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Still shaking off slowdown
Real
Issue
GROUND REALTY
Tax tips
FIRM principles
Base
rate
Real
talk
Residential realty prices back on
peak
Retail rentals up
REALTY BYTES
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Still shaking off slowdown
While the realty sector in the NCR region is buzzing with activity and has recovered from the effects of the economic slowdown, the winds of revival are yet to stir the property market in Sonepat. The realty scene is listless for buyers as well as sellers as there is no land for prospective buyers, and no buyers for multi-storey projects that had been launched by some big construction companies.
Wait and watch seems to be the policy of sellers as most of them are unwilling to sell their prime properties till the prices stabilise. They are willing to maintain patience for a few months more in the hope of making more profit, while flats in the multi-storey projects here are not being seen as good investment by buyers. Thus, though real estate prices have appreciated manifold in Noida, Gurgaon, Ghaziabad and even Faridabad, Sonepat is yet to come out of the grip of slowdown. Construction activities have come to a grinding halt at most of the sites, including those being developed by big builders like TDI, Ansals and Omaxe here. Small builders, who had launched residential projects, have been the worst sufferers as they have not been able to start work at the project sites because of lack of buyers and funds. After witnessing a speedy growth of real estate markets in Gurgaon and Faridabad, Sonepat was also projected as the next hot choice for the real estate players because of its proximity to the Capital and availability of sweet ground water. But the fair weather for the real estate here lasted only for a little while as soon the dark clouds of worldwide recession scared away the investors. And now even when the nation is out of the grip of slowdown, the situation is yet to improve in Sonepat. Before 2004, Ansals had purchased about 650 acres of land in Nangal village, and they were immediately followed by other real estate players, including TDI, CMD, Parker, Parsavnath, Omaxe, APEX, Tulip, JP Jindal, Express City, Paradize, AJS builders etc. These builders built up substantial land bank by purchasing land in villages like Rasoi, Badkhalsa, Rathdhana, Kundli, Raipur, Revli, Shahpur, Kumaspur, Barota, Lalheri, Bari adjoining GT road between Kundli and Ganaur in the district. The total land purchased by these builders was around 4,500 acres. When the private players started buying land in and around Sonepat, they initially paid Rs 15 to 20 lakh per acre. However, after that the prices started rising and these reached its peak by 2007-2008 when an acre of land would cost Rs 70 to Rs 1 crore. However, during recession the rates did not come down, but there was no sale of land. At present the prices of the flats range from Rs 16 lakh to Rs 26 lakh depending upon the location. The 200 sq yard villas cost anywhere between Rs 26 lakh and Rs 32 lakh. Plots in various projects costs anywhere between Rs 8,000 and Rs 12,000 per sq yd. The construction of villas, flats, shopping malls and development of residential and commercial plots was started on a war footing during the period between 2005 and 2007, and the period was considered the most profitable by these companies. However, most of these builders and developers, too, faced rough weather in 2008, and as a result the construction activity in many projects gradually came to halt. A visit to most of these sites revealed that the work was yet to resume. According to official sources, the monthly revenue income which used to be around Rs 9 crore in different tehsil offices in the district during peak days had come down to around Rs 2.50 crore because of sharp a decline in the purchase deals of the plots, villas and flats. Though a number of shopping malls were slated to be sold out by 2009, not a single one has been completed so far. Local market watchers maintain that the construction activities had been stopped because of the paucity of funds. When the Sensex crashed and went below the 10,000 mark, the value of the shares of the construction companies declined considerably, and this stopped the flow of loans from banks, which generally advance 75 per cent of the share value in the market. In some cases the banks even asked for a refund of the money that was loaned out when the share prices of these builders were at the peak level. Even though the Sensex has regained its old glory, the shares of these companies had not witnessed the desired hike. So these builders were not in a hurry to finish these projects. However, the marketing manager of the TDI group, Sanjiv Gupta, claimed that their company had not been affected much by the recession as they had already sold all plots in their township project. He also added that the company was now concentrating on providing affordable houses to the end users and was also giving incentives to buyers. Sanjay Sharma, a local property consultant, said the investors and realtors in Sonepat could hope for improvement by attracting more and more buyers from Delhi. “Plots, villas and commercial accommodation are cheaper in Sonepat in comparison to those in other areas of NCR like Gurgaon, Faridabad, Ghaziabad and Noida. The proposals for a metro service up to Kundli and mega city project of the Central Government for Sonepat are certainly lighting up things for the the town’s real estate sector, but the boom may take some more time to hit property markets here”, he added. Meanwhile, some real estate management firms are looking at Sonepat as a potential area which could generate good business. One of these firms — Better Option Propmart (BOP), a Delhi-based real estate management and advisory firm — has drawn up an ambitious project to set up a chain of 15 real estate boutiques across various north Indian cities, and in the NCR region, including Sonepat. The firm would be introducing real estate boutique concept in the region which would be titled “BOP studio”, where real estate dealers and consumers would get a chance to interact with each other and look at the upcoming projects in and around the area, and analyse the pros the cons of investing here.
