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Luxury rides high
Tax tips
Mall on campus
Problem of plenty in commercial arena
REALTY BYTES
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Luxury rides high
Luxury housing emerged as an attractive segment in 2006-2007 as dozens of projects aimed at India’s affluent were launched. The global economic downturn, however, arrested the trend to some extent in 2008 and 2009, and the focus shifted to affordable housing. But with the Indian GDP expected to clock 7-8 per cent growth in 2010-11, and probable double digit growth starting 2012, India seems to be ready for the next wave of wealth creation, especially in Tier I cities. The developer community senses this and has launched more luxury projects in the recent past”, says Abhishek Karan Gupta, head of research and real estate intelligence service, Jones Lang LaSalle
Meghraj.
Reasons for revival
This was one segment that withstood the effects of the slowdown also. As per the figures provided by JLLM, in the Delhi-NCR region as many as 6,819 units were sold in 2007. The economic slowdown had minimal effect on this figure as it rose to 9,128 in 2008 and 13,451 units in 2009. “The luxury segment never went into a slump”, says Aditya Bansal, MD, ABW Group, that is coming up with the La Lagune project in Gurgaon. According to him, the buyers had just deferred their decision to park funds in high-end real estate property during recession, and now as the economy had enhanced the buyer confidence, they were investing in luxury residential units. This is the reason that has made developers launch projects to meet the demand in this segment.
Increased demand
Commenting on the increasing demand in this segment, Rohtas Goel, CMD of Omaxe Group, says, “The real estate is again gearing for luxury projects as the consumers from within the country and abroad are regaining confidence to invest in swank projects. Firstly, the economy is witnessing a rise in disposable income and there is a subsequent increase in the population of people entering the millionaire club. Secondly, the aspiration of this class is driven out of their experience of world-class amenities that they would like to have in their dream home”. The group is coming up with the Omaxe Royal Residency in Ludhiana, a luxury project on 36 acres that will house palatial air-conditioned luxury apartments and penthouses in the price bracket of Rs 1 to Rs 1.9 crore.
Price threshold
As far as price is concerned in this segment, it varies according to the location and amenities provided. According to Awaish Akhter, D.G.M., Sales & Marketing, Eros Group, “usually property developers tend to label a project upwards of Rs 80 lakh as a luxury project, whereas it can only be loosely defined as such. Real luxury would mean a swank home in a premium zone in the heart of a metro – like Worli or Napean Sea Road in Mumbai or Lodhi Road or Golf Links in Delhi”. In
fact, it is the location that is the deciding factor, adds Kunal Banerjee, President, M3M India ltd. “Luxury apartments would start anywhere from Rs 2-3 crore and go up-to Rs 8 crore like in the Golf Estate project that his company is going to launch in Gurgaon
in September. The high price has not been a deterrent as the demand for such properties has definitely risen, over the last year, adds Banerjee. According to him, the target group typically includes CEOs, senior professionals, entrepreneurs in new-age businesses and the
rich non-resident Indians, who are looking for homes in India. Though the demand in this niche segment is there, yet maintaining the exclusivity of each project is extremely important and thorough market research plays a big role in this. Says Bansal: “We have to keep in mind the growth prospects of the area, and the target group for a particular project. For instance, for a group housing project like La Lagune, which caters to a premium group, we chose Golf Course Road in Gurgaon as it is an affluent area and is well connected to the major parts of the city. It is in complete sync with the needs of the niche clientele that is our target group”. Goel agrees to this while adding, “At Omaxe, we carry an extensive market survey before choosing the location of the project as it is important to sense the demographic demand, per capita income and the living standards of our target audience. This helps in generating a good volume of demand for any upcoming project”. A minimum profit margin of 50 to 60 per cent is also one of the reasons that makes developers look to
this category
Growth prospects
According to the Merril Lynch-Capgemini World Wealth Report, the number of HNI in India with assets of at least $ 1million grew from 84,000 in 2008 to 126,700 last year. This has been termed the fastest growth in Asia after Hong Kong. Thus with more and more buyers opting for a higher standard of living, there is tremendous growth prospect in the luxury segment. “Over 8,000 residential units in the luxury segment are expected to be ready by 2013. The total supply expected this year will be 85,000 units, of which about 14 per cent will be luxury projects”, says the official spokesperson of the Emaar MGF group.
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Tax tips
Q. Can you please send me a solution for following questions:
Suppose a person is given the power of attorney in favour of the buyer without registering it in his favour. Does a transfer of power of attorney attract capital gains in the hands of seller? If yes, then what are the exemptions available for the seller to plan his capital gains? — Harbans Lal A.
