budget analysis
A promise of good times
Sanjeev Sharma

The real estate sector which has been in the doldrums on account of slow sales and financing problems for the past 2-3 years is a major beneficiary of Union Budget 2014-15 as several measures that would benefit the sector have been announced by the Finance Minister.

The Budget has proposed incentives for Real Estate Investment Trusts (REITs) which will have pass through for the purpose of taxation. Announcing this during his maiden Budget speech in the Lok Sabha on Thursday Finance Minister Arun Jaitley said REITs have been successfully used as instruments for pooling of investments in several countries.

As an innovation, a modified REIT-type structure for infrastructure project is also being announced as Infrastructure Investment Trusts (InvITs) which would have a similar tax efficient pass through status, for PPP and other infrastructure projects. These structures would reduce the pressure on the banking system while also making available fresh equity. Jaitley exuded confidence that these two instruments would attract long- term finance from foreign and domestic sources including the NRIs.

Housing for all

The Budget also showed the government's commitment to providing housing for all by 2022 by extending additional tax incentive on home loans to encourage people, especially the young, to own houses. It has proposed to set up a Mission on Low Cost Affordable Housing to be anchored in the National Housing Bank.

A sum of Rs 4,000 crore has been earmarked for National Housing Bank with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment. The government has already outlined some other incentives such as easier flow of FDI in this sector and is willing to examine other positive suggestions. The inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities is another step to encourage the private sector to contribute more towards this better urban living.

Jaitley said the Rural Housing Scheme has benefited a large percentage of rural population who have availed credit through Rural Housing Fund (RHF). In the light of the above, enhanced allocations to the tune of Rs 8000 crore have been made for National Housing Bank (NHB) for the year 2014-15 to expand and support Rural Housing in the country.

In a FDI boost for real estate, to encourage development of Smart Cities, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from $ 10 million to $ 5 million respectively with a three- year post completion lock in.

To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in.

Apart from this, development of infrastructure projects, industrial corridors and tax breaks on income tax and higher limit will housing loans will boost the demand for real estate. Also, the announcement on Rs 50,000 crore of urban renewal projects will also have a spill over effect.

Positive response

Describing Union Finance Minister's Arun Jaitley's maiden budget as "half glass full" and half filled with hopes, realtors' apex body CREDAI Chairman Lalit Kumar Jain said it met with some expectations and left some out. Jain welcomed the announcements on REIT and FDI and said the subsidised rate of interest for low income group and economically weaker section groups is not enough. Pointing out some neglected areas Jain said the Finance Minister was not clear about policy neither on according industry status to housing nor on the demand for giving infrastructure status to the sector. "The details of afford clear able housing schemes are also missing in the speech," CREDAI chairman said.

However, overall the industry mavens expressed hope that the government was moving in a positive direction towards the growth of this importsnt sector. Anil Kumar Sharma, President, CREDAI NCR said that the budget for 2014-15 has given quite a few incentives for the real estate sector despite the fiscal constraints. The rebate on interest paid on home loans has been raised by Rs 50,000 to Rs 2 lakh per annum while exemption under Section 80C has also been raised to Rs 1.5 lakh from Rs 1lakh. This means that home buyers can also utilise the higher limit under 80C to account for the principal repayment on their home loans.

Industry is looking for more details on the low cost housing plan. Pankaj Bajaj, Managing Director, Eldeco Infrastructure & Properties said a beginning has also been made in the area of low cost housing with the budget setting aside Rs 4,000 crore under National Housing Bank. "We now need more details on how this money will be used but given that India needs 25 million more dwellings, the scope for low cost housing is immense", he said.

Several infrastructure projects will boost real estate growth. Kamal Taneja, Managing Director TDI Infracorp said the provision of Rs 8000 crore for National Housing Bank programme and an outlay of Rs 7000 crore for the Prime Minister's vision of 100 smart cities will boost infrastructure and real-estate sector. ""We also welcome 4P India to boost infrastructure growth and provide support to mainstreaming infrastructure development", he said.

The initiative on REITs will attract more funding for the sector. Rajeev Talwar, Group Executive Director, DLF Limited said the Budget has also ended the ambiguity on the tax status of REITS and introduction of this instrument in the Indian market will reduce cost of business for both Indians and foreign investors. It will also attract global funds to invest in the sector. REITS will again benefit individuals since they can get a share in income in a rental asset even if they cannot buy into a project.

"We also welcome the FM's statement on reviving SEZs and now wait for specific incentives in that regard", Talwar said.

