Awaiting Budget with ‘interest’
Realtors, sellers seek sops, says Peeyush Agnihotri

Budget day and Valentine’s Day share certain similarities — both come once a year, choose spring to spring surprises, yield results for just a handful and deceive many.

Zooming interest rates and agency reports on realty-on-a-plateau is making the real estate sector look towards the otherwise intimidating briefcase of the Finance Minister with much expectation this year. Interest rates on housing loans, entry of retail giants, SEZ policies, NRI investment and rationalisation of stamp duty — the issues are many.

Most of them agree that though the Budget cannot address most of the issues directly yet some directions can be given through the speech, which is considered to be an important policy document.

REMF (real estate mutual fund) approved by SEBI should be launched immediately. It will boost supply of fund to housing and real estate sector, says National Real Estate Development Council in its wish list.

“Further, sale of property to NRIs should be given the status of deemed export and 100 per cent income tax exemption should be available to builders on income earned by sale of property to NRI and money earned in foreign exchange,” the council’s note says.

Rajiv Malhotra, a Chandigarh-based chartered accountant, says that people are eagerly looking forward towards a sliced off EMI on housing loan in the forthcoming Budget. “Agreed that the Finance Ministry does not have much of a say in the independent functioning of the banks. But Budget 2007 can bring in a notification that delineates loan instalments between the first-timers and those who are going in for a housing loan for the second time. Let’s say, it can be 8 per cent in the former case and 11 per cent in the second,” he says. Another point that he puts forward is that since houses have become costlier hence Rs 1.5 lakh exemption limit should be raised to at least 2.5 lakh.

Madhur Mittal, Joint Managing Director, Triveni Infrastructure (TIDCO), thinks the same way. “During Budget, the Finance Minister really needs to look at the interest rate of the housing finance. Increase in the rate would certainly impact the middle and service class people from buying the houses of their choice since the instalments would become dearer. This move would also impact the demand and supply position and is expected to bring the prices of residential properties under a check,” he says.

Mittal says that the government needs to work out some checks wherein the NRI investment is safe as many developers oversell their properties. “Easing out the NRI investment by allowing them to freely rent out their properties in India without seeking permissions from the Reserve Bank of India and the ease of repatriating their lease income or sales proceeds is a good move to attract NRI investments in India. Policy frameworks should be there to boost the real estate sector rather than put hurdles in the fastest emerging industry. The framework should be made in consultation with the developers who actually follow the code of conduct of the building industry. In the Budget, we definitely expect some sops for the real estate industry,” he says and adds that uniform registration fees and stamp duty all over India would further help.

Shubhendu Saha, Senior Manager Investment Advisory, DTZ Debenham Tie Leung says that the companies registered under the STPI should be treated on par with those operating within IT/ITeS SEZ, in order to level the playing field between STPI and SEZ.

“The limit of tax-free income, from residential property leasing, should be increased to 50 per cent from the existing 30 per cent,” he says. He avers that rationalisation of stamp duties shall help in making investments in real estate much more transparent. “Though this is strictly not under the purview of central government Budget, but some fiscal package can be announced where the state governments get incentivised to rationalise the stamp duties,” he suggests.

Public seeks consumer-centric policies, writes S. Satyanarayanan

The soaring interest rate on home loans has played a spoilsport for those who are keen to own a dream house. Many buyers have been forced to either postpone their purchase or have a relook at their financial resources before taking a plunge. Although Union Finance Minister P. Chidambaram has asked the public sector banks not to raise the home loan rates, major private players have already raised the rates.

With Budget 07-08 round the corner, there is a general expectation in the real estate industry and also among the general public that the Finance Minister would spell out more consumer-centric policies, which would ease the burden of the consumers, especially in the high interest rate regime.

Construction activity is a big economy driver and any positive step towards the interest and welfare of the small consumers will have a macro impact on the economy.

First and the foremost expectation from the point of view of consumers, according to experts, would be that the Finance Minister raises the exemption of the interest alone on home loans from the present Rs 1.50 lakh to at least Rs 3 lakh.

They are of the opinion that a raise in the exemption limit has become essential since the average price of the apartment, especially in metros and other big cities, has grown more than 100 per cent over the past few years. Besides, the tax exemption should be given from the date of booking of the property and not from possession.