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Real Issue S.C. Dhall Though the draft Model Real Estate (Regulation of Development) Act proposed by the Union Ministry of Housing and Urban Poverty Alleviation is a boon for property purchasers, it has received much criticism from developers for not providing relief for them in getting permissions and approvals expeditiously. The developers in India have long complained about the delay and difficulty in obtaining approvals for construction from various government agencies and the need for single window approvals. This issue has not been addressed in the model Act. It also doesn’t make it clear whether it will be applicable only to projects where construction has not been commenced, or also to the existing projects where development has already been initiated. The Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body of real estate developers in India, had submitted a paper to the ministry, highlighting the provisions which would change the price dynamics in the real estate sector in India. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has also suggested A review of the Real Estate Regulator Bill as many of its provisions have been termed “harsher and inimical” to industry and stakeholders concerned. The Model Act — as the name suggests — proposes to lay down what is expected to be a regulation for adoption by all states within India. It proposes to establish a regulatory authority to control and promote construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties. The model Act provides for the establishment of a Real Estate Regulatory Authority (Regulatory Authority), which would comprise a Chairperson and two members to be appointed from amongst persons having special knowledge and professional experience in the field of public administration. The model Act provides for compulsory registration of all real estate projects where: n
the area of land proposed to be developed exceeds 1,000 sq m; or n
the number of apartments pro posed to be constructed exceeds four. For obtaining registration, besides furnishing other details and information, the promoter would have to furnish a bank guarantee equal to 5 per cent of the estimated costs of development works to the local authority or other authority having power to give permission for construction or development of land. The registration is valid for three years. Where delay in completion of the project is for reasons beyond the control of the promoter, he can seek two renewals of one year each. Furthermore, the model Act makes an ‘Agreement for Sale’ compulsorily registrable. The Indian Registration Act, 1908 does not provide for compulsory registration of an Agreement for Sale since such an agreement by itself does not create any interest in immoveable property, but merely gives the right to obtain another document, which when executed would create right, title and interest in immoveable property. The model Act defines rather exhaustively who can be termed a “Promoter” and goes on to detail the obligations and responsibilities of the promoter. The key obligations include: To make available to all persons intending to buy a plot or apartment, all information and documents relating to the property. This would include a full and true disclosure of the nature of the title which has to be duly certified by a revenue authority not below the rank of Sub–Divisional Magistrate. File with the Regulatory Authority a copy of every advertisement or prospectus he intends to publish or issue for inviting persons to purchase plots or apartments and make advances or deposits for the same. Upload on the website of the Regulatory Authority, all details of the project and the names of property dealers or brokers dealing in the project. Enter into a registered Agreement for Sale in a specified format, with the allottee intending to purchase the plot or apartment before accepting any deposit or advance. Not mortgage the plot or apartment without the consent of the person intending to purchase it after the execution of the Agreement for Sale.
Transparency and powers of the Regulatory Authority
The Regulatory Authority shall host the website of records of all real estate projects in its jurisdiction and shall ensure compliance to the obligations cast upon the promoters and allottees. The Regulatory Authority has the power to decide any dispute between a promoter and an allottee regarding failure on either part to meet its obligations.
Establishment of Appellate Tribunal
The model Act provides for the establishment of a Real Estate Appellate Tribunal (“Appellate Tribunal”) to adjudicate any dispute and hear and dispose of appeal against any direction, decision or order of the Regulatory Authority. The Model Act also ousts the jurisdiction of civil courts to entertain any suit or proceeding in respect of any matter which the Regulatory Authority or Appellate Tribunal is empowered to determine.
Offences & penalties
In order to give teeth to the provisions of the Act, penalties have been prescribed for violations of the provisions of the Act. The penalties range from up to three-year imprisonment for not registering a project, or for not complying with the orders of the Appellate Tribunal, to monetary penalties that may be ascertained on a daily basis for non-compliance or as a percentage of the development costs or sale price. When enacted, it will provide considerable relief to the ordinary investor who has to go through many obstacles in purchasing property, and, at times, is even duped by small developers, builders or brokers. By imposing strict obligations on the promoters, the model Act seeks to ensure that construction is completed in a timely manner and on completion the buyer gets the property as per the specifications that he had been promised. Further, by seeking to establish the Regulatory Authority and Appellate Tribunal, the model Act provides for a forum where disputes could be heard by a specialised expert body, which would result in expeditious dispensation of justice. Litigation in India is known to be prolonged process and the only option available to a consumer in a dispute with a developer is to file a suit in a court of law or approach the consumer courts. With the enactment of the model Act, consumers will now be able to have their grievances redressed through a specialised body. The model Act also ensures that allottees do not default in making payments, and promoters receive periodical payments. By providing for penalties for both the promoters and allottees, the model Act seeks to ensure than non-compliance would be minimal. Thus, once enacted, the model Act will ensure that all real estate transactions are carried out in a just, fair and lawful manner.