The industry is hoping that new markets will be created. Brotin Banerjee, MD & CEO, Tata Housing said the additional thrust on infrastructure with development of new industrial corridors, ports, textile parks and improving connectivity between major cities will result in creation of new micro markets. Apart from this allocation of Rs 7060 crore for 100 new smart cities will create demand for housing in the long term.

Manoj Gaur, MD, Gaursons India, said while the announcement on REITs will help to reduce the finance shortage of developers, however nothing had been mentioned on single- window clearance and infrastructure status for the sector.

Experts opine that the budget proposals will ensure that the sector gets a boost from several fronts. Navin Raheja, Chairman, NAREDCO said the change in FDI guidelines will help in getting finance for small projects and affordable housing too will get a boost as there is no minimum requirement of built up area and capital investment. "Clarity on tax treatment and promotion of real estateinvestment trust will open up new source of capital/investment for crunched real estate thereby fuelling the growth of the sector. Development of 100 smart cities and industrial smart cities will provide potential to new developments and investments in the country giving a complete new trajectory to the sector while reducing the burden on over congested cities due to the impending excessive urbanisation", he said.

Hope for allied sectors

Sectors connected with real estate like cement are also optimistic. Shailendra Chouksey, Wholetime Director, JK Lakshmi Cement said the government has very appropriately chosen to focus on housing and infrastructure as a means to kick-start the economy.

Cement Sector can certainly look forward to revival of growth in its consumption which has been languishing for the past 3-4 years at very low levels, he said.

Voices

Budget 2014 will have a positive impact on the Real Estate Sector. After 2-3 years of unfulfilled expectations, this year's budget has brought some cheer to the sector and home buyers in India. There are some short term and long term measures that would kick-start the much needed revival of the sector. The allocation of over Rs 7000 crore for the development of 100 smart cities is significant as it will fuel the development activity in the country and real estate will be the prime beneficiary of this move. With NHAI to target 8000 km of road, better road connectivity between the cities will lead to more development and time saving. People will not hesitate to make investment if they are able to cover a distance of 100-150 km in a matter of few hours. This will lead to development of satellite towns around all major cities in India.

Aditya Verma, CEO, Makaan.com

"As expected the first budget from PM Modi emphasised on affordable housing, improving infrastructure, and reviving buyers' sentiments. Tax rebates like increase in housing loan exemption from Rs 1.5 lakh to Rs 2 lakh will encourage property seekers to finalise their pending buying decisions. Also, the tax exemption limit under 80C has been increased from Rs 1 lakh to Rs 1.5 lakh. The principal amount paid for home loans is part of 80C and this additional Rs 50, 000 stimulus will help increase the individual savings and thereby release the much needed liquidity in the market.

With the government's increased emphasis on developing infrastructure in Tier 2 cities, the giants of the realty industry will also eye the new developing cities. Projects like metro rail for tier 2 cities, setting up of new airports, new industrial towns, and improvements to national and state highways would help the realty industry prosper in these cities.

Ganesh Vasudevan, CEO, IndiaProperty.com

"To put in place basic Eco Socio Economic Infrastructure to serve population of 1 million people needs Rs 6000 crore per city. An allocation of only Rs 7060 crore for the smart cities is too paltry a sum. Unless the government tops up this corpus significantly in the mid-term, this will end up being a half hearted attempt to creating new cities. The government can still make good with its policy on smart cities if it tracks down the utilised money under previous scheme of JNNURM sitting with the state governments and various urban local bodies"

Shyam Sunder Pani, President and Founder, GIREM

"There is an increase in interest exemption of Rs 50,000 for loan availed on self-occupied house property. This will give a savings of Rs 5,150 to individuals annually and Rs 5,665 for superrich. The finance minister also mentioned about providing thrust to low cost housing sector which should be win-win situation for individuals availing loan to buy property for their own use."

Vineet Agarwal, Director, KPMG in India

Overall, this was a good budget and will stimulate growth in the real estate and infrastructure sector. But certain points were disappointing. The deduction of interest on the housing loan from Rs. 1.5 lakh to Rs. 2 lakh is disappointing as this will have no impact in encouraging purchase of homes, this exemption should have gone up to Rs 5 lakh instead.

Although the statement on the revival of SEZ was encouraging, the demand for removal of MAT and DDT was not mentioned".

