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| REAL ESTATE |
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real issue
TAX TIPS
Safe bet
In Conversation
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Karnal is witnessing not just a real estate boom, but also a re-sale boom. Residential units in a number of major housing and commercial projects developed in the peripheral areas by renowned builders that were completed and sold out during the one past year are up for re-sale and that too at a huge premium.
Initially, the builders made attractive offers to woo the investors and the prices were competitive but today the rates have gone up by more than 100 to 150 per cent. As most of the buyers had purchased the flats for investment purposes, they are keen to re-sell the property at huge premium. The investors are making a quick buck and more than 70 per cent of the accommodation is on resale. The main reason for phenomenal rise in prices of flats and land was the failure of HUDA to play an effective role as interventionist on behalf of the government and instead of developing more plots and constructing more flats and offering these to people on affordable prices, it followed the builders and increased the prices of plots from Rs 7,200 per sq. yd last year to Rs 8,800 per sq. yd. However, the Executive officer HUDA, Karnal Roshan Lal was even not aware of spurt in land prices. Due to non-availability of plots in the main town and its surrounding areas, the premium on HUDA plots has gone up to Rs 15,000 per sq yd, while in established sectors like Sector 7 and 13, the price of plot is between Rs 30,000 and Rs 45,000 per sq yd. In less developed sectors like Sector 4 and 5 the land price is Rs 20,000 to Rs 30,000 per sq yd. Consequently, the prices of privately owned land have also doubled during past one year and even on the outskirts of Karnal, the land prices, which ranged between Rs 12,000 and Rs 20,000 per sq yd, have increased to Rs 25,000 to Rs 40,000 per sq yd, said Rajesh Dudheja, a leading property dealer from the city. Karnal residents are yet to adopt the “flat culture” and prefer plots, houses and independent bungalows. This has led to disproportionate increase in the prices of land as there is not much land available, said another property dealer Babu Luthera. The price of two to four-bedroom flats ranges between Rs 20 and Rs 45 lakh in most of the projects offered by reputed builders like Ansals, Alpha International City, Global Spaces, Chandigarh City and DD Cruze, Palms Regency etc. The rate per square yard ranges between Rs 10,000 and Rs 13,000 in Alpha City, Rs 9,000 and Rs 13,000 in Ansals apartments and Rs 8,100 and Rs 11,000 in Chandigarh City. The Narsi project has been completely sold out and the premium is as high as Rs 12,000 to Rs 20,000 per sq yard. Plots are available in Palms Regency project also for same price, while Parsvnath city has plots available at the price of Rs 8,500 per sq.yard. The sharp increase in land prices is also attributed to the grant of Nagar Nigam (Municipal Corporation) status to Karnal town, setting up of Kalpana Chawla Medical College and the countrywide recovery from recession. The builders are getting good response to their projects, be it housing projects or mini-township projects. The investor interest has buoyed up the realty sector in the area. Sumit Mittal, sales executive of CHD builders, said his company has completed its 150-acre township project and an extra 50 acres have been purchased to build another 100-acre complex. “All the flats have been sold and only a few plots measuring between 360-1,000 sq. yd are still available for sale”, he added. In Palms Regency (5.03 acre) also, all units have been sold and many are now available for resale at a premium. The first phase of the Alpha International City spread over an area of 114 acre is totally sold and here, too, re-sale is fetching a premium of Rs 5,000 per sq yd, said the company’s Marketing Manager, Nitin. Ansal’s self-contained township near Sector 36, which is spread over an area of 97 acre, has been totally sold out and Sushant City, coming up over an area of 140 acre adjacent to it the plots which had already been sold, are being resold and are fetching a premium of Rs 8,000 to 10,000 per sq. yd. The proposal to open a private aviation school at Karnal, work on six laning of the GT Road on a fast track, upcoming Rs 25,000 crore petrochemical Hub near Panipat are bound to boost the demand for plots and flats in the area. This will further fuel the prices of land, observe real estate watchers. About 40 per cent buyers are purchasing land and flats for settling here while the remaining 60 per cent are acquiring property for investment purposes as experts foresee boom in real estate sector in the next two or three years, said Suresh a property dealer. However, the way the prices of land and flats are shooting up and HUDA is vying with private builders to make more money, it is high time that a regulator is appointed for realty sector to protect the interests of common man.
