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DisSERVICE tax
GROUND REALTY
Can I buy another flat?
TAX TIPS
A good deal
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DisSERVICE tax
Budget proposals have proven to be dampener for the housing sector. Construction services have now been brought under the ambit of service tax in an unexpected move that would raise the cost of apartments that are still under construction.
As per the Budget proposal, the Finance Ministry has suggested that construction would be deemed to be a taxable service if the building or complex is still under construction, and approval from the regulatory authority concerned — which in most cases is the resident municipal authority — hasn’t yet been granted. The levy would cover all constructions of complex or commercial, or industrial services. The service tax levy would be 10.3 per cent, and would also apply to additional services such as those offering preferential locations for flats in multi-storey buildings where flats on each floor are priced at a premium as per the location. This, too, has been described as a service and, hence, taxable. The premium is typically levied on categories such as flats or apartments that are above a certain floor level, or have other high-value locations such as being in front of a garden or sea or any other preferred locality. The proposal is to tax construction if the entire payment for the flat is made before the completion of construction. This would increase the cost of the apartment and may discourage potential buyers. The service tax would be 10 per cent on 33 per cent of the price of the apartment, while no tax will be levied on the remaining 67 per cent. Till now, customers paid in instalments, based on plinth-level construction, and also on the progress in building activity for all apartments under construction. Banks, too, lent money to customers according to the requirement of builders. Now most developers would ask customers to pay the entire value of the building if they sought to lock in at a certain value. This would mean paying the entire sum before the construction. Typically, in cities such as Mumbai, where there is a pressure on space and hence apartments and flats are much sought after, it is common for customers to book flats in an under-construction building. “The service tax and excise duty hike on cement would also increase the overall cost of an apartment by about 10 per cent,” a Mumbai-based developer said. It’s a negative step and representatives of realtors are planning to meet the Finance Minister to plead for a re-look on this measure.
Positive note
The Budget proposes some positive measures, too, such as allowing pending projects to be completed within a period of five years instead of four years, for claiming deduction of profits as one-time interim relief. There is also a suggestion that the commercial area included in a housing project would now be 3 per cent of the aggregate built-up area of the housing project or 5,000 sq. ft, whichever is higher, compared to the existing limit of 2 per cent and 2,000 sq.ft., respectively. This would help developers and real estate companies to make their projects more viable. The word ‘service’ has been omitted from the definition, and it says construction intended for sale by the builder before or during or after construction shall be deemed to be a service provided by the builder to the buyer. The concept of self-service has been legislatively nullified. Service tax will not apply only if the buyer makes the entire payment for the property after the completion of the construction, including getting certification by the local authorities. Typically, according to developers, this will mean an additional Rs 150-200 to the cost of a square feet of built-up space priced around Rs 3,000. The message to the developers and builders appears to be to concentrate on affordable housing, particularly aimed at peripheral locations in metros and development in small cities and towns. State governments have been given a hand in supporting low-cost housing through proposals to support housing for low-income groups and slum dwellers. The welcome note was struck on the proposals for urban and rural infrastructure and housing, continuation of interest subvention on home loans and changes in individual income-tax slabs that would leave the taxpayers some spare cash that, hopefully, would be invested in housing. The Finance Minister also extended by a year the 1 per cent interest subvention scheme on housing loans up to Rs 10 lakh for houses costing up to Rs 20 lakh, and allocated Rs 700 crore for this scheme. As a one-time interim relief to developers, who had been impacted by the global recession, he has extended (up to March, 2013) the scheme to utilise tax holiday on profits (under Section 80 IB of the Income-Tax Act). The norms limiting the built-up area of commercial space in these projects would be relaxed. This income tax benefit is available to housing projects approved before March 31, 2008, that were of a minimum of one acre with residential units not exceeding 1,000 sq.ft in Delhi and Mumbai and 1,500 sq.ft in other cities. The total area of commercial space is not to exceed 5 per cent or 2,000 sq.ft of built-up area. The objective was to encourage affordable housing projects in cities. The allocation for Housing and Urban Poverty Alleviation has also been increased to Rs 1,000 crore from Rs 850 crore earlier. The Rajiv Awas Yojana (RAY) — to provide housing facilities to slum dwellers and urban poor announced last year — is to be launched with the allocation of Rs 1,270 crore as compared to Rs 50 crore last year. This will support state governments that provide property rights to slum dwellers.
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Home for homemakers
More than nine years after its formation, Haryana’s first women’s cooperative housing society is taking a concrete shape at the Mansa Devi Complex in Panchkula overlooking the prestigious Rajiv Gandhi Chandigarh Technology Park.
A milestone in women’s empowerment in Haryana where the fair sex is usually at the receiving end of the feudal “khaps” and patriarchal, the housing society — Parvati Durga Group Housing Society — is the realisation of a dream of housewife-turned-business woman Archana Sanghi.
