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Realty soars on FDI wings
Ever since the government eased the foreign direct investment (FDI) norms a year ago, the realty mania refuses to subside.
Two days ago, US private equity firm Apollo Management, in a tie-up with Sun Group, decided to pour in around $2 billion into the Indian real estate. Last week, Morgan Stanley Real Estate announced investing Rs 675 crore ($152 million) in Oberoi Constructions, one of the leading Indian real estate developers, close on the heels of Citigroup partnering with Bangalore-based Nitesh Estate. To further fuel the construction mania, US private equity firm Warburg Pincus earmarked $250 million for the Indian realty sector. All this within a span of few days. Flush with funds, foreign firms continue to pump in greenbacks on the Indian shores, adding more adipose to the already bulging real estate market.
Growth story
The FDI in domestic real estate market is expected to touch 26 per cent by March 2007, an upthrust of 10 per cent, according to a recent study by Assocham. The domestic realty market will touch $60 billion by 2010. Top players are gung-ho about it. They know they are on safe ground, as the weaker and local builders would, sooner or later, be edged out going by the market rules. Further, FDI is making the market more organised. “Inflow of FDI will have positive impact on the real estate sector in India. According to Edleweiss, there is an investment demand of $91.5 billion (16.8 per cent of GDP), annually. This unprecedented demand has resulted in organised sources of funding. FDI in this direction will lend the necessary support to the industry,” says Kunal Banerjee, Vice-President, Marketing and Corporate Communication, Ansal Group. Nilanjan Maitra, President Marketing, Baderwals Infraprojects, is of the opinion that FDI in real estate will provide much-needed investment for the fund-starved sector and bring in professional players equipped with expertise in real estate development. “The introduction of new technology and quality real estate assets will have a demonstrating effect on the real estate developers. It will lower the realty cost in the long run and also generate employment and revenue, besides, improving the quality related to infrastructure,” he says.
Ease red tape
A few established players aver that due to recession, there is an over-supply of housing in most of the developed countries, some of which are also reeling under recession in last few years. This is making most of the global real estate majors look at India as a possible investment destination. However, the government will have to clearly “explain specifics of the foreign investment guidelines,” including transparency and risk factor to attract large-scale investment in the sector, opines Madhur Mittal, JMD, Triveni Infrastructures. “Whether the policy is too restrictive to interest FDI, a reading of the policy paper makes it clear that though the red carpet has been rolled out, the red tape has not been loosened yet. Entry and exit for foreign capital is seen as not easy, with too many checks and balances. Any foreign investor would prima facie look at three things — the ease of bringing money in, the ease of managing it and returns available, and the ease of repatriating the money,” he says. “The new FDI policy does not allow developers to have a free say on the development character. Restrictions have been imposed in terms of the areas to be earmarked and handed over (free of cost) for various uses. In addition, there are reservations for NPNL (no-profit-no-loss) category and EWS (economically weaker sections). The biggest drawback, however, is seen to be that the housing/townshipsector does not qualify for the infrastructure sector (Section 80IA)benefits under the IT Act and unlike other infrastructure projects, it does not get a tax holiday. High tax rates, weak
Loopholes
Despite the bottlenecks and the proverbial red tape, FDI flows into the sector zoomed to $700 million in January-October 2006, a five-fold growth compared to the last year. Industry analysts say that some of the offshore agents, in tandem with domestic builders, are exploiting a loophole in the FDI notification wherein “original investment” cannot be withdrawn before the three-year lock-in period. This means any amount pumped in after the “base amount” is deposited can be withdrawn after the project is completed and taken out of India. It may lead to a virtual collapse after these foreign players exit. Another point is that FDI is permitted through the automatic route, i.e., without requiring the additional approval of the Foreign Investment Promotion Board. An International Monetary Fund statement this week said India has chalked up excellent growth and one of its top priorities is to stop booming credit and asset markets from causing the economy to boil over. “Vigilance is needed to guard against any potential risks of overheating,” the IMF’s executive board said with special emphasis on real estate. Subhash Chander Dhall, a local banker and a realty observer, says that once foreign investors make the kill and pull out, property bubble may go bust, rental value may increase and the realty value may tumble. “This may, however, take nearly two years or so,” he says. Till then the party rocks!
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Realtors, retailers & recruitment!