Cold response to malls
Two spacious shopping malls that have come up in vicinity of the town, however, have not been a big success. While the Super Mall is struggling to woo retailers, the Harsha K3 Mall, too, has not generated good response. “Over 60 per cent of the total 65 shops have been sold out, of which 14 shops are operational and the Vishal Mart which has shifted to our mall has made a difference and talks with big brands are on”, Manager of Super Mall, Pawan Kalyan said. Multiplexes, which are drawing crowds, seem to be the only positive aspect for these malls but the consumers complain that the service provided by fast food centres, inside the theatres is not very good.
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Policy blues
Sandeep Goel The real estate and infrastructure sector is among the top employment-generating sectors in the country, but unfortunately this is on the most neglected list of the Punjab Government. There is urgent need to make the current system more people friendly which, in turn, will bring in more revenue for the state exchequer and less harassment for people. This will benefit Punjab which is desperately in need of more new investors and projects. The realty sector in the neighbouring Haryana and Himachal Pradesh has progressed largely due to the investor friendly attitude of the state governments. The positive official approach has brought more projects and investments to these states leading to more revenue and employment generation. On the other hand the revenue of Punjab has reportedly fallen by about 28 per cent in the past few years. The Model Building Bylaws — 2010, that were notified in March 2010 are still awaiting implementation by the Municipal Corporations of Patiala, Bhatinda, Jalandhar, Ludhiana and Amritsar. One of the major points in the BJP’s election manifesto was the enhancement of validity time period for the completion of a project/construction of the building from present two years to five years. But ironically, nothing has been done in this regard in spite of a BJP minister having the charge of the Ministry of Local and Urban Bodies for the past three-and-a-half years. “Two years is too less a time to complete the constructions of housing and other major real estate projects as the builder has to take clearances from a number of departments like financial, environment, pollution, forest, PWD, electricity etc. To get the clearances from all the departments and to complete the project in two years’ time is very tough”, says Ashwani Kumar, who owns a shopping mall in Patiala. The failure to complete the project within the stipulated time limit means that the promoter has to seek all the permissions and clearances once again and deposit the charges afresh. After the coalition government took over the reigns of power, a high power two-member committee comprising Local Bodies Minister Manoranjan Kalia and Deputy Chief Minister Sukhbir Singh Badal was formed to look into the ways and means to increase revenue generation in the realty sector. The report of this committee was made public in January 2010, but sadly the recommendations of this high-level committee have not been notified and are still pending.“It is high time that the validity time period is increased to five years and that too with retrospective effect”, says D.K. Pauchauri, Director of Barnwell Builders and Developers Pvt Ltd, Kharar. This will bring a number of new projects to the state, he adds. The local bodies and urban development authorities will earn much more revenue in the form of development charges, malba charge, water charge and building application fee, and indirectly through VAT, Sales Tax and Service Tax etc. Another factor that has been discouraging for the buiders and developers is the use of different yardsticks for different promoters while approving the building plans. A very recent example is that of Tata’s Housing Project in Kansal near Chandigarh where the interest of certain politicians is involved. Permission has been given for a 22-storey project whereas initially only 11 storeys were permitted. The present building bylaws were also side stepped while approving the plans of PUDA Bhavan and Punjab School Education Board buildings in Mohali. In Mohali buildings with maximum four storeys are allowed, but for the above mentioned bodies the rules were given a go by. This pick-and-choose policy of the Punjab Government in the realty sector is worrying the promoters and thus, many of them are hesitant to launch big housing/commercial projects in Punjab and instead opt for other states like Himachal Pradesh and Haryana. It is not the builder and developer lobby that is suffering due to the apathetic attitude of the government, individual house builders are also in the same boat. A common house builder, too, has to face red tape and harassment by municipal bodies due to the faulty outdated and impractical laws and practices. Conditions like the building bylaws, two-year time period limit for the completion of construction in municipal areas, plinth level, height, boundary wall height, gate height, FAR etc, are all different for different authorities like municipal bodies, PUDA, GMADA, PIDB, Improvement Trusts etc. even though all of these come under the ambit of the Ministry of Local Bodies. It is high time, thus, to address these sore points and put the realty sector on the road to healthy progress in Punjab. — The writer is a Mohali-based consultant
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Q. I have a small house in Karnal which was constructed in 1983-84. The plot was purchased in an auction. Now I am interested to sell said house. The possible sale proceed is likely to be Rs 38 lakh.