Experts also feel that the government should do away with the service tax on residential properties. The logic is that ever since the government has imposed service tax, many builders have started charging clients, wherein the rule was very clear, that if the builder hires an outside contractor to build the units he would pay the service tax.

Another important intervention from the government that is needed is on rationalisation and reduction of stamp duty charges on the residential properties.

Experts feel that reduction of the stamp duty to 2.5 per cent will result in a win-win situation for both the government as well as the consumers as there will be more transactions and the government’s revenue will increase. Since the value of transactions has gone up manifolds in the past few years, the revenue will not get impacted due to reduction in the rate.

From the point of view of the elderly, experts feel that under Section 54 (E) (c) of the Income Tax Act, the government should issue capital gain bonds of at least Rs 20,000 crore, as the last year bonds issued were only of Rs 6,500 crore and they got subscribed in a short span.

The interest given on these bonds should be linked to bank interest rates on fixed deposits as this is extremely helpful to the elderly in ensuring their safety for the future and also has a social impact.

If the capital gains bonds cannot be issued for any reason then the government should slash the tax slabs to facilitate liquidity and also allow cross investment. Buyers should be allowed to purchase residential properties from the sale of commercial properties and also from the amounts received from the sale of commercial properties to purchase of residential properties.

Experts also feel that the government should take more steps to curb black money in land deals, as if a cash transaction begins from the root it will have a cascading effect till the end. A full cheque transaction will yield in more money.

To support the 10th Plan estimate of the government where the shortage of housing units is expected to be in the range of 22.4 million sq. ft., experts feel that the government should continue with Section 80 IB of the Income Tax Act.

The benefits under this section is coming to an end this fiscal and experts feel that since many builders have created houses under this scheme and consumers are benefited through the mass construction, the government should extend this.

The man behind Kashmiri warmth
Ehsaan Fazili meets the person whose innovation has replaced traditional hammams

Urfi Mustafa Shonthu is the man who introduced the concept of con heating in the Valley. — Photo by writer

Modern technology is all set to phase out the traditional hammam in the Kashmir Valley. Traditional hammams have since long been installed to radiate heat and provide hot water at the residences, whereby one of the rooms on the ground floor is specially designed to pass on heat with the help of burning firewood through a furnace.

The lacunae in conventional hammams is that, besides eating into natural resources, the warmth is restricted to just one of the rooms. Hammams are now fast being replaced by a central heating technology, thanks to a local entrepreneur, who has developed a heating system suitable to the Kashmir settings.

“When I first consulted architectural engineers, they did not know anything about heating systems,” says Urfi Mustafa Shonthu, a mechanical engineering passout from NIT, Srinagar.

He is the man who introduced the concept of con heating in the Valley. “I wanted to be an entrepreneur instead of continuing with the government job,” says Shonthu. With his eyes set on air-conditioning sector, suitable to the cold weather conditions of the Valley, Shonthu, after serving the state government for nearly six years, joined Fedders Lloyds at Delhi to gain expertise in this field.

Even though the cost of his home grown heater is nearly double that of a conventional ‘hammam’, it is still finding many takers

GRound REALTY
Combating tremors
Jagvir Goyal lists 10 building tips to resist quakes

It is not possible to declare a building quake proof. Unpredictable things can always happen and you never know when a high-intensity earthquake strikes the earth. If we really try to build an earthquake-proof building that may withstand the maximum intensity of all quakes that have rocked the earth in the past, it will be too uneconomical. Yes, the earthquake resistant buildings can definitely be constructed and we should really strive for them.

An earthquake resistant building is, in fact, 99 per cent safe and 1 per cent can be left to the uncertainty factor. Buildings are designed to withstand the impact of natural vagaries like floods, earthquakes, cyclones and wind storms by considering the magnitude of these forces in the past and their recurring interval. As and when we experience a force higher in magnitude and direction than that assumed in our design, we face devastation.

Don’t compromise: What has been happening in actual is that many builders compromise on quake-resistant design and make ignorant people suffer loss of life and property. Bhuj Earthquake of 2001 is a classic example of Gujarat Builder’s greed. This harrowing incident left the builders and designers stunned. Their conscience was pricked by the colossal loss that the country suffered. Today, every builder is aware of the importance of adopting an earthquake resistant design. What is important to realise is that with time, this awareness shouldn’t get eroded and no compromise should be made on adopting earthquake resistant design of buildings.

