Poor Namesake
The sleepy town of Mullanpur, adjoining Chandigarh, has become a realty hot spot. With investors and realtors making a beeline for the area that falls in Punjab, a proposed change in its name to ‘New Chandigarh’ has sparked a debate. Is there a hidden agenda here? Whether the area will live up to its new name remains to be seen, reports Rajmeet Singh 

Located on the northwest periphery of Chandigarh, the Mullanpur area is being seen as the next realty goldmine by investors, end users as well as developers in the Tricity region. The area’s proximity to Chandigarh is its chief attraction, and it has even been projected as an extension of the City Beautiful by some promoters. But it is not only the promoters who are trying to rake in moolah by using the name of the internationally-acclaimed stature the country’s first planned city, even the Punjab Government, apparently under pressure from the realtors and bigwigs, has decided to re-christen the township as ‘New Chandigarh’. And there lies the catch, as gullible investors may get taken in by this subtle twist in the name. To the investors and end users, living in far-flung towns and cities, residential and commercial property is being passed off as part of Chandigarh.

In order to get a healthy share in the profit pie, several politicians, too, have purchased large chunks of land in the area.

While the builders claim that Mullanpur is an emerging area and its biggest advantage is its proximity to the north of Chandigarh, investors lament that residential property was being offered at a price of around Rs 18,000 per sq yd where as there was no infrastructure. “Using Chandigarh’s name, where the price of residential plots is around Rs 74,000 per sq yd (as per the auction held by Chandigarh estate office in December 2009), is inappropriate as the area is not part of Chandigarh and also has virtually no infrastructure. The government and promoters seem to be in collusion”, said Rajendra Ghuman, a Kolkata-based investor, who almost finalised a land deal here as the seller “conveniently” forgot to mention that Chandigarh Extension was actually part of Punjab and not UT.

Sources in Punjab’s Department of Housing and Urban Development Department disclose that the new nomenclature (approved by the Punjab Chief Minister Parkash Singh Badal in a recent meeting of the Punjab Regional and Town Planning and Development Board) had been chosen deliberately as it would help realtors and the state government to market the township across the country and abroad.

“No one knows Mullanpur. By associating Chandigarh’s name, we will be able to market ourselves well”, said a senior government official, while giving the logic that since the upcoming township was conceived as an eco-friendly urban settlement, so it would be appropriate to rename it as ‘New Chandigarh’.

Questioning the need to rename Mullanpur LCA as ‘New Chandigarh’, Jit Kumar Gupta, the national vice-president of the Indian Institute of Architects (IIA) said, “As if the massive urbanisation allowed by Punjab in the form of high-rise buildings in the Chandigarh’s periphery in the northwest resulting in the UT’s urban decay and burden on infrastructure was not enough, the Punjab Government also wants to cash in on the name of the City Beautiful. It seems to be an exercise to help the private colonisers and other vested interests”.

Wither infrastructure

While the Punjab Government has gone all out to rename Mullanpur township as ‘New Chandigarh’, it has failed to put in place a similar infrastructure here. Planned on about 6,123 hectares in Chandigarh’s periphery, town planners believe that the upcoming would not gel with the character of the City Beautiful.

Projections on the demand of civic amenities such as water and electricity generated by urbanisation in Mullanpur could further burden the limited resources available in the area.

Based on the low-density land use projection and population of two lakh by 2031 in the Mullanpur planning area, the water and electricity demand has been put at 165 million litres (MLD) and 790 MW per day, respectively. Planning for the solid waste management and transportation network is still a far cry. It has been over a year since the notification of the Mullanpur Masterplan, proper roads and provision of adequate water and electricity supply still remain a dream etched on paper.

So far, the approved projects in the pipeline are the 1,200-acre Super Mega Mixed Use Integrated Industrial Park by DLF that will have about 6,000 houses for a population of around 80,000 apart from commercial and institutional pockets; a 126-acre mega housing project by Greater Punjab Officers Cooperative House Building that will have around 600 houses for a population of 8,000; a state-of-the-art hotel along the Chandigarh-Siswan road, and a mega housing project by Omaxe on about 170 acres having 1,100 residential units housing 16,000 people. All of these will be located within the 5 km radius of the PGI, Chandigarh. The Greater Mohali Area Development Authority (GMADA) is also coming up with a 400-acre urban estate project near Mullanpur.

