A year of Despair & Hope
Vinod Behl

The mood is upbeat in the realty sector in the last quarter of the year, but there are vital lessons to be learnt from the country’s close shave with real-estate slump

The year 2009 will be regarded as a unique year for the Indian realty. A year that brought both despair and hope.

The real estate boom that went bust in 2008 saw real estate players, investors and property consumers experiencing its pain with the onset of 2009. The global economic slowdown added to their woes.

But then luckily this pain, much against expectations, did not last long. The second half of the year brought in a glimmer of hope. In the third quarter, there were clear signs of realty revival while the fourth quarter has brought the much needed relief to the real estate players, with demand for property picking up.

Government Stimulus

The government played its role in reviving the ailing real estate sector through its well thought out fiscal policy and supporting stimulus. While the real estate is now out of the ICU, it is clearly not out of the hospital as yet. Therefore, if the recuperating real estate will not take proper “post-operative care” (read taking lessons from the downturn), then it will run the risk of slipping into serious “health problems” once again.

It is equally sad to see a section of the industry blaming global economic slowdown for the crisis that plagued real estate sector in India. The truth is that real estate bomb was ticking away and the bubble was just waiting to burst. The global economic crisis only made the matters worse for the real estate market.

Wages of greed

It was the case of killing the proverbial goose that laid the golden eggs. The sheer greed of the industry players was what led to real-estate fiasco. Builders resorted to overkill with mad frenzy to build homes, offices and shopping centers and even taking to land hoardings. They further spread it thin by moving into non-core areas. By kicking up speculative buying frenzy, they prepared a sure recipe for disaster.

Time to mend ways

It is high time for the real estate community to mend its old wayward ways and put its house in order. The boom period saw real estate developers dishing out what they wanted to serve rather than what the consumers needed. Fortunately, many of them have now turned to affordable housing which is in great demand. By moving out of the non-core businesses and making their operations cost effective and efficient, they are making serious efforts to put their business back on rail, though funding and execution challenges still remain.

The very fact that the pain did not last for long may well have worked in favour of the real estate sector. But then there is an inherent danger in it, as many players may not draw any lessons from the real estate bust. Instead, they may well be back to their old ways that led to speculative buying frenzy and property price bubble.

One hopes that the real estate sector emerges from the crisis. Let the bitter memories be a thing of the past and the New Year bring in sanity, paving a way for systematic and sustainable growth of real estate in the months ahead.

(The writer is the Editor of Realty Plus)

Housing on a high in metros

Mumbai: Property consultancy firm Knight Frank has said that 3,67,000 housing units will be available by 2011, across seven Indian cities of which 25 per cent will come up in the National Capital Region alone.

Examining potential residential supply, the report said that with 92,202 units, NCR would be the highest contributor to the supply followed by Mumbai with 20 per cent or 72,906 units, during the period.

“Our extensive research reveals that as the real estate sector’s growth continues to improve, the country will witness a supply of 138,000 residential units in 2010, 57 per cent more than the supply seen in 2009,” Gulam Zia, National Director (Research and Advisory Services), Knight Frank India said in a release.

Hyderabad would contribute 15 per cent or 53,000 housing units, Pune 14 per cent, Bengaluru 10 per cent, Chennai nine per cent and Kolkata the remaining seven per cent of the total supply.

The study also revealed that the developers were now increasingly focusing on catering to the middle-income segment with up to three bedroom-hall-kitchen housing units and not on 4&5-BHK or penthouses as they used to do few years back.“Knight Frank estimates that 75 per cent of the present and future residential supply will focus, to a great extent, on the two and three-BHK housing units being built,” the report said.

Zia said the residential property prices have increased by 10-30 per cent in Mumbai and Bengaluru since March 2009 after the big slump, which witnessed up to 40 per cent price correction.

The price improvement, however, is limited to Mumbai and Bengaluru and was not a countrywide phenomenon, the property consultancy firm said. — PTI

TAX TIPS
Exemption can be claimed for one house
S.C. Vasudeva

Q. I have read somewhere that Section 54 of the Act provides for an exemption of capital gains in case a residential house is purchased within the specified time limit. Does this mean that exemption under the Section would be for one house or it can be for more than one house?

