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| REAL ESTATE |
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Tranquil retreat
It pays to be an “outsider”
Industry divided over price correction
Tax tips
Tree concern
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Tranquil retreat
Idyllic beauty
Mashobra is a beautiful village that lies on the road leading from Shimla to Naldehra. The entire valley is covered with dense woods of oaks and pines and is ideal for taking a pleasant walk in the midst of extremely soothing climate. Mashobra attracts tourists for its utmost tranquility. The well known Craignano Resort is only three kilometers from Mashobra. The highest peak of the belt named Shali can be reached by trekking from Mashobra. Naldehra is the name for a stunning hill spur that overlooks a dense deodar grove. The USP of Naldehra is its unusual golf course. The beautiful golf course at Naldehra was the brainchild of none other than Lord Curzon, a Viceroy of the erstwhile British Raj. Naldehra is situated at a distance of 7 km from Mashobra. Sanchit Saxena, a businessman from Delhi says, “I come with my family to Naldehra every summer. I have purchased a cottage over here. Fifteen days of stay and playing golf in the lap of the Himalayas rejuvenates me for the long year ahead”. The government of Himachal Pradesh is doing its bit to promote this place as an International Tourist Destination, with the pristine beauty intact. Since the place finds a mention time and again in the works of Rudyard Kipling, Himachal Government has embarked on a unique project of establishing “Kipling Trail”. “Since the project would be a big one with a scope for further expansion, we are exploring all options, including having jeep safari, camping sites and caravan travel along these sites, which inspired Kipling to pen his famous book,” explained Virender Kumar, conservator, eco-tourism. For this project Himachal Government has identified 10 sites surrounding Mashobra and Naldehra on Hindustan Tibet Highway. There is also a proposal to expand the golf course from the current 9-holes to a full fledged 18-hole course.
Home away from home
Sensing the interests of the state government the builders and colonisers have crash landed in the area. Land prices have started appreciating and queries are being generated, as to how to have a dwelling unit in the area. Rajan Shastri, head of research and advisory indiaproperties.com, says “Over the past couple of years, while equity funds have yielded 54 per cent return, real estate about 30 per cent in general and gold 8 per cent, your abode in the vicinity of Shimla around Mashobra could well have appreciated 100 per cent”. There are a lot of cottages and villas being constructed in the area. According to Manik, proprietor of Mars properties that is a registered builder with HIMUDA, “we have developed 11 cottages in Naldehra of 3,500 sq. yard each. They come with a price tag of around Rs 75 lakh”. Amarjeet Singh of East line properties says, “I first developed 13 villas in Mashobra in 2006 and sold them at a price of around Rs 25 lakh each. Now the current price is Rs 50 lakh and to my surprise no one is willing to sell.” The demand to have a place in the area is great. “All my villas and cottages were sold at the plinth level”, adds Amarjeet who is again constructing a cluster of cottages in Sadhora village in Naldehra. The clients of these properties are all businessmen from either Delhi or Chandigarh, and a few from Mumbai also. The cottages come with equipped with a host of modern amenities also. “Since this a high-end clientele, we give them exclusivity also. My eight cottages in Mashobra have a separate transformer. Every cottage has a separate garden area, which we maintain, and a servant quarter. We give authentic wooden flooring in the rooms and the entire cottage is laced with swank embellishments. One of the cottages has been converted into a club house for the residents, and all the recreational facilities are provided there. No outsider is allowed in this exclusive club. It houses a bar, a card room and a billiards table”, adds Amarjeet. “We give ready-to-move in solutions. Our cottages have all the comforts of modern day living. We provide LCDs, carpets, furnished drawing rooms and the entire crockery”, says Manik. Since it is basically a concept of summer homes, builders ensure that the owners come with their baggage and spend one or two months and go. “Another trend that has been observed is that two or three families together buy a combined property. Since it is a home for vacation, they adjust their time schedule accordingly and stay here. It is a wise investment plus you enjoy the vacation in your own home”, comments Surinder Singh, a property consultant from the area. The trend has come as boon for the realty market in the region as the prices of land have appreciated considerably in the area. Vinod Kumar, who is a government contractor and has his own house in Naldehra, says, “There is scarcity of land. The entire land available adjoining the road has been taken up by builders, so land prices have jacked up considerably. The current rate is Rs 1.6 crore for a bigha on the Delhi bypass”.
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Tread cautiously
With Priyanka Vadra and Preity Zinta building their own private cottages in Mashobra ,owning a property in the area has become fashionable.
The area has an easy access as a helipad is in the vicinity and the road is motorable. But, property over here can only be used in summers as winters are quite harsh with temperatures dropping to subzero levels in Naldehra. So these cottages are basically summer houses for the metro jet set. But Under Section 118 of the Tenancy Act, 1972, “only Himachali agriculturists can purchase property in the rural areas of the state (exemption is given with respect to built up structures in urban areas)”. According to the above-mentioned Section lease beyond a period of 11 months and gift deed/ mortgage deed in favour of non-Himachali agriculturists cannot be made. So how these structures are being sold off is a point to ponder over by the prospective buyers.
