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Middle class looks at Tier II, III cities
Italian marble floors, bar, modular kitchen, a state-of-the-art bathroom and a swimming pool in the backyard: luxury has just got redefined, and that too, for the middle class, as far as housing is concerned.
With real estate prices in the NCR region soaring, developers are looking at greener pastures in Tier II and Tier III cities. In fact, the boom has just begun in Kundli, Sonepat, Panipat in Haryana and Rudrapur in Uttaranchal, where luxury apartments, affordable even by the middle class, are fast coming up. “All roads today lead to Tier II and Tier III cities that are around two to three hours drive from Delhi where these luxury apartments are coming up,” says Kashif N. Usmani of Taneja Developers and Infrastructure Ltd (TDI). “The last decade saw the transition of sleepy towns like Gurgaon, Noida and Faridabad into enviable addresses. But this day, these Tier I towns, as they are called, are all saturated far beyond the means of the middle class,” he says. “The focus is now on other closer-to-Delhi cities of Haryana as the development policies there are very conducive for real estate development. For around Rs 20 lakh, a middle-class person can get a luxury apartment,” says Sunil Anand of Anand Properties & Infrastructure Ltd. The catch is that these apartments come with a luxury tag. A two to three bedroom apartment comes with attached state-of-the-art baths, modular kitchens and wooden flooring in the master bedroom. “If this is not enough to lure the buyer, there is also a fountain at the entrance,” says Anand. Many big names in the real estate industry have entered the fray. TDI is coming up with what it calls a “Self Integrated City” in Kundli, while Omaxe too is building self-integrated townships. All these are coming up with, not only luxury apartments, but also schools, gymnasiums, parks, golf courses, community centres and posh clubs. Manmeet R. Singh of Omaxe says: “The apartments are very reasonably priced. We are giving them the best of luxury living at giveaway prices.” “Tier II and III cities are far more favourable in terms of affordability. At Rs 20 to 30 lakh, they are getting high rise apartments which in the city will cost them more than Rs 60 lakh,” says Partho Kumar of Alliance Nirman. Citing the case of Rudrapur in Uttaranchal, he says industry giants have invested Rs 10,000 crore in the area. These townships would be self-sustaining. It is not just luxury that is attracting the buyers. “There are plans to bring the Delhi Metro to Kundli and Sonepat in another two years time and this will only add to the comfort of the people,” says Usmani. The development of infrastructure around the Tier II and III cities is one of the main reasons that the buyers are flocking these townships, he says. The Tier II cities have become the favourite haunt for the ITES industry too. These cities provide a cost benefit in terms of low rent and low cost of living. And as the BPO industry starts moving base to these cities, they are sure to become commercial hubs. The opening of a mall in Panipat this month seems just the beginning, says Anand. However, not all Tier II cities are for the middle class. There has been a growing demand among the NRIs for a second home in places like Rishikesh. This, no doubt, has pushed up the price of such projects. Here even studio apartments (with one bedroom) can cost some Rs 30 to 40 lakh, says Anand. Kumar, meanwhile, rubbishes claims that the real estate bubble would soon burst. “It will not burst but settle down. From Kundli and Rudrapur, it would only spread further, once the saturation reaches these areas,” he says.
— PTI
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Shops make-up to resemble malls
Retail scenario changes as established outlets change the looks, says
Shveta Pathak
The first mall that came up in Punjab had raised many questions, most as to whether these malls would succeed. More than one year down the line a significant shift in the scenario seems to have occurred. On one hand are the residents waiting for more malls to come up “for a better shopping experience” while on the other an increasing number of retail chains are coming up in the state offering a shopping environment on lines similar to malls. “People now are quite sensitive to the environment offered in an outlet. They prefer outlets that offer an easy access to goods so that they can see the products and make choices and at the same time enjoy shopping,” says Dinesh Harbhajanka, proprietor, V Mart, a chain of lifestyle and home essentials stores, which recently opened its outlet in Ludhiana. The company is planning to increase the number of outlets to 50 by the end of this year. Residents are quick to list the benefits. “You get to shop under one roof, its more comfortable and malls are also a good hangout,” Geetanjali Sharma, a city resident, says. While initially people expressed doubts and said the products available in malls were costlier, a large number are now waiting for malls and big retail outlets. “Earlier people were confused. But the impact is quite visible now and a lot of old outlets have changed interiors to make them more consumer friendly,” points out Arvind Bhardwaj, Manager, Retail Pyramid, a key store in Ansal Plaza, Ludhiana. So far as established outlets are concerned, changes are visible. Naveen Bharat, a furnishings store in Chaura Bazaar here, expanded operations and opened a new four-level outlet on Pakhowal Road. “The new outlet is more on lines of modern day outlets where people enjoy their shopping,” company director Surinder Singh says. While the coming two to three years would witness over a dozen more malls in this region, residents feel malls would perform better if they took care of pricing factor as well. “Given the hassle free shopping experience malls offer, one would prefer them over routine shops. Besides, problems like parking et al are also taken care of. However, it would be better if prices in outlets in malls were also competitive. We only hope the scenario would change on this front too when more malls come up,” feels Ashwani Sharma, a bank employee.
