2006 was good, 2007 to be better
Real estate sector will continue to be one of the fastest growing sectors, writes Maneesh Chhibber

The year 2006 was one of the very good years for the real estate sector, if not the best, in the country. What’s more, experts say 2007 will be better.

With almost all major real estate companies outperforming the 50 stock benchmark Sensex by hefty margins, the scene in the real estate segment can only get better from here on.

Construction activity across the country is on an upswing, with the state governments offering incentives to real estate companies in a bid to check the spiralling demand for houses and commercial space.

Various studies have said that there would be about five times increase in office space in the next five years, 200-million sq ft for organised retail by 2010 and over 50,000 new hotel rooms will be added during the same period. India will have a demand-supply gap of 17.9 million housing units by 2010, says a study.

The 10th Five Year Plan say that out of the total shortage of 22.4 million dwelling units, over 70 per cent is for the middle and low income brackets. The additional requirement of housing per year during the plan period of 2002-2007 has been put at 4.5 million units per year.

Experts say the real estate sector would continue to be one of the fastest growing service sectors of the Indian economy. A recent study by leading business chamber Associated Chambers of Commerce and Industry of India (Assocham) pegs the total share of FDI in the domestic real estate market at 26 per cent out of the total FDI expected by 2010.

The same study also says that the real estate market is currently growing at 30 per cent per annum and offering maximum returns to investors. “The domestic real estate market, which is presently estimated at $16 billion (Rs 72, 496 billion), will increase by over three and a half times and touch $60 billion (Rs 2,71,860 crore) by 2010,” the report of the Study on Future of Real Estate Investment in India says.

Incidentally, only last year, the government had allowed 100 per cent FDI in the property and construction sector.

This is not the only good news. All major mutual funds and banks have earmarked major sums running into Rs 3,500 crore for this fast-growing segment.

The year 2006 also saw many real estate biggies trying their luck at the stock market, and making handsome gains.

If the maiden IPO of Parsavnath Developers, aimed at raising Rs 1,000 crore, received spectacular responses with 62 times over subscription, the IPO of Sobha Developers also got good response. In the pipeline are mega IPOs of DLF and Orbit.

Such was the buoyancy associated with the sector that Ishaan Real Estate of the Raheja Group successfully raised £180 million on the London Stock Exchange (LSE) while another company, Hiranandani Constructions, is planning to raise $500-750 million on the LSE.

According to reports, the market size, which is now estimated to be $12 billion, is expected to grow at 33 per cent to $50 billion by 2010.

In what can be another indicator of the dream run of this sector, the market value of Unitech shares has gone up by a whopping 75,000 per cent. While the market cap of the company was Rs 55 crore in November 2002, it now pegged at over Rs 41,000 crore.

Similarly, the price of Arrow Webtex scrip zoomed by over 44,000 per cent from Rs 1.35 to Rs 600, while Ansal Properties rose by 29,500 per cent from Rs 3.33 to Rs 985.70.

“Shares that were considered poor investment and, therefore, finding no buyers, are now a darling of the market. All this is due to the feverish activity going in the real estate sector. With new projects being announced almost on a daily basis, it can only get better,” feels Chandigarh-based Akhil Bhanot, an expert in the sector.

He attributes the rising property and construction stocks also to the huge amount of foreign investments flowing into the domestic real estate sector.

Such is the global interest in the real estate success story of India that the International Herald Tribune has predicted that the real estate market in India will grow at a more hectic pace the next year.

Says a senior officer of India’s biggest public sector bank State Bank of India: “The real estate sector has only just started growing. Name one single major company that is not venturing into this sector. A booming population will ensure that housing will always remain a problem area. It is a good investment opportunity.”

In the region, Punjab has taken a major lead when it comes to real estate projects, with almost over 75 mega housing and infrastructure projects having been cleared as development of townships, housing & urban infrastructure under the Industrial Policy, 2003 by the state government.

While Chandigarh continues to hold on to its pre-eminent position as far as property rates are concerned, Tier II cities like Mohali, Panchkula, and districts such as Amritsar, Jalandhar, Ludhiana, etc, are seeing feverish construction activity.

DLF has been permitted to construct three mega projects, while Emaar MGF Land has received a go-ahead to develop over 2000 acres.

The region is also witnessing a spurt in the number of malls and multiplexes, with many major companies entering the scene.

The Assocham has said that the number of malls in Kolkata, Mumbai, Bangalore, New Delhi, Hyderabad and Pune will grow to 300 by 2010 as against their present strength of 50.