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It pays to be an “outsider”
When it comes to taking a house on rent, the “outsider” tag is a huge advantage in
Jammu, reports Jupinderjit Singh
India is one nation but still people from one state are considered “outsiders” in the other when it comes to renting out a house to them. Be it Punjab or Rajasthan or other parts of the country, the house owners in any state have their own whims and fancies while renting out a house and deciding what could be a good security, in case, the tenant damages some part or refuses to vacate the premises. Some insist on three-month advance rent, a local guarantee or a property dealer’s assurance, while others, especially in Rajasthan and Delhi, insist on a lease agreement of 11 months on a stamped paper. The “outsider” feeling is more marked in the state of Jammu and Kashmir where residents enjoy a special status guaranteed by Article 370 of the Indian Constitution. It underlines only state residents can buy property and get a government job besides having voting right for the Assembly and Local Bodies elections. But when it comes to renting out a house, this state springs a surprise. While for everything else the state subject hood is required, outsiders are a favourite for those giving their house on rent. The “outsiders” are not asked to furnish a guarantee and security deposit of two or even one month is sufficient. A property dealer shows you the premises and introduces to the landlord, and if you like the place you can just move in. You can respond to a “Tolet” advertisement and no mediator is required. This comes as a special treatment in the state where even something as basic as a telephone connection hinges on the applicant being a state subject (certified resident of J and K) or a non-state subject. This “favouritism towards outsiders” has a simple logic. It is easy to get the house vacated. No wonder the classified advertisement columns have insertions boldly proclaiming that only non-state subjects were welcome. Kirpal Singh, a property dealer of Trikuta Nagar in Jammu says, “As people from outside can’t own land, house or shops in the state, they have no motive in forcibly occupying these. And even if they do, they get no local support.” Vikas Gandotra, who owns a house in the posh Gandhi Nagar area, had inserted an advertisement in a local English Daily specifically mentioning “only persons from outside the state should contact.” He told The Tribune there is no tension with outsiders, “It is just not that outsiders have no local support in illegal matters. It is that there social circle is very limited which ensures not many guests also.” Another property dealer, Gurminder Vicky, said the locals are preferring “outsiders” on financial reasons also. “The locals know the rent rates while with outsiders, owners at times, charge more,” he said adding this could be true elsewhere also. Sanjay Singla, who is working in a telecom company, said he had no difficulty in getting a house of his choice on rent as, “People know our jobs are transferable. We won’t make base here for long and hence there is no threat to their property.”
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Industry divided over price correction
Mumbai: Even as realtors remain upbeat about the growing demand in their sector, the industry stands divided over a possible correction in the skyrocketing prices of residential properties in major Indian metros.
Over the past few years, property prices in most Indian cities appreciated by over 250 per cent while the economy grew at eight per cent annually. “The spiralling prices in real estate, especially the residential segment, is a big concern today. Such a sudden rise in property prices is not sustainable and there is an immediate need for correction,” Mahindra Lifespaces vice-chairman Arun Nanda said. Some correction in property prices is expected over the next few months, he added. “A few builders have become greedy and are running a cartel. Those who have increased prices are not doing any business. There has to be a correction somewhere,” Nanda said. The government should come out with special schemes for affordable housing so that builders can get land at reasonable rates, the Mahindra official said. However, Niranjan Hiranandani, chairman of Hiranandani Developers, said that a correction in prices is unlikely in the near future. Nevertheless, there should be housing schemes for all segments, he added. “The government should come out with schemes for every segment. Let’s create a house for all and this is not difficult...We have done this in telecom and other sectors and were successful,” Hiranandani said. “Huge investments have been made in the sector and the bubble is going to burst. However, (this would) not (happen) in the near future,” he added. There should be more development in the infrastructure segment in order to support the realty sector, he said. Advisory and research firm Jones Lang Lasalle Meghraj’s Country Head, Anuj Puri, also said there were no signs of an immediate correction in residential prices. He said the slump in Indian real estate was not directly due to the global recession but increasing demand for space, both commercial and residential, that pushed prices up and inflated the market. “The demand was huge and prices went up unrealistically. The blow came when buyers refused to pay unrealistically high prices and the inventory piled up,” Puri added. The outlook on residential segment was positive as 2010 will be the year of affordable housing.
