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Legal hassles, delayed possession sour dreams
Hundreds of buyers are unable to get possession as their flats are not ready. Builders blame promoters for funds crunch alleging that they have diverted the money to buy more land instead of developing the project they promoted, discover
Pradeep Sharma & Rajmeet Singh
Hundreds of prospective buyers buying real estate on Chandigarh’s periphery, particularly Zirakpur, have allegedly been taken for a ride by certain colonisers and builders. With recession hitting the real estate market for past several months, the construction activity in a number of housing projects has come to a standstill on account of resources crunch, which the builders are
facing.
However, the worst-affected are the buyers, including investors and the end-users, who have invested lakhs of rupees by way of installments but are unable to get the possession of their “dream home”. Uncertainty prevails as the prospective buyers are at their wits’ end about getting the possession of their dwelling units. “It was over a year back that I was promised the possession. However, one year down the line, the promised possession has still not been given as the finishing of the flats is yet to be completed. Repeated visits to the promoter’s office have yielded no result as the contractor has reportedly abandoned the project in the wake of paucity of funds,” alleged Mr Sunil Sharma, who did want to give the name of the promoter. However, the builders have a different story to tell. While conceding that a substantial number of projects were facing tough times, they blamed the promoters for this chaotic situation. This, coupled with a number of buyers defaulting on the timely payment of the instalments, has compounded the problem. A colonizer, on the condition of anonymity, claimed that an allottee, who had booked two flats on the Chandigarh-Ambala highway, immigrated to Canada after paying only one instalment for each flat. In fact, the coloniser is at his wits’ end as he can neither allot the flats to another person nor can cancel the flat without completing the proper legal process. In the meantime the fate of the project hangs in balance. Quoting statistics, a cross-section of the builders claimed that with real estate business turning into a profitable business, a number of promoters had invested the money earned from the investors in buying lands in the other areas. However, the existing projects seemed to be nobody’s baby. In the wake of virtually no regulator for redressing the complaints of the allottees, confusion prevails among the general public. A number of complaints with the authorities concerned, including the Registrar of Cooperative Societies, bear a testimony to this fact. Meanwhile, with the civic amenities failing to keep pace with the haphazard urbanisation in Zirakpur, several projects have become “unviable” they did not have proper approach. The large-scale commercial construction, specially the construction of shopping malls-cum multiplexes, have either blocked the approach or made it congested to certain housing projects.
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Curtail credit to real estate: FM
Some impact on high-end products but no major slide in realty prices, say
de- velopers. While some of them feel there could be across-the-board
correctio- ns but this could be assessed in next few months, says
S Satyanarayanan
Finance Minister P Chidambaram’s directions to banks to redraw their exposure to sensitive sectors in order to divert credit from real estate to other priority sectors such as manufacturing, SMEs and agriculture has triggered mixed reactions from the real estate industry. While some of the real estate developers feel that there could be across-the-board corrections in the real estate market if the banks curtail their credit to real estate, some feel that there would be more impact on the high-end real estate products, with flexible credit hard to come by, than in other segments. However, most of them feel that this correction in the real estate scene could well be assessed only in the next few months. Mr Avneesh Sood, director of Eros Group, which has launched Royale Retreat II, luxury apartments in Charmwood Township in Faridabad, feels that excess supply of premium apartments coupled with short credit supply could well have its impact more on the high-end real estate products. “Well, some of the mid-segment and lower-middle segment real estate could also feel the heat if the companies promoting them are over-exposed to credits or excess supply of housing property in the area they are operating,” Mr Sood says. He, however, feels that there will not be any major slide in the real estate prices in near future as most of the promoters have already ensured credit for their existing projects either through banks or by making the products self-financing.