Matching their investment plans of over thousands of crores in the booming Indian malls and realty, multinational firms are making a beeline for top B schools to hire talent.
Retail biggies like Reliance Retail, Bharti-Wal Mart, Essar, RPG and London-based Tesco are drawing up plans to tap the top business school campuses, which is likely to make things tough for regular big-time hiring companies, belonging to finance, IT and consultancy and is certain to push up hiring costs. “Major retailers, including Reliance Retail and Bharti Wal-Mart, have evinced interest in recruiting from the campus when the placement process starts in March,” IIM Indore student placement secretary Shreyan M.L said. The increased demand is going to give a big push to the average salary of the graduates. As Shreyan puts it: “These companies have expressed interest in recruiting large number of graduates and this is going to push the salary offered by as much as 40 to 50 per cent, since finance and IT sectors would also be vying for the same graduates.” And not only are Indian retail companies coming to the campuses, foreign retailers like Tesco are equally bullish on the Indian brains to manage their operations. The London-based retail giant, which is considering entering the Indian market, has already set eyes on the B-school campuses and has confirmed its participation in the placement process at IIM Calcutta, IIM Bangalore and ISB Hyderabad. Companies are also approaching the IIMs and ISB, Hyderabad, for participating in the final placement process, which would start in March. It is not that only companies are interested in hiring talent, but students too are showing a change in taste and are evincing interest in sectors that nobody was ready to choose a few years ago. “Students are showing interest in the real estate sector as well and consequently many companies from the country and abroad are approaching us,” Shreyan said, adding that one Australian real-estate finance company Macquire Bank has even finalised its plans in this regard.
— PTI
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Realty cools as Punjab goes to polls
The coming Assembly election in Punjab has cast a shadow on those planning to buy property in the Mohali district, which had been witnessing a tremendous boom over the past one year as the colonisers have acquired much of land in the district.
Land sales has declined and so have the buyers. Everyone is putting plans on hold, in wait for the formation of the next government. The rate of real estate will depend purely which party is voted to power. Buyers interested in investments are really worried about the mega projects, which have come up during the Congress regime. The sale of land, too, has declined. The purchase of land has witnessed a sharp decline during the past four months. Going by the statistics of the Revenue Department, there has been a decline in the land registry over the past few months. In Kharar only, number of registries have declined sharply over the past four months, from 35 to just 10 a day, discloses a senior official. Mushrooming offices of property dealers on both sides of NH21 are a thing of past. These days, property dealers rarely get a good deal. Most of the investors and buyers are holding plans in wait of election result. “A temporary phase till the formation of the next government,” is how the property dealers of the area review the decline in the buyer’s frequency. “The rate of property was high, ranging between Rs 2 and Rs 5 crore for an acre, as one is looking along the highway and small distance away. We have been witnessing lesser number of property buyers visiting the offices these days. Coming elections have delayed buyers’ plans,” says a property dealer of Kharar. Another property dealer from Balongi says that over the past few months, no potential buyer has come forward. “Earlier, every day we had been receiving demand for land purchase,” he adds.
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Avoid 5 construction methods
Whenever a house builder tries to depart from the old and bad methods of construction, a mason’s standard reply is: “ If you want to differ, I won’t be responsible for the consequences.” The builder is caught in a dilemma. For safety in construction, don’t allow mason’s dictum to prevail. Follow engineer’s advice. This way economy and durability in construction shall be achieved besides, quality and safety. Here are a few bad methods of construction. Avoid these: RB roofing in housing
It is a major practice followed in India. Reinforced Brick (RB) roofing in houses is more common than the strong, impervious and economical RCC. There prevails a belief that RCC roofing develops cracks while RB roofing does not. RB roofing has bricks laid on edge and covered with a 40 mm thick layer of concrete. Steel reinforcement is laid in the gaps left between the bricks laid on edge. A bottom cover of 12 mm is provided to the reinforcement. Total thickness of slab works out to be 167 mm. Spacing of reinforcement gets decided by the brick laying arrangement in this type of roofing. On the other hand, RCC roofing laid under similar conditions is just 113 mm thick. The designer decides its reinforcement spacing. In the long run, RCC roofing, in fact, proves cheaper. As and when RB roofing is laid, bricks being highly porous, soak water from concrete resulting in cracks in top layer of concrete. Steel bars placed in between bricks come in contact with them and rusting of bar occurs after a few years. There is then no remedy except dismantling the slab. The only factor that goes in favour of RB roofing is the low thermal conductivity of bricks. This may help in lesser expansion of slab and better insulation to heat. However, this factor weighs little against the drawbacks this type of roofing suffers from. If proper end treatment is given to RCC slabs by providing a 6 to 8 mm gap, filled with asbestos filler and a 10 mm bearing plaster is provided at the base, no cracks will appear in the RCC roofing.