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GROUND REALTY Jagvir Goyal During the construction of a house, one activity that has maximum worry attached to it is the laying of RCC slab. Trepidation builds up once the door level is crossed. Silent prayers for a rain-free day and an accident free concreting job at site remain on the lips of the house builder. Once the concrete work is over and the slab is finished and made ready to receive a pool of water on it, everyone heaves a sigh of relief. However, somehow and somewhere, in the midst of all these concerns and alarms, a wrong method of laying slab shuttering has crept in. And this wrong way is becoming unanimously acceptable even to the engineers and architects, leave aside the contractors and masons. The method is none else but the wrong placement of girders for supporting slab shuttering. The wrong method
Steel girders are supported on the newly built masonry walls and then steel or wooden shuttering plates are placed over these girders. Normally the steel plates or wooden planks are 3-4 ft long. So the girders are placed at a spacing of 3-4 ft, depending upon the size of shuttering plates. Each of the rooms therefore, has three to six girders supported on the walls, the living room being the biggest in size, has the maximum number of such girders.
Detrimental effect
In order to support the girders on the walls, the masons leave big openings of 9x9 inch size in the top brick courses of walls. Each of the walls has these openings at an interval of 3-4 ft. When the girders for two rooms with a common wall are to be rested, even bigger openings are left in the walls. These openings have a detrimental effect on the support system for the roof slab.
Importance of top courses
Top three brick courses supporting the slab act like a brick beam. The 9 inch thick walls are load bearing walls and transfer the load of upper storeys and slabs to the foundation. The top three courses receiving the load from the slab need to be strong and monolithic. On the contrary, taking out so many temporary openings in them to rest the girders and just to facilitate easy shuttering work renders the top courses weak. After the laying of slab and removal of shuttering and girders, the openings are filled up by the masons in a careless manner. The bricks put in these openings do not have a proper bond with the rest of walls. The house owner never realises that the load support system of his house has been rendered weak. He is perplexed when cracks begin to appear in top courses of some of the walls, some years later.
Right way to work
The girders shouldn’t be allowed to be supported on the walls. Independent vertical pipes should be erected and the girders and shuttering should be supported on them. The top three courses should preferably be built in richer mortar to make them strong, integrated and able to receive the load and to act like a beam.
Right way to lay
One should always prefer steel shuttering for slab and beams. Wooden forms absorb water from concrete and cracks appear in it at a later stage. Otherwise, additional precautions like laying a plastic sheet are needed to be taken. Therefore, it is better to use steel shuttering or the one made of water-proof shuttering plywood with steel frames. Check the shuttering plates and ensure that these are free of holes, cracks, dents, rust and bends. Allow no gaps between shuttering plates. To check it, stand below the shuttering platform and see that no light passes through it. Gaps will allow valuable cement slurry to seep through them leaving the slab weak. Provide a little upward camber to the horizontal members supporting the shuttering plates. This camber counters the downward deflection when concrete is poured.
Right way to support
Always take care that the shuttering plates are completely independent of walls and draw no support from them. If shuttering is supported on walls, it will not be possible to remove it after the casting of slab and beams. Prefer 1.5 inch diameter steel pipes over wooden verticals to support the shuttering. See that steel pipes are truly straight, having not even slight bends and with base plates welded at one end. Otherwise the shuttering supplier will give base plate pieces for vertical pipes at no extra cost. These are 4-inch square pieces of plates with a 3-inch piece of 25 mm diameter rod welded at the centre. Placing these pieces below the vertical pipes by inserting the rod pieces in the pipes gives better bearing to the pipes and the pipes become more stable and effective.
Provide braces
Provide horizontal braces to vertical steel pipes to create a strong support system. Diagonal braces are also provided when the height of pipes is more than 15 feet. Keep centre to centre spacing of vertical pipes below 1 metre. For erection of pipes, the workers should begin by erecting first row of pipes just abutting the walls and then proceeding towards the centre. The shuttering has to be finally checked again to be gap free. Fill minor gaps with POP putty. Avoid using gunny bag pieces. These soak water from concrete and get stuck in set concrete. This column appears fortnightly
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Tax tips
Q. I sold my agricultural land on August 19, 2009 for Rs 4.08 lakh. My village is 7 km from Ropar district in Punjab. Please advise me what will be my tax liability (long/short term etc) and period limitations by which I will have to deposit the tax or buy another property? Intimate the exemptions, if any, like the purchase of agricultural land or residential/ commercial property etc. up to what value?
