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Commercial cheer
Tax tips
GROUND REALTY
Investment corridor in tricity
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Commercial cheer
Rates of commercial property in Patiala are on a northward march, reports Umesh Dewan
Real estate market in Patiala had started recovering from the economic meltdown from October end last year, and going by the trend in the recent auctions of the commercial properties it would not be wrong to say that Patiala is on a high in terms of the demand for setting up commercial establishments and showrooms. Recently, in a Joint Development Agreement (JDA) with the Patiala Urban Planning and Development Authority (PDA), Omaxe Ltd announced the launch of its Rs 77-crore shopping-cum- office (SCO) complex in Patiala. The complex will have a limited number of shops of various sizes, and will be a part of the PDA-Omaxe City, a 333-acre self-sufficient township that is coming up on the outskirts of the city. Unlike Ludhiana, there is no industry in Patiala and hence investment in the commercial sector had never been substantial. But now the trend seems to be changing. The recent auction of the SCOs at the City Centre left many surprised. What has brought smiles on the faces of those dealing in property, however, is the fact that commercial sites at PDA-Omaxe City were auctioned in the first phase with almost 300 per cent increase in the reserve price. Many SCOs, whose reserve price was fixed at Rs 30,000 per sq yd finally went for Rs 1.15 lakh per sq yd. “The response to the auction was overwhelming. It clearly indicates that the effect of recession is over”, said Manoj Suri, the Chief Manager (Sales and Marketing), Omaxe Limited. He added that the shopping-cum-office complex would provide an integrated development in the area and will boost the walk-to-work culture among the residents of the Omaxe City. “The enormous public participation (over 550 persons came for the auction), proves that realty scene and demand for commercial space in Patiala is all set to boom. With this mass involvement, the event was successful in creating a record of sorts in the auction of commercial space in the city”, added Suri. “The demand of the commercial sites and SCOs for showrooms is increasing with each passing day. During the auction of six SCOs at the City Centre, the total reserve price was fixed at Rs 93 lakh but to everyone’s surprise, the SCOs were auctioned by the Patiala Improvement Trust for Rs 1.9 crore, almost double the reserve price”, said chairman of Patiala Improvement Trust Indermohan Singh Bajaj. There were six SCOs of 1,000 sq ft each. The reserve price per sq ft was Rs 1,550 but these were sold at Rs 3,266 per sq ft. Rajinder Bansal of Shamsons Colonisers Private Limited told that such a response clearly reflected that property prices in Patiala were comparable to those in Ludhiana and Amritsar. “The jump in the prices of the commercial properties and showrooms clearly reflects that buyers are coming out of the uncertainty of slowdown”, he asserted. Another auction of the commercial showrooms in Maharaja Yadvindra Scheme of the Nabha Improvement Trust also received a tremendous response. The showrooms, having the reserve price of Rs 30 lakh, were sold by the authorities for double the price. Realtors feel that while some six months back auction had to be cancelled as there were no buyers, but now the response to almost every auction of commercial sites is very good. In Nabha, the rate of the commercial property was around Rs 3,000 to Rs 4,500 per sq yd earlier but with the coming up of the commercial establishments, the rates have now increased to Rs 6,000 per sq yd in several areas. Real estate agents said that earlier property in Patiala had never been in demand from the investment point of view. “The land requirement remained mainly confined to the residential sector. But now, we are daily receiving queries regarding the availability of the commercial land. Corporate groups are interested in setting up SCOs in several areas in the vicinity of the city. This is something very encouraging for the real estate sector”, said S.P. Singh of Singh and Singh Consultants Limited. He further told that commercial land prices had witnessed an upward trend, which was a clear indication of the fact that the market was shunning its recession blues. Expressing similar views, another property dealer Pal Juneja of Juneja Realators said, “If not at its peak, the commercial land prices have gone up substantially in the past two years”. Property consultants were also upbeat about the upcoming Rajpura Thermal Plant . According to them it had also contributed to the real estate boom in Patiala district. “As the thermal plant is a major project, corporate groups see a lot of potential in the nearby areas, and Patiala would definitely gain from this. We hope that in coming days, the demand for commercial property in Patiala would witness a drastic increase”, said S.Khurana of Khurana Developers.