Latest design: Large-scale loss of human life and property in Bhuj made the designers put their heads together and review the seismic division of the country. As a result, the laid criteria for earthquake-resistant design of buildings has been revised by the Bureau of Indian Standards and a revised code has been enforced. There are significant changes in the revised code. All architects, builders and structural designers should, therefore, follow the new version of IS 1893 issued in 2002 and design buildings as per provisions.

Check seismic zone: To make a building earthquake resistant, first thing to check is the seismic zone in which it falls. Zone V is most earthquake prone and Zone II is the least. Now Zone I has been merged with Zone II. When a building has to be constructed in an area that lies on the border of any two zones, then the building should be designed as if situated in the higher seismic zone.

Stronger but lighter buildings: For earthquake resistance, a building must be stronger and lighter. A structural engineer can make it so. Get your building designed from a competent engineer. All buildings must be designed keeping in view the provisions of Bureau of Indian Standards IS:1893 and IS:13920. Avoid terrace gardens and swimming pools on the roof. Avoid heavy water tanks as these make the top of building heavier causing more effect of earthquake on it.

Soft storey design: Buildings with soft storey (parking space at ground floor) are more vulnerable to earthquake. Therefore, extra precautions need to be taken to counter the effect of soft storey in multi-storeyed flats. Due to increased use of soft storeys in buildings such as provision of open parking space below multi-storeyed flats, definitions of soft storey and extreme soft storey have been elaborated in the new IS code and design criteria to be used for soft storeys has been provided.

RCC-framed structures: RCC-framed structure should be used for the buildings. Provide beams network at plinth level, door level and roof level. Try to restrict the number of storeys of the building in earthquake-prone area. Keep the minimum width of beams and columns in RCC framed structures as 300 mm. Make the beams doubly reinforced to avoid effect of reversal of stresses. Prefer a strong column-weak beam combination to a strong beam-weak column combination. These measures will help a lot in making the building earthquake resistant.

Size of openings: Restrict the number and size of openings in the building. So don’t keep the size of doors and windows too large. Always provide steel reinforcement around the openings to counter torsional effects of earthquake forces on the building.

Filled ground: The vibrations due to earthquake compact the filled soil to smaller volume, thereby causing excessive settlement of the building. This would cause cracks in the buildings. If the building is constructed over saturated, submerged and sandy soil, such soils lose strength due to liquefaction, even if the intensity of the quake is not very high. In such a case, the buildings may collapse. So try not to raise a building on filled ground. If the area is low lying and a lot of filling is involved, try to utilise it by providing basement in houses and parking in multi-storeyed flats. Prefer to take foundations deeper, to the natural ground. Otherwise ask the structural engineer to account for this factor and choose a safer type of foundation.

More guidelines: Let the projections be small, not too large. Avoid or minimise false ceiling and plaster on ceiling. These come down easily during an earthquake. If a wall length is more than 20 feet, provide a pillar in it. Keep the doors and windows away from corners by at least 2 feet. Stagger the laps provided in the reinforcement steel.

Recheck existing structures: If you have already got a building constructed, get its design rechecked for quake resistance as per the new provisions. Get the building strengthened if required. Today, many retrofitting specialists are providing this service.

Give priority to safety over beauty! Happy building!! The author is Superintending Engineer (Civil) in PSEB

ESTATE TALK
TDI seeks infrastructure for conurbations
The focus will soon shift to Tier II, III cities and Mohali will be the city of future, TDI Managing Director tells Geetu Vaid

The edifice of growth in the real estate sector has become an imposing one in the region. Mushrooming malls, multiplexes and high-end residential projects present one face of it. While the rapid pace of growth may be too hot to handle for the sceptics, there is a brigade of young professionals who not only have tamed the high tide but also are surfing it. One such entrepreneur is Kamal Taneja, Managing Director of Taneja Developers and Infrastructure Ltd.

This young Managing Director is overlooking the company’s mega-projects of 10 residential townships and 15 malls in the entire North India. These projects cover cities like Sonepat, Panipat, Chandigarh, Mohali, Agra, Meerut and Moradabad.

Sharing his views and vision with Real Estate this week, he said the paradigm of retail has undergone a vast change and that Mohali would be a city to watch.

Q. What is the potential of the real estate and retail sector in the northern region? Has it been properly exploited? What do these sectors lack?