Your queries are replied hereunder: It is presumed that the power of attorney will be executed in respect of the sale of an immovable property. In such a case, the capital gain would arise in the year in which the possession of the immovable property is handed over in a part performance of the contract in lieu of the receipt of consideration or any part thereof. The amount of tax payable on capital gain arising on the sale of an immovable property which has been held for a period of three years or more can be saved in the following manner: In case the immovable property is in the form of a residential house and the capital gain arises on the sale thereof, the capital gain is utilised for the purchase/construction of a residential house property. The purchase is required to be effected within one year before or two years of the date of sale. The construction, however, is to be completed within a period of three years of the date of sale. In case the immovable property is in the form of a piece of land, and the capital gain arises on the sale of such land, net consideration arising on the sale is utilised for the purchase/construction of a residential house within the period specified in (i) above. Capital gain arising on the sale of a capital asset being an immovable property (land or a residential house) is utilised for investing the same in the acquisition of specified bonds of the Rural Electrification Corporation Ltd. or National Highways Authority of India. Such acquisition has to be made within six months of the date of sale of the immovable property. It may be added that the investment in bonds should not exceed a sum of Rs 50 lakh in a financial year.
No exemption
Q. Kindly let me know if I can buy a commercial plot from the sale proceeds of a residential plot to avoid any kind of tax liability. Will I have to pay tax from the long-term capital gain by such a sale of land? — Ajay Kumar A.
In case the sale proceeds of a residential plot are invested in the acquisition of a commercial plot, the capital gain arising on the sale of residential plot would be taxable. No exemption from taxability is available in such a case. You will thus be liable to pay tax on the capital gain arising on the sale of such residential plot. It would be a long-term capital gain in case the plot has been held by you for a period of more than three years. In such a case, the amount of capital gain would be computed after giving due relief on the basis of cost inflation index applicable for the financial year in which the sale takes place.
Invest to save tax
Q. I have a residential house property in West Delhi. Three floors have been constructed on this property. Now I want to sell terrace rights. I want to know how the cost of acquisition will be calculated for the purposes of Income tax. Do I have to divide the cost of acquisition by four, since the buyer can construct only one floor? And how can I save the capital gains tax? A.
The capital gain in such a case would be computed on the basis of the proportionate undivided right in the land attached to the terrace rights. The capital gain would be computed after taking into account the indexed cost of such proportionate undivided right in the land. You can save tax on capital gain by investing 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 bonds can be purchased within six months of the date of sale for a maximum amount of Rs 50 lakh in a financial year.
Time limit issue
Q. I need a bit of help if you can clarify with regards to the capital gains tax — how do you calculate the period for which the property is held. Is it from the date of allotment or the date of possession? Does the date of letter of intent has anything significance in this — Ashok Malik A. In case the property is sold after allotment but before taking the possession, the period of three years would be worked out with reference to the date of allotment. The date of allotment would be relevant in such case for the purpose of ascertaining whether the capital gain is a short-term capital gain or a long-term capital gain arising on the sale of a property. In case the sale takes place after taking over the possession, the period of three years would be computed from the date of possession. This is because the allotment right gets merged with the right of possession.
Joint loan
— R.C. Kapur A.
In case both of you are joint owners of the house, the deduction in respect of principal and interest can be availed by both of you provided the loan documents are in the name of both the borrowers. Further, it would be advisable that the payment in respect of interest and the principal amount is made by each one of you from your respective bank accounts.
NRI deal
Q. I am an OCI (Overseas Citizen of India) and hold an American Passport. Me and my wife were NRIs and held Indian passport. A property in Gurgaon was bought at that time. This piece of residential land for in Gurgaon was bought in 2004-05 by my wife for Rs 40 lakh. The land was registered in her name in the same year. We are planning to sell this land now. The payment for the entire amount was made through my wife’s NRE account. She will get about Rs 1.10 crore for the property. I am planning to — A. K. Saini A.