The cost of plot and the onstruction in the said case was proximately Rs 3.5 lakh. Kindly guide me regarding the best use of capital gain so as to save tax liability. Incidentally, about Rs 22 lakh would we spent in the construction of house at MS Enclave Dhakoli (Mohali). This plot is in the name of me and my younger son. The cost index formula (escalation) may also kindly be suggested. — R. K. Verma A. On the basis of the facts given in the query, the amount of capital gain would work out at Rs 16.55 lakh. The index for 1983-84 was 116 and presently the index for 2010-11 is 711. The amount of capital gain as aforesaid has been computed after taking into account the escalation with reference to the cost index referred to herein above. The tax on the capital gain can be saved by utilising the amount of capital gain towards the purchase or construction of a residential house. The construction has to be effected within three years after the date of sale whereas the purchase of the residential house can be made within a period of one year before or two years which is after the date of sale. The amount of capital gain as is not appropriated towards the utilisation of construction or purchase of residential house till the due date of filing the tax return is required to be deposited in a bank under the capital gain scheme account by the said date. The amount so deposited thereafter can be utilised for the construction or purchase of a residential house. It may be added that the residential house so purchased or constructed should be in your name so as to avail the exemption. You also have an option to save the tax on capital gain by investing the amount of capital gain in tax saving bonds. Such bonds can be purchased within six months of the date of the sale of the residential house.
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Making a Will
Q. I want to know that if a person can Will his individual or self-acquired property to the family of his son (HUF)
— Dev Raj ( Kalka) A. A Will is a legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death. In India the provisions relating to such a declaration by a Hindu male are regulated by the Indian Succession Act, 1925, and Hindu Succession Act, 1956. A Hindu male can dispose off his self-acquired property by Will without any discretion. The provisions of law contained in the aforesaid Acts do not prohibit a Hindu to execute a Will in respect of his self-acquired property in favour of the family (HUF) of his son. Further the provisions of Section 64(2) of the Income-tax Act 1961 (The Act) would not be applicable to the property inherited by a family (HUF) of the son.
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Check documents
Q. I bought a flat in 2005 in Improvement Trust Colony in Rupnagar from the original allotee. The flats were allotted in 1996 and the condition of 10 per cent extra cost in case of allotment of a corner flat was mentioned in the sale deed between the allotee and the Improvement Trust. At the time of transfer of the said flat in my name, Improvement Trust had not informed me that any payment was pending. But now they have sent me a notice that I have to deposit an amount of Rs 88,500 after calculating the interest at the rate of 12 per cent. Please advise me what to do?
— Pardeep A. The issue raised by you can be clarified by the Improvement Trust only. May be the documents executed by the Improvement Trust in your favour contained a clause with regard to the payment of interest. You may, therefore, look into such documents as well as seek a clarification from the Improvement Trust as to the nature and the calculation of the interest charged by it. It is possible to settle the issue after you have gone through the documents and the clarification.
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No HRA exemption
Q. I am a salaried employee and am receiving house rent allowance from my employer. At present I am staying with my parents, and I am not paying any rent. Is it possible to claim exemption of the house rent allowance received from employer?