However, Mr Rajeev Rai, managing director and promoter of Privitech Group, which is launching new all-two-bedroom apartments in
Bangalore, asserts that there will definitely be some correction in the real estate prices across the board. Significantly, he feels that there is scope for more corrections in North India, especially in the NCR Region than in southern parts of the country as there is more “unrealistic pricing” in the North than in down South. Asserting that there is mismatch between the property prices and its rental values in the North than in the South, Mr Rai, a Civil Engineer from IIT, says that correction in the real estate could be felt more in places like Gurgoan and Faridabad rather than in Noida or Greater Noida. “Wherever there is presence of big multinationals and affluent population and there is a scope for their further presence, the corrections in real estate may not be significant as even the high-end products would have abundant buyers, but where affluent population is in short supply there could be noticeable corrections,” he said. Moreover, he feels that more rental value vis-à-vis the cost of the property will encourage individuals, who have bought properties purely for investment purpose, to hold on to it even if there was hike in housing loan interest rates. But wherever there is huge gap in the property and rental value there could be some offloading in the market by individuals leading to some fall in property prices, Mr Rai said. Mr P K Jain of Parasvanath Developers, dismisses the argument that there will be any impact on the high-end products. Mr Jain, who is the adviser to the company, says that since those who are buying properties worth crores are not dependent on finances from banks hence there will be virtually no negative impact on high-end products. “NRIs or top executives of big multinationals or big businessmen, who are keen on buying world-class luxury apartments, have their own finances or their companies are financing it… Any developer, who has a targeted approach, will not be affected by rebalance of credit portfolios by banks,” Mr Jain said, adding Parasvanath has no liquidity problem as it has already come out with public issue.
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Bill to bring cheers to home buyers There is good news for home buyers. A new Bill to regulate the real estate developers is on the cards. The proposed bill would ensure that the investors are not fleeced by the builders. The Center is currently working on the draft of the Bill. There have been instances where the builders have fudged records in mentioning the common spaces and balconies, while spelling out the floor space of a residential unit. In past several complaints have surfaced regarding such problems where buyers have been cheated of the promised facilities. These include less parking space, poor quality of work, delay in completion of flats and lack of basic amenities even after the specified period. The proposed Bill, called the Real Estate (Regulation and Control) Bill, would allow the buyer to have a clear knowledge of the common facilities and areas, which can be used freely and where residents would have limited access. The Bill would make it mandatory for the builders to specify the area of an apartment in the sale agreement, a breakdown of what the builder is charging for the apartment and a separate calculation for charges levied for common spaces like corridors, parking and lifts.
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A check list for home buyers & loan seekers Better be careful. Weigh your options thoroughly. Consult as many people, particularly experts, as possible before taking that final decision. After all, when one buys property, especially somebody belonging to the middle or lower middle class (over 85 per cent of the Indians fall in these two categories), he is taking the biggest and costliest decision of his life. In most cases, the person is spending his whole life’s savings to get a dream home. While till a few years ago, buying a house remained a dream for majority of Indians, cheap loans, freebies coupled with relative free availability of cash have changed the scenario. But, experts say, buying property, is a decision that should be taken after a lot of thought and consultation. Consider the plight of Manavinder Singh, a salaried, middle-class resident of Chandigarh, who paid a hefty sum for what was promised to him as a dream house at a dream location. “While accepting the initial deposit, the coloniser had promised that the complete house would be ready for occupation within six months. Over 18 months later, I am still waiting for the possession to be given,” he rues. Repeated visits to the builder have proved futile as the only response that he gets is: construction is on. Enquiries made by him have made it clear to him that there is little chance of the house being ready in the near future as there is a dispute with regard to ownership of the land on which the colony was to come up. Another person, Mr Amit Yadav, has approached the court with a complaint against as a property dealer for allegedly selling the same piece of plot to three different buyers at the same time. “The property dealer has vanished, while the buyers are fighting a legal battle over one plot,” rues Mr Yadav. Experts caution against arriving at hasty decisions while purchasing property, even if it is being offered by a government agency. Experts say there are some simple facts that a prospective buyer must be sure of before deciding to buy a property. Here are some of the quick checks that can come handy:
About the property