Hand mixing of concrete
Indian specifications sometimes allow ‘hand mixing’ of concrete. Whatsoever, precautions you may take, hand mixing will not produce desirable blending of concrete ingredients. Cement consumption will also increase. Water-cement-ratio will also not remain under control. Therefore, avoid hand mixing. If unavoidable, allow it for lean concrete only. Non-uniform mixing of ingredients in hand mixed concrete means lack of workability, strength and density of concrete.
Uncontrolled concrete
Some specifications and common schedule of rates widely followed in execution of works allow use of un-designed concrete in construction of houses and buildings. Naturally, specified minimum cement content factors for this concrete are very high as compared to the cement required for designed concrete. There is a double loss on use of undesigned concrete. More cement is used resulting in higher expenditure. Secondly, you are not sure about the strength of concrete. Mere addition of extra cement doesn’t assure strength and durability. Proper mix design is necessary. Use of RMC (Ready Mixed Concrete) is now increasing in India. It is concrete produced under fully controlled conditions. If you have an RMC plant near your plot, feel blessed and use RMC. You will avoid a lot of trouble and tension. Some RMC plants have come up in Panchkula. So people of the tricity can avail this opportunity.
Reinforcement in beams
Inserting extra reinforcement in beams and slabs does not help in strengthening the structure. Masons and bar binders try to insert the steel cut pieces here and there in the slab under the impression that this will make the slab stronger. They are badly mistaken. Steel bars require certain free spacing between them to allow easy flow of concrete and bajri through them. Inserting of cut pieces stops this flow and makes the concrete less dense. Result is that the slab may rather be weaker. Get your slab designed from a structural engineer. He may bring lot of saving to you. Sometimes, a mason is so disturbed over the design of slab that he refuses to accept such less quantity of steel. Don’t allow his fears to prevail upon you and get the steel laid as per design given by the engineer. Know that over reinforced slabs and beams make a building unhealthy.
Non-usage of admixtures
There is a revolution in the development of admixtures and compounds. Development of super plasticisers, water proofing admixtures and sealants have opened endless possibilities of easier laying of concrete, saving old buildings, making new buildings damp-proof, impervious and efflorescence free. However people are reluctant in use of these admixtures. These admixtures and compounds can enhance the quality of construction itself. Make use of this synthesis of chemistry and construction. Ask a house owner, hotel manager, maintenance engineer or care taker, and the major problems being faced by him are leakage, seepage, cracks or efflorescence. Right use of admixtures and compounds can help in eliminating these problems. However, the use of these admixtures has not become common in India. There are no reasons for not taking full benefit of these wonderful materials. It is a bad practice with us to adopt new materials at a very slow pace and with suspicion thus depriving us of their benefits at the right moment.
The author is SE (Civil) in PSEB
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Halwara airport impasse hits realtors
Airports always hold a great deal of fascination for real estate dealers. However, two fairly good chances that the realtors in Ludhiana had to encash upon, proved to be too shortlived.