In addition, Punjab cadre civil services officers, including the IAS and IPS, have formed the IAS and PCS Cooperative House Building Society at Shingariwala village just 2 km from the PGI, which is the closest to the Union Territory. This will have around 500 houses apart from commercial and institutional pockets.

Buoyed by the rising land rates (touching Rs 3 crore per acre), the area has become a favourite hunting ground for investors, primarily comprising bureaucrats, politicians and the influential builders’ lobby. 

“When Mohali city has already been extended to 128 sectors and it will take another 50 years to fully urbanise the extended Mohali city, there is no need to expose the eco-fragile periphery of Chandigarh. It seems to be an exercise to help the private colonisers and other vested interests. No study has been conducted on the impact of so much urbanisation in the Mullanpur area”.

— Jit Kumar Gupta, vice-chairman of the Indian Institute of Architects

Housing loan limit of Coop banks curtailed

Cooperative banks across the country will now not be able to sanction housing loans beyond five per cent of their total assets. Earlier, the state cooperative banks (StCBs) and central cooperative banks (CCBs) were allowed to extend housing finance up to 10 per cent of their total loans and advances.

These banks have been asked to initiate steps to bring their lendings down to the revised limits within six months.

The assets of StCBs and CCBs may be reckoned on the basis of the audited balance sheet as on March 31 of the preceding financial year. The decision of the RBI would curtail exposure of such lenders to real estate.

The revised limit of credit exposure for housing would be applicable with immediate effect. The StCBs and CCBs were earlier allowed to give house loan to an individual borrower up to Rs 20 lakh. In case of a bank having a net worth of Rs 100 crore and above, the limit was Rs 30 lakh. —PTI

TAX TIPS
Tax liability on acquired land

Q. My land in Ghassni has been acquired by NHAI. It was not under cultivation and is in 5 km of MC Parwanoo and Kalka. Tell me whether the compensation amount received is taxable or not. I have also received compensation for the trees which were on the above mentioned land. The payment for the trees has been made separately to me by the NHAI. Do let me know whether the sum received as value of trees is taxable or not?

— Neeraj, Kalka

A. Your queries are replied hereunder:

In accordance with the provisions of the Section 10(37) of the Income-Tax Act, 1961, (The Act) capital gain arising from the transfer of agricultural land which is situated within the Municipal area or within such distance as notified by the government is exempt from tax provided;

Such land during the period of two years immediately preceding the date of transfer was being used for agricultural purposes by the assessee or his parents.

The transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India and the compensation or consideration for such transfer is received by the assessee on or after April 1, 2004.

You have indicated in the query that the agricultural land has been acquired by the National Highway Authority of India and is situated within the notified distance but the agricultural land was not under cultivation. The requirement of the agricultural land being used for the agricultural purposes is a requirement to be met for non-taxabiliy of the compensation. In your case this condition is not met. In view thereof the amount of compensation should be taxable. You have not indicated in the query whether the compensation was approved or determined by the government. However, for the purposes of reply to your query, this requirement is of no significance since the compensation received would be taxable in view of the condition regarding the usage of land for agricultural purposes not having been met.

You have not indicated in the query whether the amount received as compensation for the trees standing on the land had been grown by you and agricultural operations had been carried on for the growing of such trees. If this condition is met, the amount received as compensation for the trees may not be taxable. Moreover, any receipt on account of the sale of trees that have grown spontaneously on the land would be taxable. 

No deduction on loan for plot

Q. I have purchased a residential plot in Gurgaon after taking loan from a few of my friends. I am paying substantial interest for such borrowings. I want to know whether

I can claim deduction of such interest paid/payable for purchasing a plot of residential house?

Can I claim deduction in respect of repayment of loan raised for buying a plot?

— Rattan

A. Your queries are replied hereunder:

The interest paid in respect of the amount borrowed for purchasing a plot is not allowable as deduction under any provisions of the Act.

The deduction under Section 80C of the Act is allowable against the total income in respect of repayment made towards the amount borrowed from bank, etc. for the purchase or construction of a residential house. Such deduction is allowable within the overall limit of Rs 1 lakh specified in the section. You would not be entitled to claim any deduction in respect of repayment made towards loan borrowed for the purchase of a plot.