* Make sure the property is in the name of the person from whom you are buying it. Verify if the land is freehold or leasehold. Leasehold land, it is important to note, comes with a lot of strings attached, including renewal. In case of flats, the most important thing is: Was the construction legal. If yes, were all government and municipal laws followed. * Before buying a pre-constructed house or flat ensure that all mandatory approvals had been taken. Among the approvals that must be considered are: building plan, change of land use (where required), water and electricity connections, completion and occupation certificates from the designated authority in case of flats. * While buying a flat/plot in a group housing society, always ensure that the necessary go-ahead from the managing committee and other members of the society is taken. Some GHSs don’t feel too comfortable with the idea of an outsider buying property from one of the members to stay in the society. * While buying a second-hand property, make sure all previous dues have been settled. There have been cases of the new buyers getting straddled with unforeseen expenses in the shape of unpaid electricity bill or society charges that they had not been informed of at the time of the purchase. Sometimes, simple bills such as power bills or house tax can run into thousands of rupees. * It is always safe to get sure that no dispute is pending in any court of law concerning the ownership of the property. In a country like India, such cases can last decades. * Avoid buying property on power of attorney as far as possible. Always remember that a power of attorney can be withdrawn anytime by the original owner. * While entering into an agreement to sell, which many also involve payment of advance, do read the fine print. Be sure when the rest of the payment has to be made, when will the property get transferred, when will the possession be given, etc.
About loans
* Make sure all loose ends are tied up before you apply for the loan. * Always be aware of the benefits of different types of loans. Be sure if you require a loan on floating rate of interest or fixed rate. One tip: in this era of rapidly fluctuating interest rates, it is advisable to opt for fixed rate of interest, even it is a percentage point higher. * Ask the bank about the hidden charges, which are never publicised, especially by the private sector banks. Always be sure whether you can repay your loan before the time limit, and, if so, what would be charges that the bank would take extra. After all, it suits the bank if you pay back your loan as later as possible. * Read the fine print in the loan document. Many times, what you may have been assured or told by the clerk while finalising the loan might not be reflected in the papers. In the end, the written word will always get more billing than the verbal promise. * Always be sure if the property you are buying is loan worthy. Most banks do not extend loan for purchasing property on general power of attorney. * You can get your loan staggered. Simply said, it means you can take the entire loan amount in instalments as and when required. Interest can be charged only from the date on which the money was taken.
About taxes
* Make yourself aware about the various kinds of taxes and duties that you will have to pay to the government, courts, etc, at the time of the purchasing the house. * Remember different states have different rates of house tax, stamp duty, etc. * Be sure of the amount of taxes that are payable on an annual basis.
Buying a property is the one of the most important decisions in one’s life. Since our law and statutes are too many, it is always better if one is fully aware of all relevant clauses concerning the property before making the payment.I have seen scores of people spending hard-earned money in court cases that drag on for years without any result. Caution at the time of the purchase can insure you against such problems at a later stage. Punjab and Haryana High Court lawyer and former Advocate-General, Haryana, Mr Mohan Jain
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Posh to slosh: flip side of ‘VIP road’
Civic amenities are out of gear along the ‘VIP road’ in Zirakpur, says
The ‘VIP road’ in Zirakpur, synonymous with the farmhouses of the rich and famous, is bursting at the seams. With many major realtors taking a fancy for the area for launching the multi-storeyed housing projects, the farmhouses are paving way for the apartments. However, with the civic amenities failing to keep pace with the urban development, the area is heading to emerge as an urban slum. With the Zirakpur Nagar Panchayat allegedly turning a blind eye towards the harmonious development of the area, tough days seem ahead for the residents of the area and the prospective buyers. It may be recalled that in the wake of its easy approach from both the Chandigarh-Ambala and Zirakpur-Patiala highways, the ‘VIP road’ has been a favourite haunt of the real estate developers for the past couple of years. Emgreen, the NK Sharma Group, the Pearl Group and the Jaipuria Group are only a few names, which have come up with multi-storeyed projects. The Silver City Township is also at a stone’s throw from the ‘VIP road’. A visit to the area could be a nightmarish experience. The narrow roads leading from both the highways are dotted with potholes giving the motorists a ‘bumpy welcome’. In fact, the road from the Ambala-Chandigarh highway is only about 24 feet wide. The provision of the other civic amenities, including water supply, sewerage and power supply, continue to be trouble spots giving a lie to the claims of the builders about the state-of-the-art apartments and amenities. “The area is going to emerge as a slum in the concrete jungle that Zirakpur is about to become in a couple of years. In the absence of any master plan for the township, the pressure on the civic