Commercial slump
The slowdown has brought down prices of commercial sites considerably in and around Sangrur, writes Shariq Majeed

The slowdown that the realty sector witnessed over the past 12 months has brought down the prices of land used for commercial purposes considerably in and around Sangrur. According to realtors operating in and around the city, even as the prices of land used for residential purpose had remained stable and, in some cases, had even witnessed a marginal increase, the prices of land used for commercial purpose like for shops, business establishment, schools and hotels etc registered a decrease of as huge as 25 per cent over the past 12 months.

Ashok Sharma, who deals in sale and purchase of property in Sangrur says in residential colonies in the city the land price had remained stable since the beginning of 2008, but the rates of land used for commercial purpose, mainly along major roads connecting Sangrur with other towns and cities, had registered a decrease of as much as 25 per cent in the last one year.

“In colonies like J.P. Colony and Agar Nagar, the price of land (and even of built-up houses) range between Rs 15,000 to16,000 per sq yd. These rates are more or less the same as compared to those last year. In colonies like Mubarak Mahal, Friends colony, Maan Colony, the rates per sq yd. range between Rs 6,000 to 10,000 and in Punea Colony, Officer Colony, Ekta Vihar and Karan Singh Nagar the prices have remained unchanged since last year at Rs 4,000 to 6,000 per sq. yd. In Shivam Colony the rates are the lowest and range between Rs 2,000 to 3,000 per sq. yd.”, says Sharma. “Rates of commercial property used for hotels, schools, college, shops, marriage halls, factories and other business establishments along Sangrur-Barnala road, Sangrur-Patiala road, Sangrur-Dhuri road and Sangrur-Patran road range between Rs 1,500 to 2,000 per sq.yd. and have registered of decrease of 25 per cent in some cases in the past 18 months, he adds.

Jasbir Singh Grewal of Grewal Property Dealers and Real Estate, one of the leading firms in real estate business in Sangrur, says that property business had been witnessing a slump for the past few years. “ The mushrooming of unapproved colonies lacking adequate facilities like clean drinking water, electricity and sewerage led to a decrease in the prices of residential property. Because of such unapproved colonies, the supply was more and the demand decreased resulting in a drop in the prices of land”.

“As far as the decrease in the rates of commercial property in Sangrur is concerned, many factors are responsible for it. One of this being the reluctance of buyers to purchase property adjoining the highways because of widening work going on. Second important reason is that no new project is coming up in this area, which doesn’t have much industrial activity. The recession did the rest of the trick for slashing the rates of commercial property”, he adds.

Grewal who has conceptualised two approved colonies — Sangrur Valley on Dhuri road and Dreamland on Patiala road — of the four approved colonies in the area, adds “Since a lot of unapproved colonies are coming up in and around the Sangrur city not many customers are coming in for the approved projects.”

Government’s role

Faulty planning of the government also has a role to play in slump in property business. Before 2006, during Congress regime, the CLU (change of land use) and development fee was less as land limit for approved colonies used to be 10 acres. But this policy was changed after the change of government and the new government not only hiked the fee but also increased the land limit for a colony to 25 acres. In 2009 the government, however, reduced the land limit for approved colonies to 10 acres, but didn’t touch the CLU fee that resulted in mushrooming of unapproved colonies hitting the property business due to simple principle of high supply and less demand.

Another property dealer says “Though the rate per sq yd of land are approved by the government but land is rarely sold as per the government approved rates and property dealers sell the land at much higher rates”.

Stable rentals

The rates of shops and the rents for the commercial establishments have not seen much change in the last 18 months. In the Kaula Park area, the only commercial site in the city, the rate of 1320 sq ft of shop is between Rs 1 to 1.5 crore. In Dhuri Gate, Patiala Gate, Nabha Gate and Sunami Gate, the rates of shops with same specification range between Rs 50-70 lakh. As far as the rent is concerned, the rent (per sq ft) in Nankiana Chowk, Patiala road and Nabha Gate ranges between Rs 7-8 whereas in Dhuri road and Kaula Park area, the rent is as high as Rs 25 per sq. ft.