— A.K. Das A. The provisions of the Act dealing with the grant of exemption of house rent allowance specifically provide the no exemption would be allowable in respect of the house rent allowance unless the assessee has actually paid the rent for the residential accommodation occupied by him. The facts given in the query indicate that you are living with your parents and are not paying any house rent. You are, therefore, not entitled to claim any deduction in respect of house rent allowance.
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Life is short and vulnerable too. That’s why man always looks for safety, security and shelter. More the means he has more safe and secure he wants his life to be. Bomb proof housing is the latest; the rich and famous are looking for Mukesh Ambani has built a bomb proof bungalow in Mumbai by spending Rs 120 crore on it. The common man, however, having no means to spend that much should take following few precautions to make his life as safe and secure as possible:
Go for quake resistance
It is not possible to build an earthquake-proof house. Therefore, choose earthquake resistant design. Check the seismic zone of your house location and get it designed accordingly. Choose beam-column framework. Provide beam network at plinth, door and roof levels. Restrict the number of storeys. Avoid heavy loads or heavy water tanks on the roof. Keep doors and windows away from corners by at least 2 feet. Stagger the laps provided in the reinforcement steel. Prefer a strong column-weak beam combination to a strong beam-weak column combination. Keep the column dimension a minimum 1 foot. Don’t keep the size of doors and windows too large. Restrict the number of openings in walls and provide reinforcement around them. Reinforce beams to take care of reversal of stresses.
Take care of cantilevers
Cantilevers are often found failing and falling. The main reason is the wrong placement of reinforcement steel which should be placed near the top face of cantilever slab. Provide proper anchorage to cantilever beams and slabs. Take special care during the construction of cantilevers and call an engineer to check its anchorage, steel placement and shuttering.
Foolproof electric wiring
Avoid a short circuit in your house. This is the most common cause of fire breakout. It occurs when two points in an electric circuit having a potential difference accidently come in contact with each other. It happens when electric wire’s insulation breaks down or when overloaded wires get overheated causing damage to wire insulation. Therefore, never buy inferior or substandard wires. Use only ISI marked wiring of reputed make. Choose copper electrolytic grade 99.97% pure wires only. These will withstand heavier overloads. Prefer wires with three layered insulation and water resistant coating.
Sound earthing
Use three pin plugs for maximum appliances. Provide good earthing system for the house and see that every electric point in the house is connected to it.
Use ELCB
Get an Earth Leakage Circuit Breaker (ELCB) provided in your house. It will save you and your family from electric shock. Any small leakage of current will make it trip. Sometimes, an ELCB causes irritation during rainy season. However, safety from shock is more important and ELCB must be provided, covering full wiring of your house.
Use secure fan hooks
Ensure that the fan hooks provided in the roof slab for hanging the fans are fully secure. While laying the slab, see that these get full anchorage. Later, get them checked by putting load on them. Ensure that no fan hook is weak enough to give way.
Avoid LPG geysers
Geysers are used in winters when the windows and ventilators of bathrooms are kept shut. Exhausts, too, are not running. This is an ideal condition for a gas geyser to prove fatal for the person having a bath. The best way to use a gas geyser is to install it outside the bathroom and to run a pipe from it to the hot water tap.
Use sockets with shutters
These days, sockets with shutters are available in the market. Use these in the kid’s room. Kids are habitual of inserting needles in the sockets. Shuttered sockets save them from electric shock.
Hinged jallis for floor traps
Often, the bathroom floor traps are provided with removable jallis which get displaced, leaving the floor trap open. These may allow a snake to crawl into the bathroom. Provide jallis hinged to frames over floor traps and see that these remain in closed position.
Use gas alarm in kitchen
Many modular switch manufacturers are producing gas detector devices which sound an alarm bell on gas detection. Get one installed in your kitchen. It may prove invaluable and save a life. More tips will follow next fortnight.