While all 48 homemakers of the cooperative housing society exult in the glory of having a home of their own, it is an important milestone for Archana. “A housing society of women, for women and formed by women, besides giving a shot in the arm to the women empowerment movement in Hayrana, would provide affordable housing for the middle income group”, she says with a sense of pride. “It is a part of my philosophy of ‘be the change’ which got unstinted support from my husband, whose expert advice on the nuances of the real estate world saw the project from conceptualisation to the implementation stage,” says Archana. The genesis of the society lies in early 1990s when Archana saw Amol Palekar-Zarina Wahab-starrer blockbuster
“Gharaunda” where a young couple puts aside every hard-earned penny for a
home later to be swindled by an unscrupulous developer. “My marriage in 1992
steeled my resolve to have a project exclusively for women to make them
grihalaxmi in the true sense of the word.” The groundwork for the
unique project started in 1998. “Most of the current members initially had
reservations about the project. However, after repeated coaxing they fell in
line and agreed to give it a try,” Archana informs. Archana sees the launching the project having advocates, engineers, doctors, academicians, civil servants and educationists as members, in 2001, as the beginning of a long journey. She
is confident of handing the possession of the dwelling units by next
International Women’s Day. As a woman did she face any problems in the implementation of her dream project as real estate in India is still the domain of vested interests? “As
a woman entering the man’s world I was prepared for some of the occupational
hazards associated with the real estate sector,” she points out. “Encroachments,
corruption and crime — all beyond the purview of an ordinary housewife —
came to haunt me but with God’s grace and my husband’s rock-solid support I
was able to take them in my stride, she says with a smile. A visit to the construction site in the sprawling Mansa Devi Complex reveals the stamp of the woman behind the project in the layout plan and proposed decor. The complex has earthquake-resistance structures, back-up for water and power, cross ventilation, optimum use of solar energy, wi-fi enabled complex, ATM and basic health infrastructure. A
unique feature of the 48 flats covering an individual area of about 2,400 sq ft
is that every kitchen faces the greenbelt to enable housewives to keep an eye
on the children playing in the ground.
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GROUND REALTY
Safety of men and materials during construction work is one area that is often given the least importance by us. Carelessness on this account can cost a lot in case of an accident at construction site. A fatal accident may steer one into legal hassles. It is, therefore, extremely important that in addition to other planning, full safety measures are taken at site during the construction of your house. Here a few points to concentrate upon:
Free edges: It is not advisable to stand at the edge of a deep excavated pit or trench. If the soil is a bit loose, such a side may collapse any time. Maintain a distance from the edge while inspecting the inside of the pit. Don’t park any mixer or machine or vehicle near the edge of an excavated pit as its weight may also make the side
collapse. Safe brickwork: When the brickwork of walls is in progress, don’t allow the workers to throw bricks to the mason. Often, a worker stands at the ground and keeps throwing bricks to the mason standing on a higher platform. The mason keeps catching these bricks and fixes them in the wall. The bricks should be carried up to the platform and gently unloaded there. Also, at the end of day’s work, masons shouldn’t leave any unsupported wall. In other words, all walls should be raised together as a grid to almost equal heights. An unsupported wall may collapse if a high velocity storm was to occur during night. Preferably, the difference in height of any two connecting walls shouldn’t be more than 3 feet when the work is closed. A single wall standing high against wind pressure is likely to collapse and may bury a labourer sleeping nearby. Slab shuttering: Failure of slab shuttering or its supports has been noted at many sites. Every time, the reason is the provision of inadequate or weak supports. Sometimes, the battens or planks provided for shuttering give way. Extra care should be taken during slab shuttering work, as the loss on its failure is immense. Always choose steel pipe scaffolding instead of wooden verticals. See that all the pipes are fully straight and there are no bends in them. Get their horizontal spacing checked from an experienced engineer. Provide good horizontal and diagonal braces to the verticals. Provide footplates at the bottom of all vertical pipes to give them a wider base. Specially care for the pipe-to-pipe joints of vertical pipes when the height of ceiling is more than pipe height. Tell in plain words to the shuttering contractor that he’d be responsible for all losses if any shuttering collapse occurs. Slab laying: Personally check before laying of slab concrete that no shuttering plate is supported on the concrete walls. It will not be possible to remove such a plate after the laying of concrete. Even if removed, the slab will not rest well on the walls and may develop cracks. Prefer to use steel plates for shuttering inside of wooden planks as a weak plank may give way under concrete load or due to movement of labourers. Also see that no packing material is filled between pipe supports and shuttering plates to make up for any short length of a pipe. Check the condition of battens provided over vertical pipes and under the shuttering plates. These must be strong and well seasoned if made up of wood. Always leave a carpenter below the shuttering to keep a watch on shuttering plates when the concreting of slab is in progress. Safe access: Always make safe access arrangements up to the slab shuttering. The ladder for going up should be rested on firm ground and well anchored to the wall. Don’t rest the ladder against freshly built walls. If it is to be done, see that the brickwork has gained sufficient strength before the ladder is rested against it. Another most neglected part of access arrangement is the stepping down system at the top of ladder for stepping down from the last step to the top of shuttering. The platform made there should be well supported and easily accessible from the ladder rung. Also, sufficient number of supports should