Anshuman Magazine, Chairman and Managing Director of CBRE South Asia Pvt. Ltd

The best part of this budget is however, the promise of Finance Minister (FM) that he will look into various recommendations of the housing industry which is very encouraging because even after what has been done till date, there are pending requirements to achieve 'Housing for all by 2022'. We hope the FM will once again engage the industry with him in the discussion on what can be done to achieve this figure.

Getamber Anand, CMD, ATS Group

"In the endeavour of developing 100 smart cities, FDI norms for construction developments projects have been relaxed. Requirements of minimum development area reduced to 20,000 sq metres and the minimum capitalisation requirements for wholly owned subsidiaries reduced to $5 m. Additionally, projects with at least 30 per cent cost allocated to low cost affordable housing projects should not be subjected to the limitations of capitalisation, minimum area requirement and lock-ins."

Anish Sanghvi, associate director, PwC India

— TNS

real talk
Rajasthan town in the footsteps of Gurgaon

Vivek Raj Anand, Director, Fairwealth Housing Pvt Ltd.

Bhiwadi has earned a reputation as the NCR’s next big industrial hub and has seen growth in affordable residential developments over the past few years. Some of the biggest names in the real estate business have come up with their projects here. This is a fast-developing Tier II town, providing all the lifestyle facilities of a big city. With high property rates in Gurgaon and Manesar, Bhiwadi has come up as a profitable and affordable destination for real estate investors and buyers. Vivek Raj Anand, Director, Fairwealth Housing Pvt Ltd whose group has rcently launched a luxury residential project in Bhiwadi talks about the growth potential of this NCR town. Excerpts from an interview:

Bhiwadi has been projected as a market with immense potential. How has it lived up to this promise over the past two years?

Bhiwadi has shown a healthy growth of 13.72 per cent YoY in the property prices which are between ~2,200 and ~ 2,800 per sq.ft. At this price range, it is extremely affordable and convenient for a small and medium investor to make the investment and one can expect a decent to good returns in the short term. The current scenario looks bright as the number of industries that are set to open up in this area are innumerous. The work on the Delhi- Mumbai Industrial Corridor has also gained momentum.

In the past two years the market has given an annualised return of 12 to 14 per cent in Bhiwadi and going forward the expectation is more of 18 to 24 per cent growth on an annualised basis considering the favourable political atmosphere and proposed infrastructural developments like metro, hi-speed bullet train and the airport.

How is Bhiwadi’s realty market attracting the investors? Why investment in Bhiwadi can be a better proposition in comparison to other destinations beyond Gurgaon/ NCR ?

It has been a tremendous growth of something like 400 per cent in the past five years. Rajasthan Industrial Investment Corporation (RIICO) is taking every possible step to harness the growth potential that Bhiwadi is showing. New industries and corporations are being invited and SEZs are being developed in and around the town to boost the economic growth of the region. It is a fast emerging Tier II city in Rajasthan. If we look at the growth story of Gurgaon, it has emerged from rags to riches over a period of 15 years. Bhiwadi, too, is on the same track.

Is it more of an affordable destination or a luxury one?

It is an affordable destination evolving into a luxury segment. Ultra-luxury and luxury residential projects like, Breeze Homes, Ashiana Rangoli, Krish City, and Aries Green in Bhiwadi are increasingly attracting real estate investors, especially those looking for higher profit margin in future. Owing to its proximity to Gurgaon and several industrial set-ups, Bhiwadi is soon going to become top realty hub with the option of ultra-luxury residential projects.

Your group is coming up with a premium luxury project here do you see demand in this segment?

This is a unique project wherein we are priced in the affordable segment and we are making amenities which can be given like any other luxury/ultra luxury project.

What are your future projections for this micro market and what are the factors that according to you are playing a role in the increasing realty worth of this market?

Going forward we should expect unprecedented growth like never seen before in the industrial belt of Bhiwadi as the government is totally focussed and is extending the sops to the manufacturing sector.

realty bites
Real estate awards

Real estate developers having projects in the northern region were felicitated at the Estate Avenues Real Estate Awards function held in Chandigarh recently. The awards ceremony was a part of the second edition of the North India's Real Estate Show 2014 organised by realty magaxine Estate Avenues. DLF group bagged the top honours as 'Developer of the Year' while Pearls Infrastructure Projects Ltd. got the award for 'Best developer of the year in Punjab'. The top Award for Integrated Township Developer went to Ansal API, while DLF bagged the honours in the commercial segment and SARE Homes in the residential segment. The Mayor of Chandigarh

H.C. Kalyan was the chief guest and gave away the awards.