— PTI
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Tax tips
A. The difference between the cost price and the sale price would be taxable in India provided the same is more than the maximum amount on which tax is not payable by an individual for the relevant assessment year. The cost will be indexed so as to give you relief for the inflation. The cost inflation index for the year 2009-10 is 632. Such index is yet to be notified for the financial year 2010-11. The cost price would be multiplied by the above index and divided by the index applicable for the year of purchase. The difference between such indexed cost and sale price would be the amount of long-term capital gain. You can save the tax on capital gain by utilising the amount of capital gain towards the purchase of a residential house within one year before or two years after the date of sale or construct a residential house within three years of the date of sale. For this purpose the amount of capital gain will have to be deposited in a bank under capital gain scheme account before the due date of filing the tax return for the year in which such capital gain is taxable. Alternatively you can also invest the amount of capital gain in the acquisition of tax-saving bonds issued by the National Highway Authority of India or Rural Electrification Corporation Limited. Such investments will have to be made within six months of the date of sale of the plot. Such bonds can be purchased up to a sum of Rs 50 lakh in a financial year.
Loan to son
Q. I was allotted a plot in urban estate which I disposed off after some time. Now an Urban Estate of Punjab has opened a scheme of plots for general public. It has mentioned that only those persons can apply, who had not been allotted a plot in that urban area. Now I want to apply for a plot on my son’s name, who is doing his engineering and is 20 years old. Will it be wise for me if my son who is major apply for that plot? I want to lend the required money to him for putting an application.
— Nagesh A. Your son, who is major, can apply for a plot in the urban estate without any difficulty. You can give a loan to your son so as to meet the cost of the plot. You can also gift the amount to your son without any tax liability. It may be added that in case the loan is advanced to your son by you, the same can be interest free provided the amount of loan has not been paid out of interest bearing funds.
Tax on insurance claim
Q. We are a partnership concern and are carrying on business as a small scale industry. The main business is that of brass forging. The firm had been allotted a small area in the small plot in the industrial area. On account of a fire due to short circuit of electricity, building had been completed destroyed. The same was reconstructed after getting an insurance claim from the insurance company. What is the position of the insurance money received from the insurance company? Is it taxable?
— Vijay A. In one of the decisions, the Supreme Court had held that insurance claim received on account of a destruction of a shed is not chargeable to tax as the destruction does not amount to a transfer of an asset. Thereafter Section 45(1A) of the Income-tax Act 1961 (the Act) has been inserted in the Act and in case the following two conditions are satisfied, any profit or gain arising from the receipt of such insurance amount shall be chargeable to Income Tax under the head ‘capital gain’. The conditions required to be satisfied are: The compensation is received because of damage or destruction of any asset. The damage or destruction is a result of four categories of circumstances, viz, (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or (ii) riot or civil disturbance; or (iii) accidental fire explosion; or (iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war). If the aforesaid two conditions are satisfied, then Section 45(1A) of the Act would be attracted and such insurance amount would be treated as full value of consideration received or accruing as a result of transfer of the capital asset for the purpose of computing capital gain under Section 48 of the Act.
Lease out land to wife
A. Your queries are replied hereunder: It would be advisable to give on lease the portion of the land on which house is intended to be constructed by your wife. The lease should be for sufficiently large number of years and should be registered as required under the Indian Registration Act 1908. The net consideration realised on the sale of urban plot should be deposited in a bank under capital gains scheme account and withdrawals from the amount so deposited should be utilised for the construction of the house. The loan to be given to your
wife should be interest bearing.
Selling inherited house
What would be the cost of the house
property which was inherited by me? Do I have to invest the full
amount realised on the sale of the house in the purchase or construction of the
new house so as to save the tax on the capital gains? — R.K. Rellan A. Your queries are replied hereunder: The provisions of Section 49(1) of the Act state that in case a capital asset has been inherited by a taxpayer, the cost of acquisition thereof shall be deemed to be the cost at which the previous owner had acquired such an asset. Such a cost would also be increased by the cost of any improvement made by the previous owner or the tax payer. Accordingly, the cost incurred by your father as increased by the cost of improvement, if any, shall be the cost of the property inherited by you. You would also be entitled to the benefit of indexation for the purposes of computing capital gains. You are required to utilise the amount of capital gain arising on the sale of the inherited house, towards the construction of the new house.
Info on reverse mortgage
A. Reverse mortgage is a scheme which enables senior citizens to mortgage a residential house with a financial institution so as to derive a tax-free regular income. It enables senior citizens to avoid selling the real estate property in their lifetime. This concept is relatively new in India but quite popular in the developed countries. As indicated above, it enables senior citizens to mortgage their property and ensure a regular income by living in their own home without having to part with the same during their lifetime. The Life Insurance Corporation of India is planning to enter this area of business. The National Housing Bank has already a scheme of reverse mortgage loan-enabled annuity. The same was launched in 2007. The idea behind such a scheme is to make the immovable property more liquid and generate returns out of such an asset for the funds being used by the owner during his lifetime.