A: The boom in North India has caught the attention of not just big Indian players, but also realtors from abroad. A lot of activity has taken place in Kundli, Sonepat, Chandigarh, Mohali, Amritsar, Patiala, Jalandhar and Ambala. These cities have emerged promising markets in the region.

Availability of prime real estate options, coupled with brand acceptance among consumers in these cities, is making retailers and developers to break even much faster as compared to Tier I cities.

Within this year, almost 18 million sq. feet of mall space has come up across 11 major cities, with most of the malls concentrated in north India. Punjab itself is all set to witness a major retail boom with nearly 40 malls coming up by 2010. The lacuna is that large contiguous parcels of land at prime locations are not available.

Q. How has the client profile in retail changed?

A. The retail sector has witnessed a lot of change as traditional formats made way for the new ones. Disorganised retail from next-door kiryana store and mom-and-pop store is fast changing to organised sector with the coming up of high-class malls. The organised retail industry has grown from 2 to about 3.5 per cent today. There are 55 malls in operation and in the next couple of years; there should be 200 malls in operation across the country. These figures are indicative of the tremendous growth and buoyancy in the Indian retail sector. Also, retail is no more a New Age profession, but has become an established one that holds high potential and high growth.

Prominent retailers, having gained significant market share in Tier I cities, are eager to expand into yet-unexplored Tier II cities. They are introducing several new concepts, and exploring new structures for space acquisitions etc.

Tier II and III cities like Sonepat, Panipat, Chandigarh and Mohali will emerge as the most promising markets for residential and retail developments in the next three to five years.

Q. Has the government support been enough? What roadblocks did you face?

A. Since most of the Tier II and III cities lack adequate infrastructure, the state governments have to consider infrastructure development as a priority sector. Public-private partnerships will go a long way in providing better services with a sustained competitive advantage.

The government has been, to a certain extent, supportive enough to lay emphasis on the development activities like speedy construction of KMP Expressway in Sonepat. Further, announcements like establishing Rajiv Gandhi Education City in Sonepat and extension of metro services to Kundli have given the required boost.

The government’s move to allow foreign direct investment in real estate has further accelerated the pace of development of retail real estate infrastructure as foreign developers enter the market. The quality of construction is also likely to improve.

Buyers hibernate
Realty takes a hit as purchasers withdraw into wait-and-watch shell awaiting Punjab poll outcome, finds out Varinder Singh

Poll has cast a lingering shadow on the real estate in Punjab. Subsequent gap of two weeks between polling and the day of poll outcome has made both the buyers and sellers adapt ‘wait and watch’ policy, instead of striking any actual deals with the outcome that real estate has plunged into a brief dormant phase.

Since hardly any land deal is being struck in Punjab these days, buyers and sellers prefer to keep their fingers crossed and wait till the political firmament gets clear with the declaration of poll results on February 27. In fact, this ongoing phase of ‘inactivity’ or ‘uncertainty’ has led to a slight dip in the land prices, particularly, the commercial property.

Actually, what has brought about this phase is a phenomena of speculation about possibility of change of land policies by the next government in the state. A majority of developers, colonisers, industrialists and real estate players are apprehending that a political change, if any, may affect the growth rate of property affairs. This is what is making them put up a face of reluctance in respect of fresh land deals.

“There is no selling or buying of property these days. The market is absolutely quiet or slow. No purchaser is there around. Everybody — from a common buyer to the coloniser — is awaiting the hazy sky to clear. They are waiting for the poll outcome. If Congress comes back to power the buying-selling with resume but, nothing can be said if Akalis come. By and large developers see Akalis having a pro-agriculture land leanings,” says Harmol Singh, Managing Director of South City, a modern colony in Jalandhar.

Agreeing over the continuing ‘stagnation’ in the market, Charanjit Singh Channi, another leading builder and developer of Jalandhar, however, observed that any change in reigns of power in the state may not largely affect property prospects in the state. “It is true that there has been no buying or selling in the brief pre or post poll scenario, but, nobody in future can stop NRIs and MNCs from investing. The real difference in real estate will come only if the market remains ‘quiet’ constantly for three-four months,” he says, hinting that commercial property price had witnessed a dip during past one month. “Take an example of Mall road in Jalandhar. The prices have come down from a whopping Rs 30-35 lakh per marla to Rs. 28-20 lakh. Actually, the bubble of hype created by certain people has burst finally,” he says.