amenities is only going to mount in the years to come further compounding the situation,” rued Mr Surjit Singh, a prospective buyer of an apartment. Meanwhile, official sources claimed that the provision of basic amenities was high on the agenda of the civic body. It is learnt that the builders have decided to widen the approach road to about 60 feet wide by leaving 18 feet area on both sides. Similarly, the grants-in-aid for the development works in the township are being released at regular intervals giving a boost to the development works. The builders are also banking on the state government to complete the development works. And in the meantime, the real estate developers are continuing with the construction of apartments though there may not many takers for the apartments. “Quality housing is still needed in India and the ‘VIP road’ provides an ideal setting for your dream home given its strategic location and easy approach,” added Mr Rajeev Bansal, managing director of the Noida-based Aditya Durobuild, which is coming up with the Palm Court complex on the road. A house for common man on ‘VIP road’ would mean: *Easy approach both from Chandigarh-Ambala and Zirakpur-Patiala roads. *State-of-the-art apartments from big real estate players. *60-feet road proposed. *Other amenities in the offing. However on the negative side it would also entail: *Hundreds of apartments would result in congestion. *Present state of civic amenities pathetic. * Potholed 24-feet road adds to motorists’ woes. *Absence of master plan adds to confusion.
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Poor infrastructure affects land prices Even though Ambala has a cantonment, which is more than 150 years old, housing facilities for retired servicemen are woefully lacking here. In most cities, normally the defence or cantonment colonies have well laid-out broad roads, availability of potable water, drainage system and proper power connections. Thanks to a good infrastructure, the land in such defence colonies is available at a high premium. However, due to lack of proper infrastructure the Defence Colony of Ambala Cantonment is not a preferred choice even for ex-servicemen themselves. Development of the Defence Colony, situated just beyond the Cantonment perimeter, started about 15 years back. In the initial years the growth was slow but the house construction activity picked up pace in the later years. Today, there are more than 600 houses in the four sectors of the Defence Colony. The price of plots in the Defence Colony had peaked during the property boom but the prices were hit substantially after registry was banned in colonies outside the municipal limits. The prices of plots, located close to the main road, had reached between Rs 3,000 to Rs 4,000 per square yard. The plots, located at a distance from the main road, were available in a range between Rs 1,500 to Rs 3,000. But after the ban on registry, the land prices have plummeted. The fall in prices is between 30 to 40 per cent, depending on the location. But despite such a steep fall in prices, there are hardly any takers for the plots in the Defence Colony due to the ban on registry. For the early investors, the Defence Colony could have been a good investment due to the low prices. In 1996-97, plots were available for as low as Rs 325 per square yard and these plots were close to the main road. Compared to colonies located within Ambala Sadar area, the Defence Colony is nowhere close to being considered a much sought after real estate. In reasonably good colonies, the prices of plots range from Rs 5,000 to Rs 9,000 per square yard and in posh colonies, the price range is even higher. The reason why the Defence Colony came up at its present location was that there was a major demand for housing from Army, Navy and Air Force personnel near the Ambala Cantonment. Since, the Army Welfare Housing Organisation (AWHO) had constructed flats in Sector 9, HUDA in Ambala City, for its service personnel, they did not find it convenient. Also many ex-servicemen did not consider it a suitable choice for settling down. Because retired officers and other personnel were keen to settle near the Cantonment area so that resources like the Military Hospital, defence canteen and other facilities were not far away. Private colonisers reaped benefit from the requirement of the ex-servicemen and gradually the Defence Colony came up. To add insult to injury, the Defence Colony, till date, is an unauthorised colony as registries are banned here. Residents rue the lack of infrastructural development in the Defence Colony. There are no internal metalled roads or sewerage facilities. Even potable water connections are yet to reach the homes and the residents have to tap the ground water for their requirement. Even power connectivity is not proper. Lt Commander KP Singh (retd), president of Defence Colony Welfare Association, rued the lack of development in the Colony. “Even though work had been initiated on the Swajaldhara scheme nearly three years back, we are yet to get water in our homes. We demand that there should be a proper drainage system and all internal roads should be metalled,” he said. He said that they have been demanding, time and again, for converting the Defence Colony into an authorised colony. “Haryana Chief Minister Bhupinder Singh Hooda had assured to look into the matter but nothing has come out of it. Even his predecessor Om Prakash Chautala had given assurance but nothing concrete had materialised,” he said. Ex-servicemen have also demanded that the AWHO should develop a proper colony in Ambala Cantonment so that they do not face any problems. “The AWHO needs to address the housing problems of ex-servicemen in Ambala Cantonment on a top priority,” they said.