A.
You have not indicated the following aspects in respect of the agricultural land sold by you: The period for which such agricultural land was held. The cost of the agricultural land and in case the same was acquired prior to April 1, 1981, the fair market value thereof as on April 1, 1981. It is, therefore, not possible to compute the amount of capital gain on the sale of agricultural land. The other issues raised in the query are replied hereunder: In case the agricultural land was being used by yourself or your parent for agricultural purposes in the two years immediately preceding the date of sale, you can save the tax on the capital gain arising on the sale of land by utilising the capital gain for the purchase of any other land within two years of the date of sale for being used for agricultural purposes. In case the amount of capital gain exceeds or is equal to the cost of agricultural land so purchased, you would not be liable to pay any tax on the capital gain arising on the sale of the agricultural land. In case the cost is less than the amount of capital gain, the balance amount would be taxable. You can also invest the amount of net consideration i.e. Rs 4.08 lakh, less expenditure incurred wholly and exclusively for the purposes of such sale, in the purchase or construction of a residential house. The purchase has to be effected within a period of one year before or two years after the date of sale. The construction can be effected within a period of three years of the date of sale. In case you opt for this proposition, you will have to deposit the net consideration (i.e. Rs 4.08 lakh, less expenditure incurred wholly and exclusively for the purposes of sale) in a bank account under capital gain scheme account before the due date of filing your tax return. The amount so deposited will be available for utilisation towards the purchase or construction of the house. You would not be entitled to any benefit from the leviability of tax on the capital gain in case the amount of capital gain is utilised for the purchase of a commercial property.
Transfer of property in family
Q. There was a query in this column regarding family arrangement for property transfer and we learnt that these are not construed as a transfer. I request you to kindly clarify how the properties will be shown in account books of transferors and transferees and how the capital gains will be calculated by recipients when they later sell these e.g. Mr X had purchased a property for Rs 1 lakh in 2005 (current value Rs 5 lakh), he transfers it to Mr A. Mr X will delete this in his account books and Mr A will add at Rs 1 lakh (or 5 lakh?). Mr A sells it for Rs 7 lakh the next year or later. Then capital gain (short or long?) on Rs 6 lakh (or Rs 2 lakh?) Kindly also inform if any there are useful tips to consider in this. A.
Your queries are replied hereunder. The reply is based on the presumption that the issues raised by you relate to an immovable property. In case a property held by one person is allocated to another person, the effect of deletion or addition in respect thereof will have to be through the capital account of the transferor and the transferee, as the case may be. In the case cited in the query, the property allocated to Mr A will have to be reflected as a deletion from the assets side as well as from the liabilities side in the Balance Sheet of Mr X. The deletion on asset side will be adjusted by giving effect to the capital account of Mr X. Mr A would reflect such property as addition to assets in his personal Balance Sheet and consequent addition to capital account. The cost of the property for the purposes of computing capital gain would be taken as the cost of such property to the previous owner. Therefore, in the case cited in the query, the computation of capital gain will have to be made on the basis of cost incurred by Mr X. I may add that the entries in the books of account of the parties should be reflected at cost price to give effect to allocation on the basis of the family arrangement.
New Will
Q. I made a registered Will of my properties in 2001. Now under the changed family scenario, I want to modify the contents of that Will. Please guide me on the following points: Is it necessary first to cancel the previous Will? Can’t I make another Will without first canceling the previous one? In my second Will, if I write a sentence — “This is my second Will and my earlier Will should be treated as cancelled”, then won’t it serve my purpose? If not, then what is the legal standard procedure for cancelling the previous Will? A.
Your queries are replied hereunder: It would be necessary to cancel the previous Will. You can make another Will. In case you don’t write a sentence about the cancellation of the earlier Will, it may lead to dispute between the legal heirs. It would be advisable to write in the second Will a sentence so as to indicate that the earlier Will stands cancelled. The sentence can be on the following lines. “I do hereby revoke all former Wills and Codicils made by me and declare this to be my last Will and testament. I further declare that I am in good mental health and am in a sound disposing state of mind”.
Exemption possible
Q. I had purchased a residential house in Noida in 2001. I have now shifted to Gurgaon and have booked a flat in a building there. I am likely to get possession within a period of one year. I intend selling my flat in Noida. Will I be able to get any exemption from the taxability of capital gain arising on the sale of Noida residential house? — Laxman Prasad A.