Rajesh Gupta, an investment consultant, says the ‘wait and watch’ policy pursued due to elections in the state had a dimming effect on land prices.” No investor is coming forward these days. They are totally silent, particularly, in case of commercial properties. There are however, a few buyers for residential property. Since the market is flooded with investors and since there is hardly any actual buyers in case of commercial property, the rates have crashed by 20 to 40 per cent exposing the fact that the entire show was being manipulated by a few investors,” he says.

Mr. Rajesh Mayor, a leading industrialist of Jalandhar, predicts that the market might show up a face of reluctance in respect of fresh land deals immediately after the announcement of poll outcome.  

Grain market proximity affects prices 
Construction activity slackens in HUDA sectors nearby, says Rahul Das

The proposed shifting of grain market of Ambala Sadar to a tract of land near HUDA sector of Ambala Cantt, located on the GT road, is a matter of concern to the HUDA plot owners as property prices are likely to be affected.

HUDA plot owners have a good reason to be concerned since the new grain market of Ambala City has adversely affected the price of property in the HUDA sector, which was adjoining it. Till date, there is a price differential in the plots located close to the grain market in Sector 8 of HUDA and those located farther away in Ambala City.

It is being anticipated that the prices in HUDA sector in Ambala Cantt is likely to be affected once the grain market shifts near it. The HUDA sectors of Ambala Cantt are being developed near Ghasitpur village.

MLA D.K. Bansal from the cantonment said that grain market is likely to be shifted near the HUDA sector of Ambala Cantt. “The shifting out of the grain market from Ambala Sadar will go a long way towards improving conditions here,” he said.

The HUDA sectors of Ambala Cantt are going to meet the long pending demands of the local populace. While plots have been allotted by HUDA through the draw of lots, the possession of plots will take place after the area has been fully developed. But, the grain market is likely to be a dampener for the allottees.

Sector 8 of HUDA in Ambala City has been affected by the grain market’s location. While going from Hisar road, one has to first pass through the grain market before reaching Sector 8. For Sector 9 and 10, one has to follow a more circuitous route.

Sector 8 was developed about 15 years ago while Sector 10 is comparatively new. Despite the fact that Sector 8 had come up more than one and a half decades back, the sector is not yet fully developed. Comparatively, Sector 9 is witnessing a hectic construction activity.

While prices in an old sector are higher than the new sectors, it is not so for Sector 8. As a matter of fact, Sector 1 (part) on the Jail Land enjoys a much higher premium.

The original allotment in Sector 8 was made at the rate of about Rs 400 per square yard with two enhancements of Rs 400 per square yard each. That works out to about Rs 1,200 per square yard. The price range today for a 350 square yard plot is between Rs 25 lakh and Rs 28 lakh in Sector 8.

Residential plots located close to grain market enjoy even lesser premium. There are hardly any takers for those plots. The reason is clear. The proximity to the grain market affects the quality of life. During the period when grain is brought to the market, the roads are clogged and the chaff from the grain can have an adverse impact on respiration.

The persons who are keen to buy a plot in HUDA prefer Sector 9 and 10 instead of Sector 8, primarily for the location of grain market.

The scenario may be replicated in the HUDA sectors of Ambala Cantt when the grain market shifts. The property prices will be affected specially for those plots, which are located close to the grain market.

Priciest homes
Ilaina Jonas

Updown Court in Windlesham, Surrey, has 58 acres of gardens and woodlands, five pools, 22 marble bathrooms and more than 50,000 square feet of living space

For a mere $138 million, you can own a cozy 103-room English country home, with a panic room, marble driveways and helipads — a property that tops the 2007 Forbes annual list of the world’s priciest homes for sale.

Updown Court in Windlesham, Surrey, has 58 acres of gardens and woodlands, five pools, 22 marble bathrooms and more than 50,000 square feet of living space, according to the list posted on Forbes.com, which did not say who the seller was.

Oh, and a bowling alley, too.

Coming a close second is The Hala Ranch (welcome in Arabic), a 95-acre property in Aspen, Colorado, owned by Prince Bandar bin Sultan bin Abdul Aziz, the former Saudi Arabian ambassador to the United States — a job that must pay well as the asking price is 135 million dollars. The 56,000-square-foot mansion has 15 bedrooms and 16 baths.