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Returns on infrastructure funds may plateau
Funds investing in infrastructure sector posted the best returns in 2006 but are unlikely to repeat the performance this year as such stocks have turned expensive and may not sustain their momentum, fund watchers said.
Three of India’s top five equity funds in 2006 were pure infrastructure funds, data from global fund tracker Lipper showed. The other two also invested heavily in companies building infrastructure or supporting it. “Returns might not be as high (in 2007) as what the infrastructure theme had delivered in 2005 and 2006,” Sanjay Dongre, fund manager with UTI Asset Management Co. Pvt. Ltd., told Reuters. Mr Dongre, whose Rs 6.63-billion UTI Infrastructure was the top-performing scheme in 2006, said returns could be on the lower side this year as “stocks have moved up sharply.” Unitech Limited, the top performer in the BSE 500 index in 2006, had returns of 2,917 per cent, while Mahindra Gesco posted returns of 121.34 per cent and IVRCL Infrastructures saw a 162.43 per cent rise. “Things might not be that easy this year because of the higher bases which we had created last year...so to that extent you should tone down your expectation,” he said. Infrastructure funds posted good returns in 2006 due to high allocation to real estate and construction stocks, many of which gave triple-digit returns, fund watchers said. These stocks now command very high valuations, which is a cause of concern, they added. “Even though infrastructure looks poised for growth due to growth in the domestic economy, there are certain sectors like real estate and construction which look frothy at the moment,” Dhruva Raj Chatterji, research analyst with Lipper, a Reuters company, said. However, infrastructure would be one of the stronger themes of 2007 as India steps up investment in the sector to support its rapidly growing economy, fund managers said. “I would think that it (infrastructure) will be one of the powerful themes,” Srividhya Rajesh, fund manager, Sundaram BNP Paribas Asset Management Co. Ltd., said. India had just begun creating infrastructure and building capacities and was nowhere near to what some developing and developed counties have done, she said. Srividhya’s Sundaram BNP Paribas Capex Opportunities fund, which primarily invests in the infrastructure sector, was among the top 10 performing funds of 2006, data from Lipper showed. Stocks in the sector would command above-market valuations purely because of visibility in terms of order book, she said, adding, “as long as there is enough accretion in the order book, the valuations would sustain.” India is planning to invest $370 billion in infrastructure development over the next five years, Ms Srividhya said. “Even if only half of it materialises, look at the kind of order book it would translate into for these companies.” However, she said, investors now have to be ready to stay invested for the longer term and should not expect returns similar to 2005 and 2006 from infrastructure funds. “We are also advocating a more longer-term outlook and a more tempered-down return expectation,” she added.