The residential house has been held by you for a period of more than three years and, therefore, the gain arising on the sale thereof would be a long-term capital gain. You can utilise the amount of capital gain in the purchase of a residential house within one year before or two years after the date of sale of Noida residential house. Therefore, in case you sell your Noida residential house within one year of the date of purchase of Gurgaon flat, you would be able to save tax on the capital gain arising on the sale of your Noida residential house. It may be added that the law does not require a live link between the amount received on sale and the investment thereof in the purchase of the other residential house. So long as the amount equivalent to the capital gain is invested in the purchase of a residential flat/house within the stipulated time frame, it should be possible to claim the necessary exemption from the taxability of capital gain arising on the sale of Noida residential house.
Uniformity in sale consideration
Q. In reply to one of the queries you had pointed out that presently capital gain is required to be computed on the basis of the value adopted by the stamp duty authorities in case the actual consideration is less than fixed by the stamp valuation authorities. What happens to the reinvestment of the sale proceeds in the purchase or construction of a residential house within the specified period? For example Mr X sells a piece of land for Rs 10,00,000, the indexed cost of which is Rs 1 lakh. On the basis of the stamp duty rates the value thereof works out at Rs 20 lakh. The assessable amount of capital gain would thus be Rs 19 lakhs (20lakh-1 lakh). However, for the purpose of investment in the purchase of a residential house what amount will have to be invested so as to save the tax on the amount of capital gain? A.
The benefit of the provisions of Section 54F of the Income-tax Act, 1961 (the Act) is available in case the amount of net consideration arising on the sale of a capital asset other than a residential house is utilised for the purchase /construction of a residential house within the specified period. In the case cited in the query, the net consideration (full value of consideration received or accruing on transfer of a capital asset less expenditure incurred wholly and exclusively for the purposes of the transfer) would be Rs 20 lakh. Accordingly Mr X will have to invest Rs 20 lakh for the purchase/construction of a residential house within the specified period. This is because there can’t be two different sale considerations, one for the purpose of Section 48 and other for the purpose of Section 54F of the Act.
This column appears weekly. The writer can be contacted at sc@scvasudeva.com
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FIRM principles
Today’s property market scenario is not amenable to companies that do not present a professional front. Clients now are far more aware, and have become savvy about the difference between specialists and amateurs. Keeping this in mind, it is important to know what makes a real estate services firm truly professional in this new environment.
Challenges
The inherent nature of the real estate business makes it very different from other business lines. Since it is difficult for the average person to successfully make the transition into the real estate business, a significant challenge for a professional property services firm is sourcing and training the right professionals. Another challenge is developing a business plan or strategy that factors in the needs of the market. In the current scenario, it is surprising that there is still so much emphasis on brokerage, when in fact the required services bouquet is much larger than that. A truly professional real estate company needs to chart all aspects of the real estate market and have an entire array of service offerings. Considering the needs of the market today, the most successful real estate service firms offer every conceivable service, including research, consultancy, transactions, project and development services, integrated facility management, property management, capital markets, residential, hotels and retail advisory.
Expert hands
Nor is just offering such services sufficient because of the high competitiveness prevalent today, the company should have operatives that have considerable expertise and experience in each segment. In real estate it takes large teams of very talented people to find opportunities, zero in on them, groom clients and finally close transactions. If you don’t have the right people in sufficient numbers and rely solely on a small core group of experts, your business will crumble.
Local angle
In India, the value a property services company adds to the overall market depends entirely on its local expertise, experience in matching Indian property to global requirements, its bouquet of services, the differentiators it introduces into these and whether or not it adheres to international best practices in property business.
Clear goals
A professional realty firm has clear, concise, measurable and achievable goals. It knows its market, the dynamics that drive it and the people who run and patronise it. Its business verticals are clearly defined and impeccably staffed, with sufficiently autonomous departments that are nevertheless centrally controlled. Being a Jack of all trades and master of none only works well for smaller outfits that focus on making quick deals. A truly professional firm concerns itself with building a reputable brand that wields authority, respect and trust on the market.
