Out of Limbo
An improved real estate scenario has led to the revival of several malls and hotel projects in Jalandhar, reports Deepkamal Kaur

The City Square in Jalandhar. Photos Malkiat Singh

With the realty sector back on the rails in Punjab, the construction of several mega projects including shopping malls, hotels and multiplexes that had been put in the cold storage during the slowdown has once again started gaining momentum in Jalandhar.

In fact, the work is going on at breakneck speed now at several of these projects with developers targeting to make these operational before the onset of the festival season.

The MBD Group has plans to open a mall, four-screen PVR multiplex, kids' gaming zone and a food court right in the heart of Jalandhar near BMC Chowk in two to three months' time.

The City Square project, a huge shopping complex, which is a joint venture of the local PPR group and the Saffron group, is also set to open around September end just little ahead of MBD Neopolis. DLF Gilleria on the Nakodar road is also almost ready. It will have commercial and retail space and a food court and is expected to become operational around the same time.

Yet another massive mall-cum-multiplex which is a joint project of the local Lotus Bawa group and Dubai-based EmaarMGF in Guru Teg Bahadur Nagar, which had been lying pending for the past two years, is likely to get started soon. Owner of the site Atamjit Singh Bawa said, "There was some problem in the cash flow during the recession but things have almost got sorted out now. We expect the construction work to resume soon".

The five-floor mall, which is at an intersection of three main roads, is supposed to be the biggest one in the area. It will have a covered floor area of nearly 5.5 lakh sq ft. It has a double basement parking to accommodate nearly 1,000 cars and a three-screen multiplex is to be set up by the Adlabs.

There are also other groups which have just started construction. Curo India Pvt Ltd is coming up with Curo High Street in a five-acre area on 66-ft road adjoining Urban Estate Phase-II. Dinesh Babbar, DGM Operations, said, "It is called so as the project is a unique one since the development is primarily based on an organised high street concept having the offerings of a mall as it consists of stand alone multiplex, a hypermarket, anchor stores, retail stores, restaurants, cafes and designated entertainment areas. The low-rise structures with theatres and car parking on ground floor have been specially designed keeping in mind the convenience of the visitors."

All these new malls are also a confluence of unique concepts. Rajan Chopra of the PPR Group while explaining the idea of The City Square said, "All shops in the mall have been constructed in such a way that each of them have will face the frontal side and their display windows could be seen from outside. Besides, there is no centralised air conditioning. The provision of ACs will be at the individual level. This has helped in cutting down the maintenance charges to just Rs 4 sq ft a month as compared to Rs 17 per sq ft a month in other such complexes."

The realtor hopes of heavy turnout of NRIs in the coming festival season for better gains and good investment.

General Manager of the MBD Group Rakesh Rawat, too, is upbeat about his project as Neopolis had already started getting a good response from the market. "Shopper's Stop has registered with us as anchor store. GigaBites is setting up its food court. There are other international brands opening their showrooms in our 1.8 lakh sq ft complex", he divulged.

The MBD group had earlier started coming up with a hotel building but had demolished it about four years back to construct a mall. It had simultaneously also started constructing MBD Krishna, a hotel on the Jalandhar-Phagwara highway, but that project also is in limbo for the past nearly four years. A group representative said, "It was difficult to carry on construction work simultaneously at all the places. We had been constructing a mall in Ludhiana and a hotel in Bangalore. The hotel construction will resume may be in a year's time after we are finished with our projects".

Yet another upcoming hotel project is on six-acre three-sided plot on the Jalandhar-Phagwara highway. Being constructed by Lally Hotels Ltd, a group that has a local connection, it will be managed by the renowned Taj Group. Sarbdeep Lally of Lally Hotels said, "We had been planning the hotel for quite some time. Since the market is now on an upswing, we have started re-designing the building plan to add more attractive features. When it comes up, it will be a landmark building for the city. There will have180 rooms, a banquet hall with a capacity of 1,500 people, an outdoor banquet, a spa and parking provision for 200 cars. We hope to finish it in 18 months' time."

Another property developer Amardeep Samra, too, is planning to start construction of a mall on district administrative complex road adjoining NRI Sabha office. "We had shelved the project because of the market slowdown but now I intend to start it soon".