On recovery path
Happy days are ahead for the retail and commercial sector in 2010, writes Geetu Vaid

The retail and commercial sector in India has been through a roller-coaster ride changing its face and approach in the past one year. But if we compare global economic meltdown with the Indian one, the situation in Indian market is far better than the rest of the world. Attracted by correcting values; investors and end-users have begun to cash in on good bargain buys, bringing momentum to the activities in this sector. A recent Cushman and Wakefield Investment report states that the Asian economies, with strong fundamentals to cope with the ongoing economic crisis, have performed better than their North American and European counterparts.

Despite divergent views amongst large international institutions, Asia is believed to be better placed economically because of its low levels of debt exposure at the government, corporate and consumer levels, which has aided an early recovery process that is now underway.

The commercial sector is currently witnessing a lot of interest from investors and corporates alike where the first movers will benefit the most. A few major locations in India have seen a significant turnaround in the number of viewings/enquiries for commercial spaces in the latter half of 2009, indicating rising interest and growth in activities. Despite weaker demand in 2009, this rise can be taken as a positive indication.

The Indian real estate market is expected to revive by mid-2010. The forecasts for pan-India commercial office space demand for the period 2009-2013 stand at approximately 196 million sq. ft., while retail space demand for the same period across India is estimated to be about 43 million sq. ft. Hyderabad, Pune and Kolkata are expected to witness the highest compounded annual growth of approximately 28 per cent during 2009-2013, highlighting the growing prominence of Tier-II cities in the India growth story.

However, Bangalore is likely to have the highest cumulative demand. Established commercial centres, however, are expected to remain slower in growth than their Tier-II counterparts. Cumulative demand among the Tier-I cities of Mumbai, NCR and Bangalore will account for 42 per cent of the total demand, with Mumbai and NCR accounting for 24 and 25 million sq. ft. of office space demand through 2009-2013, respectively (C&W report).

Retail momentum

According to ASSOCHAM the current retail market size is estimated to be $16 billion and the sector is expected to touch around $28.5 billion by 2010.

India's vast middle-class and its almost untapped retail industry are key attractions for global retail giants and for the Indian business giants who want to enter newer markets in ideal locations. As many as 100 bigger and smaller malls have been develped iIn Delhi and its suburbs, and about another 600 are coming up, and over 1,000 malls are in the pipeline for smaller townships.

Nitesh Kumar, Director, Sales and Marketing, TDI Infrastructure Limited, says, “We must not forget that retail sector is one of the fastest growing sectors in India and it is estimated that by 2010, it will generate 10 million employment opportunities. Considering this fact, the government should look into allowing 100 per cent FDI in multiple-brand retailing at the earliest; so that it helps in enlarging scope of further growth, bring in fresh capital and creates a win-win situation for all links in the value chain — suppliers, producers, retailers and customers.”

Sunit Sachar from the Parsvnath group says, “People have come out of ‘recession shock’ and have started spending. At this point of time, the retailers should further encourage spending by offering lucrative propositions, supporting loyal customers by aiming towards penetrating pricing policies instead of scheming pricing policies.” He suggests “value-for-money offers as well as giving a new look to the old products. Maximum advantage shall be accrued by out-of-box thinking.”

Jaideep Wahi, Director, Cushman and Wakefield India, feels, “Retailers need to be opportunistic but not optimistic. Location will now play an even more important role and aggressive positioning in non-established markets or peripherals is not recommended.”

Pankaj Renjhen, Managing Director, North India, Jones Lang LaSalle Meghraj, agrees with the fact that the strategy for retailers should be to evaluate the location and surrounding areas to find out whether it is in line with their expectations. There should be a right ambience for their business to flourish.

For the top eight cities, operational mall space is approximately 35 million sq.ft while upcoming supply is another 28 million sq. ft. planned for Q4 2009 and 2010 (source C&W). Renjhen further says, “Hence, for mall developers to sustain in the present scenario, the first two years of operation are important as it is the settling down cycle. Anyone can build a mall but developing the mall is an altogether different ball game. There has to be a good retail mix that will cater to the customers in totality. Most developers forget that customers, not the retailers are the real kings. It is time to look at the B2C model rather than the B2B model. It’s important for the developers to control the flexibility of mall management as customer preference is an ever changing process, so that they can tweak the requirements as per need.”