Transparency and ethics
When we talk of professionalising a property-related services firm, we must obviously touch on the true definition of “professionalism”. Professionalism in any business line is primarily defined by two aspects — transparency and ethics. India’s real estate market is largely fragmented, and it is impossible to organise it all. By adherence to international best practices this business, a property firm can attract and retain corporate clients by offering the vital aspect of transparency in all its dealings and processes. To put it in a nutshell — in a professional real estate firm, things not only look right, they ARE right... and vice versa. Nothing less will do if a firm wants to set itself above and apart from others on the Indian real estate market. It is evident that adhering to such parameters is not as easy as reading about them. In real estate, it is always tempting to find the shortest route to profits. This is a path that usually involves compromises. One tends to cut corners on hiring the best people, following professional ethics, keeping clients happy and staying current on the latest trends. Firms that choose to take this path will not make it far, and will never transcend the amateur level. It is firms that choose the harder, thornier path of never being satisfied with mediocrity and always striving for excellence in all aspects of their business dealings that are the true professionals. The writer is Chairman and Country Head, Jones Lang LaSalle Meghraj
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Base rate Gaurav Gupta
Retail loan customer like home-loan or car-loan borrower many a times had a disappointment on his face when the overall falling interest rates in economy doesn’t translate to lower cost of borrowing for him whereas the increase was more than matched by the lenders by way of increasing the rate of interest. This was largely because banks used to lend on the basis of their prime lending rate. Banks have taken advantage of existing PLR system at the cost of their borrowers. When interest rates increase, banks hike their PLRs immediately, leading to rise in the home loan rates. But, when interest rates fall, they don’t reduce PLRs. Because of this, the existing customers are not benefited by the lowering of the interest rates. However, banks pass on the benefit to new customers by increasing the discount against PLRs. In the existing system, banks are free to fix their PLRs. Most of the variable rate loans, like home loan and some of the term loans are pegged against PLR. This means, if the PLR is not changed, the loan rates remain the same. To address this problem and to make the credit market more transparent and ensure that banks pass on the lower cost of fund automatically to existing customers, Reserve Bank of India replaced the existing system of prime lending rate (PLR) to a new base rate with effect from July 1, 2010 As Defined by the Reserve Bank of India, criteria that could go into the determination of the Base Rate are: n cost of deposits n adjustment for the negative carry in respect of CRR and SLR n Unallocable overhead cost for banks such as aggregate employee compensation relating to administrative functions in corporate office, directors’ and auditors’ fees, legal and premises expenses, depreciation, cost of printing and stationery, expenses incurred on communication and advertising, IT spending, and cost incurred towards deposit insurance profit margin. Agricultural loans, loans to a bank’s own employees, export credit and loan against deposits to small borrowers will remain outside the new regime. The actual lending rates charged to borrowers would be the base rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenor premium.” Under the new system, home loans and other variable loans will be pegged against a base rate. As the new base rate is fixed on the basis of cost of funds, any change in the interest rate will reflect in the base rate, and therefore, it will be automatically passed on to the existing customers also since any change in the base rate will apply to new as well as old customers. Under the base rate system, base rate will be the minimum rate for all commercial loans and banks will not be permitted to resort to any rate below it. The writer is Director, S.G. Estates
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Real talk Geetu Vaid Gaurav Mittal, the Director of CHD Developers Ltd entered the company in 1999 with an innovative vision and purpose to create residential and commercial real estate developments of international standards. In his short career span he has gained significant knowledge of the real estate industry and has been instrumental in the evolution and expansion of the company. Under his leadership, the company has gained reputation in the real estate sector in north India and emerged as a premium player. Under his supervision, CHD Developers Ltd has created world-class commercial offices, retail complexes, office cum retail projects and hotels. He shares views on the current scenario in the sector. Excerpts: You have projects in the high profile NCR region as well as in Tier II cities like Karnal, Hardwar and Vrindavan, what are the major differences in the realty market that you personally see in these two markets (Tier I and Tier II)? New Delhi is the capital of the country and one of the most important cities in India. The property trends observed by real estate experts show that due to the limited space available within the city, real estate market boundaries are constantly extending into newer peripheral areas. Other infrastructural projects, including metro connectivity, expansion of highways and flyovers also boost accessibility and reduce commuting time and people don’t mind settling down in the periphery areas. This fast-paced urbanisation plays an extremely important role in upsurge in realty sector particularly in National Capital Region and Gurgaon is one of the most sought after destinations for investment in the residential segment. Even as the prices of property in Gurgaon are rising consistently for the past six months, its locational advantage allows investors and customers to still reap high profits. The growing population and trade expansion in Gurgaon have led to the ever growing supply deficit in both residential and commercial segments. The customers prefer high end projects that have ready infrastructure like power back up, security, water supply; social infrastructure and auxiliary facilities like a recreational club, sports ground, crèche and kids play area. And they are ready to pay the price for the premium lifestyle. The situation, however, is noticeably different in Tier II cities. Here the supply is much higher than demand leading to a glut sometimes. The integrated townships, premium group housing and lifestyle apartments don’t interest the buyers that much in these cities. The buyers here do not have