Your queries are replied hereunder: On the basis of the facts given in the query capital gain on the sale of plot of land would work out at Rs 50,75,000. The amount of capital gain has been computed on the basis of the indexed cost of Rs 59,25,000. You will have to invest the entire amount of net consideration i.e. Rs 110 lakh, less the amount spent wholly and exclusively for the purposes of such sale, in order to save the amount of tax on capital gain. The amount will have to be invested for the purchase of a residential house within one year before or two years after the date of sale or in the construction of a residential house within three years of the date of sale. In case you are not able to utilise the amount for either of the above purposes before the due date of filing the return, you will have to deposit the net consideration in a bank account under the capital gains scheme account. The amount so deposited can thereafter be withdrawn for the purposes of utilisation of purchase or construction of the residential house as the case may be. You have an option to invest the amount of capital gain in the acquisition of tax saving bonds within a period of six months from the date of sale. Such bonds can be purchased for a maximum amount of Rs 50 lakh in a financial year. In case you exercise the above option or the options are partly exercised, tax on long-term capital gain would be payable at the rate of 20 per cent plus education cess of 3 per cent thereon. In case the amount of capital gain is utilised towards the acquisition of a residential plot, it would not entitle you to save tax on the amount of capital gain. The acquisition of house in US may not enable you to get the relief from the taxability of capital gain in view of the conflicting decisions of the Income-tax Appellate Tribunal on this issue. You can, however, remit the amount of net consideration after payment of tax to the US without RBI approval.
This column appears weekly. The writer can be contacted at sc@scvasudeva.com
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GROUND REALTY Jagvir Goyal One keeps hearing about the instances of buildings catching fire due to short circuits. A fire broke out in Government Rajindra Hospital, Patiala, a few months ago and many newly-born babies were burnt alive. The reason for it was said to be short-circuit in the electrical wiring system of the place. Then, there was the news of a fire breaking out in Nagpal Hospital, Bathinda. Again, it was due to some short circuit. These unfortunate incidents could have been avoided if care had been taken to timely check and update the electrical wiring of the buildings. Electrical wiring is done when a building is constructed. Thereafter, usually one forgets all about it. We keep on adding new gadgets; keep inserting multi-plugs in the sockets and use one socket for many electrical gadgets. Electrical wiring once provided is considered sufficient for all future additions of electricity-run gadgets. Along with that, recent times have seen a spurt in the availability of new electrical gadgets in the market. Earlier, there used to be fans, bulbs and tubes only. Then coolers and refrigerators were added. The 1980s saw the addition of televisions, video-players and tape-recorders. The 1990s saw further addition of microwaves, air-conditioners, computer sets, MP3 players, DVD players, laptops, cordless phones, video-games, washing machines, blowers and steam irons. Now, dish washers and massage chairs are making an entry. But all through this change, the electrical wiring of houses has remained the same. A re-look
If you have lived in a house for almost 30 years then it is time to have a re-look at the electrical wiring. Are the ACs provided with separate wiring, running direct to the MCBs? Do the old type mains need to be replaced by MCBs? Has an ELCB been provided? Does the house need strengthening of the electrical system by providing more sockets and revising the load? Only an honest and thorough examination can bring out the shortcomings in the electrical wiring system of your house. One should go for a complete change of electrical wiring of a house built in or before 1970. The trend of concealed conduits had arrived by 1970. Here are a few guidelines for proceeding for a check and change in electrical wiring of your house:
Check the load
Hire a qualified electrician and ask him to check the present load of your house. Take into account the air conditioners, washing machine, the geysers, the electric oven, the microwave, the dishwasher, the mixers and juicers, the TV and DVD sets, the computers, the coolers, refrigerator, dish washers, the lighting system, the fans and other items if any. If the present power load is more than the sanctioned load for your house, get it revised from the electricity department. Also get the meter upgraded. The meter may get burnt if the load on it is increased beyond its capacity.
Add new points
Decide the new points to be added to the electric circuits for suitable and convenient use of new appliances added to your house. Now that you have decided to recheck all your electric wiring, freely decide the addition of new points. It is better to avoid multi-plugs. Nor is it advisable to use extensions to reach a socket at a distance. You may add the conduits and the boxes but don’t yet insert electrical wires in the newly laid conduits.
Check for wiring
Next, disconnect the mains, remove various fittings like fans and tubes and ask the electrician to check the wiring. Is its insulation intact or is it damaged or melted anywhere? Has the insulation of two or more wires running together melted and joined? Are there any cuts in the wires? Is the size of wires sufficient for the current to be passed through them in view of appliances being used? The electrical wiring of your house should be such that no wire should ever burn inside a conduit even if excessive current is there. It would be better if all the electric wiring is checked together by switching off the entire supply. Now decide the wires to be added in view of new points added and the wires that need to be replaced.
Buy electric wires
Be careful while buying new wires. See that the wires are ISI marked, have a copper conductor with copper of electrolytic grade 99.97% pure. This will ensure safety from short circuit and electrical fire. Copper has high tensile strength, high conductivity, low resistance, high thermal conductivity, higher melting point and more flexibility than aluminium. Therefore, it withstands heavier overloads. Check the wires to be IS 694 Part I marked. This ISI is for copper wires. IS 694 Part II is for aluminium wiring. So be extra careful in checking Part I written on the coils and wires. Buy wires manufactured by reputed manufacturer only. Some aluminium wires carrying copper coating on them are also available in the market. Take care that you don’t buy these copper-coated wires. Check that the wires are actually in copper. Know that wires are supplied in coils of 90- metre length and rates are quoted on per coil basis.