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Wife’s contribution
S.C. Vasudeva Q. My wife wants to invest the monetary gain received from the sale of an urban plot in the construction of a house on the plot in agricultural ancestral land which is in my name. Construction has been partly funded by me. Kindly let me know the procedure. — R. C Gathania A. The facts given in the query give an indication that you have constructed the house and your wife has contributed the sale proceeds of urban plot towards the construction of the house. The reply to your query is, therefore, based on the above facts. The amount so contributed by your wife will be treated as a loan to you. You will be entitled to claim the deduction of interest paid/payable to her on such a loan. The deduction will be limited to Rs 1,50,000 in case the house is self-occupied. She will be liable to pay tax on the capital gain arising on the sale of the urban plot. In case the plot was held by her for more than three years, the gain shall be treated as a long-term capital gain. The long-term gain will be computed by deducting the indexed cost of the plot from the sale consideration thereof. The long-term gain is presently taxable @ 20 per cent plus education cess of 3 per cent thereon.
Declare income from second house
Q. I have purchased a flat for my residence in 2006. Later I bought another residential flat in March, 2010. Both are self-occupied. The amount in respect of the second flat has been paid out of my savings. Is it necessary for me to disclose any income there from in my tax return? — Suresh Khanna A.
As per the provisions of the Income-Tax Act, 1961 (the Act), in case two or more properties are self-occupied by an assessee, one of them is deemed to be let out as per the choice of the assessee. The house which is considered to be self-occupied will have a nil income. The house which is deemed to have been let out will have an income, the gross amount of which is to be determined on a notional basis i.e. the municipal valuation or the fair rent whichever of the two is higher. The fair rent would be again limited to the standard rent in accordance with the provisions of the Rent Controlled Act, if any, applicable to the state in which you have purchased the residential flat which is deemed to have been let out. The income from the residential flat that is deemed to be let out will have to be declared in your tax return.
Using Capital Gain
Q. I have following questions:
— Umesh A. Your queries are replied hereunder:
LTCG for construction
Q. Kindly guide me if long-term capital gain on sale of a house can be utilised for the reconstruction of an existing house in possession of the owner who has sold floor rights of the said house. — M. Krishna A.
The long-term capital gain arising on the sale of a residential house can be utilised for the reconstruction of a house provided the existing house is demolished and a new house is constructed on the land on which the old house was in existence. The tax on long term capital gain can also be saved in case new independent floors are added in an existing house. The issue with regard to the sale of floor rights is not very clear from the facts given in the query. Please elaborate so as to provide the necessary clarification.
HRA calculation
Q. I am based in Delhi and getting a salary of Rs 5 lakh per month and HRA of Rs 2.5 lakh per month. The rent per month paid by me is Rs 1.5 lakh. Please let me know the amount of house rent allowance that would be exempt in accordance with the provisions of the Income-tax Act. — Kunj Behari A. The computation for the purposes of working out exempt HRA would be as under: HRA received Rs 2.5 lakh Excess of rent paid over 10% of salary (1.5 lakh – 50,000) Rs 1 lakh Amount equal to 50% of salary as the accommodation is in Delhi Rs 2.5 lakh Least of the above is Rs 1 lakh which amount would not be taxable and the balance amount of Rs 1.5 lakh per month would be added to the amount of salary for the purposes of computation of tax.
Dicey suggestion
— Ram Swarup A.
Section 10(13A) of the Act, read with Rule 2A of the Income-tax Rules 1962, which lays down the conditions for exemption of house rent allowance requires two conditions to be fulfilled for getting the exemption of HRA. The first requirement is the receipt of house rent allowance and the second, the payment of house rent for the residence occupied by the assessee. Both these conditions are met in your case, and therefore, theoretically it should be possible for your wife to claim the exemption of the house rent allowance to the extent permissible under the law. However, in practice it may be difficult to claim that a wife is paying rent to a husband for staying in the same house. Thus there is every possibility of the tax department denying the exemption on the contention that it is a case of tax evasion. In my opinion you should not enter into such a transaction.
NRI’s tax liability
— Gopal A.
Your queries are replied hereunder: The rental income from a commercial property will be credited to NRO account. It cannot be credited to NRE account. The deposits made in NRE account are repatriable and carry a low rate of interest as against this NRO account is basically a rupee account in which the income earned in India is required to be deposited. The payments in rupees can be made out of such an account. You would be entitled to claim a deduction of municipal taxes paid, interest paid/payable on loan raised for buying the commercial property and a standard deduction of 30 per cent to cover repair and maintenance expenses. The resultant figure would be added to your other income arising in India so as to arrive at the total taxable income.