a very high spending power, and it is not easy for them to comprehend the distinction between an unorganised colony and a self-reliant muti-storey group housing or integrated township. But off late the mindset of buyers in smaller cities, too, is undergoing a change. The success of CHD’s residential projects in Karnal, Hardwar and Vrindavan reflects this change in mindset, and there is a substantial increase in demand for such products from the young professionals. Is the trend more towards residential or commercial segments in these areas? What are the reasons for this? Commercial segment is basically divided into retail and office space. Gurgaon has witnessed a substantial brewing up of office space. The reason for this is essentially the flourishing demand for residential property. At this juncture, both office and residential segment is on the upswing. People here clearly differentiate between where they stay and where they work unlike in other Tier II cities where they prefer to work far away from homes. Is the present scenario conducive for those looking to invest in the real estate market to make a killing? The economy is crawling fast out of the meltdown and it is the ideal time to invest in real estate when it comes to long term investments. You can get more bang for your buck What is the USP of your projects in Tier II cities like Karnal and Hardwar? CHD City, Karnal is a self-contained township, spread over 250 acres. Strategically located on NH 1, CHD City is abutting the existing organised colonies. Great connectivity complete with in-house amenities like an international club house, Educomp’s The Millenium School, CHD Plaza, Karnal Business Centre, a magnificent temple, hospital; 100% power back up, security and underground electric wiring etc set it apart from the rest. Gayatrilok, Hardwar with the holy Ganges on one side and the Shivalik on the other provides one with a picturesque countryside view. The tranquil complex has a stone structure temple with marble flooring in one quiet corner, a Satsang Bhawan and is landscaped with lush green lawns. Gayatrilok is furnished with jogging trail, restaurant, dormitory for drivers, EPABX facility and security. Srikrishnalok, Vrindavan is strategically located a little before Vrindavan town on National Highway 2, equipped with modern amenities like jogging track, EPABX facility, 100% power back up, 24/7 water supply and 70% green space. The magnanimous Sri Krishna Temple within the premises is the jewel in the crown of Srikrishnalok. The construction of this temple deploys Asian technology. In view of rising inflation as well as likely increase in the raw material costs and the new taxes, do you think that the threshold of affordable housing is rising, or is going to rise, in the next 12 months or so? It’s already on the rise. This is further expected to be driven by growth in infrastructure fuelled as the government continues to lay emphasis on the latter. I foresee an upswing in the threshold of affordable housing for next three years at least.
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Residential realty prices back on peak
Mumbai: Leading home-loans lender, HDFC, feels that residential real estate prices in the country are hitting the peak levels observed pre-slowdown. “There is an improved economic sentiment and developers have started charging premiums as land prices have also suddenly started going up...prices are getting to the peak levels,” HDFC’s Chairman, Deepak Parekh, said while addressing shareholders at the company’s annual general meeting in Mumbai recently. Parekh said between September 2008 — when the slowdown hit the markets — and October 2009, residential real estate prices dropped by over 25 per cent but have started going up afterwards. He cited such trends observed in India’s most active markets of NOIDA in the NCR, western suburbs of Mumbai and a Bangalore suburb to illustrate, saying the prices have gone up across all of them. Commercial real estate prices and rents will remain subdued for sometime, he said. “In the next 12-months, over 4-million square feet of office and IT space is going to be made available...where will there be takers for so much of space?” he asked. Parekh also said that he “strongly feels” for having a real estate regulator in place. Talking for the common man and the hardships faced, he said, “I feel the prices are very high and should go down.”
— PTI
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Retail rentals up
New Delhi: Rentals for premium retail spaces in Delhi-NCR have increased by 10-15 per cent in the past six months on the back of increased interest from the domestic as well as global retailers, a global property consultant said.
“The first half of 2010 saw increased retailer interest. National as well as global retailers, who were earlier cautious in their approach have started booking space in prime markets across high streets and malls,” CB Richard Ellis said in a report. The growth in the overall retail market appears to be driven largely by the fast expanding organised retail market, the consultant said. The report revealed that rentals in Delhi-NCR are moving towards stability after an extended period of correction over the past few quarters. “While Grade B markets have observed corrections of 5–10 per cent, Grade A retail spaces are close to their pre-recessionary rentals, with a 10–15 per cent increase in rental values over the past few quarters,” the report said. Average rentals in high-street Connaught Place have risen to Rs 500-700 per sq ft a month during January-June period from Rs 450—550 per sq ft in July-December period of 2009. In organised retail, the monthly average rentals in Saket district centre has increased to Rs 150-350 from Rs 100-300 per sq ft. During the past quarter, CBRE said international apparel giant Zara entered the Indian market with its flagship outlet opening up at Select Citywalk mall, Saket. There has also been a visible trend in the F&B space, with multiple coffee chains and casual diners such as Gloria Jeans, Segafredo Zanetti and Mocha mushrooming across the city, the report added. The trend is likely to continue in the coming months and the market should seen the entry of other prominent global brands like Jack & Jones, Forever 21, Diesel, Timberland and Ecko in the city. The recessionary phase has been a learning period and many retailers and developers are taking the minimum guarantee and revenue share route to partner each other’s success. “Over the past 6-8 months, the retail segment in India has seen some movement with retailers reporting an increase in enquiries for taking up space,” CBRE South Asia Chairman & MD Anshuman Magazine said. He said although retailers are still cautious, India continues to be one of the fastest growing retail markets in Asia Pacific and the improvement in consumer sentiment and market stability is likely to provide a boost to the sector.