Nitesh Kumar opines, “Both the mall developers and investors/retailers should be open to work on a revenue-sharing model to create a mutual profit-generating environment. Also, there has to be a balance between a focus on customers and retailers with innovative approach to design and commercial viability.”

Wahi adds, “Some developers are proactive in giving rent-free periods to help retailers establish themselves, thus lowering operational expenses during the first few months and reduce costs. A mall can do well only if the all the retailers within the mall are doing well. The rules of the game have changed — retailers are being more cautious and thus developers now have to prove viability before a retailer commits. Details such as design, circulation areas, zoning formats etc., which were largely overlooked earlier, are being paid attention to. Mixed use developments with maximum efficient use of space (commercial, retail and hospitality) would provide for best returns on a risk adjusted basis.”

TAX TIPS
Invest in CG bonds
S.C. Vasudeva

Q. I have one property with Improvement Trust. We had bought it in 1980 for a total price of Rs 80,000. Now we can get about Rs 1.5 crore for it. Now we are planning to buy flats in Jaipur from the money got from selling the aforesaid property. But, I have read that one can buy only one residential unit against the sale of one residential unit. Then how can we to buy more. In my family there is my mother, who is 64-year-old and is retired and gets a pension of Rs 11,000 per month; my 66-year-old father, who retired as a professor but gets no pension; and myself (35 years old unmarried boy). I am doing business with share trading and have commodity account also. Do guide us as to how to invest the money with maximum possible tax saving. — Navtej

A. It is assumed that the property purchased from Improvement Trust is a residential house. If that is so, then it will be advisable to utilise a part of the amount of capital gain arising on the sale of such residential house for purchasing another residential house. The remaining balance of the capital gain that I presume would not be more than Rs 50 lakh, should be utilised for the purchase of capital gains tax saving bonds. These bonds can be either of the Rural Electrification Corporation Ltd. or National Highways Authority of India. The purchase of the residential house should be within two years of the date of sale of residential house and the purchase of capital gains tax saving bonds should be within six months of the date of such sale. This would enable you to save tax liability on capital gain arising on the sale of residential house purchased in 1980.

Exemption status

Q. I had sold my residential house in 2007 and purchased another house immediately thereafter. The residential house sold by me was a long-term capital asset and therefore, I was able to claim exemption from taxability of the long-term capital gain arising on such sale.The new house purchased by me is not suitable and I intend selling the same. What would be the position in respect of the exemption of capital gain claimed earlier? — D.K. Agarwal

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:

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.

Sale consideration of the new residential property X

Less: cost of acquisition (original cost of acquisition Y

of the new residential property minus the exemption

given/availed earlier in respect of capital gain)

Short-term capital gain X – Y

CGT to be paid

Q. I was alloted a flat in a co-operative society in Chandigarh in 2002. I paid its total installment of Rs 8 lakh from 1998 to 2001 and then a spent a sum of Rs 2.5 lakh on woodwork in 2004. I sold the flat in May 2009 for Rs 22 lakh and purchased a plot for Rs 8.25 lakh in joint name with my son. I made full payment of the price of the plot through cheque and my son has taken loan for construction work and he will be paying the installment for it. I want to know whether any Capital Gain Tax applicable on me or can my capital gain be adjusted in the value of plot purchased by me. — Munish

A. It seems from the facts of the query that the possession of the flat was taken in the year 2001 and thereafter woodwork in such flat was carried out. The flat so bought by you would be a long-term capital asset as the same has been held for a period of more than three years. The gain arising on transfer of flat shall be treated as a long-term capital gain. The long-term capital gain arising on the sale of the flat would thus be taxable, as the purchase of the plot would not entitle you to claim any exemption. You can seek exemption from the taxability of capital gain to the extent of your share in case the construction of the house is completed within a period of three years from the date of transfer of the flat and such share of capital gain arising on the transfer is deposited in a bank under capital gains scheme account before the due date of filing the return for the financial year 2009-10.