Rebate on loan for under construction house

Q. Can there be a tax rebate for construction loan for house still under construction?

— Ravi

A. As per Section 24(b) of the Income Tax Act, where a property has been acquired, constructed,repaired, renewed or reconstructed with borrowed capital, the amount of interest payable on such capital shall be allowed as deduction subject to other conditions stated in the said Section.

Further, the interest payable on such capital for the period prior to the year in which the property has been purchased or constructed, shall be allowed as a deduction in five installments, starting from the year in which the property has been purchased or constructed.

In view thereof, you will be eligible for deduction of interest on loan for the pre-construction period in five installments, staring from the year in which the construction of the house is completed subject to the maximum limit mentioned in the said Section.

However, no deduction shall be allowed for the principle component of the loan, because deduction under Section 80C(2)(xviii) of the Act is allowed only in cases where the income from residential house property is chargeable to tax under the head house property, i.e. the house should be complete in order to claim the aforesaid deduction.

Share in father’s property

Q. We are two brothers and one sister. My father got married twice. From the first wife (who is not alive now) I am only son, and from the second wife my father has one son and one daughter. My father has some ancestral property and some self-acquired property. So I want to know how much share I can claim legally in all the property if my father does not want to give me any share in his property. At present I stay separately from my father.

— Manjeet Kumar

A. On the basis of the facts given in the query, you would be entitled to one fifth share in the ancestral property. This is in accordance with the provisions of the Hindu Succession Act 1956 read with the provisions of Hindu law. As to the property purchased by your father from his own funds, it may not be possible for you to claim any share therein as your father has all the right to decide with regard to inheritance of such property after his death. 

Joint loan and rebate

Q. My wife and I are government employees. We had purchased a flat in joint names and taken a loan from the HDFC in our names, but the installments of loan are being paid by me from my salary account. Please tell me whether I can claim the rebate on loan interest from my income. My second question is that a piece of agriculture land (which was transferred in my name after the death of my father) was acquired by government and a cheque amounting Rs 3,03,750 was issued by the department concerned in my favour after the deduction of TDS on the cost of land @ 10 per cent. Explain under which scheme should I invest this amount as TDS has already been deducted from the total income and is it compulsory to mention all these transactions in the IT return and which form should I fill?

A. Your quires are replied hereunder:

A deduction in respect of repayment of the amount borrowed by the assessee for the purposes of purchase or construction of a residential house property is allowable within the overall limit of Rs1lakh specified under Section 80C of the Act. On the basis of a strict interpretation of the language used in the Section, you should be entitled to claim deduction in respect of the amount borrowed by you. In case the installment towards the repayment covers the borrowing made by your wife, you may not be able to claim the deduction in respect of such repayment. Interest paid/payable on the amount borrowed for the purchase or construction of a residential house is allowable as deduction from income from house property. The amount of interest paid/payable in respect of the amount borrowed by you would be allowable as deduction against such income.

Any amount of compensation received on the compulsory acquisition of agricultural land situated within the limits of the municipal area or within such distance of the municipal area as is notified by the Central Government is exempt from tax provided;

The agricultural land was being used within two years immediately preceding the date of acquisition for agricultural purposes by yourself or your parents;

The agricultural land is acquired under any law or the compensation is determined or approved by the Central Government or Reserve Bank of India; and

The consideration in respect of the acquisition is received on or after April 1, 2004.

In case the said conditions are satisfied, the amount of compensation would not be taxable and you should be able to claim the refund of tax at source deducted from the amount of compensation received by you. You can file your tax return in Form ITR-2 for claiming the refund of tax deducted at source. The fact that compensation is exempt from tax will have to be mentioned in the Income-Tax return.

Not ready to pay penalty

Q. I bought a flat in the Improvement Trust Colony in Jalandhar from an original allottee. At the time of transfer of the flat in my name, the Improvement Trust had issued the demand notice. On depositing the transfer fee the Trust issued me a no-dues certificate and transferred the said property in my name. The state government has issued a notification to get the sale deed on the allotment money. I applied for the same but the Trust issued a letter asking me to deposit the first installment with penalty. Can the Improvement Trust demand penalty after issuing the no-dues certificate and receiving the full and final payment? I am ready to deposit the installment without penalty. Please advise me what to do.