This column appears weekly. The writer can be contacted at sc@scvasudeva.com
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Self-sustaining townships hold the key
Pradeep Sharma Rahul Mehta, Executive Director (North), DLF Home Developers Limited, is a hardcore professional with experience in diverse fields, including telecommunications and real estate sectors. According to Mehta Chandigarh’s periphery is on way to emerging as the next National Capital Region (NCR) adjoining Delhi. The new townships, supported by job opportunities, will attract the investors and end users, he forecasts. How is the real estate market responding to the post-recession scenario? The global recession definitely had an adverse impact on the realty sector with even the financial sector becoming wary of advancing loans. However, with recession on its way out, the residential segment has already staged a comeback. But the commercial and retail sectors are not growing as aggressively as the residential sector. But future looks bright as the economy grows from strength to strength. What are DLF’s expansion plans in the region? DLF has the largest land bank in Chandigarh’s periphery after the National Capital Region (NCR). The first phase of the DLF Valley, Panchkula, took the realty sector in the region by storm. In fact, the company is set to launch major residential and commercial projects in Panchkula and in the upcoming Mullanpur urban estate, besides other parts of the region. But why Chandigarh’s periphery? With large chunks of land, strategic location and environment-friendly setting, Chandigarh’s periphery provides enough scope for planned townships. Since the region has a large NRI base and general prosperity, the projects seem to be more viable in the tricity and its vicinity. What are the new concepts in the housing townships? Residential townships must be affordable and cater to every segment of society. Also a township must be supported by job-related activities to make them self-sufficient in the long run. Which trend is better for the end users, plotted colonies or apartments? With land getting scarce, apartments provide community living at affordable prices. Moreover, the focus is now on good quality, reasonable rates and timely possession which is easier in case of apartments. Do you advocate entry of private builders in Chandigarh as Chandigarh Housing Board’s performance leaves much to be desired? Yes. In fact, competition will bring out the best in the CHB and the general public will be the ultimate beneficiary.
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Paving a perfect courtyard
Jagvir Goyal
The three main materials used are:
Terrazzo flooring, plain cement concrete flooring, interlocking tiles and marble crazy flooring are not preferred these days. Some house builders choose to use red stone in courtyard flooring, but it doesn’t give a clean look and shouldn’t be provided. Kota stone
This is the most prevalent material for courtyard flooring. This stone is produced from mines around Kota in Rajasthan. It is bluish, grayish, brown, green and red in colour. Choosing Kota stone: If you decide to use Kota stone in paved areas, you have chosen the best and cheapest flooring option. Choose greenish or greyish Kota stone tiles. Choose the lot carefully, looking for the lot having least colour variation. Some colour variation is always there and it doesn’t look odd. It is a natural characteristic of Kota stone. Work out the total quantity required, and shortlist the lots having that much quantity. Apply water to the Kota stone tiles as it will enhance the colour variation if any. Now, it becomes easier to choose the lot to be purchased. Pre-polished as well as rough Kota stone tiles are available in the market. Choose pre-polished tiles though polishing will be finally completed in the courtyard itself, of laid tiles. Size and thickness:
Choose Kota tiles of size 575 X 575 mm. See that the tiles are machine-cut. See that the edges are dressed for full thickness and not at the surface only. Choose thickness not less than 32 mm for floors and not less than 20 mm for stairs, skirting and walls area. Mostly, Kota stone tiles are not cut to true right angles. These, therefore, need to be set to right angles at site by making a mould of the tile size on the ground. This results in some edge cutting of Kota stone slabs. Account for this wastage while buying Kota slabs. If you have bought Kota stone at Rs 20 per sq ft, actual cost that you will be bearing will be around Rs 23 to 25 per sq ft. Add marble strips:
Marble border and strips look beautiful when added to Kota stone flooring. The marble border can be two inch wide. At tile joints, either marble strips or small rectangular pieces of barfi shape can be added. The floor will exhibit its magnificence after the first polish itself and you’ll feel the thrill of providing it.