Buyers gain a bit
Market may look up after Punjab polls, says Pradeep Sharma

After one of the biggest booms in the history of the real estate sector in Chandigarh’s periphery in 2005, 2006 was the year of recession with real estate developers having a tough time selling multi-storeyed apartments.

Though mega projects continued to be launched by the realtors, including real estate giants from all over the country, the market failed to look up bringing jeers to the real estate developers.

The recession particularly hit the small-time realtors hard, who did not have the wherewithal to finance the entire housing projects and keep the time frames of giving timely possession to the buyers.

In fact, back-out by the investors, who, spurred the 2005 rally, from the real estate market, had a downward spiralling effect on the market. With investors disappearing from the market, the timely installments eluded a substantial number of the promoters, who struggled hard to keep the projects going in the wake of severe financial crunch.

This resulted in delay in the completion of projects, which left the allottees fuming and defaulting on their own payments. The situation came to such a pass that a number of projects were virtually left in the lurch. The entry of the big players, who could sustain the projects for a longer time, proved to be another jolt to the fly-by-night operators.

With supply exceeding the demand, there seemed to be no takers for the thousands of the apartments in Chandigarh’s periphery. As the apartment culture was yet to take roots in the region, plots rather than flats seemed to have caught the fancy of the investors and end users, including the NRI.

Paradoxically, new projects, apparently to reap the benefits of the mega projects policy of the Capt Amarinder Singh Government, continued to be launched with impunity creating artificial hype around the mega housing projects with a promise of a dream home to the common man.

And the political uncertainty in the run-up to the February 2007 Punjab elections only tested the patience of the realty firms. The foggy political climate also played the spoilsport.

However, on the flip side, realty majors such as DLF, Parshvnath, Silver City, Jaipuria, Emm Green, Pearl Group, Chadha Group, Janata Land Promoters and the NK Sharma Group ventured into the new mega projects firing the imagination of the investors and the general public.

Observers felt that the market might look up after the Punjab elections in the new financial year. The “correctional period” for real estate market is over and should be on rails the next fiscal year, claims Mr Sunil Bandha, a Zirakpur-based realtor.

“Since real estate is one of the drivers of the Indian economy the Central Government cannot afford to keep it in the recessionary phase for a long. Be ready to expect some good news for the real estate sector in the forthcoming Budget,” hopes Mr SK Sharma, Chandigarh-based property observer.

As the world rings in the 2007, the realtors, the investors and the end-users are keeping their fingers crossed as their fortunes are tied to the twists and turns the realty markets takes in the year to come.

Haphazard growth hits hills

Landowners violate planning Act, sell plots without proper approach roads, says Rakesh Lohumi

Illegal subdivisions of land and non-adherence to the basic principles of town planning have been mainly responsible for the haphazard construction across the hill state.

Landowners have been selling undeveloped plots without proper approach roads in blatant violation of the state Town and Country Planning Act. The Section 16C of the Act clearly lays down that no registrar and sub-registrar will register land transfer deeds involving subdivision of land unless duly approved by the Town And Country Planning Department. Only the transfer of land involving family partition is exempted. However, the revenue authorities all these years have been ignoring the Act and registering all kinds of land transfer deeds without the mandatory approval.

Consequently, multi-storeyed structures have come up on the slopes, which are not fit for construction. Worse, most of them do not have proper approach roads and there is no room for providing even the basic civic amenities like water supply and sewerage. The ultimate sufferer is the purchaser who has to do without the basic civic infrastructure.

The government has now issued directions to the deputy commissioners to restrain the registrars and sub-registrars from registering land sale deeds or documents of any sub-division of land on share basis unless the subdivision into plots has been duly approved. The approved subdivision of land for creating saleable plots will be entered in the revenue record to ensure that there are no disputes after the sale.

As per the norms laid down by the department, the saleable plotted area cannot exceed 60 per cent and the remaining 40 per cent will be utilised for circulation, infrastructure networks, parking, parks, open spaces, playgrounds, recreational pursuits and providing basic services. The subdivision will be carried out keeping in view the interest of the purchaser and not the seller.

The plots will be permitted at right angle to the road with proper shape and dimensions in accordance with natural profile of land and slope, so that the optimum use of the land is ensured. The dimension of the plot should preferably be in the ratio of 2:3 and in no case the ratio should exceed 1:3. The sub-division of land will be permitted in accordance with the natural profile of topography as shown on a contour map, drainage of the land, accessibility, road alignment, wind direction, local environmental imperatives and in accordance with the prescribed land use.