Who are the prospective buyers? “These properties are marketed internationally. I supposed you would say to the wealth of the world,” said Joshua Saslove president of Joshua & Co, the listing broker of The Hala Ranch.

“We all know there’s been large growth in the petroleum fuel industry, but there’s been an enormous amount in money management, private equity, in real estate,’’ he told Reuters.

At these prices, buyers pay cash, he said.

Where would opulence be without Donald Trump, whose Maison de L’Amitie is up for sale at an asking price of $125 million.

Trump bought the estate, previously owned by health care executive Abe Gosman, in 2004 for $41.25 million at a bankruptcy auction, Forbes.com said. The Palm Beach, Florida abode is adorned with 475 feet of oceanfront.

Sharing fourth place at $100 million each are Tranquility, in Lake Tahoe, Nevada, a 210-acre estate owned by Tommy Hilfiger cofounder Joel Horowitz; and Waterfront Estate in Istanbul, Turkey, which has a nearly 200-foot-long quay. — Reuters

NHB plans joint venture that may guarantee loans 
Rajkumar Ray

Housing demand has gone up with rise in income, says S. Sridhar

India’s regulator for housing finance firms is in talks with foreign institutions to launch a company that will guarantee home loans if borrowers defaulted, its chairman said.

Potential partners included Asian Development Bank, International Finance Corp., AIG United Guaranty of the United States and Canada Mortgage and Housing Corp., S. Sridhar told Reuters in an interview.

India’s real estate market is overheated because a robust economy has boosted incomes and demand for houses, office space and shopping malls, he said.

Home loans portfolio was growing at more than 30 per cent a year, while the number of new houses being built was rising at only 10 per cent, he said.

“Demand has increased with higher economic growth and rise in disposable income,” said Sridhar, who heads National Housing Bank (NHB), a unit of India’s central bank.

“More people now want to own a house,” he said. “On the other side, there is a supply constraint — there are not enough houses which can meet the demand.”

There was an estimated shortage of 31.1 million housing units, NHB said in a November report.

India’s economy is expected to grow by 9.2 per cent in the current year ending in March after 9 per cent expansion in the previous year. It is the world’s fastest growing major economy after neighbouring China.

NHB, which mainly refinances housing finance firms, has seen loans grow 17 per cent to 35 billion rupees ($790 million) in the quarter to end-December from a year earlier, Sridhar said.

Many banks such as ICICI Bank, which has a large home loan portfolio and had disbursed Rs 213 billion in the nine months ended December, do not seek refinance from NHB because they have access to cheaper deposits.

NHB, which gives loans at 10.5 per cent a year, has no plans to raise its interest rate, Sridhar said.

However, the central bank’s recent monetary tightening measures could slow down demand for loans to build shopping malls and office space, he said.

In January, the Reserve Bank of India (RBI) increased risk weightage and asked banks to make extra provisions for loans to commercial real estate projects, but exempted home loans from such provisioning.

The central bank also raised its key-lending rate by 25 basis points to 7.5 per cent in January, and last week increased the level deposits that banks must keep with the RBI by 50 basis points to 6 per cent in two stages.

“The RBI move will somewhat slow loans to commercial real estate,” Sridhar said. — Reuters

A Manhattan in the making
North Bangalore is becoming a hot proposition, notes Jangveer Singh

North Bangalore, the sleepy part of the city more known for its VIP residential areas, is the new Manhattan in the making, commanding real estate prices, which were unheard of till a few years ago.

“North Bangalore ended at Hebbal, which is around 8 km from MG Road,” says Arun Patel, an investment specialist. However, the construction of a modern flyover with two arms and establishment of new colonies on the Bellary road extended the city. Arun says even then the area was not much in demand till the international airport project was announced.

“All hell has broken out since then”, he says, adding the entire area has seen a sea change. Coming down from the flyover on the Bellary road, which leads to the upcoming international airport at Devanahalli nearly 30 km ahead, one comes across a new mall, which is nearing completion. The Columbia Asia hospital is functioning close to the mall and a new Rs 250 crore hospital is nearing completion opposite it.

This is not all. The area is developing as a centre for luxurious apartments. Lifestyle Habitat, one of the most spectacular projects in Bangalore, modelled after the Malaysian Petronas Towers, comprising 24 floors and 100 units, is also nearing completion on this road. The project, being promoted by the Beary’s group is almost sold out.