Among the other individual category awards for North India Microtek Infrastructures won the Emerging Developer of the Year honours in residential category, Tata Housing as Best Luxury/Premium Housing Developer, Alpha G:Corp as Best Asset Facility Management Company in residential category, Beyond Squarefeet was honoured as the Best Shopping Mall Advisory Company.

In the professional segment the top winners included Rema Menon (Retail Head of Parsvnath Developers) and Vineet Relia (COO-SARE Homes).

decor trends
Let freedom soak in
Varun Gupta

Freestanding bathtubs are becoming a popular bathroom trend nowadays as several homeowners are getting built-in bathtubs removed and are replacing these with freestanding bathtubs. Elegant and sophisticated, these bathtubs are not only the latest style statement, but also score big on luxury by giving a spa-retreat feel to the bathing experience.

The simple beauty of freestanding tubs creates a well-defined focal point in the master bath. Traditionally, these types of bathtubs were identified with a single design - a large deep tub with claw feet, reminiscent of the Victorian era baths and showers but now a vast choice of designs, shapes and materials is available in the market. This means you can get long, shallow baths that are perfect for bathing children, or deep luxurious baths where you can soak happily for hours.

These create a bold statement in the bathroom all by itself. Since a built-in tub is dropped into a fitted enclosure, the homeowner can completely customize the design. Depending on the size, shape and position of the tub, the placement is quite flexible (as long you have a water source), allowing the homeowner to get creative in the bathroom by angling the tub against the wall, or placing it in between his and her bathroom vanities.

One big advantage of these bathtubs is that it comes with freedom. For example, if your bathroom has a large window with beautiful views, you can place the tub in that particular spot in order to take advantage of this feature. You can also raise the tub on a platform or opt for all sorts of original design and décor solutions. Freestanding tubs also allow bathrooms to be updated much easier. Flooring can be changed from tile to wood; walls can be painted or wallpapered over and over again without the hassle of a built-in tub.

While buying these however, keep the following points in mind:

nDo a basic research about the materials as it will save you a lot of trouble later. Popular materials used for freestanding tubs are stone, acrylic, solid surface, copper, wood, cast iron, and fiberglass. While selecting the material, make sure you are capable of cleaning it and maintaining it well

nWhile buying you freestanding bathtub, keep the measurement template handy. It will help in getting the right size. Moreover, make sure to measure the largest person using the tub. If you cannot fit in the tub with legs extended, it is of no use. Try to find the most comfortable fit.

nFreestanding bathtubs are extremely easy to install. Simple connect the drain to the rough-in plumbing, secure the bathtub to its installed location, and you are ready for full relaxation. Try to plan the installation according to your bathroom layout before beginning bathtub shopping.

nIf you want to use the space properly in the bathroom, try to combine shower with tub. Have a look at the various smart modern looking shower head-tub combinations.

The other thing to consider is the plumbing. Now, the plumbing is one of the main benefits of a free-standing tub. The plumbing for these tubs is visible, unlike that of other tubs. Because of the visual appeal, the plumbing comes in several finishes, including brass, nickel, and chrome. There are also several faucet styles, including gooseneck, rim, and hand-held. The faucets come in many designs, as well. Again, it depends mostly on your personal taste and budget. Unfortunately, this beautiful plumbing does not magically appear next to your tub. The drain and water pipes must be run beneath the floor and up through the floor, so you'll have to consider how accessible and easy it is to reroute the plumbing. You'll have to check and see how easy or difficult this will be before deciding where to put your tub. There may be a lot of cutting and drilling through beams in order to relocate the plumbing. Also, assembling free-standing pipes, faucets, and drains can be a tedious process. There are also plumbing codes to consider, such as a faucet spout being located one or two inches above the tub rim. Contacting a licensed plumber to help with the planning and rerouting of your plumbing can help you be sure that the job is done properly and up to code.

— The writer is Joint Managing Director, Bathline Sensations

Green house
Pots of elegance
Amarjeet batth ...

Space constraints and shrinking garden space in modern cities and small apartments make gardening enthusiasts switch to potted plants. But maintaining a garden in pots is not a cake walk as it requires extra care and maintenance as even a slight neglect can result in withering of a plant. Potted plants have a mobility as these can be shifted to add a different appeal to your collection of flowering and foliage plants.

Selection stage

Potted plants could be seasonal or perennials but the choice of varieties must suit the local environment. These plants need correct size pots, balanced pot mixture, regular fertilisation, adequate moisture, light levels, temperature and humidity for flourishing.