The amount so deposited will have to be utilised for the construction of the house. Presuming that your share in the plot is 50 per cent, such share of capital gain arising on transfer of flat, has to be invested in the construction of house within the aforesaid period to claim exemption from the taxability of capital gain. The remaining 50 per cent of capital gain would be taxable in such a case. This is because your son would be an owner to the extent of 50 per cent of the residential house, being the amount paid by you on his behalf towards the purchase of plot. The expenditure on construction is also being borne by him by borrowing the amount from bank, as he thereof would make repayment.

Service charges not income from house property

Q. I own a property that has been given on rent for a sum of Rs.1 lakh per month. Apart from the rent I am also being paid a sum of Rs 20,000 per month for different services like air conditioning, lift and other similar charges.

The Assessing Officer has assessed Rs 12 lakh as income from house property and an amount of Rs 2,40,000 as income from other sources. Is the action of the Assessing Officer correct? — Kishore Kumar

A. In accordance with the provisions of Section 22 of the Act, income from house property is chargeable to tax in case the same consists of any building or land appurtenant thereto, and the assessee is owner thereof. You are receiving the amount of Rs 20,000 per month towards various service charges provided to the tenant.

The said amount is, therefore, not in respect of the income from house property of which you are the owner. The action of the Assessing Officer in treating the above amount as income from other sources is correct.

You would however, be entitled to a deduction of expenditure incurred for providing the aforesaid services against the said amount of Rs 2,40,000 received by you.

Define MC limits

Q. In reply to a query in this column you had quoted notification No SO 1320 (dated 28/12/99) that the area up to a distance of 1 km from all municipal limits would be considered to be outside the local limits of municipality or cantonment board. Please clarify whether the word is outside or inside the municipal limits up to 1 km distance. — Darshan Singh

A. Column 4 of the Schedule, which is part of Notification No. SO 10(E) (dated 6.1.1994) as amended by notification no. SO 1302 (dated 28.12.99) has the under mentioned heading to indicate which particular land would be covered for being categorised as a ‘capital asset’ within the provisions of Section 2(14) of the Income-Tax Act 1961 (the Act).

“Details of areas falling outside the local limits of municipality or cantonment board etc.”

In the said schedule against main item no. 18 (Punjab), Hoshiarpur District has been specified as sub item no. 14.

It refers to “Areas up to a distance of 1 km. from municipal limits in all directions”. Therefore, if the agricultural land is situated outside the limit specified herein above, the same would not be categorised as a capital asset under Section 2(14) of the Act, being an agricultural land not situated in any area within the distance notified by the Government of India.

Deduction on house rent

Q. I am making a payment of rent for a house at the rate of Rs 10,000 per month. I am not receiving any house rent allowance from my employer. Can I get a deduction of the said amount from my salary income? — Bhagwan Das

A. The deduction for the rent paid by an assessee for occupying an accommodation for his residence is allowed as a deduction from total income provided the following conditions are satisfied:

w The assessee is an individual

w The assessee is not receiving any house rent allowance from the employer.

w A residential accommodation is not owned at the place where the assessee resides or performs the duties of his office or employment by the assessee, or by his/her spouse, his or her minor child and the Hindu Undivided Family of which the assessee is a member.

The maximum deduction allowable to an assessee is least of the following:

w Rs 2000 per month.

w 25 per cent of the total income without allowing deduction for the rent paid.

The excess of actual rent paid over 10 per cent of the total income.

The total income for the purpose is construed the gross total income less long term short term gain, less amount deductible under Section 80CCC to 80U of the Act except Section 80GG of the Act which deals with the deduction for rent paid.

In case you are covered by the above provisions the deduction allowable can be computed on the basis of the above formula. It is not possible to compute the same, as relevant facts have not been given in the query. 

Ground Realty
How green is my terrace
Jagvir Goyal

Attractive features like statues make terrace gardens attractive

With a rapid increase in the population of India, the housing needs have also increased proportionately. At the same time, the area available for housing has decreased as a major chunk of space is required to be assigned to the development works for meeting the rising needs of the population. This situation has turned the direction of the expansion arrow from horizontal to vertical. Flats and apartment culture, already prevalent in the metros, is fast spreading among the towns and cities now. Soon a time will arrive when having a lawn in the house will become the biggest luxury for its owner. At the same time, an inbuilt crave for the ‘green’ will cause a spurt in creation of terrace gardens. In order to create your own share of ‘green’, here are a few useful tips for you. The lucky few having some space to have independent lawns or terrace gardens can use these wherever possible:

Terrace garden

If you are not living on the ground and plan to set up a terrace garden, you need to take care of a few things. These include the structural design of the roof, its size, its waterproofing and its drainage. It is better if the issue of having a terrace garden is decided before taking up the construction of a building as the foundations are also required to carry the additional weight from the garden and are needed to be designed accordingly.

Size

Though the architects show a terrace garden of just 50 square feet size, it should have a minimum area of 150 sq ft if the real feeling of having a lush green lawn is to be had. Wherever the terrace area is available, terrace gardens can be as big as 500 sq ft. Ideal length breadth proportion is 3:2. A 150 square feet lawn can therefore be 15 feet x 10 feet size.

Structural design

The roof slab should be designed for the extra weight that the terrace garden will put on it. The weight of terrace garden should be calculated by considering the load of wet soil instead of dry soil. Creating a terrace garden on a cantilever slab should be avoided. A cantilever slab with terrace garden will become extremely heavy and uneconomical.

Ideal time

Best time to lay the terrace garden is February or March. By the time monsoon arrives, the earth is well set and the garden can make best use of the monsoons.

Waterproofing

Needless to say that waterproofing of roof slab is as important as its structural design. For this, give proper treatment to the roof before laying the garden. Clean the terrace well with wire brushes and treat the slab well by applying a polymer based flexible water proofing layer on it. If there are any cracks in the slab, convert them into small v shapes and fill them with a polymer-modified mortar. Now lay a layer of 6mm thick 1:3 cement sand mortar over it. Add waterproofing compound to the mortar. Over the mortar layer, lay a layer of tiles in slope as per drainage plan.

Drainage

Proper slope to the roof slab has already been given during its construction. A concrete ‘gola’ at the junction of the slab and parapets is also provided in normal practice, as these junctions are the vulnerable leakage points. What you have to do now is to just lay a two-inch thick layer of water borne aggregate or shingle or pebbles over the tiles in the same slope by maintaining the two-inch thickness uniformly so that the slope in tiles is acquired by the stone layer also.

Geo-membrane

For best terrace garden, it is better to lay a thick layer of geo membrane on the tiles before covering them with stones. However this is optional as the geo-membrane is costly. However, one must lay a HDPE net over the stones. This will help in holding the soil and excess rainwater can drain off to the rainwater pipes. Now, the base is ready to receive the soil.

Soil cover

Now lay the layer of soil mixed with manure over the net layer. Keep the thickness of soil layer as 8 to 10 inches. Add leaf mould, vermin compost and sand to the soil. Add an insecticide like Lindane dust to keep away the ants. Some experts suggest adding bentonite to the soil. It should be avoided. Know that all the above treatment may cost about 50 per cent of the total cost of the terrace garden.

Sowing

Sow the grass seeds and allow them to develop for two weeks. Add bamboo fence to the garden. It will act as a wind barrier. Check the direction of sun and decide the kind of plants to be grown accordingly. If terrace is on sunny side, choose sun-bearing plants. Try choosing plants that don’t need much of water. Add cacti on the sides. Choose agaves. Choose fast growing plants like Ficus plant, hibiscus and duranta. Use Mexican or Korean grass for the lawn.