Samra had earlier set up a posh commercial building at BMC Chowk. The ground floor of the building is now being taken by McDonalds.

The Delhi-based TDI group, too, had announced the launch of a mall recently. The construction work, however, is yet to begin at the site on old GT Road near Namdev Chowk.

So, the hub of sports goods manufacturers seems to be all set to become a happy playfield for the players on the commercial property scene. 

Tax Tips
No exemption on short-term gain
S. C. Vasudeva

Q. In a draw by HUDA, I won a residential plot costing Rs 30 lakh. I paid Rs 3.20 lakh earnest money with application on October 14, 2010. The balance amount is payable in six equal half yearly installments beginning from the date of issue of the allotment letter, which is still awaited. I have entered into a deal to sell this plot with present status, without paying any further amount to HUDA. The purchaser has undertaken to pay me earnest money paid by me along with profit of Rs 10 lakh. The total payment of Rs 13.20 lakh is to be made within three months of the issue of the allotment letter. Kindly advise whether my capital gain will be short-term or long-term, and my corresponding tax liability. Also elaborate the channels to save this gain and the dates and period to invest the gain in LT Infra bonds as investment in purchase of residential or non-residential plot or house. I already have a residential house. My annual income from all sources is Rs 3.50 lakh and I am a senior citizen. — Kailash Rani

A. The allotment right in HUDA plot will be construed a capital asset and if sold within a period of three years of acquisition of such capital asset, the profit arising on sale thereof will be treated as a short-term capital gain. The profit so arising would be added to your other income of Rs 3.50 lakh and will be taxable at the slab rate applicable to the total income, including the amount of short-term capital gain. There are no channels available for seeking exemption in respect of tax payable on a short-term capital gain.

Save IT records for seven years

Q. A friend of mine has recently sold his residential house for Rs 19 lakh. The indexed cost of the house is Rs 16 lakh. He does not want to build another house and wants to live with his sons. He proposes to gift the sale proceeds to his sons. Kindly advise, whether in order to save capital gains tax, he has to invest the whole sale proceeds of Rs 19 lakh in capital gains bonds or only Rs 3 lakh, which is actually the capital gain on the sale of the house. His only source of income is pension from the Punjab Government and interest on deposits with banks/Post Office. For how many years should one preserve income tax returns and relevant records. — Gurnam Singh

A. Your queries are replied hereunder:-

a) Your friend is required to invest the amount of capital gain for seeking exemption from the taxability of capital gain. He can, therefore, invest Rs 3 lakh in the acquisition of tax saving bonds within six months of the date of sale so as to seek such an exemption.

b) An income tax assessment can be reopened within six years of the end of an assessment year. For example an assessment for the assessment year 2005-06 can be reopened by March 31, 2012. It would thus be advisable to keep a copy of return and other supportive documents for a period of seven years. The assessment orders should, however, be kept for as many as years as possible.

Purchase in own name

Q. I am an agriculturist. I have sold my agricultural land for Rs1.40 crore in May, 2011. I want to purchase agriculture land again. Kindly advise:

n What investment should be made to avoid the payment of income-tax?

n Time limit for the purchase of new land?

n Can I purchase the new land in the name of my adult son? — Ram Lal Yadav

A. Your queries are replied hereunder:

n You are required to invest the amount of capital gain in the acquisition of the agricultural land.

n The time limit for such acquisition is a period of two years from the date of transfer of the agricultural land.

n The agricultural land will have to purchased in your own name so as to claim the exemption under Section 54B of the Act.

Buy before August, 2012

Q. This has reference your reply published on September 18, 2010 in these columns. It is clarified that the sale consideration of Rs 30.40 lakh is equal to the value assessed by the Stamp Valuation Authority and the stamp duty has been paid by the purchaser. As advised, I have got the fair market value of the property assessed from the approved Valuer based on Punjab State Common Schedule of Rates applicable as on April 1, 1981. The total fair market value has been worked out as Rs 1,67,999 (cost of land Rs 20,000 +cost of stamp papers Rs 1.600+construction cost Rs 1,46,399). Keeping in view the above facts, please advise what will be the tax liability if I purchase a residential flat for Rs 22lakh. — Asha Bansal