Halwara International Airport euphoria died down after the deal was postponed, if not cancelled, for a second time. Prime Minister Manmohan Singh, who was to lay the foundation stone last fortnight, could not do so as the Cabinet refused the approval owing to some objections raised by the Defence Ministry. The international airport was to be set up as an additional civil terminal of the Halwara Air Force Base. Although at several places in the country, the civil and Air Force airports are close by, the Union Defence Minister raised certain objections about Halwara. The state government had already started acquiring land for the airport, although the farmers were resisting the move, as the government was not offering the market prices for the land. On the other hand, realtors had set the boom in progress offering fabulous prices to people close to the airport and also for the land along side the road towards the airport. A number of deals were finalised and advances paid. Once the airport proposal was shelved, deals ran into rough weather. In certain cases the buyers, who had paid the advances, did not turn up for the final transfer as the land prices had crashed. In the process, a number of people suffered huge losses running into several crores. This is not for the first time. Earlier, the state government had proposed another international airport at Ladhowal, nearly 10 km from Ludhiana. But again the proposal was cancelled, as the Union Aviation Ministry raised objections over the feasibility. Ladhowal is a low-lying area with threat of floods from Satluj. However, by that time a number of people had made huge investments on the land in the area with robust expectations, only to be belied later. A real estate dealer said, though not much was expected even after the setting up of an international airport either at Halwara or Ladhowal, yet realtors found it a good opportunity to cash in on the move. People presumed that hotels and business centres would come up around the airports. Whether these come up or not, is a secondary issue, but it certainly sparked boom in the real estate business. And prices shot up instantly. In the mad euphoria, people hardly bothered about the long-term implications. As the herd mindset prevailed, dealers rushed one after the other for transactions. “This is because the margins were quite substantial and huge and the dealers did not mind taking a little risk, even if they had to suffer at the end,” he disclosed, while adding that during such events people should play safe.
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‘Biggest’ compensation deal
A mega land-for-land and cash component package gets AP Cabinet’s nod, reports
Said to be the most generous in the country, the Rs 1,170 crore package, a combination of land-for-land and cash component for the affected families of the prestigious Outer Ring Road (ORR) project, was recently approved by the state Cabinet. Under the new package which reflected a hike of Rs 1,000 crore, the affected family will get a compensation ranging from Rs 8 lakh to Rs 25 lakh per acre and also developed plots from 100 square yards to a maximum of 1,200 sq yards each. The Rs 3,000-crore eight-lane Outer Ring Road that seeks to girdle the state capital attracted sharp criticism from the Opposition and the displaced people over meager compensation, among other issues. The project, with an eight-line divided carriageway, is proposed to be implemented in two phases. Work has already started on the first phase of the project. The compensation would be applicable to the Phase II of the project covering 5,500 acres, spread over 68 villages, with an estimated 750 families facing displacement. The Cabinet approved all recommendations of a three-member group of ministers, headed by Finance Minister K Rosaiah, constituted in August last to go into the compensation issues. The 162-km ORR is being taken up with an aim to decongest growing traffic pressure in the twin cities by connecting various state and national highways. But the project hit a roadblock, with the Opposition and the displaced alleging that the alignment for the project was changed several times to benefit a few well-connected people. Prices of lands on the outskirts of the city shot through the roof after the project was announced by the Rajasekhara Reddy government. Lands, which were not worth a couple of lakhs an acre earlier, were quoting in the range of a crore, with real estate companies vying with each other in coming up with new lay-outs along the proposed ORR. Bowing to the mounting pressure by the discontented farmers and political parties, a judicial probe by a retired high court judge and a CBI inquiry was ordered by the Rajasekhar Reddy government in September last to look into any irregularities in changing alignments. Though the compensation has already been awarded for the displaced families of the Phase I, covering 330 acres of private land in 16 villages, the government expressed its willingness to extend the new package to them as well. A major highlight of the package is that the cash compensation for those losing agricultural or vacant land has been increased by 100 per cent over the rate decided earlier by Land Acquisition Officer, subject to a minimum of Rs 8 lakh and a maximum of Rs 25 lakh. Those who stand to lose the government-approved plots would be given alternative plots, equivalent to 75 per cent of the plot acquired, subject to a minimum of 100 sq yards and a maximum of 900 sq
yards.,
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Taken for a ride in Faridabad
Though the transformation in the real estate sector is on in this industrial city of Haryana with hundreds of acres of agricultural land in the area located on the eastern part lining the town acquired by over two dozen builder companies, residents of several villages have alleged cheating by the companies in the purchase of their land.