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Reliance to set up retail outlet
Other major groups, too, line up to buy or rent space in many upcoming malls in the holy city of Amritsar, claims
Ashok Sethi
Major industrial groups, including Reliance industries, have lined up to buy or rent space at major malls being set up in the holy city. The Reliance group, which has recently ventured into retail segment, has shown keen interest to set up shop for its large retail stores. This would be the first retail store by a leading company in Punjab. A leading real estate developer and at present involved in a major construction project for a leading construction company in Delhi, Mr Kapil Mehra, said that the upcoming malls have been receiving quite enthusiastic response from the leading Indian and international brands, including major food chains, to set up their retail outlets in the city. With the retail segment here expecting a major sales boom due to urbanisation of the city, the leading manufacturers and industrial houses have started scouting for spaces for direct sales segment to showcase their product range. Mr Mehra said that city had emerged as one of the most important tourist spot in the country with over one lakh pilgrims and devotees visiting Amritsar recently. This has ushered in massive investment into the shopping mall segment in and around the city. The pride of place, the Mall Road, has become the “Mall’s street” with eight to 10 major real estate developers having descended here to develop multiplexes, shopping complexes and commercial estates. The developers are also eyeing other prime posh localities of the city. Mr Kapil Mehra said that a majority of these malls, numbering more than 10, would become functional by the end 2007 and 2008 and would offer space for lease or for sale to the reputed and established names in the country. He said that a mall or a multiplex usually offered around five lakh square feet area each in the each building. He said at present the mall authorities were receiving enthusiastic response from India and abroad. He claimed that majority of the space available in the malls would be sold out positively by next year. The retail segment in India, especially in the northern states, had been growing considerably and the people of this area were preferring to do their shopping in the malls and enjoy all international class facilities. Not to be left behind the major food chains giants, restaurants and hotels were also making a beeline to set up food courts at these malls offering a wide variety of food items from Italian to American fast food, Thai food, Indian cuisine besides typical Punjabi and continental food as well. The major builders who have undertaken the construction of the one of these world-class malls, include Omaxe builders, MGF, Metroplitan malls, Celebrations by Advance Projects India Limited, Maiden Malls by Today Homes. Besides these builders local builders too have launched four commercial buildings. Madan Mohan Malvia road, Queenz road, Lawrence Road, Court Road have emerged as the major locations for the construction of more malls and commercial complexes.