A. On the basis of the facts given in the query, the amount of capital gain would work out as under:

Fair Market Value 1,67,999 as on 01.04.1981

Indexed Cost 11,94,473

Sale Price 30,40,000

Capital gain 18,45,527

You can seek the exemption from the taxability in respect of the said amount of capital gain if you purchase a built up flat within two years after the date of sale i.e. August, 2010. The amount of capital gain not utilised for the purchase of built up flat before the due date of filing tax return should be deposited in a bank account under capital gain scheme. The due date of your case would be July 31, 2011. The amount so deposited can be utilised for buying the flat before August, 2012.

No claim

Q. After the demise of my grandfather in 1964, his 15 kanal agricultural land was equally divided among his three successors - wife, only son and daughter as per law. My aunt sold her share of 5 kanals to me through a registered deed. My grandmother gave registered Will to my father and her 5 kanal came to my father after her death, which he further transferred to me through Court Decree in 1994. My father's share of 5 kanal was given to my son as a gift deed (registry) as he needed money. We are three brothers, and two of them have been living separately since 1967. Now my father has expired leaving a registered Will in my favour. But my two brothers are demanding their share in the 15 kanal land. Will you please let me know the legal status of 15 the land which is in my name now? Will the hereditary status of land change, if it is transferred in the name of women as mentioned above. — J.S Dhanki

A. The facts in the query do not indicate whether the agricultural land divided amongst the legal heirs of your grandfather was an ancestral property or was his self-acquired property. On the basis of the presumption that the same was your grandfather's self-acquired property, in my opinion your brothers have no right to claim a share in the land owned by your grandfather. Your grandmother, your father and your aunt were his legal heirs and, therefore, the division amongst the legal heirs was correctly done. The facts given in the query indicate that the agricultural land as inherited by legal heirs of your grandfather was either inherited/gifted/transferred during their life time by such legal heirs. In my opinion your brothers have no right to make a claim in respect of the said land at this stage as they did not question the earlier actions by the legal heirs who had inherited such land. 

Utilising sale amount

Q. Suppose a man sells his property (residential house building + land) for an overall amount (entire) of "A1" during 5/2011 and purchases a residential (PUDA approved) plot for an amount "A2". If A1=A2, then there is no liability of tax (I assume). If A2 is less than A1 then how should one deal with the amount A1-A2.

A1-A2 is a very small amount comparable to A1 and A2 and has to be spent on the above said plot as soon as the extra amount for corner or preferential site is determined and intimated by PUDA. The entire cost of the plot has been made in full, except preferential cost 5 to 10% extra, in one go at the start.

My queries are as below:

n In what account this amount A1-A2, is to be deposited to save tax, which is to be paid in future for the plot.

n What is the time limit for spending the amount A1-A2 so deposited as per item 1?

n How the tax is calculated on unused amount, if any after all. — Gurmail Singh

A. At the outset let me point out that your presumption that the amount of capital gain would not be exigible to tax if a residential plot is purchased by utilising the entire sale consideration accruing on the sale of a residential house is not correct. An exemption from taxability is allowable in case the capital gain arising on the sale of residential house is utilised towards the purchase or construction of a residential house within the specified period. Further such exemption is allowable in case the capital asset i.e. residential house has been held for a period of three years and is sold after the said period of three years. Your queries are replied hereunder after taking into consideration the above provisions of the Income-tax Act, 1961 (The Act).

n As explained hereinabove, in case of sale of a residential house held for more than three years, capital gain arising on such sale is required to be utilised for purchase or construction of a residential house within the specified period so as to claim exemption from the taxability of the capital gain. So much of the capital gain as is not utilised for purchase or construction of a residential house before the due date of filing the tax return, is required to be deposited in a bank account under capital gain scheme on or before the said date.

n The amount of capital gain so arising should be utilised within one year before or two years after the date of sale for purchase of a residential house or within three years after the date of sale for construction of a residential house.

n In case the amount of such a capital gain is utilised for purchase of a residential plot without any intention to construct a residential house thereon within the specified time, the capital gain, would be taxable at 20% plus education cess of 3% thereon.