— Surat Chander

A. The facts of the query are not complete as you have not indicated whether the original allottee had paid the full amount due towards the acquisition of the flat. You have also not indicated whether you have obtained the copies of the receipts issued by the Improvement Trust towards the payment of the consideration for the acquisition of the flat. In normal course, such documents are obtained by the purchaser at the time of making payments for the purchase of the flat. It is also not evident from the facts given in the query as to how the seller could have entered into agreement with you for the sale of flat without making payment of the first installment. The fact that you have agreed to make the payment of the first installment gives an indication that there is some error which has crept in. In case the payment of installment had not been made and factually there is delay in making such payment, any consequent charge as per the agreement with Improvement Trust would be leviable. 

GROUND REALTY
Scoring high on energy efficiency
Jagvir Goyal

Climate change, global warming, environmental pollution — these are some of the new household words these days. After the Copenhagen summit, every one is trying to come to terms with these phenomena. Those amongst us, who weigh everything financially, have an arousing interest in carbon credits. The fact that carbon credits can earn some income for one has motivated a few banks to devise schemes to buy carbon credits from people, sell them to the developed nations and earn money for the individuals as well as the banks. Any building or industry that saves energy can earn carbon credits. At the same time, one also makes direct savings through energy efficiency.

An energy efficient house is one that makes the best possible use of natural light and air and consumes minimum of energy and water. This can be achieved by cutting down certain consumptions and by adding such features to one’s house which allow natural air and light to flow in, conserve water and minimise the use of air conditioners. Here are a few tips which can make a house energy efficient:

Right Orientation

Proper orientation of your house to the sun is necessary to shield it from heat. The window area should not be less than 10 per cent of the floor area of the house so that good natural lighting is received in the rooms. Depending upon the direction of your plot, see that the doors, windows and ventilators are so placed that they catch as much of breeze as possible.

Insulate the roof

Insulate the roof of your house well. Expanded polystyrene roof insulation should be used to insulate the roof against heat. Alternatively, terrace should be covered with reflective roof paints so that there is minimum load on the air-conditioning system. These days, Fevimate, a roof insulation material is being used frequently to insulate the roof.

Double glazing in windows

Use aluminium windows with double glazing in your house. Double glazing should be heat strengthened with 12 mm air cavity and outer glazing coated with low e-coating. Such double glazing sealed units prove effective in insulating the rooms from outside heat. As a result, the rooms remain cool and lesser use of AC is required in summers. The load on ACs also gets reduced. Sealed double glazing units should be bought from a reputed company only as they provide 10-year guarantee against entry of moisture between the two glass sheets and provide silica gel balls in these units to soak moisture.

Solar water heaters

Use solar water heater system for hot water instead of electric or gas geysers. The latest models of solar water heater system are very effective and serve the purpose well. Electric geysers consume a lot of power while the gas geysers are proving highly dangerous these days. Solar water geysers are installed on the roof and pipes carrying hot water are run to various bathrooms or toilets.

Central cooling system

If you are building a new house, make arrangements to install a jumbo sized cooler on the roof and run air ducts from it to different rooms of your house. This simple arrangement pays dividends by reducing the power consumption. Coolers installed in the windows of all rooms look ugly and spoil the front elevation of a house. Many house builders are adopting this cooling system in North India. While installing the cooler on the roof, arrangement is also made to release water to fill the cooler from the living floor level itself by providing a stop cock on the water pipe run to the cooler inlet.

Run AC at optimum temperature

Use power efficient ACs. BEE has made it easy to find a power efficient AC by introducing star ratings. Choose three star ACs for windows as four star or five star window ACs are not available in India so far. Use four-star or five-star split ACs where required. Install ACs of right cooling capacity as per size of a room. There is no use of installing an AC of more or less capacity. General thumb rule to find the right cooling capacity of ACs in tonnes is to find the square root of the floor area of the room, divide it by 10. An AC with larger than required tonnage will cool too quickly and you will keep switching it on and off frequently. It will rather prove uncomfortable for the user. Comfort air conditioning means running an AC at 23 to 24 degree C not at 18 degree C. This will help in reducing power bill also.