Citigroup pragmatic on India Citigroup’s global equity strategist said that developed markets such as the United States, Europe and Japan would outperform emerging markets this year, and warned that rallies in India and China could falter. Citibank’s Ajay Kapur said he expects equity markets in the United States, Japan and Europe to rally 10 to 15 per cent in 2007, thanks to healthy corporate earnings and strong economic growth coupled with low inflation. By contrast, emerging markets — which outperformed last year — now appear overvalued, with both India and China at the risk of a correction. “When there are elevated levels of sentiment, any policy error, any mistake obviously hurts (markets) that are most inflated,” Kapur told a news conference organized by Citibank’s private bank. — Reuters
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Indoor plants feel the chill
Satish Narula lists ways to tackle frost
The basic differences between the facilities and conditions at different levels are many. To name a few, it is the micro-climate, exposure to external conditions, availability of sun or shade, space factor and above all, water availability. When it comes to the purchase of indoor plants, beauty of the plants in nursery lures. If you are aware about the behaviour and the cultural requirements of the plants, it is good otherwise, consult an expert gardener or specialist about the species that would be most suitable for a given situation. Once you buy a plant and bring it home, nurture it. During winter months, it becomes all the more important to give special care and treatment. Frost this season has caused havoc with the indoor plants. Those in the exposure got ‘burnt’. During winters, sensitive plants like croton, coleus, dieffenbachia, maranta, calathea etc are the first ones to face mortality. Such plant should at once be shifted indoors before the temperature starts plummeting. In certain conditions if it is not possible to shift the plants indoors, some gardeners bury the plant, along with the pots, in the soil. The rate of mortality or damage is less in such cases and in some cases the plants do not even shed the leaves. Keeping a good supply of water also helps ward off the ill effects of frost. In the balconies, where these are south facing, plants kept under the shelter of the roof that gets winter morning sun are the most benefited. Make sure these are not exposed to fast currents of winds. There is, however, no escape in case of top floor residents. They can erect temporary poly covers or green shade net houses. In case of die-back symptoms, the dead part should immediately be removed or else the backward dying of tissue continues and the plant dies ultimately. In case of upper stories, space is always a constraint and there is a limit to the number of plants that can be sent indoors. And remember; do not make a conservatory of your home, especially the bedroom. The plants emit carbon dioxide at night. Under the space constraint, you have to make a selection out of the lot depending upon the comparative hardiness. The hardy species include dracaena, asparagus, pines, and schefflera, those belonging to genus Ficus like rubber plant, peepal, benjamina, pandamus, variegated, lyrata and so on.
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Completion certificate not needed for claiming IT rebate
by S.C. Vasudeva Q. Kindly clarify if income tax rebate on home loan is available only after the completion certificate has been secured from the municipal committee, HUDA etc. I have taken a loan of Rs.6 lakh from ICICI Bank for renovation of my house. Earlier, I had applied to HUDA for completion certificate five years ago but that has not been granted yet. Am I eligible for IT rebate on this loan (which was for renovation/addition) without having been issued a completion certificate by HUDA? No need to say that I had completed the construction of the house five years ago. — Khazan Singh, Jhajjar A. Section 24 of the Income Tax Act, 1961, (the Act) permits the interest paid on loan taken for the renovation of the house. Therefore, you would be entitled to claim the deduction of interest against your property income. There is no necessity to have a completion certificate from HUDA. You should be able to produce evidence that renovation for which loan was taken has taken place. I may add that the deduction in such cases is limited to Rs 30,000 only. Mutual agreement
Q. We had a prolonged litigation over moveable and immovable properties of my grandfather. Now we have settled the matter out of court and got Rs 10 lakh as my share therein. It is not based on the actual values of said properties and is only a token amount. Kindly advise me regarding my tax obligations. — G.D. Singh, Patiala A. The facts given in your query are not complete. For example, it is not evident as to what is the nature of the movable properties as well as the immovable ones in respect of which prolonged litigation existed. To enable me to advise you with regard to the tax treatment of the amount of Rs 10 lakh received by you, it would be essential to go through the document, if any executed for the out-of-court settlement to ascertain whether any income has arisen. You will appreciate that the income tax is leviable on ‘income’ and, therefore, it would be essential to ascertain this aspect.