Investing sale proceeds

Q. I am an agriculturist. I sold my agricultural land for Rs 1.40 crore in May 2011. I want to purchase agricultural land again. Kindly enlighten:

n What investment should be made in order to avoid tax liability?

n Time limit for the purchase of new land?

n Can I purchase the new land in the name of my adult son? — Ram Lal Yadav

A. Your queries are replied hereunder:

n You are required to invest the amount of capital gain in the acquisition of the agricultural land.

n The time limit for such acquisition is a period of two years from the date of transfer of the agricultural land.

n The agricultural land will have to purchased in your own name in order to claim the exemption under Section 54B of the Act. 

The writer can be contacted at sc@scvasudeva.com

Green House
FruitFull Effort
Satish Narula

Time to plant fruit tree saplings is approaching fast. It is of utmost importance to keep certain factors in mind before planting a fruit tree. It is not only the city gardeners whom we advise to plant fruit trees in their home gardens but the farmers too, who even when they are not planting fruit trees for commercial reasons, should spare a patch in their land to ensure year round availability of fruits, vegetables and even some pulses for their own consumption.

Before we take up the task of planting, there is a word of caution. Due to the recent hype in eco-activism, there are numerous organisations that are participating in this endeavour to do planting and even providing various tree species to their volunteers. During this time I have seen saplings being distributed free of cost even at petrol stations to customers. A wonderful drive indeed so far as only the ornamental or shade tree saplings or medicinal plants are distributed. But unknowingly, they are doing a disservice when fruit plants are distributed that have been obtained from unspecified sources. In most of the cases, these are seedlings procured from sources where these are given free of cost.

The result of planting a fruit tree comes after four to five years of planting and it is very disappointing to get poor quality fruit of unspecified variety after such a long wait. In case of plants that have been raised from seeds, the fruiting may even be delayed by a decade.

Most of the time it is seen that it is only at the time of planting that the gardeners become active, procure plant and plant the sapling. This is not correct. Each sapling should be planted in a pre-dug and filled round one meter deep and one meter wide pit. These pits are filled with a mixture of top soil and well rotten farmyard manure in equal parts. The refilled pits should be watered a few days before planting the trees. To each pit, 30 gram of lindane 5 per cent dust or five milliliter of chlorpyriphos 20 EC should be mixed to keep the white ants at bay.

Due to a great demand for the fruit plants, the gardeners get plants from some of the local nurseries that are brought from the neighbouring states. Such plants that are raised in clay soil and do not fit well in our soil conditions and may die even three to four years after planting. The roots in such cases remain confined to the earth ball. As the above-ground part of the plant grows, its nutritional requirements are not met by the meager roots and there is mortality. In the nursery you will find such plants growing to four to five foot height but with hardly 250-300 gram earth ball. Do not get lured merely by the size of the plant.

(To be continued)

This column appears fortnightly. The author is the Senior PAU Horticulturist at Chandigarh and can be reached at satishnarula@yahoo.co.in

REALTY BYTES
Tata’s new township project

Tata Housing Development Co. Ltd. and Arvind Limited recently floated a 50:50 joint venture to develop an integrated township project spread over 134 acres near Ahmedabad.

The project will have a built up area of more than 9 million square feet, located on the western outskirts of Ahmedabad. The township will include residential, commercial and retail spaces apart from a hospital, a school and other civic amenities. The mega township project will be planned and designed to become a benchmark infrastructure project in Gujarat.

Tata Housing has been in the forefront for developing integrated and sustainable township projects. The company’s integrated township projects in Mumbai are in a class of their own. Tata Housing’s existing portfolio is well over 45 million square feet, in various stages of development.

Speaking on the partnership, Brotin Banerjee, MD & CEO of Tata Housing Development Company Limited, said, “As part of a long-term strategy, we are looking at establishing our presence in the emergent Tier I and Tier II cities. This partnership with Arvind Limited will help us tap onto Gujarat, an important market, for township projects, while being committed to our endeavor of sustainable development”.

Demand

The government should set up a strong regulator to protect consumers from dubious operators and bring transparency in the real estate sector, industry body Assocham said. The regulator could set up a public portal for project monitoring and protect consumer interests against dubious operators, it said, as the government prepares to introduce The Real Estate (Regulation and Development) Bill in the upcoming monsoon session.