Natural flora and fauna will have to be preserved and the natural nullahs, which pass through land involving sub-division, shall be developed and maintained according to the discharge of water during the peak rainy season. Minimum area of a plot for a detached house will not be less than 150 sqm (square metre), while semi-detached house construction will be allowed on a minimum of 120 sqm plot. Row housing on plots of minimum 90 sqm will be permitted subject to the condition that maximum number of such plots does not exceed 8 in a row after which a gap of 7 m shall have to be left.

Under exceptional circumstances, considering site conditions the minimum 60 sqm plot for construction in a row with two common walls may be allowed, so as to provide smallest possible residential construction.

Failure to correlate the width of road and the maximum permissible height of structures along it in accordance with the principles of town planning has been another major factor contributing to the haphazard development. The government has allowed multi-storeyed buildings along narrow hill lanes in main towns, which has not only created problems like traffic congestion and shortage of space for providing basic services but also spoilt the environmental quality. The high-rise structures leave no room for cross-ventilation and also block sunlight. Even fire tenders and ambulances cannot pass through these narrow ways.

The Town and Country Planning Department has proposed severe restrictions on roadside constructions as per which only a single storey and an attic will be allowed along roads with width ranging between 3.5 m and 5 m.

Buzz on Bourses

Stake in Unitech Corp Park

London: Global fund house, Fidelity, along with its other group companies, has picked up 5.82 per cent of the shares offered in the public issue of Unitech Corporate Parks, a subsidiary of Indian realty firm Unitech Ltd. The shares were acquired by Fidelity International Ltd, FMR Corporation and Fidelity Management Trust Company, according to a regulatory filing with London Stock Exchange. — PTI

Punjab project for C&C

New Delhi: Infrastructure development firm C and C Constructions Ltd, which is planning to tap the capital market with its public issue, today said it has bagged a Rs 380 crore worth road project in Punjab. In a joint bid with B Seenaiah and Company (Projects) Ltd, the Gurgaon-based company has bagged the Build, Operate Transfer (BOT) project of the Kurali-Kiratpur section of National Highway- 21 under the National Highway Development Programme- Phase II A in Punjab, C&C said in a statement. — PTI

Shareholders nod for Ansals

Mumbai: Real estate developer Ansal Housing & Construction has said shareholders have approved the raising of up to Rs 150 crore through institutional investors. At the EGM, the shareholders decided to issue shares under the provisions of qualified institutional placement, the New Delhi-based company informed the BSE. — PTI

Country Club raises $25 m

Mumbai: Leisure and infrastructure company, Country Club India Ltd (CCIL), has raised $25 million through the issue of Foreign Currency Convertible Bonds (FCCBs) to part fund its Rs 600 crore expansion plan. The FCCBs have been subscribed by Morgan Stanley and Co International Ltd, the Tudor BVI Global Portfolio Ltd and Citadel Equity Fund Ltd. The FCCB will be listed on the Singapore Stock Exchange.— PTI

Assocham’s suggestion

New Delhi: Industry body Assocham has proposed setting up of malls and commercial complexes at Delhi Transport Corporation’s (DTC) depots as a step towards providing low-cost establishments to traders and businessmen affected by the sealing drive in the city. With permission to put up malls and commercial complexes in some of the 34 depots in its possession, DTC would be able to earn annual revenues to the tune of Rs 300 crore by way of rent, advertisement and parking, Assocham said in a release. — PTI

Four-laning on NH 75

New Delhi: Infrastructure developer DS Constructions has said it has bagged an order worth Rs 650 crore from NHAI for the four-laning work of 80.12 km Gwalior-Jhansi stretch on NH 75. The company has signed a concession agreement with NHAI for the four-laning work to be completed on Build-Operate-Transfer basis, D S Constructions said in a statement. — PTI

Property show in Ahmedabad

New Delhi: A three-day property show will be held in Ahmedabad from January 5, which would showcase over 200 realty projects, to attract investments in the Gujarat’s estate market. The event, Brand Ahmedabad: Target 2020, is being organised by the Gujarat Institute of Housing and Estate Developers (GIHED) and would showcase properties from about 80 developers. — PTI