Syed Mohammed Beary, founder of Beary’s Group, says: “Most of the people, who have purchased apartments here are software professionals with nearly 40 per cent being NRIs, mainly from the United States”.

Even more spectacular is the response to Godrej Woodsman Estate coming up close to the flyover. The project, which is situated over 15 acres and comprises of 780 apartments, has already sold more than 500 apartments even though it has just started and will take another two years to complete.

So what is the reason for the appeal of the area? Inderneel Singh, a factory owner from Batala who has settled down in the city, says the Bellary road does not have the slums which even premium areas like Koramangala in Bangalore are famous for. “Moreover all construction activity is coming up in a planned manner with all necessary approvals making it a favourite for investors.”

Besides this, he says the Bellary road is well connected through the flyover to the centre of the city, which is only 8 to 9 km away. “Nowhere else in Bangalore can you travel faster than on this route mainly due to the VIP areas in-between,” he adds.

The upcoming international airport is also leading to steep prices. Godrej Woodsman Estate started bookings at Rs 1,925 per square feet one and a half years back. Today it is selling apartment space at Rs 3,400 per square feet. Similar is the case with other builders who have already built premium apartments in the area. Sobha Malachite’s three bedroom small row houses are renting out for around Rs 40,000 a month in an area, which had no takers five years back. More premium apartments of various builders, including Nitesh and Renaissance are planned in the area because investors feel this is where people will stay in before the area adjoining the international airport fully develops.

Property in North Bangalore, along the Bellary road, is also becoming a hot proposition for people who have grown tired of living in central Bangalore. Along with is the problem of commuting and lack of parking spaces in old apartments. With amenities like malls and multiplexes planned along the Bellary road, it may well become an attractive suburb.

Buzz on Bourses
Citigroup raises fund

Seattle: Citigroup’s property unit said it raised $1.29 billion for its first fund to invest in real estate and related assets in the Asia-Pacific region, with focus on China and India. Citigroup, the largest US bank, and its investment professionals committed $200 million to the fund, CPI Capital Partners Asia Pacific, according to a statement from the New York-based bank. A Hong Kong-based team of more than 25 employees, led by Managing Director David Schaefer, will manage the fund. About 40 per cent of the fund has been already invested or pledged. — Bloomberg

L&T plant in Jebel

Dubai: India’s Larsen and Toubro Limited has set up a ready mix concrete (RMC) plant with a capacity of 240 cubic metres per hour in Jebel Ali near here. The plant will be operated by ECC, L&T’s Construction Division, and will meet the growing demand for ready mix concrete in the UAE. L&T plans to expand the total number of plants in India to 150 by 2009-10. The company proposes to expand its operations in other emirates, specifically Abu Dhabi and Ras Al Khaimah, and also Sohar and Muscat in Oman. — PTI

Emgreen to invest

New Delhi: Emgreen, an Imperial Group real estate arm, will pump in Rs 80 crore into a number of upcoming projects in Punjab, Himachal Pradesh and Haryana by 2008. “We will invest Rs 80 crore into various projects including shopping malls, group housing and residential townships by the end of 2008,” Emgreen Executive Director Amol Arora said here. The projects will be spread over in Patiala (2 acres), Ludhiana (4 acres), Rajpura (3 acres), Shimla (4 acres), and Panipat (8 acres), he added. — UNI

Parsvnath pact

New Delhi: Real estate company Parsvnath Developers Ltd has signed a Memorandum of Understanding with the Gujarat government to develop projects at an investment of Rs 1,600 crore over a period of nearly three years. The company would develop townships, group housing, commercial complexes, IT parks at Ahmedabad, Bhavnagar, Rajkot, Vadodra, Surat, Jamnagar and other districts in Gujarat, it said in a statement. — PTI

HDIL plans listing

Mumbai: Housing Development and Infrastructure Limited (HDIL), a real estate development company, proposes to enter the capital market with a public issue of 30,000,000 equity shares of Rs 10 each through 100 per cent book building process. The issue comprises a reservation of up to 6,00,000 equity shares for subscription by eligible employees and a net issue to the public of 29,400,000 equity shares. There will also be a green shoe portion of up to 4,500,000 equity shares. — UNI