It would help buyers make an informed choice and facilitate comparison based on objective criteria, it said.

”Even as the real estate sector contributes about 9 per cent of GDP, the rapid growth is largely unregulated leading to rampant public complaints about fly-by-night operators who take advantage of the vulnerability of consumers”, Assocham Secretary General D S Rawat said. Project monitoring applications must be encouraged to provide a level-playing field to all stakeholders — developers, investors, bankers and consumers, he said. — PTI 

At sea in Shahberi (Noida extension)
Interrupted Home run
The recent SC ruling regarding the cancellation of land acquisition in Shahberi village in Noida Extension has soured the dreams of over 6,500 people who had booked flats in one of the most upcoming and promising realty sites for affordable housing in the NCR. As almost 1,00,000 units have been sold in the area that is pegged as the next big destination for housing boom, buyers are wallowing in the mists of uncertainty regarding projects in other locations also. A reality check from ground zero...
Rohit Vaid

Once touted among the most attractive destinations for housing projects in the National Capital Region, uncertainty looms large over Greater Noida after 156 hectares of farmland for realty projects was ordered to be returned to villagers.

"Builder sentiments have been hit," said Manoj Gaur, managing director of Gaursons India and president of western region of the umbrella body for realty sector, Confederation of Real Estate Developers' Associations of India (Credai).

"Buyers, especially, are uncertain about the fate of their properties in the area", Gaur told IANS, referring to the mood after the Supreme Court decision that upheld an earlier order asking the authorities to give back the land at Shahberi village there. According to him, it may prompt other farmers, who have sold their land, also to knock at the doors of courts to seek similar recourse in a bid to get higher compensation than what they had earlier received — since such a framework has now been set in courts.

Gaur's views were corroborated by Neeraj Bansal, director of consultancy firm KPMG, who said the judgment had hit sentiments across the board — investor, builders, banks and most importantly first-time house buyer.

“Many buyers — first-time buyers — may have taken home loans for the property and now find that the initial collateral, which the house or a flat represents, is not there at all now”, Bansal said.

He further added that sociopolitical upheavals in Noida and Greater Noida, constituting a major portion of the larger National Capital Region, will also have an adverse impact on the price in the similar category housing projects in other areas surrounding New Delhi.

“Builders, investors, buyers and banks, through those buyers, have invested in a lot of their money. Therefore, all these factors also have the ability to adversely impact on prices in housing projects in a similar price range and areas”, Bansal said.

Short-term impact on investment in realty development in Greater Noida, in particular, may also occur, unless the government or any other regulatory authority takes stock of the situation”, he said “Financing projects in the area would be a bit difficult now. As the collateral itself — which is the property — is in jeopardy. Commercial banks have slowed down the processing of loans for that region”.

“There is fear in the consumers mind and sales have completely stopped in Noida Extension,” CREDAI Chairman Pradeep Jain told PTI He, however, said that sales had improved in Noida and Ghaziabad because of this decision.

Jain said: “We are the victim of the recent development in Greater Noida. Developers have bought the land through auction process. Besides, they have invested money by paying taxes and advertisements for the projects. Some had even started construction.”

Industry officials and officials agree customers may be the biggest loser. Vinod Behl, editor of niche magazine Realty Plus, said that the compensation package was also headed towards a raw deal as developers were struggling under huge-debts.

“Customers are going to be hit hard since some builders do not have an alternate project to shift them to. Due to the high debt they are under it would also be difficulty for them to pay higher compensation," Behl added.

Experts also blamed the state-run Greater Noida Industrial Development Authority (GNIDA) for chosing an inappropriate model to acquire land. Farmland was bought at as low a price as Rs 800 per sq ft and then sold for Rs 11,000 per sq ft. — IANS and PTI

500 cr loss

Claiming a Rs 500-600 crore loss due to the Supreme Court order quashing land acquisition for some projects in Noida Extension, builders have said home buyers would get back all their money, including costs incurred as home loan interest payments.

At a press conference organised by real estate developers' body CREDAI, the builders of the affected projects at Noida Extension, which is a part of Greater Noida, said they were sitting on a loss of about Rs 500-600 crore due to last week's court order that cancelled land acquisition from farmers.