— A.C. Pathak

A. The expression “a residential house” has not been defined by the Section. It can be interpreted that “singular” includes “plural”. It is therefore possible to argue that the word “a residential house” should be read as “any residential house”. This is in view of the clarification issued by the Board vide Letter No. 207/24/76-IT(A-II),(dated March 25, 1977) which reads as under:

“Section 54 lays emphasis on the use of the property mainly for the purpose of assessee or his parents’ own residence. If an assessee has retained more than one house for the purpose of his own or the parents’ own residence, and has used them for such residence, and not for any other purpose the capital gains arising on transfer of each such house would qualify for exemption under Section 54, provided the other conditions spelt out therein are fulfilled.”

However, there are contradictory decisions by the Income-tax Appellate Tribunal on this issue and recently a Special Bench decision of the Mumbai Bench has held that exemption is allowable in respect of investment in one single residential house (107 ITD 327) (SB) (Mumbai). In view of the above decision of the Appellate Tribunal, it would be advisable to claim exemption in respect of investment in one residential house.

Capital gains tax on land beyond MC limits

Q. I have agricultural land in my village in Hoshiarpur district. This land is at a distance of more than 8 km from the municipal boundaries of all the municipal towns of the district. But it is at a distance of less than 8 km from the municipal boundary of the town Bhogpur of Jalandhar district. Please clarify if I have to Capital Gain Tax on the sale of this land.

— Armaan Dhillon

A. As per the Notification No. SO 10(E) (dated 6.1.1994) as amended by Notification No. SO 1320 (dated 28.12.1999), the areas upto a distance of 1 km from all municipal limits in direction would be considered to be outside the local limits of municipality or cantonment board etc. Accordingly, in case your land is beyond the distance of 1 km from municipal limits in all directions from Hoshiarpur, it would not be considered a capital asset within the meaning of Section 2(14) of the Act. The capital gain arising on such a land would not be exigible to tax in view thereof.

No exemption on service charges

Q. I am a member of a co-operative housing society in Delhi, by virtue of which I have a flat in such co-operative society. According to the rules of the society a member has to pay a fixed charge if he lets out his flat. The society also recovers service charges for watch keeping and lifts from the members. Is it possible to claim a deduction for such charges?

— P.K. Maheshwari

A. Section 24 of the Income Tax Act 1961 (the Act), provides for a deduction of 30 per cent of the annual letting value as deduction against income from house property. The deduction for service charges and fixed charges payable to the society for letting out the flat are not allowable as no such deduction is specified under Section 24 of the Act.

Defining assets

Q. I understand that the Wealth Tax is payable on net wealth exceeding Rs 30 lakh. Would you please elaborate what is covered in the term asset under the provisions of the Wealth Tax Act?

— R.K. Kanwar

A. Section 2(ea) of the Wealth Tax Act, 1957, defines the term ‘asset’ for the purposes of levy of Wealth Tax as under:

Any guesthouse; residential house; commercial property; and/or farm house situated within 25 km of the local limits of any municipality or a cantonment board; but excluding:

A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having gross annual salary of less than Rs 5 lakh,

Any residential house forming part of stock-in-trade,

Any house for commercial purposes, which forms part of stock-in-trade.

Any house, which is occupied by the assessee for the purposes of any business or profession, carried on by him.

Any residential property which has been let-out for a minimum period of 300 days in the previous year; and

Any property in the nature of commercial establishments or complexes;

Motor cars, other than those used in assessee’s business of giving cars on hire or held as stock-in-trade;

Jewellery, bullion, and furniture, utensils or any other article made wholly partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, other than those held as stock-in-trade by the assessee;

Yachts, boats and aircrafts, other than those used by the assessee for commercial purposes;

Urban land, being land situated in any area, within the jurisdiction of a municipality or a cantonment board which has a population of not less than 10,000; or within 8 km of the local limits of such municipality or a cantonment board, as the Central Government may notify except the following urban land:

Land on which construction of a building is not permissible under any law or the land on which building is constructed with the approval of the appropriate authority,

Any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him, and

Any land held by the assessee as stock-in-trade for a period of 10 years from the date of its acquisition by him;

Cash in hand, held in excess of Rs 50,000, in case of individuals and Hindu undivided families (HUF) and in the case of other persons any amount not recorded in the books of account.