This column appears weekly. The writer can be contacted at sc@scvasudeva.com
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Green House
It’s tree time. The monsoons are round the corner and everyone, be it an industrialist, real estate owner or even an NGO, wants to go in for planting saplings whether for environmental concern or as a pure business consideration. It is, however, very important to plan and then plant as a tiny sapling planted by you may grow into a ‘dangerous tree’.
Planting a tree properly is very important, but it is more important to give the tree its proper place and monitor its growth and performance. There are many reasons for a tree to be termed as dangerous. Some of these are natural while others are manmade. We have taken up this matter now as this is the right time to plant saplings and also to take measures to avoid it becoming a burden or dangerous after some time. After a tree is fully grown and becomes dangerous, it can neither be removed for many considerations nor corrected to live and let live.
Right site
First consideration is the selection of site for planting a sapling. Normally, we see the ground at the time of planting a sapling and never look up. We don’t even consider the underground services. This results in the heading or pruning of limbs or branches that gives the tree a lop-sided growth. As the tree canopy is unbalanced there are more chances of it falling with even a slight increase of the wind velocity. This is more so when the anchorage is poor due to the weakening of roots. This weakening is a result of the white ant attack, disease infestation or injuries inflicted by man. The planting should be done keeping future expansions in mind. No doubt development in a city is needed at all times but least consideration is given to the trees. First action in case a tree is in the way of an expansion plan is to ‘let it go’. In many cases it is seen that a tree or even a row of trees can be saved if the development is planned judiciously. Even when we have taken care that the tree is not uprooted, we inflict severe injury to the roots by using JCB and upper ground portion with crude weapons like gandasa or axe. What happens after such an “assault” is a chain reaction. The tree limb or a branch cut with such crude ‘weapons’ will have irregular terminal edge which allows settling and breeding of tree trunk borer. It inflicts a multifarious injury on the tree; by eating on the bark, making holes in the trunk and disrupting the conduction channels and hollowing the limbs from within by feeding, and secretion of some chemicals. The heavy limbs become hollow and are prone to breaking at the slightest of excuse. Don’t forget that a tree takes years to grow. It is better to save a tree or a row of trees if it is possible by shifting the road or wall alignment rather than by removing them. (To be concluded)
Fortnightly alert
During rainy season it is quite possible that the rains accompanied with strong winds bring the limbs or even the whole trees down. Keep vigil at least around your house and avoid parking vehicles under the trees that are planted in very narrow beds with concrete all around. In case you have any doubt you should consult a horticulturist to have a look at the tree or shrub for advice. Report any dead tree growing in your area as it a potential source of spread of diseases and insects.
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The sweltering sun seems to be in no mood to sympathise barring two three ‘timed’ drops of showers. How we wish we could escape this sun and enjoy some ethereal moments in the hills far away from the maddening heat and dust of the plains. Now here is a solution to fix this problem once and for all. The builders have started constructing and selling cottages in Mashobra and Naldehra, situated around 35 km from Shimla on the Hindustan Tibet Road. Even government of Himachal Pradesh is drawing up ambitious plans, to promote this area as an international tourist destination.
When it comes to taking a house on rent, the “outsider” tag is a huge advantage in
Jammu, reports Jupinderjit Singh
India is one nation but still people from one state are considered “outsiders” in the other when it comes to renting out a house to them.
Be it Punjab or Rajasthan or other parts of the country, the house owners in any state have their own whims and fancies while renting out a house and deciding what could be a good security, in case, the tenant damages some part or refuses to vacate the premises.
Cost & sale price difference
It’s tree time. The monsoons are round the corner and everyone, be it an industrialist, real estate owner or even an NGO, wants to go in for planting saplings whether for environmental concern or as a pure business consideration. It is, however, very important to plan and then plant as a tiny sapling planted by you may grow into a ‘dangerous tree’.
The sweltering sun seems to be in no mood to sympathise barring two three ‘timed’ drops of showers. How we wish we could escape this sun and enjoy some ethereal moments in the hills far away from the maddening heat and dust of the plains. Now here is a solution to fix this problem once and for all. The builders have started constructing and selling cottages in Mashobra and Naldehra, situated around 35 km from Shimla on the Hindustan Tibet Road. Even government of Himachal Pradesh is drawing up ambitious plans, to promote this area as an international tourist destination.
Q. I am an NRI settled in USA. I own a flat in Chandigarh which was purchased about five years back. I would like to sell it to a friend of mine. There will be a difference between the cost price and the sale price. Will the difference be assessable to tax in India? Is it possible to save the tax if so in what manner?
— Deep Singh
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
Q. I inherited a house from my father in 2005. The same was built by
him in early 1980s. I have sold the above property as I intend to
purchase/construct a house at a place where I am employed. I have two
queries in this regard. 
Q. What is reverse mortgage? Can you please explain main features of the scheme?
— K.K. Arora 