They, however, maintained that the home buyers at their projects would not suffer and they are being given the option to either shift to some other project or take a refund of the amount paid by them, including the payment toward interest on home loans.

Assurances

Out of 400 units, around 124 flats have been sold out, which lie in Shahberi village. So in our case only 124 customers are affected, out of which we have reached to more than 50 settlements. Rest of the buyers/investors is mainly looking for relocation. In case even if someone wants their money to be refunded then we will refund their money with interest.

— Ashok Choudhary, Chairman & MD, Panchsheel Buildtech

We will shift the buyer or refund the money with interest equivalent to the interest paid by customers on home loan... We will at least protect the home loan interest payments

— Anil Sharma, CMD, Amrapali Developers

Shahberi is a very small part of Noida Extension and will not affect the entire housing hub planned. Only one project of ours - Eco Village II - has been hit by the court order. All other projects are safe and construction is on in full swing at the sites.Those who are seeking refunds, we are returning entire amount with interest

— R K Arora, Chairman, Supertech

We are processing the refunds of buyers who booked flats in our villas, falling under Shahberi. All their money will be refunded with interest and without any deduction. We are ready to help our customers in every way in the future

— Amit Jain, Director, Mahagun & Hope...

Even after the chaotic situation, which has happened in the last 20 days, Noida Extension still has a very bright future ahead as the development of this area has not stopped and is in full swing. Also, only a part of Noida Extention has been affected by this, which includes projects in Shahberi Village where the farmers have not agreed for the compensation but in other parts of the area, the farmers have already been compensated by the government and therefore, there will not be any further hindrance from their part. All the builders are trying to resolve this matter with the Authority, which will continue the development of this region.

Noida Extension has seen a lot of development within a year's time and will continue to be like this in the coming years

— Anuj Chaudhary, Director, Panchsheel Buildtech 

Ease your loan load
S.C. Dhall

Sachin is a 32-year-old person working in a IT company. His family includes a wife (homemaker) and a four-year-old daughter, Sachin had taken a home loan of Rs 20 lakh one-and-a-half year back at 7.99 per cent for a period of 20 years with a monthly EMI of Rs 1,800. Apart from repaying the home loan, Sachin’s other financial goals include planning for his daughter’s education, marriage and saving for his own retirement.

In the past one year the interest rate on Sachin’s home loan has increased from 7.99 to 10 per cent and his EMI has shot up and the outstanding balance is Rs 18.80 lakh. Against the original total interest outgo of Rs 12,50 lakh now the total interest outgo on the loan in the next 19 years will be Rs 16,20 lakh even after paying the first year’s interest of Rs 1.80 lakh.

Just like Sachin, a lot of other people are also facing the same problem due to the increase in their EMIs.

RBI has been constantly increasing interest rates for the past one year. All this has increased the borrowing costs for banks over a period of time. Initially banks were able to absorb the rate hikes and shield their customers against increased EMIs. But banks can’t absorb the rising costs of funds all the time. After initially resisting the move to increase interest rates, banks have now started passing the rate hikes to their customers by increasing the interest rates on floating rate home loans.

So how can people like Sachin tackle such a situation and what are the options available to them? Here are a few tips to manage home loan woes:

Pre-payment

All banks allow customers to pre-pay home loans. Pre-payment helps a customer to reduce the outstanding amount which also means reduced interest burden and finishing the loan earlier than its normal schedule.

Pre-payment can be done in two ways: pre-paying a lumpsum amount or by increasing the EMI (5% or 10% or whatever percentage the customer is comfortable with). One can explore the two options.

Pre-paying a lump sum amount:

If a customer gets a one-time cash flow, he can use that to make a lump sum pre-payment and reduce the outstanding balance on his home loan. Proceeds from savings/fixed deposits can also be used to make a pre-payment and reduce the outstanding amount on home loan. By making a pre-payment the customer has two options:

n Reducing the loan tenure: The customer can make a lump sum pre-payment and reduce the tenure of his home loan and keep the EMI same.

n Reducing the EMI: The customer can make a lump sum pre-payment and reduce the EMI of his home loan and keep the tenure same.