TDI to invest Rs 1,500 cr

Sonepat: Taneja Developers and Infrastructure Ltd (TDI) plans to invest Rs 1,500 crore for building an integrated township here spread over 1,200 acres. “We are developing a self-sufficient integrated township at Kundli, Sonepat, on a minimum 1,200 acres of land,” TDI Managing Director Kamal Taneja said. — PTI

Atlanta pact for SEZ

Mumbai: Atlanta has entered into a Memorandum of Understanding with Ahmedabad-based NG Realty for setting up a Special Economic Zone (SEZ) near Ahmedabad district with an investment of Rs 1,000 crore. Atlanta would also acquire 50 per cent shareholding of NG Realty, the company informed the Bombay Stock Exchange. The SEZ company has acquired 230 hectares of land and entails an investment of Rs 1,000 crore, it added. — PTI

Speculators lose on Baramula-Uri stretch
Ehsan Fazili

The tourist resorts of Gulmarg, Pahalgam and Sonamarg fall in the forest areas of Kashmir valley, and therefore, any plan to upgrade the tourist infrastructure would not impact the real estate prices.

Govt grapples with urbanisation challenges

Saddled with the Herculean task of providing houses to 25 million urban poor, the Ministry of Housing and Urban Poverty Alleviation spent 2006 grappling with the challenges of urbanisation.

To meet the acute shortage of housing, the Ministry devoted a lot of time and energy in drafting a National Urban Housing and Habitat Policy, which is expected to see the light of the day only in 2007.

“The policy will earmark specific role to various stakeholders to address the housing issues in a time-bound manner,” Minister of State for Housing and Urban Poverty Alleviation Kumari Selja said.

To deal with the problem of unplanned and haphazard settlements, the Ministry is contemplating paying more attention to planning for sustainable cities and devising macro-economic policies to enable flow of resources to the housing and civic infrastructure sectors. — PTI

Good year for hotel industry

Higher room rates, never-before occupancy levels and promise of a whopping Rs 20,000 crore investments by domestic and foreign players to exploit the huge supply-demand gap made 2006 no less than a dream year for the Indian hotel industry.

Ranked by the World Travel and Tourism Council (WTTC) as the fastest-growing tourism destination with a projected demand of over one lakh new rooms, India saw its hospitality industry literally go into a fast-forward mode in 2006, continuing the revival post 9/11 attacks in the US in 2001.

If DLF scooped a deal with Hilton for a foray into the burgeoning sector and Unitech tied up with Marriott, foreign players like Accor, Emaar and Hillwood also announced plans for the country.

Not to be outdone, the domestic biggies like Indian Hotels, ITC, Leela Group and Oberois also loosened their purse strings to add rooms, the budget segment being the hottest.

And in between all this growth, the year also saw the industry losing one of its biggest doyens in the sudden death of hotelier Lalit Suri, the late Chairman and Managing Director of Bharat Hotels. Suri, 59, who was in London as part of a delegation of industry chamber FICCI, died of a massive heart attack.

This loss notwithstanding, the industry had some of its best moments in the year, especially due to the fact that peak tariffs also failed to dampen the high occupancy rates, as foreign tourists inflow rose to 3.88 million during January- November 2006 compared to 3.43 million a year ago.

And many factors justify the industry’s bullishness on the outlook. WTTC has predicted that the Indian hospitality sector, which has been growing at an annual rate of 8.8 per cent, has the potential to earn 24 billion dollars in annual foreign exchange by 2015.

Add to this, the 2010 Commonwealth Games, which in itself is a great catalyst for spurring growth and attracting more and more players to the hospitality sector.

Leading the pack were giants like Marriott, Hilton, Wyndham and Accor, who announced different plans of investments.

At last count, around 50,000 branded hotel rooms were in various stages of planning and development in ten cities, which are expected to be completed by 2010.

However, to tide over skyrocketing land prices, many of the players joined hands with realtors who are sitting on massive land banks.

Marriott took the lead when it signed an agreement with the largest publicly traded real estate firm Unitech in middle of the year itself to manage its three hotels. As per the agreement, Marriott would manage Unitech’s three hotels totalling 659 rooms, slated to open by 2009.

US-based Hilton announced its much-awaited joint venture with domestic real estate major DLF to develop and own 75 hotels and service apartments. The venture would invest $550 million (about Rs 2,500 crore) in next seven years. — PTI

Snakes can detect earthquakes

Nanning, the provincial capital of South China’s Guangxi Zhuang Autonomous Region has developed a unique snake based earthquake detection system.