The most important aspect of having a garden in pots is the selection of right pots. Select an earthen pot with a drainage hole and keep in mind the growth potential of the plant. A fully establish plant should be in proportionate to the size of the pot.

Then the next stage is the selection of right mixture in the pot. A pot mixture should constitute

* two parts of garden soil

* one part leaf-mould (if available)

* half part sand

* half part farmyard manure

* 250 grams of DAP per cubic meter of pot mixl.

Once the pot mixture is ready, cover the drainage hole with broken bits of earthen pots and moisten the pot mixture to facilitate settling it layer by layer in the pot.

Then take out the selected plant from the poly bag and make a space in the pot of the same size and fit the plant in it. Fill the pot mixture and ensure that the there is about 1-2 inch space below the collar of the pot so that there is enough space for watering. Irrigate with the help of a sprinkler and keep it under shade till the time the new plant is stabilised or starts growth activity which is visible from emergence of new foliage.

In the hot and harsh climate of our region, many kinds of small trees, shrubs, climbers, palms and cypress can be grown in pots for keeping outdoors.

Position of potted plants is very important and makes all the difference. The large sized plants in pots are essentially placed outside or in verandahs and need to be shifted considering their tolerance of changing climatic condition.

Choose wisely

Potted plants are grown in varying sizes from 4 inches to 24 inches. Many kinds of foliage plants, like Begonia, Coleus, Chlorophytum etc make impressive display in pots as small as 4 inch size. Some outdoor plants that can be grown in big pots are: Cycas Revolute, Ficus Blackiana. Ficus Panda,Tecoma Gaudichaudi, Tecoma Capensis, Plumeria, Hibiscus, Hamelia and Phoenix Palm etc.

Plants which are maintained indoors need to be regularly shifted outside every 7-10 days and should be brought back again when plants seem to have regained its health which was lost in absence of sunlight indoors. However, avoid taking the plants that have been kept indoors outside directly as it will give a temperature shock to the plant. It is better to keep these pots in a semi covered area like a verandah or under the shade of a tree. Plants kept near windows can be rotated frequently for the balanced exposure to sunlight. Plants may be interchanged within their present locations indoors depending upon the light and air flow.

Water wise

Secret of good health of potted plants is the regulation in watering. Plants do not need water frequently; it is customised for every plant; so it's not by time, but by need. The best way to judge the water requirement is to observe the plant in the morning, if the foliage of the plant is dropping it means it requires irrigation. Turgidity of foliage is the best indicator to gauge water requirement of the plant. Water logging should be avoided as it may lead to rotting of roots.Excess irrigation is not good for the growth of the plant.

Pot plants, flowering or foliage need regular fertilisation. Apply NPK 20:20:20 dissolved in 2 gram liter at a fortnightly interval to the seasonal plants and the foliage plants need to be fertilised only during their active growth period. Ensure the solution does not spill on the foliage as it can burn the leaves.

Some indoor plants

* Aglaonema, Dieffenbachia, Syhgonium, Philodendrum, Dracaena, Asparagus meyersii, Fern, Asparagus, Ficus (Rubber Plan), Adinium, Galphimia Gracili.

* Pothos (Money Plant) is a evergreen vine, Schefflera is a shade-loving plant that is propagated for its variegated leaves.

* Palms - Areca Palm, Chlamandorea Palm, Raphis palm.

* Seasonal flowers like Zinnia, Gompherena, Gallardia, Cosmos, Portluca.

* Coleus and Celosia planted during June- July remain attractive till Oct.-Nov.

* Winter annuals preferred for pots are Antirrhinum, Aster, Brachycome, Calendula, Cineraria, Marigold, Nemasia, Pansy Petunia, Phlox and Stock. Chrysanthemum and Dahlia raised from cuttings are preferred for pot flowering.

* In the areas having partial shade Cineraria and Salvia makes an impressive show.

Affordable buzz in NCR markets
Anshuman Magazine

Real estate investors as well as developers in the Delhi National Capital Region (NCR) had been cautiously awaiting the results of the recently concluded General Elections to ascertain the future mood of the market. Having been elected with a full majority, the new government will hopefully usher in a stable regime at the Centre, which will definitely have a positive impact on the real estate sector too. The initial expectations from the new government include an investor and reform-friendly government, open to global as well as domestic investment opportunities.