Increasing the EMI by 5%

Every individual expects his salary to increase by 5% or 10% every year. So one can use this increased cash flow to lighten his loan burden. One can ask his bank to increase the EMI by 5 per cent compounded every year.

Points to ponder

While the customer can always make a partial lump sum pre-payment or ask the bank to increase the EMI on his loan, there are a few things that he should keep in mind. These include:

n A customer should not use money reserved for other goals like child education, marriage, retirement etc. for pre-payment of home loan.

n When a customer asks the bank to increase the EMI by 5 or 10 per cent every year, then he should make sure that he will be able to service the increased EMI. For example if the customer increases his EMI by 10% compounded every year, then after few years the EMI may become very high and the customer may find it difficult to service it.

n It is wise to use a combination of partial lump sum pre-payment and also increase the EMI every year by a certain percentage and finish the loan before its normal schedule. — The writer is a senior banker

On a weak wicket
James Jose

Realty stocks may have staged a minor recovery in the past few weeks but the sentiment remains weak due to continuing disputes over land acquisitions, hikes in interest rates and the apex bank's caution on exposures to developers.

The realty index of the Bombay Stock Exchange (BSE), a representative index of 15 firms in the business, is down nearly 30 per cent over the past year, even if it is ruling 4.5 per cent higher over the past month.

In contrast, the benchmark 30-share sensitive index (Sensex) of the exchange is up over 7.5 per cent over the past year and 3.35 per cent over the past month, even managing to scale the crucial 19,000-point mark during the week ended Friday.

"Real estate stocks have not been a favourite for quite some time now", said Jagannadham Thunuguntla, strategist and head of research, SMC Global Securities, a leading brokerage and advisory.

"Lack of transparency both in the government regulations and in the manner in which some companies are functioning and heavy financial costs of developers have just added to the gloom surrounding these stocks", Thunuguntla told IANS.

One of the reasons for the poor show of realty index may be that over 45 per cent of the weight has been assigned to DLF and Unitech, both of which have their dominant market presence in the north, notably around the national capital.

The latest ruling by the Supreme Court, which upheld an earlier ruling by a lower court quashing the acquisition of some farmland in Greater Noida for housing projects, shook the sentiments even further.

How have some of the stocks performed?

n DLF, which logged a 52-week high of Rs 397.35 on Oct 10 last year, closed at Rs 236.85 Friday, after falling to a low of Rs 206.55 June 11.

n Unitech, which logged a 52-week high of Rs 98.45 on Oct 7 last year, closed at Rs 36.55 Friday, after falling to a low of Rs 28 on June 11.

n Sobha Developers, which logged a 52-week high of Rs 403.90 on Oct 4 last year, closed at Rs 285 Friday, after falling to a low of Rs 185 on Feb 11.

Neeraj Bansal, director with global advisory firm KPMG, says investments in real estate firms and properties could get stifled, especially in the regions where land has been acquired despite reservations by the owners.

Banks too would be hesitant in financing such real estate projects, Bansal said.

"Financing projects in the area would be a bit difficult now as the collateral, which is the property itself, is in jeopardy. Banks have also slowed down the processing of loans for that region". — IANS

REALTY GUIDE
Good investment
B K Sanghi

Q. I am a small farmer and own about 2.75 acres on a prime location on the Chandigarh-Ludhiana highway. Currently, I am engaged in vegetable farming and want to continue farming. A Gurgaon-based builder has offered to buy my land at a good price. Should I sell the land to the builder? Please advise. — Gurmukh Singh

A. Since your land seems to be situated on a strategic location, it should be fetching a good price. Many farmers in similar situation have sold their lands near big cities and invested the money in buying larger tracts in the interior areas of the state where land prices are not that high. This way you can continue farming and also have some cash in hand to invest elsewhere. If you already have a residential house in or around the city then a part of the money can be invested in some commercial property since returns from the farming are fast-diminishing. Since the land which you would buy after selling the current land would be much more, you could explore the possibility of other commercial activities such as dairy farming or poultry farming along with farming.