Experts at the bureau monitor nests of snakes at local snake farms via video cameras linked to a broadband Internet connection, the video feed of which runs 24 hours per day.

According to Jiang Weisong, director of the bureau, snakes are most sensitive to earthquakes and can sense coming tremors from 120 km away, some three to five days before they actually happen.

Jiang said snakes could sense a coming earthquake from 120 km away, three to five days before it actually happens.

“When an earthquake is about to occur, snakes will move out of their nests, even in the cold of winter. They respond by behaving erratically. If the earthquake is a big one, the snakes will even smash into walls while trying to escape,” China Daily quoted him as saying.

He said other animals like dogs and chickens also behaved abnormally when an earthquake was about to happen, but snakes were the most sensitive to tremors.

“Of all creatures on the earth, snakes are perhaps the most sensitive to earthquakes,” he said. — ANI

TAX tips
Out-of-court settlement sum is taxable
By S.C. Vasudeva

Q. I occupy a residential house. The area in which residential house is situated has become the centre of commercial activity. The tenancy in respect of the house was taken about 25 years back and the rent of a fairly large sized house having three bedrooms and a large-sized garden is very meagre considering the prevailing rates. The landlord has been asking me to vacate the house but has not so far succeeded even in the courts. He is keen to make an out of court settlement and pay a sum of Rs.20 lakh for vacating the premises. Is the amount so received taxable under the provisions of the Act?

— Nimesh Gupta, Bathinda

A. Yes, the amount would be taxable in view of the amended provisions of Section 55 of the Income Tax Act, 1961 (The Act) and the cost of tenancy rights is nil. The amount of consideration received would be taxed as a long-term capital gain in your case.

A. Your information that one house or part of a house is exempt from the levy of wealth tax is correct. Apart from the house, a plot of land not exceeding 500 sq. meters, belonging to an individual or HUF is also exempt from the levy of wealth tax. The exemption is contained in Section 5(vi) of the Wealth Tax Act, 1957. Shares and bank balances also fall outside the purview of the Wealth Tax Act, 1957.

A. The test to be applied for the purpose of determining whether a particular land is an agricultural land is to ascertain the use to which such land is being put. If it is being used for agricultural purposes or even if the agricultural use has ceased but it is apparent that the land is meant to be used for agricultural purposes, it would be an agricultural land. Therefore, in order to treat a particular land as agricultural land in India, where the land is not being actually put to any use, it is essential to ascertain whether the land is capable of being used for agricultural purpose having regard to various factors and the physical characteristics of the land so that it can be regarded as an agricultural land (56 ITR 608) (Gujarat). It may be added that all facts and circumstances will have to be considered e.g. situation of land, the lands around that area etc. etc. Another factor, which will have to be considered, would be whether such land owned is within the specified area of the city limits or outside such limits. The exemption from capital gain would be available only if the agricultural land is situated outside such limits.

The amount by which the compensation or consideration is enhanced shall be deemed to be income chargeable as income under head capital gain in the year in which such enhanced compensation has been received by the assessee. In case of any reduction in the compensation or enhanced compensation by the court, the capital gain is required to be recomputed in the year in which such reduction takes place. The tax on the amount of compensation received by you will have to be computed in accordance with the above said provision.

Lock-in period

Q. I had purchased a residential house from the capital gain earned on the sale of a residential house. I had earned a sum of about 20 lakh by selling such house. I have invested the said amount in purchase of a residential house for a sum of Rs 30 lakh. I have been advised by an astrologer that the house is going to bring ill luck to me. I intend selling the said house within the lock-in period of three years. Please let me know the consequences thereof.

— A.B. Mishra

A. If the new residential house is transferred within a period of three years from the date of its acquisition, the amount of exemption given earlier would be withdrawn. In such a case the capital gain would be computed as under: Sale consideration of the new residential property = A

Less: Cost of acquisition (cost of acquisition of new residential property minus exemption given under the Section 54 which is going to be withdrawn because the new residential property is transferred within three years) = B

Short-term capital gain = C (A-B)

The above amount of capital gain would be taxable at the applicable rate.

Mysore becomes hot industrial destination

Emerging from the shadow of its cosmopolitan neighbour Bangalore, Mysore, witnessing a flurry of activities on many fronts, is all set to evolve as a brand.

The city, hitherto known for its rich history and regal past, is now promising to be the next hot industrial destination not just in Karnataka, but across the country. Making the task of building ‘Brand Mysore’ easier are the Information Technology (IT) majors, who have committed to invest crores and create thousands of jobs here.