Claiming major financial loss in several deals, aggrieved residents have now sought the intervention of the state government for proper solution. Some of them have even threatened to dump the deal in wake of non-acceptance of their demand of hike in the compensation paid by the companies. The government has given licence to several builders to develop these residential sectors having all kind of housing options, including independent plots, houses and flats in multi- storied high rise buildings. While several applications are still awaiting licence clearance from the Town and Country Planning Department, approval for over 2,000 acres has been provided by the government. ‘The department concerned has earmarked several sectors in the area for the development of housing facilities, which is located across the Gurgaon and Agra canals here. It was primarily an agricultural region till a couple of years back, when the government decided to launch the scheme, a representative of one of the companies involved in such a project said. He claimed that the land prices in the area spreading over a dozen of villages had skyrocketed during the past two years and the majority of the farmers had either sold their holdings or had been in the process in view of the lucrative compensation. It is stated that the price of an acre of land, which had been less than Rs 10 lakh in 2003- 2004 had gone somewhere between Rs 1 and Rs 2 crore at present, depending upon the location. Several residents, including the farmers of the affected villages like Kheri Kalan, Kheri Khurd, Budena, Bhatola, Faridpur, Bhadoli, Neemka, Fajjupur, Prahladpur and Mirjapur, have complained of inadequate compensation and alleged cheating by various companies. Nawal Singh of Kheri Kalan claimed that the deal had left many of the sellers cheated due to the failure of the buying companies to honour their pre-deal agreement. Claiming that some of the buyers had promised to pay the land rates prevailing on the day of land registration, he said the sellers were left high and dry, when they were not given the required compensation. Hundreds of residents of many villages held a meeting a few months ago and lodged their protest. They even submitted a complaint with the police in this connection. According to one of the sellers, post-dated cheques given to some in the region had either bounced or not honoured due to stop-payment move by the companies at the last moment. He claimed that wrong tactics and unfair play was adopted by the builders in this process as the farmers were made to believe that the land would be acquired by the government through Haryana Urban Development Authority (HUDA) at nominal rate, a few years back, when the prices had started some acceleration. According to a resident of Bhatola village in the area, there had been a huge difference between the rates of the land purchased by the builders and the rates at which many of the companies had sold the plots and flats in the pre-launch schemes in the recent past. He said while the initial seller was given just 20 to 40 lakh per acre (4,840 sq.yrds), the companies had sold at a rate of 7,500 to 15,000 per sq. yard just after a few months and amidst the fact that there had been no development on the ground. He said many of the farmers and their families suffered huge financial loss due to low rate and delayed or deferred payments. It was the buyers who took advantage on both sides. “While basic infrastructure for civic amenities was still to be laid and the buildings were still to come up, the companies had been carrying on with an intensive advertisement campaign in the media about the projects to attract the investors or buyers,” said a property agent here . He said the unusual delay has made some of the persons interested in owning a house to withdraw their investment and think of other options, though he claimed that majority of the people who have booked a house or flat had done with the main aim of reaping profits later. While at least 20 sectors are proposed to be developed and the move seen as a development of Greater Faridabad, on the pattern of Noida, the issue might face teething troubles in the wake of resentment by the farmers.
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Crisil study on cement price
The government’s move to remove customs duty on portland cement is not expected to have any impact on the domestic industry as the prices of the commodity in the Indian market are lower than landed price, according to a study.
“The reduction in the custom duty on portland cement from 12.5 per cent to zero is not expected to have any impact on the domestic cement industry. This is primarily on account of domestic cement prices being lower than the landed price even after the cut in the custom duty,” Crisil Research said. However, the agency said the import duty cut would act as a ceiling to ensure that cement prices do not rise beyond a particular price band. Handling of cement traffic at Indian ports is fairly inadequate and the possibility of importing large quantities in the short-to-medium term appears unlikely, it said. On stainless steel, the Crisil Research said reduction in duty in stainless steel from 7.5 per cent to five per cent would result in the lowering of landed costs of imported stainless steel by around Rs 4,300 per tonne. “Prices in the domestic market are also expected to decline comparably,” it said, adding that this would have a marginally negative impact on alloy steel and stainless steel industry. The operating profit margins of the companies are expected to fall by 200 basis points. On copper industry, it said the impact of reduction in customs duty to five per cent from 7.5 per cent would be major as landed costs are expected to decline by around Rs 7,500 per tonne, which may lead to a dip in domestic prices as well. — PTI
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Bharti realty arm plans
Davos: Bharti Realty, the real estate arm of Bharti Group, will support the group’s ambitious foray into organised retail as the front-end franchisee of Wal-Mart, which is scheduled to open its first store within this year. “Given the concerns on the real estate prices, the group company, Bharti Realty will support the Bharti-Wal-Mart foray in retail,” Bharti Group Chairman Sunil Bharti Mittal told reporters on the sidelines of the World Economic Forum meeting here. Mittal said while he desired to open the first Bharti retail store with the Wal-Mart on August 15, the outer limit would be December end.