Use CFLs

Use CFLs instead of conventional bulbs. These will help in saving a lot of electricity. Use slim tubes and CFL luminaries where required. A 11W CFL gives illumination equivalent to 60W Tungsten filament lamp. A 20W CFL is equivalent to 100W bulb. General formula is that 1 watt of CFL gives illumination equivalent to 5 watts of conventional bulb. CFLs are available for 7W, 9W, 13W, 15W, 23W, 26W, 35W, 45W, 65W and 85W also.

A porch or garage for vehicle parking

Build a porch or garage in your house and always park your vehicle in it during summers. That’ll help in reducing the load on your car AC as well as petrol consumption.

Provide rainwater harvesting arrangement

Rainwater harvesting should be used and zero drainage to municipal storm water drainage system should be ensured. Many housing and urban development authorities are making its provision in a house mandatory. This arrangement can be easily provided when the construction of a house is in progress.

Dual flushing cisterns

In order to save water equip the flushing cisterns with dual flushing equipment. Such cisterns can discharge partial or less quantity of water according to the usage. For partial discharge, chain or handle is just pulled once and left. For full discharge, chain or handle is pulled and held that way till full discharge takes place. Saving of water by a family through this measure can be substantial.

In the latest models, you’ll find two separate push buttons for short and long flushing. Sanitaryware manufacturers are producing dual flushing cisterns with different discharge capacities. Earlier, the partial and full discharges were 5 litres and 10 litres, respectively. Now, the manufacturers have come out with 3 litre-6 litre combination or even 2 litre-7 litre combination. However, 5 litre-10 litre combination remains the best for proper flushings.

Avoid flush valves

Avoid using flush valves in toilets. Flush valves remained prevalent for sometime but were soon rejected in view of large volumes of water used by them. All the water contained in the pipe up to the tank gets drained when a flush valve is used. Cities like Mumbai have banned their use in an effort to save water. Secondly, flush valves make a lot of noise during flushing, reason for this being the fast flow of water in the pipe under gravity. During night hours, this loud noise is often disturbing.

Leak-proof taps

Taps are often found leaking in the houses, especially in the front and back courtyards. Keep them leak-proof. Often, a simple washer needs to be replaced to stop leakage from taps. Leaking taps cause wastage of a lot of water.

REAL TALK
Small builders need protection
Pradeep Sharma

Satish Jindal, Managing Director of Barnala Builders, is a builder with a vision whose two residential projects under the brand name Maya Garden at Zirakpur have set a benchmark for luxurious living at affordable prices. The builder, who launched the Phase III of the Maya Garden recently, firmly believes in customer satisfaction and transparency with a view to meet the expectations of the hi-end customers. In an interview with the Real Estate Tribune, Jindal says that quality of construction, affordable prices and ethical dealings with the customers are success mantra for any developer:

Q. With the coming up of the major residential and commercial projects, Chandigarh’s periphery is bursting at seams. Is there enough room for all major and minor players in the realty market?

A. In the next few years Chandigarh’s periphery is set to surpass even the metropolitan areas in terms of construction and population. With faster connectivity, particularly in the wake of the forthcoming Metro project connecting Chandigarh with the neighbouring townships, city’s vicinity is set witness a construction boom in near future. This provides enough space for all local and national real estate players in the region who cater to different segments of society.

Q. How do you foresee the realty market in the coming decade?

A. With recession being over, the confidence of the banking industry and financial institutions in the real estate developers, investors and end-users is being restored. Since “roti,kapda and makaan” are the basic necessities of life, the real estate market can look forward to bright future in the years to come. As property still remains one of the best investment options, the property market will grow by leaps 
and bounds.

Q. What kind of competition the local builders face from major builders who have pan-India presence?

A. With huge resources at their command, the big builders pose a major challenge to the local builders. However, even in the face of stiff competition the small builders’ track record of giving quality construction at reasonable prices has been acknowledged by the investors and end users. However, the small builders need protection from land sharks through government legislation with a view to provide them a level playing field.