Feature gallery

Add pots to the garden sides. Use wooden, plastic, aluminium or fibreglass pots for lesser weight. Use stands for the pots. Don’t place them directly on the terrace. Add attractive features like baskets, pebble artifacts, statues, and animal figures. Pint the pots. Add a small water feature to the garden. Add aquatic plants to it. If a wall is available, show a water feature or mural on it. It will add to the beauty. Create a small rock garden in a corner.

Fence

Provide a bamboo fence to the garden to act as a wind barrier. Also use it to provide shade to the shade-loving plants. Use small flower shrubs like Menia Erecta, bellaperone, and jasmine. Never use any palms. Their roots may spread all round. Use shallow rooted plants.

Water connection

Get a water connection for the terrace. Generally, we keep a tap on the terrace to draw water. Same tap can be used for watering the terrace garden too. Your terrace garden now fully equipped for you to enjoy. More tips in next episode. Till then, happy gardening!

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

Spurt in demand for office spaces

Considering the commercial market for office spaces, demand has definitely dipped in Delhi-NCR (around 60 per cent), but with the fact that new players, including some big business houses, are entering the market, demand has revived to around 15 per cent.

Although it’s a known fact that due to global meltdown, the demand for large spaces for IT & ITES companies has shrunk, but the good news is that there is an inherent demand for smaller spaces by lot of companies that were not able to buy properties or lands due to high prices. But, with the revival of economy there is going to be demand for more office spaces, explains Sunit Sachar.

The demand for corporate office space in the second quarter of 2009 registered a growth in excess of 65 per cent over the previous quarter (January – March 2009) to settle at 5.66 million sq.ft. This increase in demand was largely due to improved economic conditions, positive market sentiments and growing corporate confidence. Bangalore saw the highest demand of approximately 1.29 million sq. ft. In 1H 2009, commercial office space supply across the major cities was approximately 24 million sq.ft. NCR received the highest infusion of fresh supply estimated at 5.80 million sq.ft. followed by Pune (4.50 million sq.ft.) and Mumbai (4.33 million sq.ft.).

Overall commercial office space absorption across the major cities for 1H 2009 stood at 11.30 million sq.ft. largely driven by sectors like IT/ITeS, banking, financial services and insurance (BFSI) and telecom. With modest fresh supply expected to enter the market in 2010-11 and a healthier demand forecast of approximately 56 million sq.ft for 2010-11 across the major cities, the commercial office market in India is likely to head towards a more balanced demand and supply situation (Cushman & Wakefield report).

The pan-India demand for office space is estimated to be 196 million sq. ft. by 2013, with seven major cities accounting for approximately 80 per cent of the total demand. Hyderabad, Pune and Kolkata are expected to witness the highest compounded annual growth of approximately 28 per cent during by 2013, highlighting the growing prominence of Tier-II cities in the India growth story.

It’s a known fact that Gurgaon has evolved as an alternate business destination with influx of corporate across diverse sectors. Majority of the real estate activity in NCR has been concentrated in this location leading to an increase in the total demand of office space in this location from 59 per cent in 2007 to 72 per cent in 2008. According to the estimates, demand for commercial office space in Gurgaon is likely to be approx 12-15 million sq.ft. by 2013. Investors looking at commercial real estate options in North India, may take a closer look at this micro-market. It is anticipated that demand for office space in this location will double in the next few years with the rental values appreciating to their peak values.

Nitesh Kumar feels that it is not a bubble but there is a realistic upsurge and it’s a demand driven market at the moment. He further adds that pre-recession, prices had gone over-board not only in metro cities but also in tier II & III cities. Rentals were unsustainable for the retailers and the developers were minting money out of CAM charges but prices have reached a realistic level and cannot go down further.

Laju Augustine, National Head - Land and Investment Sales, India, Cushman and Wakefield adds that the commercial sector has already shown signs of revival in the last two quarters of 2009 where the intelligent investor took the opportunity and partnered with the right developers in a depressed market and created wealth which would have otherwise taken a lifetime to create. That sweet spot and fast money is now over but as in every market opportunities do exist waiting to be exploited although in the short to medium term wealth will be created in the traditional method i.e. slow and steady.

Indian retail and commercial sector, thus, is definitely on the path to recovery.