Marble flooring
If your choose marble for courtyard flooring, it should not necessarily be as expensive as the one used for room floors. Many mines in Rajasthan are producing marble of varying quality. Makrana white marble of first quality is available at Doongri and Bhat. Other places where marble with light shades is available are Albeta, Kola Doongri, Lodhi Doongri, Raj Nagar, Ambaji, Kumhari, Gulabi, Adanga, Chauseera, Ulodi. Marble is known by the name of the place from where it has been quarried. Size and thickness: Thickness of marble slabs to be used in courtyard flooring should not be less than 20 mm. Marble slabs vary in thickness which may go up to 150 mm. The cost depends on the thickness of the slabs. Normally 25 mm thick slabs prove strong enough. Size of marble slabs may vary from 1 foot X 1 foot to any big size. Marble tiles, smaller than 1 sq. ft in area, look odd. Big sized slabs are costly. Therefore, size of slabs used in courtyard flooring should be limited to 2 ft X 2 ft to save expenditure. However, all slabs should be of one size only. Other features:
Choose marble having low porosity and high density. Density of good marble is about 2,800 kg/cubic metre. Its water absorption should be low. After 24-hour immersion in water, marble should not absorb water more than 0.4% of its weight. Marble is available in white, pink, green, brown, gray and even black colours. For courtyard flooring, any light or dark colour can be chosen as per user’s choice. Also check that the slabs don’t carry any pinholes or hair cracks in them. Pay special attention to edges and angles of marble slabs. No slab should have curved edges.
Tile flooring
Tiles are becoming popular for use in courtyard flooring due to their easy availability, zero variation in size, unlimited colour choice, uniform thickness and cost competitiveness. Above that, these are factory finished and don’t need any polish. The floor can be put to use much earlier than those with Kota or marble tiles. Choosing tiles: Such a great variety of tiles is available in the market that the buyer tends to get confused. Tiles to be used in courtyard flooring should be heavy duty to bear heavy loads of vehicles. These should have rough surface and with projected texture to prevent skidding. These shouldn’t fade with time. These should have high hardness and impact resistant. Tiles hardness is measured on MOH’s scale. More is the MOH value, more hard the tile is. Tiles used in courtyards should have a minimum value of 7 on MOH’s scale. Normal tiles have a MOH value of 5 only. For this, manufacturer’s test certificate for the particular tile should be checked. Size and other features:
For courtyard flooring, tiles of 12” X 12” size should be preferred. Thickness of tile for courtyards should be 10 mm. A 12” X 12” sized tile should weigh more than 2 kg. Tiles can generally be classified as vitrified tiles and ceramic tiles. Ceramic tiles are classified in four groups: Group II, III, IV and V. Group V tiles are toughest and suitable for outdoor use. These days, heavy duty vitrified tiles with rough surface and projected texture are also available. These are also suitable for outdoor use. So choose either Group V ceramic tiles or heavy duty vitrified tiles.
Laying courtyard flooring
Whether you choose Kota stone tiles, marble or tiles, keep a few points in view while laying them in the courtyard. Create level marks: After laying the concrete base, create reference marks on it with the help of floor reference line already marked on the walls. Let the slope of courtyard floor be 1 in 48 towards the main gate. Reference marks help in providing required slope to the floor. Don’t allow the masons to use the concrete base as the reference surface. Prepare the base:
Always clean the top of lean concrete (base course) with a wire brush before starting laying the topping over it. Clear it of all the muck, debris and mortar deposits. Make it rough to have a good joint with the final floor material. Use a stiff bristled broom for doing that. Allow lean concrete to set well before laying the Kota or marble or tiles on it. Wet it well before laying the mortar bed over it. Though thickness of mortar laid over base course has to be ¾”, see that it does not exceed 1 inch anywhere. Zero air gaps:
It is most important to ensure that there are zero air gaps below the courtyard flooring material. Otherwise the tiles will give in to the load. Keep joints between Kota stone tiles not more than 3 mm thick. For marble or tiles, the joint thickness shouldn’t be more than 1.5 mm. Concluded This column appears fortnightly
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Investment corridor in tricity
Sudden upheaval in the financial world globally has turned the realty sector into a buyer’s market from a seller’s market. Investing in property is a good choice provided one is wise with one’s money. The simple rule is to look around rather then sitting at the fence in a speculative market. Currently, property transactions at certain cities are being carried out at the rates that prevailed in 2006-2007.
After dipping by around 30-40 per cent from November 2008 onwards, the market now is not only back on the track, but is also is flooded with lucrative deals for those willing to invest in residential property. The investors engaging in flipping should keep a watchful eye on rightly priced and hot properties. A good investment in property will give a return of 14 to 16 per cent. “In five to six years from now, the property values will easily double and the buyers will be happy about their decision.” Cushman and Wakefield, the global real estate consultant, in its report, clearly says that India has fared reasonably well in this sector and will continue to grow through 2010. Realty speculators are seen to be more active in smaller cities around state Capitals like Mohali, Kharar, Nayagaon, Kansal, and Panchkula (Haryana) around Chandigarh.