The current liquidity crisis in the sector has been ongoing for the past couple of years; and having overlapped with the present slowdown, it appears that much more pronounced. As a result of the wider cash crunch plaguing the sector as a whole, developers in the Delhi NCR have faced quite a few project delays too, including in the Noida and Faridabad areas. Nonetheless, with the economy gradually moving into recovery mode, and the new government ushering in new hope and expectations with it, the quantum of sales may be expected to improve,going forward.

Housing demand

Housing demand in the region has remained subdued over the last few quarters. While home buyers have largely shown interest in cost-effective suburban markets, prime residential areas have hardly witnessed any new launches in recent times. As home buyers considered the low-cost emerging micro-markets along Noida Extension and the Yamuna Expressway, which offered affordable investment options, developers delayed new project launches and focused on clearing up existing vacancy levels.

The cost effective suburban markets of Gurgaon attracted buyer interest too; while demand for builder floor units remained stable in Delhi-across mid-end / high-end as well as premium housing projects.

Developers across micro-markets in the region also offered incentives-such as freebies, flexible payment schemes and discounts-to offload existing inventory.

New supply

On the supply side, new project launches continued to focus on cost-effective options in alternative markets, particularly in Noida Extension and New Gurgaon. Developers largely focused upon luxury housing in Gurgaon during the first half of 2013; while the second half saw new launches, primarily in the high-end and mid-end segments along the Dwarka Expressway and New Gurgaon area.

Moreover, even though units in residential projects launched by established developers attracted maximum buyer interest and purchases, developers across segments continued to adopt various strategies, including further discounts and free merchandise to boost sales.

Noida’s housing market was one of the few in the region to have seen continued addition of fresh residential projects over the past year. The Noida Extension micro-market, arguably, saw the maximum addition of housing units in the high-end and mid-end segments over the past couple of quarters. The micro-market has been finding favour due to its comparative affordability and planned development, which has driven developers to launch projects in this region.

Pricing issues

Increasing inventory levels, coupled with challenges such as insufficient demand, inflation and lack of funding are all likely to put pressure on housing prices in the region in the short to medium term. However, the situation can be marginally ameliorated if new projects are launched at affordable rates. Capital values across most of Delhi’s micro-markets underwent a marginal dip due to rising preferences for apartment units over builder floors in the region (besides cautious buyer sentiments) over the last few quarters.

Investment sentiment

The investment sentiment of most institutional investors about the NCR continues to remain upbeat. The NCR, especially Gurgaon and Noida, has always been one of the strongest residential markets for India, driven by affordable pricing and a multitude of product offerings that are available for buyers.

The relative slowdown in sales in the NCR is a pan-India phenomenon, mostly on account of an upwards spiral in prices, larger unit sizes and higher interest rates for home loans. However, locations such as Dwarka Expressway and the Noida Expressway still continue to offer affordable tickets to end-users.

The NCR will continue to see increased investments into the housing space due to the strong demand drive in the region, coupled with the fact that Delhi as a metropolitan city does not create any significant housing supply in the mid-market segment, leading to a spillover of such demand into the peripheral locations of Noida and Gurgaon.

— The writer is CMD, CBRE South Asia Pvt. Ltd.

loan zone
Can I transfer mother’s loan in my name?
S. C. dhall ...

Q. My mother has taken a home loan from her employer and the house is registered in her name. Is there a way to convert it to joint ownership and transfer the loan in my name so that the remaining amount can be paid by me? We want to do this as my mother wishes to retire early. 
— Ram Avtar

A. Your mother can sell or gift half the property to you. But, change in ownership must be approved by the lender, your mother's employer. There will also be stamp duty and registration expenses to be paid (concessional rates if it's a gift).

You can transfer the home loan to another bank by foreclosing it and you can be the co-applicant. Of course, this can be done without you having to become a co-owner of the property. But, you will be able to claim tax benefits on your share of loan repayment only if you are a co-owner.

How is a pre-approved loan beneficial for me?

Q.  had applied for a home loan and the bank informed me that I have been given a "pre-approval" home loan. What does that mean? How would it benefit me? — Meenu Bhandari

A. A pre-approved home loan refers to the bank granting an in-principal approval to home loan borrowers who have not identified a property yet. This is, however, done after a thorough examination of credit worthiness of the borrower, while the approved amount depends upon several factors including age, income, savings history, credit score etc. A pre-approved home loan helps a customer in planning the purchase of the property. Since the customer is aware of the funds available to him, he can buy a property within his budget.