Use right sized wires
Use proper size of wire for different appliances. Commonly used sizes of wires are 1 sq.mm, 1.5 sq.mm, 2 sq. mm, 2.5 sq. mm and 4 sq.mm. Use 4 sq. mm wire for AC points, 1.5 sq. mm wire for lighting points, three-pin 5 ampere points and call bell points and 2.5 sq. mm for three-pin 15 ampere power plug points. Lay separate conduits for telephone cable or television cable. For any appliance of 2.5 KW or above and split ACs, use 6 sq. mm wire. Tell the electrician to use right colour code for wires to detect neutral, earth and live wires. In India, live wires for 3 phases should be in Red, Yellow and Blue insulation. Keep neutral in Black and Earth in Green. Otherwise, there may be problems at a later stage whenever repair work is undertaken in your house.
Earthing and MCBs
Review the earthing system of the house. Wherever earth wires are ignored and two-pin plugs are used, replace them with three-pin plugs and see that every point in the house is connected to the earthing system. Add an Earth Leakage Circuit Breaker (ELCB) to your house. Equip the electricity circuits with more MCBs (miniature circuit breaker), wherever required to be added. A short circuit will trip these breakers instead of blowing the fuse. Use ISI marked MCBs. Ask the electrician to see if separate circuits are now created for different rooms so that the whole house is not plunged into darkness when an MCB trips on short circuit. This arrangement also helps in detecting the fault as only the circuit which carries the fault will trip. That completes the recheck and renovation of electric wiring system of your house. Give it a trial, see that all points are working well and live peacefully. (This column appears fortnightly)
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Mall on campus
With the trend of malls and shopping arcades becoming popular in cities and along the highways in the state, it now seems to be the turn of campuses of institutes to have multi-storey shopping centres catering exclusively to students and faculty members.
Lovely Professional University (LPU), Jalandhar, which boasts of 25,000-plus students, has come up with a five-storey “student service centre”. The centre will offer space for banks, food joints, bookstores, stationery items, readymade garments and other basic youngster-oriented stuff. CT Institute, Shahpur, is also in the process of coming up with a shopping complex, which it instead calls facility stores. Since both the institutes are located beyond the city limits, the students generally can’t go to a market to buy clothes, footwear and other accessories. The concept, which the institutes are working on, is to attract relatively low-price brands, specifically catering to the student segment. “Our institute doesn’t want to earn anything out of profit-sharing or other means. We would rather want the companies to offer their products at the lowest prices so that these suit the pockets of our students. Since the companies can expect good sales because of high student strength, offering products on subsidised rates should not be a problem”, Manhar Arora of CT Institute said. The LPU centre, which will be ready in six months, is already flooded with offers from some top brands that are ready to buy some space. The authorities maintain that it will be a non-profit venture and some space will also be given to the students, who want to try their entrepreneurship ideas while studying. The campus already has kiosks of Nescafe and Verka, and a lot many other consumer products, besides a restaurant run by popular, city-based Headquarters group. Rayat-Bahra Institute of Engineering and Technology, Balachaur, too, has a food court housed by Hot Millions at its 200-acre campus. Chairman Gurvinder Bahra said the shopping complex on the campus had 10-12 shops, including those of readymade stuff, saloon, tailoring shop, stationery etc. Rajesh Chopra, a real-estate developer, said that the concept was new in the city and could have a high success rate if opened in a planned manner. “High-end showrooms will not be able to register any sales. Even medium range products can find very few takers because students have limited resources. Only items that are low-priced will draw attention”,
he opines.
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Problem of plenty in commercial arena
New Delhi: India’s realty sector is likely to face the problem of plenty with office rental space set to outstrip demand resulting in a further drop in rentals, according to a report released recently.