Though Mysore lagged behind Bangalore, located just 140 km away, by at least three decades in terms of industrialisation, the royal city could take on the state Capital as it scored better in offering good quality of life, pollution-free atmosphere and lived up to its reputation of being a centre of education and knowledge, the IT honchos of the city said.

After finding a place among the top five tourist destinations in a survey conducted by the Union Tourism Ministry recently, the city had been ranked among the top 10 cities in a survey of 18 important urban centres conducted by Business Today, a leading business weekly from the India Today stable. — UNI

Chivalrous Haryana
Housing Board waives half of transfer fee for women, reports Ruchika M. Khanna

After having granted 33 per cent reservation for women in all its housing schemes (flats and independent houses) last year, the Haryana Housing Board has now decided to waive off 50 per cent of the transfer fee, if the house is transferred in the name of a woman, thereby encouraging participation in property matters.

A decision to this effect has been taken to encourage greater transfer of assets to women, thereby empowering them economically. According to the new policy on transfer and execution of conveyance deed, if the transferee is a woman, 50 per cent discount in transfer fee, be it residential or commercial property, is granted.

The transfer fee for Economically Weaker Section (EWS) house is Rs 100, for the low income house in Rs 300 and for a middle income house is Rs 10,000. In the open category, if the property price is less than Rs 10 lakh, transfer fee is Rs 10,000 and in case of sale being over Rs 10 lakh, the transfer fee is Rs 10,000 plus 6 per cent of the amount exceeding Rs 10 lakh. In case of commercial property, 6 per cent of the sale price of the property is the transfer fee. With a huge discount of 50 per cent being given to woman transferees, Housing Board hopes that more and more women will participate in property matters.

Last year, the board had decided that 33 per cent of the houses/ flats be reserved for single or first women applicants. “The idea behind this is the Board’s commitment to economic empowerment of women,” says Ashok Khemka, Chief Administrator, Housing Board, Haryana. As compared to a mere 10 per cent women applicants in the schemes earlier, this reservation for women led to at least an eightfold increase in women applicants for their housing schemes.

Thus, it has also been decided now that the scope of 33 per cent reservation for women in various housing schemes of the board should be expanded. Women applicants under various reserved categories will not only get a chance for being successful in the reserved categories, but unsuccessful women applicants in these categories will also get a chance to participate in the draw of lots for general category. “By granting two chances to a woman applicant, we will ensure that maximum applications are received in the name of women. We had initiated 33 per cent reservation for women in all housing schemes last year, following which 80 per cent applicants in our schemes have been women. By extending the scope of this reservation, we hope to further increase the number of women applicants in our schemes,” Khemka adds.

Meanwhile, the board has also decided that houses and flats constructed by Housing Board, Haryana will now be allotted only to the homeless. The board has decided that no allotment of residential property would be made if the applicant already has a residential property in his name, his spouse’s name or in the name of his dependent children, anywhere in the country.

Carrying forward its social responsibility, Housing Board has also said that the interest earned by the Housing Board, through deposits of applicants in various housing schemes, will not be treated as its income. Instead, a separate account would be created by the Housing Board for such net proceeds, which would be used for charitable activities.

This money will be used for construction of houses for poor families or for families affected in case of natural calamities, through the Prime Minister’s or Chief Minister’s Relief Fund.

GROUND realty
Sellers need to be organised
Jagvir Goyal offers a few tips to the builders

Recent realty boom in India had its effect on Chandigarh also. A large number of builders acquired land on the periphery and drew plans to develop large townships in Panchkula, Mohali, Zirakpur, Kharar and other areas. Appearance of full-page advertisements in major newspapers inviting applications for booking of flats has been a common occurrence.

Good response and bookings are essential for successful commissioning of a new housing project. These provide finance and confidence to the builder. However, recently, many builders have been found complaining of lack of enthusiasm among flat-aspirants. The demand-supply law of economics has begun to play its role. Presently, the number of builders and the number of flats being offered by them are large while demand has receded. There are hardly any bookings. People are expecting a fall in prices. They have become choosy too. They are comparing the locations and specifications also. The change from a seller’s market to a buyer’s market is quite evident.

Another striking feature of the present scenario is that some builders are receiving fairly good response while others are hardly getting any bookings despite making alluring promises. Builders need to know that a number of factors affect the bookings of flats with them and unless these factors are taken care off, expecting an encouraging response for their flats or apartments will only bring disappointment.