— PTI
Hindujas plan for Qatar
Doha: The Hinduja Group is considering investments in Qatar’s energy sector, special economic zones and waterfront real estate developments, Chairman Ashok P. Hinduja said. He said the proposed investments in Qatar real estate would be done by a company being floated by the Indian arm of the Hinduja Group. It is setting up multi-purpose townships having facilities ranging from IT parks to hotels, commercial centres, residential units, malls, multiplexes and hospitals, he told Gulf Times. The Hinduja Group has invited Qatari real estate company, Diar, to participate in FDI-related real estate developments in India.
— UNI
Berggruen Hotels
Mumbai: Berggruen Hotels, a new venture backed by US investment firm Berggruen Holdings Inc, will invest $100 million in a chain of boutique budget hotels in India. At least 38 hotels, branded Keys, will be launched in India in the next five years and the brand will then be taken globally, Berggruen said in a statement. The first hotel will be launched around June 2008, with tariffs starting at Rs 1,400 to Rs 2,200. — Reuters
FII holding in Ansals
New
Delhi: Real estate firm Ansal Housing and Construction Ltd has said foreign institutional investors (FIIs) have increased their stake in the company by 9.45 per cent to 14.47 per cent at the end of December 31, 2006 compared to 5.02 per cent in the previous quarter. The major FII shareholders at the end of the latest quarter includes Citigroup Global Market Mauritius, Lehman Brothers Asia Ltd, Morgan Stanley and co and UBS Securities Asia Ltd, a statement from the company, quoting data available on stock exchanges, said. — PTI
Parsvnath in Ranchi
New
Delhi: Setting footprints in Jharkhand, real estate major Parsvnath Developers Ltd has said it has bagged a project to build a modern city centre in Ranchi at an investment of about Rs 400 crore. The company, which recently listed on the bourses by floating an IPO of over Rs 1,000 crore, emerged as the highest bidder to bag the project having a saleable area of 10-lakh sq ft. The company outbid about 20 firms such as DLF and Ansals. — PTI
Nirula’s new format
New
Delhi: Restaurant chain Nirula’s has said it would adopt new retail formats, including ice-cream kiosks and food courts, to tap the buoyant retail sector and increase its consumer base. “By riding on the current boom in the retail and real estate sector, introducing Nirula’s Express, Food Court Unit and Ice-Cream kiosk formats was a strategic decision by us to make the brand more accessible to customers,” Nirula’s MD Samir Kuckreja said. — PTI
Puravankar on Oracle
Mumbai: Puravankar Projects Ltd, one of India’s leading real estate developers, has completed the deployment of Oracle e-Business Suite (Oracle Applications) as part of its expansion plans to address India’s growing residential and commercial real estate requirements. “Oracle Applications have been deployed across Puravankar’s corporate office in Bangalore and its branch offices in Kochi, Hyderabad, Chennai and Mumbai. This has enabled integration of processes across Puravankar’s core functions, including sales, marketing project management, project costing, procurement and financial management,” company Chairman and MD Ravi Puravankar told reporters here. — UNI
Discussion on realty
Hyderabad: Professionalism, research and data analysis are the need of the hour for the booming real estate industry, top industry participants felt at a panel discussion in Hyderabad. The Indian School of Business (ISB), in association with Ernst & Young Private Limited, India, conducted the first Real Estate and Urban Studies panel discussion recently in Hyderabad. The session, titled Real Estate in India — the Research Imperative, is a research initiative by the Students of the Real Estate Club and the Wadhwani Centre for Entrepreneurship Development (WCED) at the ISB, to bring together industry professionals, ISB alumni working in the Real Estate sector and the ISB students, who consider real estate a career prospect. — TNS
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TAX tips By S.C. Vasudeva Q. I am settled abroad and am not likely to get back. I have inherited house from my father. I would like to sell the same and am interested in getting money repatriated to the US. Is it possible to do so? — Aman Kapoor A. According to the recent announcement by the department concerned, there is no lock-in period for remitting the sale proceeds of a residential house outside India. You can do so immediately after selling the house. I may add that the capital gain, if any arising on such sale, shall have to be paid in India and, therefore, the remittance would be of the net amount. Tax on kiln
Q. I am senior citizen having PAN and annual pension of nearly Rs 1,54,000 for 2006-07. I have purchased some land and agricultural income from that land is nearly Rs 1 lakh annually. So there is no tax liability against me though I am filing I.T return. Kindly advise, whether I should file IT returns in future or not? Is there any penalty for not submitting the IT return? ii) If I give my land to a brick-kiln company for making bricks from the earth of that land for a period for three years and get six or seven times more money than the annual income from land, then how should I show that money in the IT return? Would I be taxed or not? Ordinarily, I would not have been taxed as I am senior citizen. Is any other tax leviable by the state or Central Government? — Lachhman Singh, Faridkot A.