“With the forecast growth of net completions expected to outpace that of net absorption, a significant supply overhang is expected to remain over the next one year,” Confederation of Indian Industry (CII) and global real estate services firm Jones Lang Lasalle Meghraj said in a joint report. “This will lead vacancy level across India, which was 17.2 per cent in 2009 to rise to 20 per cent by 2010-end,” it added. It said the commercial lease and rental space in India would witness a low occupancy rate till 2011. The report, however, added that most Indian cities have witnessed an increase in the volume of lease transactions in the first quarter of 2010 with Delhi, including the national capital region, Mumbai and Hyderabad having recorded more than a million square feet of leases each. In 2009, occupiers showed a strong preference towards operational vacant stock rather than projects under construction, a departure from 2007-08, the report pointed out. On the future trend, report said the most micro-markets were expected to reach their rental lows within the next 2-3 quarters, if not reached as yet. “With India’s economic recovery well underway, its commercial real estate market is beginning to stabilise. Apart from charting the today’s lucrative micro-markets in terms of commercial real estate, this report also affirms that the commercial property landscape will remain favourable for tenants in 2010, and that landlords will have greater influence towards the beginning of 2011,” said Abhishek Kiran Gupta, Head - Research & REIS, Jones Lang LaSalle Meghraj. The report titled “The Seven Stars of India - India’s best performing micro markets for occupiers” highlights the trend and forecast on realty rental market in seven cities of India — Delhi, Mumbai, Pune, Chennai, Bangalore, Hyderabad and Kolkata.
— IANS
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REALTY BYTES Chennai: Real estate developer Mantri Developers was awarded Brand Excellence award in the Construction and Real Estate category by the Singapore Asian Council. The award was presented to Mantri Developers CMO Bharat Dhuppar at a ceremony on July 23, a company release said here recently. “We are proud to have achieved this recognition. Our single-minded focus on creating a strong and enduring brand has helped in contributing to this success. We believe that such recognition and accolades go a long way in reflecting our credibility”, Mantri Developers CMD Sushil Mantri said. Over 300 brands from various countries competed for the awards, it said. The company has a strong presence in premium housing, retail, IT Parks and Education, it said. — PTI Luxury apartments in Jammu
Jammu: Realty firm Horizon Buildcon has launched a luxury township consisting of 72 apartments in Jammu. “Seventy two such luxury apartments named Aerobera Luxury Apartments will come up here”, Naresh Sabharwal, Chairman of Shivam Group,the promoters of Horizon Buildcon said. The construction work is going on at fast pace; two floors of one block are already completed and development works on the project is on, he said. JMD Chattels, a unit of Horizon Buildcon and Shivam Group, is building the luxurious township and 20 bookings have already been registered for three-bedroom apartments, he said. The six storeyed complex will have 72 apartments, each consisting of three bedrooms plus drawing room, dining room, lobby and modern kitchen and a spacious balcony with all the rooms, he said. The township with provisions for uninterrupted power and water supply, will involve parking lots, children play grounds, green spaces, high-end security phones, swimming pool and healthcare facilities, Sabharwal added.
— PTI
Ashiana Housing Q1 revenue up
New Delhi: Volume growth, led by strong contributions from the existing projects, has enabled Ashiana Housing Limited to record a revenue growth of 47 per cent in the first quarter ending June 30, 2010. The company’s Sales and Other Income grew to Rs 42.85 crore in the current quarter ended June 2010 from Rs 29.23 crore in the quarter ended June 2009. EBITDA during the quarter under review grew 32 per cent at Rs 14.91 crore compared to Rs 11.28 crore recorded in the corresponding quarter of the previous year. Profit after tax in the current quarter grew 32 per cent at Rs 11.71 crore from Rs 8.90 crore in the corresponding quarter last year. Commenting on the robust performance in the fist quarter Varun Gupta, Director, Ashiana Housing Ltd said, “With quarter bookings of 3.26 lsf in first quarter, 276% higher than the corresponding quarter last year, Ashiana Housing has started this fiscal year with a notable performance and we are geared up to meet our annual target of 12 lsf bookings. “In the first quarter we started recognising revenues from Utsav Lavasa. We have also started construction of Rangoli Gardens at Jaipur”, added Gupta.
— TNS
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GROUND
REALTY
Affordable housing is and will remain the catchword of the Indian realty sector, but it is not the only segment that is generating demand at present. The luxury segment, too, has seen an upswing in the wake of the revival of the sector. If one goes by the number of projects that have been launched in this segment over the past few months, it becomes amply clear that the luxury segment is brimming with possibilities.
A stronger economy, greater integration with global lifestyle and increasing disposable income have created a robust demand for high-end luxury housing. The evolved Indian consumer has moved up the value chain and is looking to embrace luxury homes that now come with a host of sophisticated amenities such as private swimming pools, jogging tracks, health clubs and manicured greens. According to a report by RNCOS, a New Delhi-based market research company, the luxury sector is expected to grow from $4.3 billion last year to $13 billion by 2013.
— Joginder Singh
Q. I am purchasing a flat along with my son. Both of us are loan borrowers. Then who among us can get the benefit of IT exemption for principal amount and the interest paid thereon.