Here are a few tips for the builders to follow. This 10-point program if followed, is going to invite a better response to their housing schemes:

1. Build trust: Good track record of a builder impresses the people most. To build trust, exhibit previous works completed successfully in your advertisements. Reputation travels fast. When it becomes known that people living in flats built by a builder are happy and have no complaints, bookings for the next project swells.

2. Good location: While planning to set up a colony, keep location in mind. Location is one of the most important factors that speeds up the booking. Proximity to a good city, connectivity and availability of a main highway, availability of telephone, availability of internet facilities with wi-fi technology, provision of cable network or DTH satellite, pollution free environment with greenery all-around and small distances from railway station, airport and bus stand matter a lot.

3. Go green: Choose a ratio of 65:35 or more for open area : occupied area. Concentrate on landscaping. Develop parks. Let there be greenery all round. Plant trees early. Must develop a jogger’s track. All these will bring a healthy feeling to the flat buyers.

4. Develop services: Develop water supply and sewerage services fast. Lay metalled roads. Provide street lighting. Put signboards showing directions and flat numbers. Complete 24x7 power back-up arrangements for essential services. Still better, if you are building a market, a club and a swimming pool. Approach district administration to make local buses run up to your colony. Let these services be in progress when flat-aspirants pay visits to your colony. The development will leave a good impression on them.

5. Sense of security: Provide proper boundary wall for the colony. Provide barbed wire fencing of proper design with at least four runners over the boundary wall. Provide gated security. Let there be round the clock guard at the gate to scan the visitors. Sense of security plays a great part in tempting the buyers to buy a flat. Must take full and actually effective fire fighting measures.

6. Site visits: Keep conveyance available for any one who approaches you and seeks to book a flat. Almost force him to pay a site visit through free conveyance provided by you. Keep a good guide who could explain the plus features in easy language and in a brief manner. Keep care of customer’s time. The way a test ride makes up the mind of a car buyer, a site visit plays significant role in winning a customer.

7. Structural design: Must get the building designed from a competent structural engineer. Make the structures quake resistant. Never adopt design evolved on basis of thumb rules. Change your mindset and drive the thought out of mind that a structural engineer will make the buildings costlier. He will rather help in saving money by providing economical RCC work.

8. Durability: Make the buildings stronger and durable. Current practice is to ignore quality and supervision and cover all defects through attractive finishes. Choose durable materials and specifications rather than brittle but attractive looking products. This will bring long-term benefit. Let the flats be maintenance free for years to come.

9. Reasonable profit: Look for a reasonable profit only. Greed leads to doom. Produce more, sell more with less profit per unit and see your profits soar. Don’t try to kill the golden eggs laying hen in one day. Nobody stops you from preparing realistic estimates, counting unforeseen expenses and counting escalation in prices but profits must be reasonable.

10. Transparency: After reading the brochures, a buyer are going to develop a certain idea of the size of the flat that he is going to own. Take care that his dream is not shattered when his flat is handed over to him. Let there be full transparency in the deal.

Flexible norms attract Indian realtors to LSE

London has always been a preferred destination for Indians seeking to go abroad, but now, flocking to the financial streets of the British capital are India-focused companies, looking to raise funds.

As many as 15 Indian and India-focused companies have hit the London Stock Exchange since the beginning of this year with public issues of their shares, while managing to raise proceeds of about Rs 20,000 crore (over $4 billion) through these offerings.

These companies have approached investors in London for doing India-oriented businesses while betting on the growth potential of the Indian economy — particularly in sectors like real estate and IT — as a guarantee to seek funds.

The amount raised by such companies represents about 20 per cent of the total foreign IPO proceeds of about $22 billion (Rs 1,00,000 crore) on the LSE so far, in 2006.

Some of these companies include established players like Noida Toll Bridge and Eros International as well as investment arms of domestic real estate majors Unitech, K Raheja Group and Hiranandani Developers.

The rush for London listings has accelerated further in the past two months, particularly among realty firms.

Investment arms of companies Unitech, Hiranandani group, K Raheja Group and West Pioneer Properties along with a few India-focused real estate funds have collectively raised about Rs 10,000 crore.

Besides, there are more than 20 Indian companies in line to raise over $ 2.5 billion (over Rs 21,800 crore) in the coming months, a senior investment banker said.