Commercial gains

Q. I am very keen on investing in commercial property but am in a fix as I don't know whether I should invest in some office and retail projects that are coming up near Chandigarh. Are returns from these good and what if I buy such a space and don't get tenants later. How can I make a good investment in commercial property? — Pramod Gaur

A: While people prefer residential property for obvious reasons, commercial property is the investment to watch out for near Chandigarh in the years to come.With the tricity region comprising Chandigarh, Mohali andPanchkula and the nearby areas growing by leaps and bounds and connectivity not being a major issue, long-term investment in commercial property in Chandigarh’s neighbourhood makes perfect sense. Here it may be added that the MNCs mainly in the retail sector do not buy the commercial spaces in the office malls and shopping malls themselves. They rely on the commercial property on the leasehold and rental basis. In fact, certain big builders may help you in entering into rental or leasehold agreements with the MNCs offering assured regular income.Currently, there is slump in the commercial property market in the periphery. While making investment you must keep in mind that the office or retail projects should be strategically-located on the highway and should serve the daily and entertainment needs of a large population.

The writer is president of the Haryana Group Housing Federation. The column will be published fortnightly. Readers can send their queries at Real Estate Desk, The Tribune, Sector 29, Chandigarh (by post) or through e mail at realestate@tribunemail.com

Guest Column
Strike a dream deal

Buying a house is not a cakewalk and there are several factors that should be considered before finalising a deal to fulfill your dream of owning a place of your own. Here’s a quick check list in this regard.

Budget

Before buying a house, make sure to keep a budget in mind. If you pre-decide your budget it would be easier for you to select a house.While the cost of the house is the most important issue, additional expenses such as registration and conveyance deed amount, cost of renovation or getting interior fittings etc should also be considered.

Flat vs independent house

After your budget is sorted out, you will be able to reckon which type of property would be available in your budget. As per your budget, you can think of an independent house, villa or an apartment. For example; an independent house would be advisable for a joint family as extension of the house in future is feasible. However, an independent house in an upscale location would always be expensive in comparison to an apartment in a project or a group housing society.

Location

Choose the best location that fits in your budget. The location should be close to the necessary areas like schools, hospitals, bus stands, etc and more importantly the work place. The time spent on traveling should be minimal. The location should also be in a good neighbourhood. Even in a moderate or low budget you can get a house in a location that fits the above criteria.

Finance

You must always know how much money you can spare for your house. Never over spend and remain within your budget. If you are going to apply for a home loan you make sure that the facility is available in your shortlisted house. Always remember that properties which are sold without registration or on POA are ineligible for home loans acceptance.

Agent vs direct deal

A real estate agent can make or break your property deal. Make sure you employ a reliable property dealer. It is advisable to go for a professional real estate company or agent rather than local property dealer or else direct deal with the company can turn out to be much effective.

Paperwork

When purchasing a house the paper work must always be order. You will have to sign many documents, which must be thoroughly read. It is imperative to ensure that all the gvernment approvals, licenses etc. have been taken by the builder for a particular project.

Possession Date

The later the possession date, the more expensive the deal will be for you. Thus, it is necessary to know the possession date and it should be a part of your paperwork too.

No decline in lendings

Though the Reserve Bank of India has laid out strict due diligence standards for banks while sanctioning loans to real estate companies, industry experts believe lending to the sector will not decline.

"Banks will continue to fund real estate projects. The RBI is concerned about transparency in the system. If good projects come up, banks will fund them. Availability of funds will not be a major cause of concern for the sector", consultancy firm Jones Lang LaSalle's Chief Executive Officer (Business) Sanjay Dutt said recently.

However, what would really impact the sector is the time-consuming process of obtaining approvals from various regulators and inflation, which is leading to an increase in input costs for developers, he said.

A senior official from Axis Bank, who did not wish to be named, said, "Of our total lending last year, 3-4 per cent was toward real estate sector. We will continue to lend at same levels in the future. I don't think there will be any impact on lending by banks for the sector. Only the banks will now be more cautious." HDFC Chairman Deepak Parekh has also said that there was no slack in demand for home loans as "there is a shortage of houses and people want to buy a house".

"I think even if the interest rates go up by another 100 basis points, even then there would be demand. People won't stop purchasing a house because of a half a per cent hike in interest rates", Parekh said. — PTI