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Comfort zones
Wide playfield for small investors
Tax tips
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Comfort zones
The daily life across all contours has become so choc-a-bloc, that people not only want their house to be designed with all the modern gadgets, but also to be situated in such a location that all their daily requirements as well as recreational needs of their families are taken care of easily. “When I was looking for a house, I wanted the complex to be complete in all respects. It should be suitable for me and should take care of all the requirements of my child as well. In other words I was looking for an integrated township”, says Sharat Pathak, who is working in a public sector bank in Chandigarh. So going a step ahead from the modular kitchens, tiles, bath tubs and extra balconies, the builders are now offering swimming pools, gyms, club houses, malls, shopping arcades and even golf courses to add a touch of exclusivity and luxury to the lifestyle offered to home buyers. The tricity area has a number of such projects coming up that are set to add another dimension to the concept of group housing and community living. These are no doubt, high end products targeted at the double income professionals and entrepreneurs.
USP factor
Projects that are coming up in the periphery areas are providing that extra punch to attract customers. The idea here is that the homeowner is saved the hassle of commuting to the main cities for his day-to-day requirements. “Who would like to drive 20-25 km to play a game of tennis or to take children for swimming or to enjoy a drink in the club. So the endeavor is to provide these facilities within the complex”, says Waraich. Sports and other recreational facilities have been projected as the major plus points of integrated township projects coming up in the area. “We at Emaar MGF are developing three sectors, in Mohali. Our product would be the first of its kind with every facility of daily requirement available within the township itself. We are developing a territory of over 600 acres”, says the official spokesperson of Emaar MGF. A visit to the township revealed the swank infrastructure that the company has created. With such a massive land bank in its kitty Emaar MGF is certainly having certain aces up its sleeve. “We have a nine-hole golf range in our township, which is functional. The golf range has been designed and constructed by one of India’s leading golf course management groups — Rishi Narain Golf Management Group, Gurgaon”, he adds. The golf range is the highlight of the project, as it is strategically placed. There is no other golf range close to southern part of Chandigarh. Thus golf lovers are bound to flock it. Golf course is also the USP of ATS Golf Meadows project in Dera Bassi. “Though our golf range is not operational as yet, the leveling work has already started”, informs Hardish Sharma, General Manager of the project. Apart from the proposed golf course, each apartment here will have three sides open with no two units sharing a common wall, each apartment will have five to six balconies. “Dera Bassi is going to develop into a major corporate residential area, so we chose this place to develop our township over here”, says Sharma. “Ours would be a complete integrated project, in which we have earmarked space even for the construction of religious sites”, informs Sharma. It is not only the township projects that have recreational needs of the inhabitants in mind, high-end residential projects like Uppal’s Marble Arch in Manimajra, too, have facilities like in house swimming pool and club house. “We wanted to give a product in the market, which, apart from luxury, had all the recreational facilities. In other words we wanted to offer a habitat”, informs B.S Arora, head, sales of Uppal’s Marble Arch. “We are giving 100 per cent finished product to our customers, and we have three separate swimming pools for seniors, kids and ladies”, adds Arora.
Facilities at your door-step
“There is a shopping mall and a multiplex coming up in the next phase of our development. A site for the construction of ‘Sarovar Premier’ a five-star hotel, has been earmarked and we are just awaiting final drawings from our architect before we start with the construction, says Sharma about the Dera Bassi project. Emaar MGF is constructing an exquisite club house which would be thrown open to all the residents of the township. “Since our township is close to the industrial belt and the proposed IT park of Mohali, we have planned a state-of-the-art business centre there. Our club house will have a card room, billiards and table tennis tables, informal bar as well as a health club with spa”, informs the official spokesperson of the company. “We are also constructing an amphitheatre with a community hall, where people can organise their own small family functions. We have a club house also coming up which will have yoga and meditation hall with squash court as well as lawn tennis courts”, informs Sharma. The response to such projects has been good and this indicates that more and more homebuyers are ready to pay for such facilities. These properties are selling like hot cakes. “We have sold 241 of our 303 units, so logically talking our project is a huge hit”, says Sharma. “Buoyed by the response that we have got from the market, we have even decided to have two club houses in the township”, says the official spokesperson of Emaar
MGF.