— PTI
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REALTY BYTES Mumbai: Kalpataru Builders has purchased 4.5 acres of land in a busy Mulund area for close to Rs 200 crore in one of the biggest real estate deals in the suburbs here, a source said. “Kalpataru builders have signed an agreement to buy 4.5 acres of land in Mulund that belongs to Schrader Duncan Ltd, a leading manufacturer of tyre tube valves and accessories,” the source close to development told PTI in Mumbai. The total land area is a little over 1.5 lakh square feet with a floor space index (FSI) of 2, the source said. Kalpataru Builders, however, did not reply to e-mail queries seeking confirmation of the deal. The land owner, Schrader Duncan Ltd, had shifted its automotive plant from Mulund to Ranjangaon, in Pune, in 2009, where commercial production has already started. Before that, the company had shifted its pneumatic division from Mulund to Mhape, in Navi Mumbai. According to a filing to the BSE, the company had sold 2 acres of land at the backside of the property for Rs 28 crore in December, 2006, to fund its new plant. Schrader Duncan is a joint Venture between Delhi-based Industrialist J P Goenka and Schrader Bridgeport International Inc, USA, which is a subsidiary of global engineering and manufacturing group, Tomkins PLC, UK. — PTI
Gitanjali expects Rs 525 cr from realty biz in 30 months
Mumbai: Leading diamond jewellery player Gitanjali Group, which recently entered the realty business, expects Rs 525 crore from two projects over the next two-and-a-half years, a top company official said.
Gitanjali Group, under its wholly-owned subsidiary Gitanjali Infratech, is developing around 8 lakh sq ft of land in suburban Mumbai, which includes a luxury residential project. “We plan to develop around 4 lakh sq ft space each in Andheri East (commercial) and Borivali (residential). We are expecting around Rs 125 crore from the Andheri project, and around Rs 400 crore from the residential one,” Gitanjali Group’s Chairman and Managing Director Mehul Choksi said. However, Choksi said revenues would flow-in only after 24-30 months as the properties would take some time to be developed. The group has so far invested Rs 100 crore in the realty business.
— PTI
GREEN concerns
New Delhi:
The green business Summit 2010 was held here recently. Different speakers from the industry dwelt upon the ways in which companies should inculcate different kinds of strategies for a sustainable future in everyday business operations and development, and create environment friendly strategies along with the use of energy saving technologies while still keeping their competitive edge.
Speaking on the occasion Vikas Gupta, MD, Earth Infrastructures Ltd,said, “Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle: from sitting to design, construction, operation, maintenance, renovation, and deconstruction.” While speaking about energy efficiency he said, “With an annual increase in the built-up area of residential and commercial buildings by 10 per cent, the projected annual increase in the energy demand is 5.4 billion kWh. The need of the hour is to design and construct ‘high performance buildings’ so that the use of electricity can be controlled. The main points which need to be kept on priority while building, is to use simple, standardised energy performance metrics throughout all phases of building design and operation. New buildings must be designed to meet local energy codes, but should also be expected to meet aggressive energy. These design targets should be verified when the building is built and operated. This feedback loop is important and often missing in building lifecycle”.
— TNS
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Retail loan customer like home-loan or car-loan borrower many a times had a disappointment on his face when the overall falling interest rates in economy doesn’t translate to lower cost of borrowing for him whereas the increase was more than matched by the lenders by way of increasing the rate of interest. This was largely because banks used to lend on the basis of their prime lending rate. Banks have taken advantage of existing PLR system at the cost of their borrowers. When interest rates increase, banks hike their PLRs immediately, leading to rise in the home loan rates. But, when interest rates fall, they don’t reduce PLRs. Because of this, the existing customers are not benefited by the lowering of the interest rates.
During the concreting operation, leave a man, preferably a carpenter, below the shuttering area to keep a constant watch on it. If any plate seems to be sagging or a support seems buckling, he can caution the concreting team and take preventive measures. Check that all open mouths of sanitary and rain water pipes and floor traps have been plugged well with gunny bag pieces to avoid their blockage with concrete. Always keep a few spare scaffolding pipes at site for emergency use in case a shuttering plates gets loose. Take care of creating a bond of PVC conduit pipes with the concrete slab by wrapping some binding wire around them in helical fashion. 
— Sewak Banwait
— Ashok Gupta
— Rajbir Singh
— Ashok