It may be added that there are exemptions in respect of certain assets that are contained in Section 5 of the Wealth Tax Act, 1957. One of such exemptions is one house or part of a house or a plot of land not exceeding 500 sq. meters belonging to an individual or a HUF. The above definition of assets being an inclusive one, other assets such as shares, debentures are not exigible to Wealth Tax.

GROUND REALTY
Pool delight
Jagvir Goyal

There were times when a swimming pool used to exist either in a five-star hotel or in the sports-training institutes. Times have changed and now, swimming pools are developed in all the clubs of standard, society complexes, farm resorts, big bungalows and even on terraces. These add to the style and status of the owner. However, simple construction of a swimming pool in a complex or house doesn’t close the chapter. Rather a full job of its maintenance lands in the hands of the owner and he has to draw a clear-cut programme for its periodic maintenance.

The culture of having a personal swimming pool within the boundary of a large bungalow, a farmhouse or a villa is fast catching up in metros. Somehow the blue waters with umbrellas and lounging chairs put nearby attract people like a magnet. These days many builders, too, are providing swimming pools in penthouses or on terraces for apartments.

Area requirements

A club, colony or hotel can always have a swimming pool of a desired shape and size. Barring a few exceptions, within a residential unit, area constraints are always there. However, private pools are always of smaller size than public pools. The smallest size of a pool can be as less as 150 square feet. However, it may give the feeling of a large tub or a wading pool. Normal pool size for private use is 16 x 32 feet.

Depth requirements

Depth of a swimming pool depends upon the fact whether it is to be used for swimming only or for diving also. In residential areas, diving in pools is avoided, as it requires too much depth in the diving portion of the pool. Depth of a swimming pool may be kept uniform or variable. A pool with uniform depth shall have a flat bottom. A pool with variable depth has a combination of two different depths by combining a flat bottom for some length with a sloping one for balance length. A flat bottom pool is good for freshers, a variable depth pool for a family and a deep sloping one for sports persons. A swimming pool, in general has a depth between 0.80 to 1.80 metres.

Level

Level of the pool means whether it is to be constructed on the ground or on an upper floor of the building. These days, builders provide swimming pools on various floors in luxury apartments. It is a costly proposition and requires immense care and safety in design against structural failures and leakages. A pool at any floor of the building will alter the structural design of the building as the weight of the pool and the water contained in it will have to be taken into account.

Structure

Once the parameters are decided, structural design of the pool should be evolved. See that the pool has a RCC base slab with RCC walls all round, their joints with the base slab are made waterproof by inserting PVC water bars or stoppers in them. This has to be done at the time of concreting of slab and walls. Here, proper insertion of water bar or stopper, equally in the slab and wall is very important. Generally this bar is not given due attention and is found inserted in a wavy manner. This results in leakages at the junctions. To avoid leakage and maintenance problems, a swimming pool must be made hydraulically tight. Add water-proofing compound to concrete. Thickness of bottom slab can be kept between 9 to 12 inches. The walls may have varying thickness, thicker at bottom and thin at top end. Keep wall thickness as 9 inch at top and around 14 inch at bottom. Always provide steel on both faces of walls and bottom slab. 8 mm dia and 10 mm dia steel if provided at suitable spacing can make the structure safe. Use M20 mix for concrete.

Tiles

Choose glazed or mat finish tiles for the pool. Glass mosaic tiles look still better. The deck flooring can be in terracotta tiles or a mix of red sand stone and kota stone.

Filtration plant

Filtration plant is the most important attachment to a swimming pool to keep it hygienic and workable. Its capacity depends upon two things:

Volume of water in the pool

Turn-over period.