Mohali
The IT sector, upcoming International Airport terminal, world class bus stand and railway station, and hospitals with state-of-the-art facilities kept the city out of the downturn turbulence for quite some time. Value of property in posh localities is now on an upward swing. Plots are touching Rs 40,000 per sq yd in sectors 67 to 69 and 76 to 79. Flats here are commanding rates between Rs 4,000 and Rs 4,300 per sq ft in Sector 68. The prices are likely to increase substantially over the next few months, so the market is ripe for those wanting to make some profit.
Kharar (Greater Mohali)
Kharar has the strategic locational advantage of being on the main National Highway that connects major Punjab cities like Ludhiana, Jalandhar, Amritsar and other towns in Himachal Pradesh to Mohali and Chandigarh. Being the nearest city (just three km) from Chandigarh and Mohali, this town has all the major advantages of connectivity to educational institutes, hospitals, bus stand and International Airport. Kharar has witnessed realty development at a very fast pace. Construction of defence housing projects like the one by the Air Force, Naval Housing Board and Army Welfare Housing Organisation, is in full swing. Market value in posh localities like Sunny Enclave, Gilco Valley etc is Rs 15,000 to Rs 18,000 per sq yd, and is definitely going to touch Rs 25,000 per sq yd soon. For those interested in investing in flats, the market has moved up from Rs 1400-1500 per sq ft to Rs 2000 per sq ft in the past six months and is showing an upward trend. The prices are bound to touch Rs 2,500-3,000 per sq ft in the next few months.
Nayagaon & Kansal
Situated in the foothills of Shivaliks and adjoining Sukhna Lake, Punjab & Haryana High Court, Secretariat, PGI and all major educational institutes, this area is a good choice for investment purpose this year. A sudden upward trend has been witnessed in the residential sector in these areas. Kansal Block “B”, which is housing most of the VIPs was commanding Rs 20,000 per sq yd, the current rate is Rs 30,000 per sq yd, and it is likely to go up to Rs 38,000 per sq yd. Pocket A & C, because of the location and unplanned development are still lingering at Rs 15,000 to 20,000 per sq yd, but the prices are bound to touch Rs 23,000 to Rs 25,000 once these shortcomings are removed. Nayagaon: Here land was available at around Rs 8,000-10,000 per sq yd in 2009. As this area is being Notified prices have moved up to Rs 15,000 to Rs 18,000 per sq yd and are bound to touch Rs 25,000 per sq yd.
Panchkula
Though Panchkula is far better designed than Mohali, but is lacking as far as facilities like educational institutes, medical care, bus stand and International Airport are concerned. But still there is a vast scope in the realty sector. Market value in posh sector is around Rs 35,000 to Rs 38,000 per sq yd. Flat market, especially in Sector 20, has moved to Rs 3,000 to Rs 3,300 per sq ft depending on location, and the prices here are bound to touch Rs 3,500 to Rs 3,800 per sq ft.
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With commercial property in the royal city of Patiala in good demand these days, the realty sector in city is once again abuzz with activity.
Real estate market in Patiala had started recovering from the economic meltdown from October end last year, and going by the trend in the recent auctions of the commercial properties it would not be wrong to say that Patiala is on a high in terms of the demand for setting up commercial establishments and showrooms.
REAL TALK
Sudden upheaval in the financial world globally has turned the realty sector into a buyer’s market from a seller’s market. Investing in property is a good choice provided one is wise with one’s money. The simple rule is to look around rather then sitting at the fence in a speculative market. Currently, property transactions at certain cities are being carried out at the rates that prevailed in 2006-2007.
With commercial property in the royal city of Patiala in good demand these days, the realty sector in city is once again abuzz with activity. 
Q. I am a retired defence officer getting a pension. My wife is also a working woman and is a tax payee. She is also getting house rent allowance. We are living in our own house which is registered in my name. Is it possible to issue a receipt for the payment of rent by me to my wife so that she can get a rebate in respect of house rent allowance?
Q. I am an NRI settled in USA. I am planning to buy a commercial property in India for which I would also be raising a loan from a bank. Can the rental income from such a property be deposited in my NRE account? Further, do I have to pay Income Tax on rental income? Will the amount of interest etc. payable on the loan be allowed as deduction in case the income from rental is taxable in India?
Last fortnight, we had discussed the important points to be kept in view for laying a strong base for the courtyard flooring. Today, we will discuss various flooring materials used in courtyard flooring and their suitability.