Q. What are your comments on the government policies vis-à-vis the realty sector?

A. Both the Central and the state governments have realised that the real estate sector forms an important part of the Indian economy. With that end in mind the governments have started giving incentives and formulating pro-builder policies. The role of the construction industry as the major indicator of the state’s economy’s is also being recognised by the Punjab Government.

Q. What is the USP of your latest venture — Maya Garden-3?

A. The project, having 230 finest apartments, will redefine international luxury living in the region. The 3 BHK/Penthouses AC apartments will be fully furnished providing already fitted amenities like geysers, split ACs, fans, RO system, tube lights / CFL. Club house and round the clock security will be the value additions in the project.

REALTY BYTES
Contract awarded

Realty major Lodha Developers has awarded the Rs 450-crore contract for civil construction of its tallest residential building in Mumbai—World One—to a joint venture between Arabian Construction Company (ACC) and Simplex Infrastructure.

“ACC brings unique knowledge of high rise construction and global best practices and Simplex provides significant capability and resources in the Indian context. We believe that this consortium is best suited to build independent India’s most iconic building,” Lodha Group’s Managing Director Abhisheck Lodha said.

ACC has constructed some of the tallest buildings in the world, including Princess Tower, Dubai (100 floors), Etihad Towers, Abu Dubai (74 floors) and Pentominium, Dubai (100+ floors), a press note issued here said.

The 117-storeyed residential project is expected to be completed by 2014.

Construction work begins

The foundation laying ceremony was recently held at Avenue 71, a premium residential project by CHD Developers. Avenue 71, with a total saleable area of 1.6 million sq ft is spread over an area of 16.5 acres, (G+4 / G+14 storeys) is located in Sector 71, Sohna Road, Gurgaon. With a worth of over Rs 800 crore, the project aims to bring a new level of elegance in Delhi/NCR.

Speaking on the occasion Gaurav Mittal, Managing Director, CHD Developers Ltd. said, “It marks the beginning of our endeavor to offer world class lifestyle to the residents. With this high end township we are determined to set higher standards of global features and state-of-the-art architecture.”

The project was launched in mid 2010 and has received a very encouraging response since then. The initial phases of Avenue 71 have been booked by majority of end-users in a record time. The construction has begun and the project will be ready for delivery in 2013.

The township offers 2, 3 and 4 BHK apartments. The master planning of the project has been done around the flora rich Central Avenue to keep the residents in touch with nature. An immaculate world of tranquility awaits to welcome the elite.

Ravi Saund, Head Business Development, CHD Developers Ltd. present at the bhoomi pujan said, “Having received a Gold Certification from the Ministry of Environment and Forests, CHD Developers Ltd. has taken all measures to create Avenue 71 as an energy efficient and environment friendly township. It is carefully designed keeping the idea of water and electricity conservation in mind. The township promises zero water discharge. The architecture maintains a balance between energy usage and design excellence, and the results are simply phenomenal.”

Dhoot Group bags MoD project

Dhoot Group, a Kolkata-based conglomerate with pan-India presence, has been awarded a Rs 225-crore project by the Director General, Married Accommodation Project, Ministry of Defence for the construction of 1,585 units for the Army and Air Force at Ahmedabad, Chilloda, and Gandhinagar region.

Making the announcement at the start of the project Pawan Dhoot, Managing Director, said, “The total project is spread across on an area of 80 acres for the construction of about 19 lakh sq. ft, which will create thousands of jobs in Ahmedabad and strengthen our relations with vendors and suppliers. We have kept a 25-month timeline for the completion of the project, and the work at the site has started now to meet the set deadline“.

GTM Builders to invest Rs 250 cr

Real estate firm GTM Builders and Promoters will invest Rs 250 crore over the next three years to develop two projects and announced signing of cricketer Harbhajan Singh as its brand ambassador.

The company would develop a housing project ‘GTM Greens’, comprising 750 units at Sonepat in Haryana, while a shopping mall-cum-hotel project at Dehradun in Uttarakhand.