There is no need to file return in case you do not have a taxable income which is arrived at without claiming any deduction under the Sections 10A, 10B or Chapter VI-A of the Income-tax Act, 1961 (the Act). If the land is given to a brick-kiln company for the purposes of making bricks on such land, the income shall be classified as income from other sources. The amount so received would be taxable and, therefore, added to your income from annual pension. In case income from pension and the rent from kiln exceed Rs 1,85,000, you will be liable to file return and pay tax thereon.
Wealth tax
Q. I am staying in an ancestral house, which has a large covered area apart from huge lawns. I am self-employed, having sufficiently good practice as a Dental surgeon. I had been told by one of my friends that the house property occupied by me is liable to wealth tax. I shall be obliged if you could give your advise in this regard. — Kirti Prasad,
A. Section 5 (vi) of the Wealth Tax Act, 1957, provides that value of a house or a part of it shall not be included in the total wealth of an individual or a Hindu Undivided Family. In case you are having a house, which is self-occupied, the same shall be exempt from the levy of wealth-tax in view of the above provisions.
Taxable perks
Q I am a salaried employee getting a basic pay of Rs 96,000 and a dearness allowance of Rs.14,000. I am entitled to reimbursement of medical expenditure to the extent of Rs.4,000. My employer has provided a rent free unfurnished house in Chandigarh, the lease rent of which is Rs.72,000 per annum. Please let me know as to how much perquisites in respect of house rent would be added to my income. — Y.P. Singh A. The answer to your query is given hereunder: 1. Income from salary (in Rs) Salary 96,000 D.A. 14,000 Total 1,10,000 2. Medical reimbursement (not taxable) Total salary income 1,10,000 Lease Rent 72,000 20 per cent of salary 22,000 The above amount of 20 per cent being lower than the actual lease rent of Rs 72,000, the taxable perquisite would be 20 per cent of salary i.e. Rs.22,000 in accordance with the provisions of Rule 3(1) of the Income-tax Rules, 1962. I may add that it has been presumed that the DA received by you is to be included for the purposes of the computation of retirement benefits. Unpaid price
Q. I had borrowed a sum of Rs 2 lakh for buying a house. However, on my negotiations with the seller, it was agreed that I would pay the sale price in instalments, along with interest due thereon. The loan raised by me from bank was thereafter repaid. I had claimed the deduction of interest on such unpaid purchased price. The same has not been allowed by the Assessing Officer. Is the stand taken by the officer correct? — A.K. Yadav A. The stand taken by the Assessing Officer is not correct. This is in view of a decision of the Punjab and Haryana High Court in CIT vs. Sunil Kumar Sharma (122 Taxman 159). According to the said decision when a buyer, instead of raising loan from a third person enters into an arrangement with the seller to pay sale price in instalments, along with interest due thereon, such an arrangement according to the Hon’ble High Court would make the seller a lender qua unpaid purchase price and the purchaser as a borrower. Thus unpaid price can be treated as capital borrowed for acquiring property and interest paid thereon should be allowed as deduction under the Section 24 of the Act.
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Some construction methods introduced decades ago as per materials and equipment available at those times are still prevalent in India. There is a vast improvement in the quality of materials and availability of equipment now and these old and bad methods are no more relevant in today’s times. Yet people continue to follow these in many parts of the country. The force behind using these methods are those masons, who are skilled in these practices and enforce them upon the house builder.
It was described as the “biggest land compensation deal” in the country and may serve as a model for future acquisitions in the urban areas of Andhra Pradesh.