Experts believe that realty firms are getting attracted to the London market due to flexible norms and easy availability of funds there.

“There is lot of euphoria among global investors about the Indian real estate market and the regulatory norms are much relaxed in London,” senior manager with global real estate consultant Jones Lang LaSalle, Gautam Hora said.

However, this market would soon dry up because there is a limit to when investors can subscribe to the Indian real estate market, he added.

Undeterred by this word of caution, Hirco Plc (part of Mumbai-based Niranjan Hiranandani Group) has already raised Rs 3,300 crore through its IPO earlier this month and is reportedly planning to float another Rs 1,000 crore fund on Alternate Investment Market (AIM). It has hired Bear Stearns and HSBC as advisers.

Besides, two other domestic real estate firms Ansal and Lok Housing are also understood to be mulling over their London listings.

Earlier this year, Noida Toll Bridge Company Limited was admitted to LSE’s AIM for trading in March after raising about Rs 190 crore through global depository receipts.

In July, India Hospitality Corp (IHC), which has Hero Honda CEO Pawan Munjal as one of its directors and plans to acquire hotels in India, raised $100 million (Rs 460 crore).

Investment bankers like Elra Capital, which is planning to raise over Rs 1,700 crore from listing of an India-focused fund, would target investments in the country’s property, retail and media sectors. — PTI

Haryana swoops on dubious pre-launches
Ravi S. Singh

Action by the Department of Town and Country Planning and Haryana Urban Development Authority (HUDA) against dubious pre-launches of colonies and illegal colonisations have contributed substantially in checkmating the appreciating prices of real estate.

The two-fold action has also stymied the haphazard growth, at least for the present. The Department of Town and Country Planning and HUDA have unleashed various administrative actions against the fly-by-night operators following a special directive from the government. This was done in the wake of reports from several quarters that dubious land dealings were adversely affecting colonisation operations, both by HUDA and various genuine private developers and builders.

The unauthorised pre-launch of dubious colonies, besides cheating the government of revenue, also duped innocent buyers of several hundred crores. The menace has spread to such an extent that Department of Town and Country Planning had resorted to public appeals asking people to beware of such fraud launches.

Also the areas around municipal town, Gurgaon, Sohna, Nuh, Manesar, Damdama, Sultanpur, Gwal Pahari, Ferojpur Jhrka in Gurgaon district and Mewat have been declared “controlled” or “urban areas” under the Punjab Scheduled Roads and Controlled Areas Restrictions of Unregulated Development Act, 1963 and the Haryana Development and Regulation of Urban Areas Act, 1975 respectively, wherein any kind of construction or carving out of plots/flats or selling of plots without the permission from the department/government was illegal.

The modus operandi of the mafia and some builders-colonisers included giving advertisements for bookings of flats and plots in “unsanctioned”/illegal colonies and apartments. They used to collect huge amounts of money through this method.

The procedure is that a licence has to be procured from the Department of Town and Country Planning for setting up of colonies and apartments. The licenses can be provided in “controlled” areas. For “high-potential” zones like Gurgaon and Faridabad, a builder or an investor needs to present proof of possession of 100 acres of land for setting up a colony project and 10 acres of land for setting up multi-storeyed apartments. However, outside the high potential zones, the land required is less. The proviso is that the applicant for license needs to have possession of land for the project concerned. However, there is no guarantee that the license would be given for the project even though the applicants have proof of possession of land.

But the operators did nothing of the sort and straightaway started collecting money by way of booking of plots. They allegedly conspired with many real-estate brokers and other agents.

According to Administrator, HUDA, Gurgaon Circle, Mr S.P. Gupta, 17 FIRs were registered against such operators recently. Well-known realtors were also booked in the case. A builder was allegedly caught carving a colony in the controlled areas of Mansar (around Gurgaon) and booked plots through some dealers.

Apart from these polished frauds, Gurgaon has been witness to local mafia thugs who resort to crude form of illegal colonisation starting from about one acre around the Gurgaon city. But the authorities have come out heavily against them. Though the menace appears to have been checkmated yet has not been totally eradicated. A few days ago, the demolition squad of District Town and Planning (Enforcement) had to demolish infrastructure on about 10 acres of land near Sheetla Colony.

According to Mr Gupta, the culprits first quoted a low price for land in the illegal colonies to create an artificial rush. Then they pushed up the prices further and were able to create artificial competition. The outcome of this shoddy practice was the overall disequilibria in the availability of land and the price line in the real estate market.