However, the loan approved is valid for a particular period. In case the customer approaches for disbursement after that period, the bank will do a re-assessment of his eligibility. This way he could even get a higher loan amount if he desires provided his income would have risen during that period.

What will be my EMI?

Q. Is the amount paid towards a home loan in a year dependent on the amount of loan the bank has disbursed or the amount sanctioned? I have been sanctioned a home loan of Rs 20 lakh. But, as per the builder's plan, the bank only needs to pay Rs 10 lakh in the first year the construction begins. So what would be the EMI that I will have to pay in the first year? — C Mohan

A. As the property is under construction, it is true that most lenders will make the disbursement in parts based on the progress of construction. Now, till the housing loan is fully disbursed, you have to pay simple interest at the rate you have agreed upon with the lender. This is known as the Pre-EMI. You will start paying your EMI from the month following the full disbursement of Rs 20 lakh. If one opts for tranche EMIs, then it will be paid on the disbursed amount.

launch pad
Mantri Serene in Chennai

Mantri Developers Pvt. Ltd, recently launched Mantri Serene adjoining the Periya Eri, on the Pallavaram - Thoraipakkam Radial Road, Pallavaram, a small residential township located 4 kms from Chennai Airport. The project will consist of two phases. As of now phase I has been launched, which has a total of 143 apartments including 11 penthouses.

The apartments have been designed to ensure optimum natural ventilation and streaming of natural daylight. The design focuses on the lake with attention to street frontage - land thus presenting the lakefront development as a clear statement of contemporary design. The project will have facilities like rainwater harvesting, STP (sewage treatment plant), water softening, solar energy to power the common lights besides a high end club house and sports facilities.

tax tips
No tax saving on short-term capital gain
S. C. Vasudeva 
email your queries to realestate@tribunemail.com

Q. I am 76 years old and I have no source of income. I had been working in private companies at different times and was a tax payer. I had purchased an apartment in the suburbs of Chandigarh for Rs 34,14,500 out of my savings. Detail of payment is as under:

21.6.08 1,00,000.00

25.8.08 3,50,000.00

4.7.10 5,42,500.00

10.6.12 9,75,000.00

1.7.13 10,00,000.00

17.4.14 1,60,500.00

" 75,000.00 car parking

" 43,500.00 IFMS

" 55,000.00 Power back up

" 1,08,000.00 Sales tax

" 5,000.00 Wire gauge shutter

Total 34,14,500.00

Agreement was signed on August 3, 2010 and possession of the said apartment was taken in April, 2014. Now I intend to sell it and am expecting to get around Rs 52-53 lakh. Kindly guide me about my tax liability/ calculation and IT form to be used, if any. — p. s. thukral

A. As the possession of the apartment has been taken in April 2014, you should hold the apartment for a period of three years, otherwise it will be treated as a short -term capital asset and any profit arising on the transfer thereof, within a period of three years from the date of the possession will be taxable as a short -term capital gain. According to the provisions of the Income Tax Act, 1961 (The Act), a short- term capital gain is taxable at the normal slab rate which is applicable to your total income, including the amount of short- term capital gain. In such a case, you would not be entitled to the benefit of cost inflation index in respect of installments paid from the year 2008 and onwards.

The transfer of the apartment after a period of three years would enable you to claim the benefit of cost inflation index in respect of installments which would result in increase in the cost of the apartment which will lead to the reduction in the amount of capital gain. Such capital gain, being in the nature of long- term capital gain, shall be taxable at a lower rate of 20 per cent plus education cess of 3 per cent thereon.

In case the flat is sold within a period of three years as suggested in the query, short -term capital gain of Rs. 18,85,500 (53,00,000 - 34,14,500) will be added to your other income and brought to tax at the slab rates applicable to such total income. Presuming that you are holding more than one immovable property, you would be liable to file your return of income in Form ITR-2. The amount of short -term gain of Rs. 18,85,500 would be taxable for assessment year 2015-16 (financial year 2014-15) and Form ITR-2 applicable for the said assessment year would be notified somewhere in April/May 2015.

Do I need to deduct TDS?

