers, stalled projects as a direct result of liquidity crunch, demand-supply mismatch and a huge inventory of unsold homes. But after the dark clouds, there is a silver lining over the realty sky, raising hopes for property developers.

Today, the real estate landscape has changed considerably with the once investor-driven market completely turning out to be an end-user market. There has been a considerable drop in both the property prices and the home loan rates. Together with that, the attempt by the developers to restore the shattered confidence of the homebuyers has contributed to bring some sanity and stability to the market that is price and product sensitive.

There has always been a good demand for right product at right price. This demand was, however, not being met, resulting in a sharp drop in home sales. But now the developers have realised the genuine demand with focus on affordable housing. As a result of this, developers as well as housing finance companies have started getting potential enquiries with first-time homebuyers entering the market.

By now, it’s well known that price cuts and lowering of home loan rates alone are not able to spur sales. What’s needed is to restore the shattered confidence of property buyers. And it is heartening to see that developers are now taking steps to win back the confidence of customers. They are not only committing timely completion and delivery of their projects but some of them are also offering protection against any further fall in prices.

Also, considering that demand-supply mismatch had proved to be the bane for the real estate, National Housing Bank’s move to set up a Residex (an indicator of property prices) and the RBI’s plan to come up with the Housing Start-Up Index (a barometer of future housing demand) are set to revive the market. These reform measures will facilitate builders to do realistic number of projects as per demand and help consumers take informed decision about investing in a particular location. Not just that, these initiatives can really help check the formation of a property bubble of the kind which led to the recent real estate bust.

The other significant real estate reforms planned by the Housing Ministry, like providing affordable housing to the masses, ensuring timely delivery of projects and to protect property consumers from frauds will have a desired effect in giving the much needed momentum to the sector.

And with the consumer-driven Indian economy set to bounce back in the next financial year in response to fiscal and monetary policy stimulus and abatement of recession in the international economy, real estate sector is poised to pick up pace.

The writer is Editor, Realty Plus

LIC Housing eyes 25 pc growth in loan disbursal

Mumbai: LIC Housing Finance, which disbursed Rs 8,762 crore loans during the 2009 fiscal, is expecting a growth of 25 per cent in its loan disbursements portfolio this fiscal, a top company official said.

“In FY 09, we disbursed loans amounting to Rs 8,762 crore. This year, we see a growth of 25 per cent in our loan disbursements,” said LIC Housing Finance’s director and chief executive RR Nair.

The housing finance subsidiary of Life Insurance Corporation of India (LIC), LIC Housing Finance, witnessed a jump in its net profit by 37 per cent to Rs 531.62 crore in 2009 fiscal from Rs 387.18 crore during the year-ago period.

LIC Housing Finance’s marketshare in 2007-08 was 6.3 per cent and it expects the share to increase to 8 per cent-plus in 2008-09, Nair said.

The company also saw a decline in its defaults and non-performing assets (NPAs)in FY ’09. Gross NPA of the company declined to 1.07 per cent in the year from 1.70 per cent during the previous year while its net NPAs fell from 0.64 per cent in FY ’08 to 0.21 per cent in FY ’09. — PTI

GREEN HOUSE
Forgotten Fruits
Satish Narula

There was a time when we used to see these fruits every few yards. But thanks to the developments and encroachments, they have been phased out

Whenever we talk about planting, it is always about along the roadside, in the parks, institutes or societies. We have stopped thinking about the social and community planting that has many visible and hidden advantages. This has led to the extinction of a few old timers. See the accompanying pictures and those in their mid-fifties will get nostalgic.

Now, show the pictures to your children and may be many of them would have not even seen these fruits, let aside hearing about their name shehtoot (mulberry) and ber (zizyphus). There are many more like this, phalsa (a bush plant), Jamun (blackberry), bel, karonda, Khirni, katha ber (small red), etc.

There was a time when we used to see one of the aforesaid fruits every few yards either along the roadside, in the houses or growing in the wild as no-man’s property. It was available to one and all. All thanks to the developments, encroachments or say the love-lost that we have phased them out. Some removed them as ‘they made the place dirty’ or ‘invited stones’, or for the reason of limb breakage. Even in orchards we have stopped planting these fruits due to a high cost of plucking and those who have them, sell them at premium.

How these fruits survived in the wild or open spaces unattended? Most of these fruits fit well in our climatic conditions. For example, Jamun needs dry weather at the time of flowering and setting of fruit. At the time of setting of fruit, the June rains are also available and thus they need little care. Another prominent thing about their success is that they are least susceptible to insects, pests or diseases. But slow phase out, however, has done some good too. Those with concern have started making selections and collection of biodiversity in various institutes. At Punjab Agricultural University too, the seedling mango collection is made from all the corners and Jamun collection is made from Shirdi in Maharashtra and also from Bihar. And now whoever plants these fruits, as a delicacy or for fancy, gets the best of it, and of course within a few years of planting due to the availability of the grafted plants. Do not forget they had tremendous medicinal value too.

I do not advocate planting them along the roads for the fear of stones, limb breakage, etc., but then in colonies these could be planted in corners or in the parks. Also planting the trees is not the only prerogative of city dwellers but village people should also take it up as a campaign. The trees could be planted along village paths, on the common village lands, near the tube wells, wells and any other water source. Trees like ‘kathal’ and ‘Khirni’ could be planted near village common sitting place as unlike Ficus species plants viz. pilkhan, papal, etc. the place do not get dirty by their shedding of fruits. Moreover, they have the same thick growth for shade besides giving fruit aplenty. The forgotten fruits are also being recommended for planting in the nutrition gardens for the year round supply of fruit and vegetables.

Your elders did it for you. You lost them and now it is your moral duty to do it again for your next generations. Let it be in a planned manner so that they live long.