Turn-over period is the time period in which in which the total pool volume shall pass through the filtration system once. Lesser the turn-over period, more clean and clear is the pool water. However, too less turn-over period unnecessarily increases the load on the filtration units. Therefore, choose turn-over period carefully by estimating the number of users and the hours in which the water is likely to get dirty. Peak hours of summer days should be considered. For a pool having a water volume of 1 lakh litres, a turn-over period of five hours is normally sufficient. Residential pools may have turn-over periods of 8 to 10 hours.

The filtration plant consists of circulating pump and filters. The circulating pump turns the pool water through the filters to clean it. The capacity of a circulating pump can be worked out by dividing the volume of water with the turn-over period. A pool having 1 lakh litres of water and turn-over period of five hours should have circulating pumps of 20,000 litres per hour capacity. Prefer pumps of smaller capacity but more in number, as the circulation system will continue to work if one pump goes out of order.

The filters are called pressure sand filters. These may be of stainless steel or anti-corrosive fibreglass or polyester resin filters. Their filtration rate is kept low. Slow filtration rate makes filtration more effective. However, in private home pools, medium or high filtration rate is permissible. A rate of 6 litres per sq. inch per hour can be said as a low rate while a rate of 20 litres per sq. inch per hour is a high rate of filtration.

Choose a filtration plant that is capable of handling any type of water pollution such as dust, leaves, chemical wastes, bacteria, spores, pollen etc. It should also be able to handle the pollution caused by swimmers through sweat, sun-tan oils, urine, bacteria and viruses. The filtration plant should have proper system of valves to handle backwashing of filters.

Backwashing of all filters should always be done at least once a week. When the pressure gauges start showing extra pressure of 0.2 kg/sq.cm that means extra clogging of filters has occurred and these should be backwashed.

Dosing

Add a dosing pump system to your pool maintenance kit. There should be separate dosing pumps for chlorine and soda ash. These should add chlorine and soda ash to water to disinfect it and to correct its pH value.

Piping and valves

Take special care of the pipes, valves and gratings for the pool. These are required for inflow of clean water and outflow of used water. Keep the main drain in stainless steel. See that the bottom inlets and grating supports are anti-corrosive, preferably made of plastic. The other piping and valves may be of unplasticised PVC and able to handle the required pressure. Provide the pool with deck overflow channels. The drainage pipes connecting the overflow channels to the balance tank should have 25 per cent extra capacity.

Lighting

Underwater lights add to the beauty of a pool, make it usable during night and should always be provided. Prefer to have extra flat lights and that too without the requirement of niche so that these make no hindrance in swimming. Colour choice is yours.

Construction

It is always better to get a swimming pool constructed on turnkey basis. You need to tell the capacity, size, shape and depth of the pool required, finalise the amount to be paid and rest can be left to them. However, you can always prescribe the makes of equipment, type and colour of tiles, colour and pattern of lighting. A maintenance guarantee should be secured from the turnkey contractor. Chinese equipment should be avoided. Prefer the equipment supplied by a FINA approved company. FINA is the international body that approves the equipment suppliers for Olympics swimming events..

Portability

These days, portable pre-fab swimming pools have also become available. These can be of any shape or size, can be installed indoor or outdoors, above or below ground level. A 20 x 12 feet pool with depth of 4 to 5 feet costs around Rs 5 lakh. These are equipped with a filtration unit, chlorine dispenser, purifier, special liners and other accessories. Choose one if you want to avoid the construction hassles.

The last word

It is better not to have a swimming pool if you can’t maintain it. An ill- maintained swimming pool invites unhygienic conditions around its location, spreads disease among the users and ultimately stops functioning, wasting all the expenditure incurred on its construction. Draw a pool and equipment maintenance chart and religiously get the chores done.

More tips will follow next fortnight. Till then, happy swimming.

This column appears fortnightly. The writer is deputy chief engineer, civil, PSEB. He can be reached at www.jagvirgoyal.com

REALTY BYTES
Millennium Spire to invest Rs 4,500 crore

UK-based private equity firm Millennium Spire will invest $ 1 billion (over Rs 4,500 crore) in various real estate projects in India over the next five years as it sees huge potential in the country.