— This column appears fortnightly
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Affordable and feasible
Even though the luxury and premium segments in the housing sector have been buzzing with activity in the second and third quarters of 2010, the affordable housing segment has not lost its sheen. A two day conference “Affordable Housing Development Summit” is going to be held in Delhi on November 29-30 in New Delhi, to pave the way to provide affordable housing for all in India. With the maximum demand being in this segment, providing residential accommodation which is within the reach of a salaried person is, no doubt, the need of the hour. However, not many builders are enthusiastic about venturing into this segment as the profit margins are slim. But for some it is the winning formula as ready demand in this segment means 100 per cent sale. Raglan Infrastructure Limited is one such company in the tricity that has come up with as many as five projects in less than a decade providing houses to middle income group buyers. The Managing Director of the company Ritu Singal, talks about the affordable housing scenario in the region. What is the latest benchmark in affordable housing? As a builder my endeavour is to offer a price range in which a service class buyer can afford to fit in the monthly EMI in his budget. Though one keeps reading about the thin line between the affordable and mid-segment and how the price threshold of affordable segment has seen a rise, I would say that the latest benchmark in affordable housing varies between Rs 14 lakh and Rs 24 lakh depending upon the accommodation and area of the flat. In our current project we are offering a three-bedroom flat for Rs 15.61 lakh and a four-bedroom one for Rs 24.71 lakh. Though there is huge demand in this segment, many builders, including some big players, have scrapped their projects on the pretext of economic non-feasibility. What are your comments on this. The policy and vision of each builder is different. The affordable housing can only be enjoyed by the one who has mission to serve the society irrespective of the margin of profits. Yes, some builders have scrapped their projects. As far as I understand there is a substantial margin pressure due to rise in material cost, product mix and interest burden. How can builders/developers make profit while keeping the costs low for the buyers? The builders/developers can make profit by negotiating the prices as the quantum of purchase does matter and by completing the project on time, as delays can create cost escalation of project. High turnover helps the builders to maintain profits even after reducing the margin of profit on a single unit as we do. We can reduce input cost by proper supervision, control of resources, nil pilferage and wastage. Does it necessarily mean compromise on quality? No, it is never a compromise on quality, as the builder can only survive for long in market if he is trusted for his product. From my own experience I can tell you that the maximum number of flats in our projects have been sold on references of our old satisfied clients. Rather our endeavour is to improve the quality thereby may be we lose a bit on profits but earn a lot in terms of trust and appreciation. What made you target this segment only as most of your projects are in the affordable range? What makes you stay away from luxury and premium projects? We are trying to create some value by providing shelter to those who are staying on rent and by just converting their rent into EMI they have their own dream home. There is some sense of achievement felt when our clients tell us, that they could purchase their own house because we offered it in their range and our projects are 70-100% occupied by the end-users. What is the demand in this segment in the tricity area? There is a huge demand. The tricity has a majority of service class people and houses in Chandigarh /Panchkula/ Mohali are beyond the reach of common man. Thus, the periphery areas with their affordable housing projects are the ideal choice for home buyers. How helpful have the government policies been for this segment and what do you find lacking in this regard? The govt. policies have definitely been positive, like giving benefit in terms of taxes up to Rs 1.5 lakh of interest and few others, yes there are few irritants like imposition of service tax and frequent increase in collector rates as well. — As told to Geetu Vaid
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The real estate and infrastructure sector is among the top employment-generating sectors in the country, but unfortunately this is on the most neglected list of the Punjab Government. There is urgent need to make the current system more people friendly which, in turn, will bring in more revenue for the state exchequer and less harassment for people. This will benefit Punjab which is desperately in need of more new investors and projects. The realty sector in the neighbouring Haryana and Himachal Pradesh has progressed largely due to the investor friendly attitude of the state governments.
Life is short and vulnerable too. That’s why man always looks for safety, security and shelter. More the means he has more safe and secure he wants his life to be. Bomb proof housing is the latest; the rich and famous are looking for Mukesh Ambani has built a bomb proof bungalow in Mumbai by spending Rs 120 crore on it. The common man, however, having no means to spend that much should take following few precautions to make his life as safe and secure as possible:
