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 Thriving times 
The realty scene may not be very heartening in the country but in spite of the recent setbacks to the sector, land and property remain a priority area for investors in Karnal and prices here, too, have not shown any sign of slackening as per the local realtors. The real estate business is thriving in the region as the large number of major players who have launched mega projects here seem to be having no difficulty in finding buyers in spite of the high prices which have increased by 150 to 200 per cent in some cases in the recent past.
Dicey COMBO
Tax tips
Ground Realty
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The realty scene may not be very heartening in the country but in spite of the recent setbacks to the sector, land and property remain a priority area for investors in Karnal and prices here, too, have not shown any sign of slackening as per the local realtors. The real estate business is thriving in the region as the large number of major players who have launched mega projects here seem to be having no difficulty in finding buyers in spite of the high prices which have increased by 150 to 200 per cent in some cases in the recent past.
Investing in plots As the "flat culture" is yet to gain momentum in and around Karnal, a large number of buyers are actually purchasing plots as these give good returns within a span of two to three years as the infrastructure facilities are improving at a rapid pace. This sort of demand has pushed up land prices here as only a limited number of plots are available. As per the Collector Rates the land price ranges between Rs 30,000 and Rs 35,000 per sq yard in developed sectors, Rs 25,000 and Rs 30,000 in the developing areas and Rs 15,000 and Rs 18,000 in upcoming sectors. The market price, however, is almost double this price, say real estate consultants. Though better infrastructure is generally the main factor for price appreciation, plots offered in HUDA sectors remain the first choice of investors despite poor infrastructure. The reason is the price factor in HUDA schemes (Rs 7,800 to Rs 10,000 per sq yd). These plots fetch very high premium for alottees. The premium for four, six and eight marla plots is in the range of Rs 25 lakh, Rs 35 lakh and Rs 45 lakh, respectively. The people's choice is clearly reflected in draw of lots of HUDA plots where 2.87 lakh applications were received for 1,382 plots at a recent draw of lots. The prices of HUDA plots have also been increased significantly but still these are much lower when compared to the current market rates. Plots allotted by HUDA in draw of lots easily fetch a premium of Rs 20,000 per sq. yd, said a local property dealer. Spate of projects The response of the people was lukewarm when big names in real estate business had launched housing projects in Karnal about five years ago and attractive offers were made to woo the buyers, but today there is no dearth of buyers in spite of phenomenal increase in prices. The builders are optimistic about good prospects in the fast developing city of Karnal and feel that it would be bracketed with Gurgaon, Faridabad and Panckula in the next 10 years. Hence they are coming up with new projects after successfully selling the properties developed in earlier projects and some new builders have also forayed into housing projects in the city. The New World Regency luxury residential apartments are coming up adjoining Noor Mahal over 6.5 acres area and two projects of Sky Height (residential 5.25 acres and commercial 2.25 acres) are also in the pipeline. Leading realtors like CHD developers, Alfa City, Ansals have not only succeeded in selling the properties but have launched new projects. Narsi, Palm Regency and Parasnath City have been completely sold and premium on sale ranged between Rs 20,000 to Rs 40,000 per sq yd. Alpha International City where 1,129 plots in sizes 970, 500, 360, 250 sq. yd have already been sold has launched its Phase II, while CHD Developers have launched Phase III of their integrated township project. The new phase is spread over an area of 23 acres and has 215 plots with sale value of Rs 125 crore on offer. CHD also plans to expand the township further and expand its size to 300 acres, says, COO, CHD Developers. The Alfa Group also plans to set up a mall in Karnal at a cost of Rs 300 crore. Sturdy appreciation The prices of two to four bedroom flats which ranged between Rs 20 to 45 lakh in most of the estates offered by reputed builders like Ansals, Alpha International City, Global Spaces, Chandigarh City and DD Cruze, Palms Regency, developing townships or residential and commercial complexes spread over an area of about 1800 acres have doubled in resale and consequently the base prices of new houses coming up in these areas have also been increased substantially. Just two years ago, the per sq yd rates ranged between Rs 10,000 and 13,000 in Alpha city, Rs 9,000 and 13,000 in Ansals apartments and Rs 8,100 and 11,000 in Chandigarh City but the prices have more than doubled within a short span of time. With the upgradation of Karnal Municipal Council to Municipal Corporation and merger of peripheral villages, the setting up of Kalpana Chawla medical college, a proposal to construct civil airport, comparatively pollution free environment and six-laning of NH-1 with the construction of a dozen flyovers, the prices of land and houses are bound to shoot up and real estate developers see Karnal as the hub of construction activities, opening up new areas for investment in real estate. Vinay, MD Satyam Estate said the rates of property had almost doubled as compared to the last year. "Karnal being the property hub fetches the maximum rates as compared to the adjoining areas. However, unauthorised market that has come up is the main drawback", he added. In the absence of "regulator' for real estate, there is no check on prices and even a small house has become unaffordable and out of the reach of a common man.
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Dicey COMBO
So in effect the fixed-floating home loans are back. But this time around though, they come in a different avatar; one that may not be in the best interest of home loan borrowers. These products 'fix' interest rates at levels higher than rates prevailing on floating rate loans. Locking into them may be a bad idea, as interest rates look quite likely to fall from here, if not within the next few months then certainly within a year or two. The products do not also serve the purpose of assuring borrowers of a fixed EMI given that they would turn 'floating' after a certain period. To gauge whether the product is beneficial for them, borrowers need to look at it in light of the following: firstly, are these offerings different from the earlier teaser loans? Secondly, is this the right time to lock into interest rates? And thirdly, as a borrower, is fixed EMI a priority for you right now? The recent products,however, don't appear to be similar to the teaser rate products. Teaser loans offered lower interest rates than the floating loan rates for an initial period of one to three years. They then switched you to floating rates linked to the respective bank's benchmark rates. But that is not the case now. HDFC's three-year fixed option for instance has a 11.25-per cent fixed rate for loan value between Rs 30-75 lakh, higher than the floating rate of 11 per cent for a similar amount. Agreed that fixed home loan rates, unless meant to 'tease' you are seldom offered at lower than the floating rate, given that they provide the comfort of having to pay a fixed amount as EMI. But then, the timing of entry into these products matters a lot. Fixed rate loans offer some benefit only when the interest rates are expected to move upward in the medium term. Borrowers who availed the teaser rates of SBI in early 2008 would have benefited from the lock-in as the rates have been moving up steeply since then. Whereas now, with slower GDP and lower inflationary pressures, the general consensus is that we may be closer to the peak of a rising rate cycle. Viewed in this background, the fixed rate products do appear more beneficial to the lender than the borrower. A look at the prime lending rate of public sector major SBI for instance, suggests that benchmark rates are at a 14-year high. In all likelihood, borrowers, especially those going for the three or five-year fixed term products may well lose out on at least one cycle of lower interest rates that would actually cut down their EMI outgo. Even if borrowers want the comfort of fixed outgo every month, it is noteworthy that the recent products are not entirely fixed. Once they turn floating after the fixed tenure, you would be subject to the vagaries of the market. In general, the uncertainty that floating rates carry can be overcome if investors go for a loan value that provides them enough leeway for additional outgo. For instance, if a bank permits say 45 per cent of your gross salary as EMI outgo, you may choose to restrict your loan value so that 35-40 per cent of the gross salary goes into EMI. This will ensure that you can bear any additional outgo. If this is not workable, you can always choose to keep the EMI fixed and extend the loan tenure.
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Tax tips My elder brother and his family is settled abroad. Before going abroad he stayed on the first floor of the house for two-three years as parents were living with me on the ground floor. I am living on the ground floor in this house and the first floor has been given on rent. The rent is Rs 8000 per month and income from the agricultural land is 1,00,000 per annum. Sir, I deposit Rs 8000 and Rs 40,000 in my niece's account which is joint with me. Whenever my brother and his family come to India, I withdraw money the bank and give to them. My brother and bhabi also have a joint bank account. I have joint bank accounts with both my niece and nephew. Is this amount taxable? — Anil Kumar Guleria A. Your queries are replied hereunder on the presumption that the properties inherited by both the brothers have duly been mutated in the name of both of you and that both of you have equal shares in the house and the agricultural land.
l The rental of Rs 96,000 p.a. is taxable in your brother's hand as income from house property. In case such income has not been declared in his return of income, the same should be so included and a return of income including such income should be filed. l His share of agricultural income Rs 50,000 (1/2 of Rs 1,00,000 ) shall be added to his total income for rate purposes and tax on his total income shall be chargeable on the rate so ascertained. l The share of income belonging to your brother should have been deposited in his NRO account. His daughter could have operated such an account as his power of attorney. l You will have to explain to tax authorities in case of any query that the joint account with your niece is actually the income of your brother which has been disclosed to tax authorities by filing his return of income.
Smooth Shift
Q. I have taken home loan from HDFC Bank a year back. I would like to shift this loan to SBI. Kindly help me in my decision, which factors to look out for? Whether both lenders will agree to this?
— Dalip Singh A. Taking of loan from one bank and making payment to the other in respect thereof would require the acceptance of both the bankers. You must compare the rate of interest and terms of repayment which the State Bank of India has offered to you and in case the terms are beneficial as compared to HDFC Bank, you may resort to pre-paying the loan from HDFC. I may, however, caution you that a pre-payment normally involves penal interest and in case HDFC insists on the payment of such penal interest it may not be advisable to pre-pay the loan because the comparative advantage, if any would be lost on account thereof.
Can’t deduct interest on HOME loan Q. I intend to sell a property purchased by availing a housing loan and purchase another house. The EMIs that I have paid till date have been accounted for the interest portion of the loan . Can I adjust (deduct) this interest from the sale proceeds of the property being sold?
— Atul Kumar Q. My father sold a house for Rs 30, 00, 000. Is he liable to pay any tax? Till now he does'nt pay any tax as his income doesn't fall in the taxable bracket He is working at a fuel station and earns Rs 12000 per month through all his income sources.
Secondly, I am going do my masters abroad and for that I got to show an amount of about Rs 25,00,000 as my father's bank balance so if my father deposits so much amount in his account will he then be accountable to the Income Tax Department in any sense or will he have to pay any tax. A. Your queries are replied hereunder: l Your father is taxable on the capital gain arising on the sale of the house. The capital gain will have to be computed after deducting the cost or indexed cost of the house, as the case may be, from the sale price. In case the house has been held by your father for more than three years, the capital gain arising on the sale thereof would be a long-term capital gain taxable @ 20% plus applicable education
cess. In case the house has not been held for the aforesaid period, such capital gain would be treated as a short-term capital gain and taxable at the normal slab rates. l Your father should be liable to explain the source of deposit of Rs 25 lakh in his account and in case the same is from his past savings and this fact can be proved, no tax would be payable thereon. However, in case the said amount remains unexplained or the said amount represents an income, then the amount would be taxable.
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Ground Realty Real Estate heads the list of the sectors that have often been affected by recession. There are phases when there are no takers and the buyers simply absent themselves from the market and there is no cash flow. Lack of liquidity hits the pace of projects. Builders find themselves cash-starved, have no money to invest and offer sops to the buyers. This is the time for the investors to analyse various factors and clinch a deal.
Analyse cost factor During boom times, the builders earn good profits. The cost is often devised in such a manner that hidden profits are available under many items. Land prices are high and are projected accordingly in the cost of apartment while the builder may have bought it at quite low rates. When the sales are low, the builders are forced to rationalise the profit percentage. Hidden profits are eliminated and only a small profit after accounting all overhead, administrative and establishment expenses is added to the actual cost of apartment. 'Build more, sell more with less profit per unit' is the new rule for them. In such times, the buyer can strike a good bargain as the builder, short of cash, will be willing to sell the apartment at a discount. Reject lollypops The advertisements issued by the builders often offer multiple lollypops to the apartment buyers. 'Pay nothing and book your flat!' says one which may translate into "Get hooked and then we'll squeeze the entire amount from you". "Prices slashed by Rs 10 lakh", claims another which indicates that earlier, the prices were inflated and indicates the builder's level of transparency. Don't get fooled by such advertisements and keep your eyes open for the fine print and find where the catch lies. Also know that a builder will never sell an apartment by causing a loss to himself. Therefore, reject lollypops, ask for clear and transparent terms and strike a firm and final price. Builders' reputation Good track record of a builder impresses the people most. To build trust among people, good builders always exhibit their previously completed works in their advertisements. The trust of people won by a builder provides an extra edge to him. Check the builder's reputation from the residents of his completed projects. If it becomes known that people living in flats built by a builder are happy and have no complaints, then shortlist him for finalising the deal. Check location 'Location' is what matters most in buying an apartment. Always keep it in mind and assign top importance to it during apartment selection. A location having proximity to a good city never loses its value. Take example of Gurgaon. The projects located on Golf Course Road are enjoying almost double the price of those located on Sohna Road. In addition, look for road connectivity and the existence of the main highway near the complex. The proximity to railway station, airport and bus stand also matter a lot. Builders often have an eye for good locations. For example, the builders in Gurgaon they have sensed that future development areas will be around Delhi Mumbai Industrial Corridor and Kundli Manesar Expressway. Therefore, check the location of the apartment from all angles before finalising the deal. Shun Super Area terminology The myth of super area is shattered the moment you examine the floor plans and find that the built up area is much less than what you had imagined after reading the advertisement. A good builder takes care that the customer's dreams are not shattered when his apartment is handed over to him. Look for full transparency on this front. Super areas mentioned in the advertisements include the percentage of many common areas. The carpet area and plinth area of an apartment are much lesser than the super area. Have a fairly good idea of the built up area, not super area and then decide. Even CREDAI now advises the builders to mention the plinth area and carpet area instead of Super Area. Examine services See that the water supply and sewerage services have been well completed by the builder. In addition, see that the laying of metalled roads has been completed. In case a part of project is under construction, have an undertaking from the builder that he would re-lay the road carpet on completion of the project. Often the builders leave the roads un-metalled, telling the visitors that the carpet shall be laid on completion of construction activity. Such colonies and complexes give the look of an unfinished project. In addition to roads, water supply and sewerage, look for street lighting also. Quake-resistant design Check that the building has been got designed by the builder from a competent structural engineer and the structure is genuinely earth-quake resistant. Check whether the drawings mention the Seismic Zone in which the building falls. If required, take the services of a structural engineer to check the earthquake resistant design aspect. Security features Look for a proper boundary wall around the apartment complex. The boundary wall should be at least 7 ft high. It not only generates a sense of security among the residents but adds exclusivity to the project. In addition, look for barbed wire fencing of proper design with at least 4 runners over the boundary wall. Look for round-the-clock gated security manned by guards to scan the visitors. Also check that full and actually effective fire fighting arrangements have been provided by the builder in the apartment complex. Pollution-free environment Choosing a 65:35 ratio for open area and occupied area helps in developing a pollution free environment in a complex. Check the ratio. A feeling of greenery all round wins the customer's hearts. Be aware of the importance of living in clean environment. Builder often get the saplings for trees planted at the earliest so that these develop good size by the time the complex develops. Look for them and you'll know the builders' level of awareness. In addition, examine that good landscaping, parks and a jogger's track exist in the complex. Additional facilities Some finer points if taken care of bring good returns. A good builder puts sign boards in the complex, showing directions and flat numbers. Look for these. See whether 24X7 power back-up arrangement exists for essential services. Still better if you examine the provision of a nearby market, a club, a swimming pool and local bus connectivity. Examine the finish Always give priority to strength and durability. Finishing comes thereafter. See that the builder has chosen durable materials and specifications rather than brittle but attractive looking products. The apartments should be as maintenance free as possible. See that full treatment against leakage and termite has been done. Take these steps and strike the best deal during recessionary times. More tips will follow next fortnight. Till then, happy bargaining! (This column appears
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Real estate group Ashiana Housing Ltd. has joined hands with global luxury hotel chain Hyatt Regency for its four-Star hotel project "Marine Plaza" coming up in Jamshedpur.
The 1, 80,000 sq ft project is located at the prime location of Marine Drive on the banks of Subarnarekha, Sonari in Jamshedpur. Once completed the property will be the first Hyatt Place hotel to open in Jamshedpur and will mark the introduction of Hyatt's select service brands to the city. Speaking on the occasion Vishal Gupta, Managing Director, Ashiana Housing Ltd, said, "Marine Plaza is a destination for shopping and hospitality all under one roof with retail space on ground and first floor and the four-star hotel on the rest five floors. Hyatt hotel will be designed for the 24/7 lifestyle of today's multi-tasking business traveler and will feature casual hospitality in a well-designed, technology-enabled, contemporary environment. The 5-storeyed business hotel will have 120 rooms." "Jamshedpur is an important market for us and this deliberate tie up with Hyatt Hotels, for management and marketing of our 4-star hotel is to serve customers with the best. And, Hyatt's knowledge of the Indian market and its global reputation is consistent with our pursuit of delivering quality and satisfaction to our customers", added Gupta. — TNS
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There was a lull in the home loan market after the teaser loans that were offered by most banks were slowly withdrawn, especially after the RBI expressed concern over such products. But ICICI Bank, and more recently HDFC and LIC Housing Finance have attracted attention by launching dual rate home loan products. While ICICI Bank offers a one and two-year fixed rate option, after which rates would float with the bank's lending rates, HDFC offers fixed rates for three and five-year duration.
The rate difference is more pronounced for a five-year term with difference being as much as 50 basis points. This could mean Rs 1,100-2,000 a month additional
outgo for loans between Rs 30-75 lakh.
Q. We are two brothers and one sister. My father had purchased a plot in Panchkula and built a double-storey house. He also has agricultural land in his name in Rajasthan which he got in lieu of the land he owned in Himachal Pradesh. After his death this property, house and agricultural land has been transferred in the names of us brothers as our sister gave a statement before judge that she didn't want any share.
A. Section 48 of the Income-tax Act 1961 (the Act) deals with the computation of capital gains arising from the transfer of a capital asset. The section provides that for the purposes of computing capital gain, the cost of acquisition of the capital asset, expenditure incurred on any improvement to the capital asset and the expenditure incurred wholly and exclusively in connection with the transfer of the capital asset shall be deducted from the full value of consideration received or accruing as a result of the transfer of the capital asset. In accordance with the aforesaid Section, the amount of interest paid for purchasing a house property is not a permissible deduction for the purposes of computing capital gain.
— Raj Kumar