Sale of house
Q. I booked a freehold house in July 1999, at the rate of Rs 8,09,742 in a development authority and deposited all its dues (about Rs 9,50,000), including freehold charge and interest, by April, 2002. I took possession of this house after the execution of sale deed in May, 2005, after spending Rs 90,000 as registry charges and sold it in July 2006 for Rs 14 lakh. Out of this amount, I paid Rs 5,46,000 as balance loan of a financial institution against the same house. I purchased a plot for Rs 1,00,000 and spent Rs 4,30,000 on construction of house in this plot. My queries are: i) Whether return from selling of house is treated as long term capital gains and how much of the selling amount will be the long-term capital gain. What amount I would have to pay as tax on long-term capital gains. ii) Whether gain from selling of the house be counted as income for IT purposes during 2006-07. iii) As I have invested Rs 5,30,000 on the purchase of plot and construction of house at Delhi, what would be the effect in taxes? iv) What is other way to save taxes on this gain? — Shrish Chandra Dixit, Chandigarh A. The issue whether the sale of a house which had been booked and paid for by April 2002, the possession of which house was taken in May 2005 will be categorised as a short-term capital asset or a capital asset is not free from doubt as there are two schools of thought. One of the views in this regard is that a right to property having been acquired and paid for by April 2002, such capital asset should be taken as a long term capital asset as the period of three years has been completed by the date of effecting sale in July 2006. The second view in this regard is that the right to property gets merged with the right of possession and therefore the date of acquisition of the property should be taken as May 2005 and since the period of three years have not elapsed between the date of acquisition of property and date of sale, it should be categorised as a short term capital asset. Any gain on the sale of a long-term capital asset would be chargeable at a reduced rate of 20 per cent plus education cess of 2 per cent thereon. A surcharge of 10 per cent is also leviable on tax in case the total income of a person exceeds Rs.10 lakh. However, the gain arising on this sale of short-term capital asset is included in the total income and taxed at the normal slab rates. In your case if the capital gain is taken to be a short term capital gain, the difference between Rs.10,40,000 and Rs 14,00,000 being the sale price i.e. Rs..3,60,000 would be included in your total income and brought to tax on the lines pointed out here in above. In case the same is treated as a long-term capital gain, the capital gain would be computed as under: Indexed cost 9,50,000 X 519 divided by 447 =Rs 11,03,020 90,000 X 519 divided by 497 = Rs 93,984 Total: Rs 11,97,004 The above indexed cost will be deducted from the sale proceeds of Rs 14 lakh and the balance amount of Rs 2,02,996 would be treated as long-term capital gain. In case your contention of treatment of such gain as a long-term capital gain is accepted, no tax would be payable as you seem to have constructed the residential house within a period of three years.
Capital gains
Q. I sold my ancestral land, which is within the 8 km radius from the municipal corporation limit of the city. The said land was purchased by my grandfather in 1958. I am in a government job and a regular income tax payee. I fill my income tax return regularly on yearly basis. Kindly tell me, whether the capital gain is calculated on the whole amount? How can we save capital gain tax? Whether I have to mention it in my income-tax return. I saved the money as bank fixed deposit for one year. Is it safe? — Sukhmanjit Singh, Bathinda A.
The facts given by you are not complete. It has not been clarified whether such agricultural land though being within eight kilometers of the municipal limit is covered within the definition of the term ‘capital asset’. This would have to be checked with the notification and for that purpose the exact difference and the name of the relevant district and the village in which the land is situated will have to be ascertained so as to confirm the inclusion of such land within the category of term ‘capital asset’. The capital gain is calculated by deducting the cost price or the indexed cost as the case may be from the sale price. The capital gains can be saved by investing the capital gain in the acquisition or construction of a residential house. If such house is constructed it should be within one year before or two years after the date of transfer. If it is constructed it should be between three years of the date of transfer. The capital gains tax can also be saved by investing the capital gain in the bonds issued by the National Highway Authority or the Rural Electrification Corporation Ltd. The assets acquired on inheritance must be mentioned in the return of income. The money invested in the nationalised bank is always safe. However, in case you intend saving capital gains tax, the investment tax savings bonds should be made within six months of the date of transfer. In case you want to buy or construct the house, the capital gain should be deposited in a separate bank account under capital gain scheme before the date of filing the return for the year in which capital gain has arisen. The money so deposited can be used for buying or constructing the residential house.
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Buzz on Bourses
New
Delhi: PNB Housing Finance Ltd, a wholly owned subsidiary of Punjab National Bank, has tied up with Iffco Tokio General Insurance to provide its customers with fire and personal accident insurance policies, along with the housing loans. The policy would provide protection against all accidental occurrences that might lead to death or permanent disability of the insured, PNB said in a press note.
— PTI
Omaxe-PDA township Chandigarh:
Omaxe, one of the India’s leading real estate company, plans to develop a world class integrated city at Patiala in a joint venture with the Patiala Development Authority (PDA). Spread over 336.5 acres, PDA Omaxe City will be the first of its kind in Patiala bringing in a brand new workculture and an unmatched living pleasure. “This self-contained city will comprise of world class IT Park, bio-tech park and other facilities,” says Mr Rohtas Goel, Chairman and Managing Director, Omaxe Limited.
— TNS
Green City projects Chandigarh:
Green City Group has received a go-ahead for Shimla and Bhiwadi projects. According to a press note of the company, Green City is also developing real estate projects at Agra, Lucknow, Bhiwadi, Fatehgarh Sahib, Meerut, Ghaziabad, Mohali, Rohtak, Sonepat and Jaipur. Mr Jitender Chaudhary, Chairman, said the “group was expanding its canvas of activities by diversifying on to a wider horizon.”
— TNS
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