Q. I am working as a doctor in PGI Chandigarh and my monthly gross salary is Rs. 75000 without deductions. My wife is also a doctor working under Punjab Government with gross salary of Rs. 55000. I made a closed bid for residential plot in Sector 65, Mohali held by GMADA and was successful. I deposited 25 per cent amount of the total bid price (Rs 1.15 crore) with GMADA and allotment letter is expected soon. Rest of the money can be deposited either in lump sum within 2 months of allotment letter or in 6 half yearly instalments with 12 per cent interest. Possession will be given within three months of the issue of the allotment letter. I want to construct it for myself. My queries are:

a) Whether new income tax law passed in 2013 under which 2 per cent TDS deduction by the buyer is applicable under this case. If yes, how to execute it in both modes of payment. Is there any alternative if GMADA refuses to accept it.

b) What type of loan can be sanctioned, plot loan or housing loan. At what stage can I avail income tax deduction for home loan? Can I avail the benefit for previous years also? — Jaskaran Goyal

A. Your queries are replied hereunder:

a) The provision with regard to the tax deduction at source introduced by the Finance Act, 2013 (Section 194-IA of the Act) is applicable for payment made by the transferee to a resident transferor in respect of the amount payable for transfer of an immovable property other than agricultural land. The deduction is to be made @1 per cent of the sum payable to a transferor by cash or by issue of cheque or draft or by any other mode. This provision is applicable where the consideration for the transfer of an immovable property exceeds Rs 50 lakh.

b) The consideration in your case being Rs 1.15 crore, you are required to deduct tax @1 per cent from any payment made to GMADA, Mohali. No exemption for payment made to the authorities like GMADA, Mohali has been provided in the Section. GMADA cannot refuse to accept payment after deduction of tax at source. There is no alternative for you but to deduct the tax at source. In case it is not done, you will be deemed to be an assessee in default and would be liable to penalty and interest in respect of the tax not deducted at source.

c) Normally, a financial institution or a bank does not grant a loan for the purchase of a plot. The loan is normally granted for the construction or purchase of a house. You would be entitled to claim deduction from your total income in respect of the repayment of instalment towards the principal amount of loan borrowed for the construction of the house as and when the house is fully constructed. Presently, such deduction is allowable under the provisions of Section 80C of the Act which also covers other specified payments. The deduction permissible under the said Section is limited to Rs. 1,00,000. You would also be entitled to claim deduction in respect of the interest paid / payable on loan raised for construction of a house against income from house property which would arise as and when the house is complete. Such deduction is limited to Rs. 1,50,000 if the house is self- occupied. The amount of interest paid for the construction period is also allowable as deduction against income from house property in five equal instalments beginning from the year in which such income is computed for the first time.

Rights of auctioned property

Q. An individual person got allotted a Panchayat common land for setting up industrial unit in Rural Focal Point in Punjab, on lease for 30 years from the Rural Development department, with terms and conditions thereon, that the land allotted can only be used for the sanctioned project and the Lessee can not further lease any part of the land to anybody. The lessee mortgaged the lessee rights to any financial institution, for availing loan for building and machinery on his own? The lessee later became defaulter of the financial institution and it took possession of land, building and machinery, to recover the loan amount. The financial institution later put the unit on Public Auction, without the permission of Panchayat Department to which the land belongs. The purchaser paid the full auction money to the financial Institution. After receiving the entire sale consideration, the F.I. says that the Lease Deed in favour of the purchaser shall be executed by the Panchayat Department. The department says the financial institution had no authority to handover the land to anybody. I am the purchaser in this case and I have neither got the lease done in my name nor the financial ibstitution, namely Punjab Financial Corporation , is refunding the sale amount. Kindly advise as to what I should do in order to get my money back. — mahabir singh yadav

A. The following facts emerge from the query:

* Panchayat common land was allotted to an individual on lease for 30 years for setting up an industrial unit in Rural Focal Point in Punjab.

* The said land could be used for the sanctioned project and the land so allotted or any part thereof could not be transferred to anybody.

* The land was mortgaged to a financial institution for availing loan for construction of factory, building and purchase of machinery.

* The loan so raised could not be repaid by such an individual to the financial institution as a result of which the financial institution auctioned the land, building and machinery to recover its money.

* The purchaser paid full auction money to the financial institution and therefore, stepped into the shoes of the financial institution so as to become the mortgagee.

Reply to your query based on the above facts, is given hereunder:

A purchaser of the land, in such a case will have only those rights which the financial institution had in terms of the mortgage deed because the financial institution could not have conveyed any title other than that which it had in the said properties. In my opinion, the purchaser steps into the shoes of the financial institution, and therefore, can exercise only those rights which the mortgagee had in terms of the mortgage deed. It is not possible to give a reply with regard to the refund of money from the financial institution or the entitlement to the grant of lease in favour of the purchaser without looking into terms of the mortgage deed.