The writer is a senior horticulturist at PAU and can be reached at satishnarula@yahoo.co.in

Changing Skyline
PK Jaiswar

Haphazard mushrooming of commercial buildings coupled with the unplanned growth in the holy city of Amritsar has once again raked up the long-pending demand for a master plan

A plethora of commercial projects, including multiplexes, malls and hotels, are fast coming up in the holy city of Amristar. However, in the absence of planned development and a proper blueprint of a master plan, haphazard growth of buildings and malls has taken place, which is resulting in distortion of the face of this historic and heritage city.

Chaotic mushrooming of commercial buildings in residential areas — especially in the posh Ranjit Avenue, encompassing Mall Road and its periphery, including Madal Mohan Malvia Road, Albert Road, Court Road and outer circular road — with concentration of business complexes has caused a lot of inconvenience to residents. Many have been complaining about the frequent traffic jams, and with lack of proper parking space, a large number of vehicles are being parked on roadsides, leaving little place for pedestrians.

A number of NGOs concerned about the planned development of Amritsar have been crying hoarse for evolving a consensual approach on working out a proper well-defined master plan, which not only meets the aspirations of the people but also give a green signal to those projects that conform with the heritage status of the city. Even the politicians and those holding powerful positions have failed to bring out the true parameters with blue prints to have a planned and developed city on the lines of several similar cities across the country.

Commercial activities have also started in the areas around the historic Rambagh garden, which has been declared as a protected monument by the Archeological Survey of India. Further, the master plan for the development of the city is yet to see the light of the day.

Several eminent citizens have questioned the civic authorities and the government about the number of commercial buildings required to fulfill the need of the local population, which is roughly around 10 to 12 lakh, so that sanctions for constructing these buildings are given keeping in view the future vision of the city. Since the government has not drawn up any framework for the city, the municipal corporation, Amritsar Improvement Trust and PUDA are using it as an excuse for failing to come up with any concrete vision plan, resulting in haphazard growth of commercial establishments all around the civil line and walled-city areas.

The city — which was once proud of its green vistas, boulevards, Mall road and adjacent residential areas — has become a concrete jungle. Civic amenities are also being stretched as it has failed to cope up with the alarmingly high constructions on the small stretch of two-three kilometres’ radius with Lawrence Road and MM Malvia Road being the central point.

The much-touted and -hyped Amritsar Development Authority (ADA), initiated by a few well-meaning citizens of the city and eagerly taken up by the local MP two years ago, had failed to come up with a plan to harmonise the heritage status of the city with modern needs to fulfill the future projection in view of the heavy flow of devotees and tourists. Much to the anguish of the local citizens, the ADA has so far no impact, with many blaming it on the members that the authority comprises of — bureaucrats and the Chief Minister being the head of the authority.

A senior citizen with complete disdain said it was a mockery of constituting the ADA with not a single member taken from the city, who can represent the aspirations of the people of the city to the authority. He said the authorities had only met once and failed to draw its priorities besides giving shape to the norms and the bylaws for the future vision.

Senior functionary of the corporation, on anonymity, said in view of the enforcement of the model code of conduct due to elections, he was unable to quantify his response to the planned development, but he hastened to add the government was seriously contemplating to work on a master plan for the city to demarcate commercial areas from residential areas.

REALTY BYTES
3C Company to invest Rs 2,000 cr on green buildings

New Delhi: The 3C Company, which is into development of green buildings, have announced an investment of up to Rs 2,000 crore over the next three years on construction of four such projects in Noida. “We develop only green buildings as it saves energy and reduces carbon footprint. The construction cost is higher by 5 per cent than regular buildings which we are absorbing,” said, Vidur Bharadwaj, director, 3C Company.

The Noida-based firm has developed seven to eight green projects, including Wipro and Patni Campus at Gurgaon and Noida, respectively. At present, the company is working on four projects that includes two IT SEZs of seven million sq ft each and a housing project.

“We will be investing Rs 1,500-2,000 crore in the next three years on construction of projects in hand. We already have land in possession for these projects,” Bharadwaj said, adding that it has in-house design and construction firm.

The housing project will come on Noida Expressway where 500 flats would be launched in the first phase. “We will launch the housing project in July. We have not decided on the price, but it will be luxury project at affordable price,” added Bharadwaj.

Besides, the company is developing 100 villas along with nine holes golf-course. The 3C Company has 300 acre of land bank in Noida for future development.

— PTI

Property funds jitters for European investors

LONDON: Investors are highly concerned about potential debt problems in unlisted European real estate funds, causing them to drastically cut back equity commitments to the sector, said a worried industry body.

In a survey of investors, 88 per cent said they were either “very concerned” or “concerned” about property funds breaching covenants, INREV (the European Association for Investors in Non-listed Real Estate Vehicles) said in an industry conference held in Greece.

“Investors have identified that the vintages of funds that are likely to cause most concern are from 2006 and 2007,” said Russell Chaplin, co-chair of INREV’s Research Committee and Global Strategist for UBS Asset Management.

“(That was) when peak levels of capital flowed to non-listed real estate vehicles and when the propensity to use debt was high,” said Chaplin.

The debt worries have hit the capital raising efforts of property funds this year, as one-third of investors and half of fund of funds managers who had been asked to commit fresh equity had rejected the request, INREV said.

Property fund managers surveyed said they plan to raise 6.1 billion euros ($7.95 billion) in 2009, down 59 per cent from the amount targeted in 2008. The most popular target for property investments this year are offices in the UK, where fund managers intend to allocate 8 percent of their capital as they eye the upswing following a steep fall in prices, said INREV.

British commercial real estate has seen the sharpest correction among markets so far in the current downturn, losing over 40 percent of their value since the peak in mid-2007. — Reuters