be available to take a grip while stepping off the ladder. Electricity connection: One should always seek a temporary electricity connection and an unauthorised connection shouldn’t be ever made. In case any welding sets are to be run at site, the load should be got sanctioned for the same. Use well insulated wires for electric supply to various locations or rooms, carpentry yard and mixer etc. Insulation of these wires often comes off causing electric shock to someone who may step on the naked wire. Run these temporary wires through loose PVC conduits. Prefer to run these wires over temporary wooden poles. A naked wire may prove fatal during the curing of concrete, brickwork and plasterwork when water is being sprinkled all over the building. See that all electrical items being used at site are well earthed. Removal of slab shuttering: Be extra careful during removal of slab shuttering and its supporting pipes. Put a man on guard outside the room where the shuttering is being removed. Tell him not to allow anyone inside the room. See that the pipes, planks or plates removed from the slab are not thrown from height as it may cause injury to someone besides damaging the pipes and plates. Fire guard: Keep a fire extinguisher at site. Sand and water are already available there. Train the watchman or some workers in operating the fire extinguisher. Whenever any gas cylinders are used for welding or cutting work, see that these are kept in upright position and not in horizontal position. Safety helmet: If you are getting a multi-storey house or building constructed, buy yourself a safety helmet and begin wearing it when the work on upper storeys is in progress. Keep care that no worker uses an electrically run tool while standing
in water. Illumination: Provide sufficient illumination if the work is continued during night hours also. Keep an emergency light at site. Keep the plot area well
illuminated. Take safety precautions and avoid accidents. Happy building! This column appears fortnightly. The writer is deputy chief engineer, civil,
PSEB. He can be reached at www.jagvirgoyal.com
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Can I buy another flat?
Q. My father died in 2009, and as I am the nominee in the housing society flat at Chandigarh, the said flat will be transferred in my name now. Please tell me whether my wife or dependent children or I can have another flat in Chandigarh / Panchkula or Mohali. What will be the status if my wife purchases a flat in Chandigarh and after that I transfer the said flat in my name?
— Atul Sharma A. You should look into the terms of allotment of the flat allotted to your father. In case the flat had been built on a freehold land acquired by the society there should not ordinarily be any bar for the acquisition of another flat in Chandigarh/ Panchkula. Such restrictions existed in Delhi as the flats had been built on leasehold lands and therefore there was a requirement of giving an affidavit by an allottee that he or his wife or minor child do not hold any residential property in Delhi. This limitation does not exist in case of a freehold land. It may be added that the issue may have also to be looked into from the angle of any rules framed by the state government in this regard.
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TAX TIPS S.C. Vasudeva Q. Please refer to my query dated Feb 13, 2010. The society obtained occupation certificate on March 10, 2004; land conveyance deed on August1, 2007 and deed of declaration on Sept. 10, 2007. My flat’s super area is 166 sq m, including six balconies (area 32 sq mt), and the covered area is 134 sq m. Society says that the conveyance deed of the flat will be on “super area” at Circle Rate, whereas, Haryana Govt. Website ‘revenueharyana.gov.in’ says the registration is to be on the ‘covered area’ of the flat. If I am charged on super area at Circle Rate I will have to pay the stamp duty twice. I have already paid stamp duty on the land conveyance deed. Kindly clear my doubt regarding whether I am liable to pay the registration fee on super area or covered area? — Vijay Vig A. The issue with regard to the payment of stamp duty on super area /covered area depends on the terms of allotment of the flat by the society. In case the society has charged you for super area, the conveyance deed will have to be registered on the basis of the super area.
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A good deal
Q. I am an NRI settled in the USA. I want to invest in residential property in India (Gurgaon, Haryana). I have following questions: — Sunil Jain A. Investment in the acquisition of a residential house in Gurgaon or any other place in India is a personal choice. The amount realised on sale of a property which has been purchased out of remittances from abroad after payment of due taxes, if any, can be remitted back to US without any problem. The capital gain chargeable on the sale of a capital asset (residential house) would be treated as long-term capital gain provided the capital asset is held for a period of more than three years. Any profit arising on such a sale after a period of three years would thus enable you to pay tax at a lower rate in accordance with the provisions of the Act. In case the capital asset is sold within three years, the tax will be payable at normal slab rates. It would always be advisable to take a loan so as to get the benefit of deduction allowable under Section 80C of the Act with regard to the amount paid towards the repayment of loan.
The writer can be contacted at sc@scvasudeva.com
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The Budget proposal to tax constructions may discourage potential buyers, writes S. C. Dhall
Q. My father died in 2009, and as I am the nominee in the housing society flat at Chandigarh, the said flat will be transferred in my name now. Please tell me whether my wife or dependent children or I can have another flat in Chandigarh / Panchkula or Mohali. What will be the status if my wife purchases a flat in Chandigarh and after that I transfer the said flat in my name?
Maintaining side slopes: When the foundations are deep or a basement is to be built, the foundation pit to be excavated is quite deep. The walls of such a pit may collapse if not cut to proper slope. Never allow the contractor to vertically cut the sides of the pit. Ask him to maintain a slant of about 45 degrees to vertical or horizontal. The contractors or labourers try to save earth cutting by making vertical cuts. Such cuts are dangerous as these may collapse any time and bury the workers inside the pit.