“The growth in Indian real estate market is very robust. Although no big ticket private equity investment has been announced this year, 2010 is going to be a year full of events,” Millennium Spire India Management Managing Director Ashish Bhalla said in New Delhi recently.

“We have decided to invest $ 1 billion in Indian real estate in the next few years. Going forward, we will also work on infrastructure projects,” Bhalla said, adding the company is exploring possibilities in Haryana, Uttarakhand and Tamil Nadu and is talking to the respective state governments.

The $ 15 billion group would pick up controlling stake in these projects, which would be built by local developers.

Millennium Spire India Director Sunil Gandhi said the company would develop residential and commercial projects over the next five years under the planned capex.

“Our focus area will primarily be the National Capital Region (NCR). We are going to launch four new housing projects in the next 2-3 months, which will come up in Gurgaon and Noida,” he said.

Design your home

New Delhi: Realty players are doing all they can do to woo customers and the latest in the offing is a real estate project in Pune, which would be based on the designs from prospective homebuyers.

Mumbai-Pune developer Kumar Urban development has launched an eco-friendly township at Hinjewadi in Pune that will be designed by prospective homebuyers.

The company undertook a survey called “Design Your Home” inviting homebuyers to share their expectations of a premium home and a world class township, the company said.

“Our architects and designers have taken into account each and every aspect that came up during the survey in which over 800 home buyers participated and sent in their own designs of their dream homes,” Kumar Urban development Director Kruti Kumar Jain said.

The project Christened Kumar Ecoloch, is being designed by internationally renowned architect, Hafeez Contractor. — PTI

Dusit to enter India

Thai hospitality chain Dusit, acclaimed for blending modern global service standards with the country’s traditional hospitality in its hotels, hopes to open its first luxury property outside the country in New Delhi next year.

This will be followed by four more hotels and resorts, one each in the national capital, Jaipur, Rishikesh and Goa, by 2013, as part of the group’s major expansion plans in the international space.

“The expansion plan in India includes opening of the company’s first-ever Dusit Devarana — the most luxurious brand under the Dusit International umbrella,” said Anton Kilayko, corporate director with the hospitality chain.

Officials said they have entered into a joint venture pact with India’s $100-million Bird group, with interests in travel trade, hospitality and airport services, to bring the collection of Dusit brands to the country.

The new venture is looking to bring the best in Asian hospitality to the Indian Capital before the Commonwealth Games to meet the anticipated shortage of rooms during what is touted as the second largest sporting event in the world.

The Dusit team in Chiang Mai explained that the "Devarana" brand itself has been derived from Sanskrit, translating into "garden in heaven" and its spas combine age-old therapies and modern knowledge to pamper and revitalise guests.

The New Delhi project will be the first luxury hotel in Dusit’s India portfolio with only 78 luxury rooms, located near the city centre of New Delhi, officials at the chain said. This is also the company’s fifth sub-brand and promises the visitor who values only the finest in the world a definitive sanctuary, they added.

”Every aspect of the Bird-Dusit properties is expected to set a new benchmark for the Indian hotel industry,” said Ankur Bhatia, executive director of the project collaborators, the Bird group.

“The brand culture will be manifested through its people — a devoted group of professionals inspired to understand the needs of each guest and deliver highly personalised experiences to create the elusive Dusit Devarana,” Kilayko added.

The officials explained that in New Delhi, apart from launching their Devarana brand, they will also built another property under the DusitD2 brand. The projects in Jaipur, Rishikesh and Goa will be offered under the Devrana brand.

In fact, even its menus are known to combine some of the best in Thai and Indian cuisines. The highly acclaimed restaurant here, Moxxie at D2, offers some amazing dishes like broiled snow fish tikka and tajima wagyu meats with morel sauce.

The fare includes some palette-tickling ginger-based desserts and the chef has added new Asian-Indian dishes to the selection of cuisines. — IANS