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Interest on security may be added to rent by S.C. Vasudeva Q. I have received a security deposit of one-year in respect of a flat which I have let out for a sum of Rs 1 lakh per month. The amount of security deposit received is Rs12 lakh. The deposit is refundable as and when the tenant leaves the accommodation. At present the lease deed has been executed for a period of 3 years with an option to the tenant to renew it for a further period of 3 years. Can the interest on the security deposit so received can be included as part of the annual letting value of the property? Himanshu Gupta, Ludhiana A. To find out whether a notional interest on a refundable security deposit can form part of the rent received or receivable, the purpose for which the security is taken from tenant would have to be examined. In case it is possible to establish that the refundable security deposit has been paid to the landlord to compensate for the short payment of rent, it may be possible to add the notional interest to the rent received or receivable. No tax liability on donor on gift to son
Q. My son, serving at Gurgaon, desires to purchase a small flat there residential purposes so as to avoid living in a rented accommodation. As the purchase involves huge money, I want to help him by gifting some money out of my own savings. Can I do it and up to what amount? What will be the tax liability, if any, to either of us? G.G. Sachdeva, Bathinda A. In accordance with the provisions of Section 56 of the Income-Tax Act 1961 (the Act), a gift by father to his son is not taxable in the hands of the recipient. Further, the income from the amount gifted to a major son would not form part of the income of the donor. You can therefore gift any amount to your son to enable him to purchase a flat according to his requirements. No tax liability would arise in respect of the amount gifted by you. You should, however, disclose the amount of gift in your income-tax return together with the complete address of your son and his Permanent Account Number.
Married daughter has equal property rights
Q. You have mentioned that a married daughter would have no shares in an HUF property on partition, as she becomes part of the family in which she is married. Please clarify, is this rule applicable for:- Ancestral property S. Singh, Chandigarh A. The Hindu Succession Act 1956 has been amended by the Hindu Succession (Amendment) Act 2005. Section 6 of the said Act which dealt with the devolution of interest of a male Hindu in co-parcenery property (ancestral property) has been amended by the said amendment Act so as to provide equal rights to daughters in the Hindu Mitakshra co-parcenery property as the sons had. Accordingly, a daughter now has an equal right in the ancestral property and she is also entitled to ask for partition in a joint family property. The Hindu Succession Act 1956 provides for an equal right to all legal heirs in their self-occupied property and this provision has existed since the commencement of the aforesaid Act.
Income from a vacant plot not taxable
Q. Section 22 of the Act provides for the computation of annual letting value of a property consisting of a building or land appurtenant thereto of which the assessee is the owner. I shall be obliged if you could clarify what is meant by the word “land appurtenant thereto”. A.K. Sinha A. The appurtenant land in respect of a residential building may be in the form of approached roads to and form of public streets, compounds, courtyards, backyards, playgrounds, kitchen garden, motor garage, cattle shed etc. attached to and forming part of the residential building. In respect of a non-residential building, such land may be in the form of car parking, roads connecting one department with another department, playgrounds for the benefit of employees etc. It may be added that the income from a vacant plot is not taxable under the head income from house property.
No rebate if kids studying abroad Total Salaried income (expected) 3,67,000 Perquisites: a) Vehicle loan 6,754 b) Accommodation 38,797 45,551 Total gross income 4,12,551 Exemptions in conveyance 9,600 Savings: 1) PF 27,800 2) LIC 15,708 3) Mediclaim insurance 11,568 55,076 I have possessed an own-named leased accommodation @ Rs 3,500 and my company also reimburses me Rs 3,500 pm. After deducting the appropriate-leased fees of Rs 317 the company charged income tax on my leased accommodation @ 15 per
cent of my basic pay of Rs 23,330 but has not given any exemption of 10 per cent of my basic pay of Rs 23,330. I am paying Rs 3,500 to my landlord as rent charges. My son is studying at Sydney and I am paying his tuition fees from India only but getting no exemption on this amount. I am a scale III officer with public sector and posted at a C Class city. Neeraj Sekhri,
Una
A. In accordance with the provisions of Rule 3(1) of the Income-tax Rules 1962 (the Rules), the perquisites value for the unfurnished accommodation is to be computed in the following
manner:
“Where the accommodation is provided by an employer other than Central or State Government
and
It seems the company has charged 15 per cent of your salary on the basis that the accommodation is provided by the employer because the rent is being reimbursed to you. On the basis of this presumption the addition to your salary has been made in accordance with the Rules as aforesaid. The deduction under Section 80C of the Act in respect of tuition fee paid for any two children of the assessee is allowable if the same has been paid to an institution in India. As your son is studying in Sydney, no deduction under the aforesaid section is allowable. |
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