“The investment, including land cost, in the housing project would be Rs 150 crore and Rs 100 crore on commercial project,” company’s Chief Executive officer Neeraj Aggarwal said. The project cost would be met through internal accruals and advances from customers, he said, adding that construction works on both these projects would start in six months. For the housing project, GTM has entered into a marketing tie-up with DHFL Property Services Ltd. “We have got an exclusive right to sell 500 housing units in this project,” DHFL Property Services Ltd Business Head Satish Kulkarni said, adding that group company Dewan Housing Finance Corporation Ltd (DHFL) will give home loan to buyers. Aggarwal of GTM said the housing project has been launched at Rs 1,499 per sq ft. In Dehradun, the company will build a shopping mall covering 3,50,000 sq ft and a budget hotel having 104 keys. — PTI 

This column appears fortnightly. The writer is deputy chief engineer, civil, PSEB. He can be reached at www.jagvirgoyal.com 

A win-win situation
The interest subvention scheme is a good option for homebuyers, writes Harinder Singh

The country’s largest lending agency, the State Bank of India, has come up with a new scheme that is expected to give the much needed fillip to the realty sector and increase home sale. The interest subvention scheme, as it is known, envisages a special arrangement between SBI and the builder offering under-construction homes for sale.

The SBI Scheme has a provision wherein the rate of interest for the home loan taken by the buyer would be paid by the builder until the construction is complete. The buyers will have to pay the interest on their EMI only after they get possession of the home.

Under the subvention scheme, the consumer planning to buy a house by going in for a home loan makes only an upfront payment of 15-25 per cent of the home price to the developer while the rest is disbursed to the developer periodically by the bank with which the developer has a prior tie-up.

The consumer does not pay anything thereafter till the delivery of the flat or for the period (example- one, two or three year) for which the offer is valid — depending upon the nature of the scheme. The developer in turn pays the pre-EMI amount (which is only the simple interest component) to the bank in phases. After the delivery of the flat, the customer starts paying EMI, which constitutes both principal and interest, till the loan period ends.

For people staying in rented homes, it makes absolute sense to go in for this because on the one hand, they are not burdened by additional monthly payments till they shift to new flat, and on the other the extra interest payment due to delay in delivery time falls on the developer, prompting him to speed up construction The new scheme may also prove beneficial for the bank as it reduces chances of default.

As for the developer, apart from a direct boost in customer confidence, this will also provide a flow of funds from the banks indirectly with the developer having to dish out lower interest rate of 9-10 per cent on home loans in comparison to 12-14 per cent on builders’ loan from bank

Banks are now extremely cautious in choosing the developers, and only those with a good track record and credibility to meet completion commitment will be considered.

Global property investment set to rise

Global direct real estate investment is forecast to rise 20 per cent this year to $380 billion, led by a sharp rebound in the United States, with total volumes still about half the market’s 2007 peak, a report said.

Investments in commercial real estate — mainly offices, malls, and industrial properties — had reached $316 billion in 2010, a 50 per cent jump from an eight-year low of $209 billion in 2009, property consultancy Jones Lang LaSalle said.

Investment volumes soared to $759 billion at the market’s peak in 2007, before the property bubble burst and helped trigger the 2008 global financial crisis. “Barring further sovereign debt crises or financial shocks, the momentum of 2010 is expected to continue over the next 12 months and we predict global volumes for 2011 should increase by 20 to 25 per cent,” said Arthur de Haast, head of the firm’s International Capital Group.

For 2011, Jones Lang expects volumes in the Americas region to jump 40 percent to $135 billion from last year, and for the Europe, Middle East and Africa (EMEA), and Asia Pacific regions to rise by between 10 and 15 per cent to $150 billion and $95 billion, respectively.

“The Americas’ recovery has mainly been underpinned by investor interest in core gateway cities like New York, Washington DC, San Francisco and Rio de Janeiro,” said Steve Collins, a Jones Lang managing director.

In the United Kingdom, Europe’s largest market, 2010 volumes were up by 46 per cent to $49 billion, as investors targeted London, which is viewed as a transparent and more liquid safe haven from economic and financial uncertainties elsewhere, the consultancy said.

A number of major Asia Pacific markets also posted significant growth in 2010 volumes, including a 219 per cent year-on-year jump in Singapore, 77 per cent in Australia, 41per cent in China, and a 28 per cent in Hong Kong. — Reuters

Global direct property investment to rise 20 per cent in 2011

Volumes forecast to hit $380 bn, led by rise in Americas