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Wide playfield for small investors
Despite the present limitations for small investors, a property investment can give the buyer protection against inflation. Like gold, real estate tends to retain its intrinsic value. However, unlike with gold, it is possible to earn a regular income on it. Depending upon various economic factors, a property owner can increase rent in times of high inflation. Also, real estate is always good investment option because of the possibility of capital appreciation. Of course, an individual must decide on the basis of his own income, existing financial health and risk appetite how much he should allocate for real estate. The limitations pertaining to buying and selling of real estate in India exist to prevent speculation. Considering what has happened before such regulations were enforced more strictly, they are required. We do not want a situation similar to the one faced by the US in this country — thankfully, our banking system is a lot more conservative, and this has been one of the main reasons why India did not suffer as much as other countries in the recent economic turmoil.
REITS and REMFs
Unfortunately, there is currently no way of predicting when they will become a reality. Small investors will only get real investment power when REITs (Real Estate Investment Trusts) and REMFs (Real Estate Mutual Funds) see the light of day in India. These vehicles will present them with a liquid, dividend-paying means of participating in the real estate market. We are all still awaiting clarity on the introduction of REITS and REMFs in India.
Reliability of developers
The extent to which one can rely on the professionalism of a developer depends both on the developer’s existing credibility in the market and on the strength of enforcement agencies specific to each state. Generally speaking, larger developers are becoming a lot more transparent and professional in their business dealings. There is increased accountability in the organised sectors, brought on by greater awareness among buyers and also increased investments by international investors. However, players in the unorganised parts of the market — especially those who have a very limited number of smaller projects to their name — are often not subject to the same accountability. Therefore, the safety of an individual real estate investor’s interests in a property transaction continues to depend a lot on personal research and understanding of the real estate market, especially in local terms, prior to purchase.
Market Transparency
Real estate transparency in the country is increasing, but it is currently of greater benefit to larger investors who have full-fledged real estate portfolios. In any case, investors have to judge opportunities according to local dynamics, because real estate in India is a local business. For instance, FSI Regulations, approvals, saleable area norms, stamp duties, property taxes etc. change from city to city. This requires a thorough analysis and diligence on an investor’s part. It is advisable for investors to deal in markets that they understand best.
Primary Factors to Be Considered
Location, legal non-encumbrance of the property, present and future market drivers in the locality, duration of holding capacity, financial ability, and personal investment objectives are the primary factors to keep in mind while investing in property. One should ascertain the correct entry point, which is a challenge in the current times. While it is understandable that buyers wish to wait for prices to fall, there is a definite danger in waiting too long for the perfect opportunity. As in the stock market, it is impossible to predict the point of lowest ebb in the real estate market. The buyer may lose out on the best properties and deals by waiting too long. Individual property investors should be focused on what they are looking for, and should be selective about their purchase. Purchase decision should be based solely on the availability of a good deal in the location of choice.
When to Invest
The right entry point for property investment is something of an enigma — it can usually only be judged in retrospect. At the current time, smaller property investors should realise that certain areas within larger cities like Mumbai may correct in the mid-term; it may be wiser to delay purchase for eight to 10 months. In the case of some other cities, the best time would probably be now. One cannot give a blanket judgment on this; the best course is to study the local market and inquire into the prevalent and expected dynamics there. However, a good yardstick is affordability. One should also know how much of one’s wealth can feasibly be invested in a real estate asset. Once this is determined, and a property with sufficient appreciation potential is available at the desired location and at a good price, an investor should make his move. Taking a speculative watch-and-wait stance should be a game of experts, who are also willing to risk a loss if they time their move wrongly. (The writer is Joint MD, Capital Markets, Jones Lang LaSalle
Meghraj)
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Tax tips
A. On the basis of the facts given in the query it may not be possible for you to claim the exemption within the provisions of Section 54 of the Act. The exemption is allowable in case a residential house is purchased or constructed by an assessee within a specified period after the transfer of the previous residential house. The utilisation of the amount for effecting alterations and additions in existing building belonging to a person other than the assessee cannot be considered as construction of a residential house by the assessee. The courts have held that the term ‘residential house’ used in Section 54 of the Act would include a ‘residential unit’. The amounts spent towards the additions and alterations of the house belonging to your husband cannot assume the form of an additional residential unit in your name. In view thereof, in my opinion, you would not get the desired relief in the appeal.
Circle rate
Q. I had received an advance of Rs 10 lakh towards the selling of my residential house in Delhi, and I purchased a residential flat in Gurgaon. I am informed that for the purposes of computation of capital gain, the circle rate will be taken as the rate for computing capital gain. Is the information correct?
— Sher Singh, Hisar A. Section 50C of the Income-Tax A3ct, 1961 (the Act) provides that where the consideration received or accruing as a result of the transfer on the capital gain being land or building or both is less than the value adopted or assessed by any authority of state government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of Section 48, deemed to be full value of consideration received or accruing as a result of such transfer. Therefore, the information given to you is correct and the capital gains on the sale of your house will have to be computed on the basis of the circle rate if any, notified by the state government.
Partnership deal
A. According to the provisions of Section 45 read with Section 2(47) of the Act, capital gain arises when there is a transfer of a capital asset. Revaluation of the asset does not result in any transfer in accordance with the provisions of Section 2(47) of the Act as the property remains as property of the firm and it has not been transferred. There is no extinguishment of any right of ownership by the firm or by the partners. No capital gains tax liability arises on such a revaluation.
Family arrangement
Q. In case a joint family property is transferred to the brothers through a family arrangement, whether such arrangement amounts to transfer as per Income-Tax Act and would attract any capital gains tax liability.
— Krishan Kumar A. A family arrangement is an agreement between the members of the same family intended generally and reasonably for the benefit of the family by compromising doubtful or disputed rights so as to preserve the family property and the peace and security of the family by avoiding litigation. The family arrangements are covered by the principles which are not applicable to dealings with the strangers, and the family arrangement amongst the members of family is in the interest of maintaining harmony in the family. The realignment of interest by way of family arrangement among the family members is not construed a transfer. You may refer to the decision in case of CIT vs. A.L. Ramanathan 245 ITR 494, Madras for the purpose.
Exemption rules on renovation
A. The Section 54 of the Act provides that in case the amount of capital gain is equal to or less than the cost of the residential house so purchased or constructed, the capital gain shall not be charged to tax under Section 45 of the Act. The words used in the section are thus ‘cost of the residential house’. Consequently the words used signify that the amount of purchase will include other necessary expenditure to make the residential house habitable, and taken together the cost will have to be considered for the purposes of the grant of exemption under Section 54 of the Act. In this connection you may refer to the decision of the Mumbai Tribunal reported in 83 ITD 649 in the case of Gulshan Banoo R. Mukhi vs. Joint Commissioner of Income Tax. It has been held in the said decision that if a residential house is in the state of general disrepair and is inhabitable, the necessary repairs carried out to make the same habitable would constitute part of the cost of the new house for the purposes of allowing exemption under Section 54 of the Act.
Wrong contention
Q. I sold a residential property in April 2008, for a sum of Rs 90 lakh. On the basis of the indexed cost the capital gain worked out at Rs 35 lakh. In August 2008, I have purchased a plot for constructing a residential house for Rs 70 lakh. However, as it didn’t comply with the vaastu requirements so I have it in December 2009. Meanwhile, before the due date of filing the tax return for assessment year 2009-10 I had deposited the amount of capital gain of Rs 35 lakh in a bank under the capital gain scheme account. The amount so deposited was withdrawn and utilised for the purchase of a residential house in January 2010. The cost of the residential house is Rs 70 lakh. The balance amount was arranged from my savings and by raising a loan from the bank. I had claimed an exemption under Section 54 of the Income Tax Act for the transaction which took place in financial year 2008-09. The Assessing Officer is reluctant to allow me relief under Section 54 of the Act on the contention that the amount of capital gain has not been utilised for the purchase of the new residential house. Is the contention of the Assessing Officer correct?
— Sanjiv A. According to Section 54 of the Act, the exemption in respect of capital gain arising on the transfer of a long-term capital asset being a residential house has to be dealt with in accordance with the provisions of clauses (i) and (ii) of the said Section. The Section requires that in case an assessee has, within a period of one year before or two years after the date on which transfer took place, purchased or within a period of three years after that date constructed a residential house, he will be entitled to claim the exemption as to the taxability of the capital gain in accordance with the provisions of the said clauses. The conditions specified by the Section are duly met in your case, and there is nothing in the provisions of Section 54 of the Act to establish a live link between the amount of capital gain and the cost of the new asset. In view thereof, the contention of the Assessing Officer is not correct and therefore you should be entitled to exemption under Section 54 of the Act. In this connection you may invite the attention of the Assessing Officer to a decision of the Mumbai Tribunal reported in 20 SOT 468 (Mumbai) in case of Assistant Commissioner of Income-Tax vs. Dr. P.S. Pasricha.
This column appears weekly. The writer can be contacted at sc@scvasudeva.com
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Green House
Thus while planting, the “dangerous tree” aspect should be given the top priority. Selection of species is very important. But sometimes even “safe” trees can become dangerous. So, both for fresh planting as well as the existing trees, make the following observations and make amends where the need be. Always remember that the cutting or removal of tree is the last option. There are more than 90 per cent chances that a tree can be given a fresh lease of life through proper treatment. In case of certain trees like Araucaria cooki, normally called Christmas tree, we plant it in a pot for indoor display. As the tree is slow grower and its roots, too, remain pot bound, one can keep it in a pot for several years. But when it starts out growing the pot, we plant it in the garden in a bed or near the gate etc. But as the tree has weak roots that were formed in a pot, it has very poor anchorage. After a few years, when the tree grows tall, it will definitely bend towards one side posing danger. Never, put this tree at a place where it can become dangerous. So locations like near a gate, near the parking area or close to the house etc should be avoided. In case you have a tree already growing in any of the above-mentioned areas, then either remove it or head it back at seven to eight feet from the ground to let it sprout again. This process will have to be repeated every few years. Care should be taken while selecting the species of trees to be planted along the roadside for avenue plantation. It is better to go in for low-headed trees to avoid interference with overhead wiring. But at the same time one has to take care that the tree does not interfere with the free movement of the traffic. At some sites the low overhead wiring makes low- headed flowering trees the best option. Species like Lagerstroemia (like Pride of India), Plumeria, are the best suited for such a location. In such cases, monitoring has to be done to keep the trees clipped as they grow. At such locations, one could also use deciduous trees like Amaltas where the limbs could be trimmed to contain the growth of the tree. Such an “operation” could be carried out when the tree is dormant during summer months. Do not plant trees like Cassia nodosa or Millingtonia as these have weak limbs. Strong winds and thunder squalls may lead to snapping of branches. No doubt one should prefer growing local species but at the same time utmost care should be taken to select the perfect site to plant these trees.
Fortnightly alert
This is the right time to go ahead with planting saplings of trees. So make sure not to make the mistake of planting a neem tree sapling near your house or in a market place. It should, in fact, be near a corner in open spaces as its falling fruit not only litters the place, but also emits foul smell. Similarly, Pilkhan should not be planted near parking areas as its falling berries become sticky and slippery when pressed under wheels of vehicles and pose danger. Peepal grows too much and the spread of the roots is also very far. Make sure that it is not planted at a site where its roots interfere with a wall, road, premises etc. Similarly, the roots of the ornamental rubber plant spread far so it should be planted with caution.
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Realty Bytes
New Delhi: SVP Group and Ashiana Homes has launched the ‘Villa Anandam’ project at Meerut Road, NH-58, Ghaziabad. The 198 villas will be spread over an area of 12 acres and are expected to be ready for possession by mid 2012. The total cost of this project will be Rs 150 crore. In first phase ‘Villa Anandam’ offers 125 independent luxurious four-bedroom duplex villas on 140 sq yard, 146 sq yard and 178 sq yard with a built-up area of 1,810 sq. ft. with the price tag of Rs 75 lakh onwards.
Vijay Jindal, CMD, SVP Group, said, “Over the last couple of years this location has witnessed unprecedented growth, swiftly emerging as one of most coveted destination. Villa Anandam goes much beyond quality construction, making a definitive statement in opulence and luxury. Here, you have the privacy of your own villa, the lifestyle of a plush resort, the security of a gated community, and the advantage of having like minded individuals as neighbours.” “Luxury market was never out of the scene. It was always there, the only hindrance was the people’s unwillingness to buy property because of many economic reasons. But now things are coming back on track. And our project in on NH 58 that is going to be the area where people will like to live because of many infrastructural developments planned for that area. Nearby proposed metro and widening of roads are some of the things happening in the vicinity, ” he added.
— TNS
One-stop property shops
New Delhi: Franchise India, a franchise solution company, has tied-up with real estate brokerage network, RE/MAX India, to launch one-stop property shops across the country to offer real estate brokerage services, officials of the two companies said Monday. “There was a need for this type of an initiative where a network for real estate brokerage was established which had a pan-India presence,” Gaurav Marya, president, Franchise India, Marya said the initial plan of starting 25 co-branded property shops will start with first four offices in Delhi and the national capital region (NCR) and the same will soon assume a pan-India presence by 2012. “Everything from circle prices to local market intelligence on buying and selling of property will be available on line as well as in our branch offices,” Marya added. The co-branded one-stop property shop joint venture was launched after Franchise India became an institutional partner of RE/MAX India. “The tie-up will help both the companies to optimise their business potential. We propose to offer real estate brokerage services to cities and businesses across India on a need and demand basis,” Marya added. “With about 100 offices in India we are well placed to meet the real estate requirements in this huge retail segment,” said Samir Chopra, director-RE/MAX India.
— IANS
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The concept of housing has undergone a paradigm change. Earlier the buyers used to look for a just house, then came the concept of a home with all the facilities, but as now the prospective home buyers look forfor a habitat — a complete lifestyle solution in itself. “I understand the dynamics of the current real estate market, so I named my company as BN Habitat”, says GPS Waraich a Chandigarh-based real estate consultant.
No hope of relief
Green House
The concept of housing has undergone a paradigm change. Earlier the buyers used to look for a just house, then came the concept of a home with all the facilities, but as now the prospective home buyers look forfor a habitat — a complete lifestyle solution in itself. “I understand the dynamics of the current real estate market, so I named my company as BN Habitat”, says GPS Waraich a Chandigarh-based real estate consultant.
In a market that is flooded with loads of options, the reason for developers going out of way to offer extra amenities is to create the differentiator from other developers and to foster a better demand for the projects. A clear understanding of the market needs help in deciding the right application of facilities as per the requirements of the target audience. Like in our proposed project in
Mullanpur, Global Business Park will house an international hotel and business hub in Punjab catering to the business community. It is expected to have first of its kind 360-degree world class international hub with 5-star hotels and club, retail space, office space, service apartments, business suites to start a new work-eat-shop-fun culture in Punjab.
— Rohtas Goel,
CMD Omaxe Ltd.
In the current scenario small real estate investors don’t have as much scope as institutional investors in the country. They can hold multiple properties, but banks will generally not fund beyond a second home loan. That does not mean that they cannot invest beyond that from their personal accruals, however. They certainly have the option of investing in rent-generating assets, which can fetch very decent returns if they have been purchased wisely.
Q. I sold my residential house in January 2009, for a consideration of Rs 18 lakh. The cost of the building and the improvements thereto amounted to Rs 45,000. I have utilised the entire sale consideration in making alterations and additions in the existing residential house which is in the name of my husband. The construction was completed in May 2008. I had claimed an exemption under Section 54 of the Act on a contention that the entire consideration had been invested in the construction of the house. The claim has been disallowed by the Assessing Officer. The Assessing Officer has contested my claim on the basis that the construction of a residential house has not taken place and that improvements to the existing building not owned by me, cannot be treated as a construction of a new building. Can I get a relief in appeal? — Surinder Kaur
Q. We are a partnership firm. A property (freehold land and building thereon as well as the plant and machinery) was purchased in 2005 for a consolidated price of Rs 30 lakh for the purpose of our business. The value of the immovable property which was purchased along with machinery has gone up over the years. We have decided to revalue the immovable property i.e. land and building at the present market price and credit the difference between the original cost and the market value to the capital account of the respective partners. This has been done on the basis of an approved valuer’s report. Is the difference so credited to partners account taxable?
— Naval Kumar
Q. I purchased a flat and incurred renovation expenditure to bring the flat to a habitable condition. The expenditure has been included for claiming exemption under Section 54 of the Act. The Assessing Officer is of the opinion that the said amount in not a part of the cost of construction. He is, therefore, intending to disallow my claim to that extent. I seek your advice on this issue.
— Raj Kumar
A lot of stress is being laid on planting saplings in order to increase green cover in cities, but as mentioned last time, most of these saplings of big trees are planted without proper thought and planning. Because of this on becoming fully grown these trees become dangerous and in many cases there is no option but to fell these to ensure the safety of property as well as of human lives.