Garnet eyes Australia

Mumbai: Garnet Construction is mulling residential projects in Australia by next year and plans to invest about $10 million in that country. “The Australian market is growing at a good pace and hope in the next four to five years, it will create huge demand in the property market,” Garnet Construction Director Arun Kedia told reporters here today. Kedia said the price of land Down Under was ‘high’, but could not be comparable to the ‘hot’ land prices in the metropolitan cities in India. He said the company would invest around $10 million initially in the Australian market. The company announced an exclusive three-year tie-up with Dubai-based real estate firm Sternon Group for marketing its Rs 1,200-crore township. — PTI

Omaxe project in Baddi

Chandigarh: Omaxe is coming up with a housing project in Baddi. Omaxe ParkWoods, as the project will be called, will house 1,669 apartments of different types. According to a company press note, the project will be located in Housing Board, Phase II, Chakka Road, Baddi. — TNS

West Bengal inks deal

Kolkata: In pursuance to the government’s policy of rapid industrialisation through the SEZ, the state Chief Minister Buddhadeb Bhattacharjee has signed a business agreement worth Rs 33,000 crore with M/s DLF, a foreign consortium company on the real estate, for setting up a satellite township in an 4,840 acres of areas at Dankuni, 20 km from Kolkata, to be acquired through the SEZ programme. The famous architect firm of Singapore, M/s CPG, would be involved in the scheme. — TNS

TAX tips
Amount credited to partners on revaluation not taxable as capital gain
By S.C. Vasudeva

Q. We are a partnership concern carrying on business of manufacturing stationery items and selling them in our retail shop. Manufacturing is carried out in a small building in the industrial area. The value of the factory has considerably appreciated over the years and it was decided by the partners to revalue the same for the purposes of reflecting its real value and getting higher facility from the bankers. The assessing officer wants to tax the revalued amount. Is it possible for him to do so as in our opinion the surplus on revaluation is not an income chargeable to tax?

— Jamna Das, Jalandhar

A. The contention of the assessing officer is not correct as the provisions of Section 48 of the Act are attracted if there is a transfer of the immovable property. In ITO vs. Ramesh M. Shah (2004) 2 SOT 558 (Mumbai) it has been held that the amount credited to capital account of partners on revaluation is not taxable as capital gain since there is no transfer of any capital asset on account of such revaluation.

Fund transfer

Q. I am 61 years old, having property moveable and immovable at Panchkula costing approx. Rs 2.50 crore. I intend to shift to Canada where my son is residing. If I sell my immovable property how I can transfer the sale proceeds to Canada. Will I have to invest the sum in some scheme to avoid payment of tax for a fixed period? If I do so, what will happen after that period? Will I be able to transfer my funds to Canada?

What is the procedure for transferring cash deposits lying in various accounts of banks (savings, FD and PPF) and PO? (all these funds are approximately Rs 25 lakh). I retired in 2005 and these funds include my PF./gratuity/leave encashment etc.

I shall be obliged if any other valuable information related to this can also be provided.

— Arjun D.K.

A. The immovable property, which you intend selling for Rs.2.50 crore, will involve the payment of capital gains tax. The amount realised on the sale of such property after the payment of capital gains tax can be remitted to Canada without any difficulty as the government has now liberalised the remittance scheme in such cases. In case, you choose to make investment in capital gains tax saving bonds, the amount of net consideration less capital gains can be remitted abroad. The amount of your bank balances and other accumulated savings can also be remitted abroad without any hassles.

Officer is wrong

Q. I had constructed a residential property in 2003-04 and incurred a sum of Rs 30 lakh on the construction thereof. The construction was finalised from my savings as well as by raising a loan from bank. I am using the residential property for self. During the course of assessment proceedings for 2004-05, the assessing officer did not accept the cost of construction despite having given all vouchers and valuation report from an approved valuer. He has added a sum of Rs 5 lakh as my undisclosed investment in the construction on the contention that the cost is low looking into the type of construction. I have filed an appeal against the said order. What are the chances of the success in appeal?

— Raghubir Singh, Ludhiana

A. You have a very good chance of succeeding in appeal before the IT Appellate Authority, as the provisions of the Section 69 of the IT Act, 1961, (the Act) requires the assessing officer to establish the following before making any deemed addition under the said section:

a) The assessee has made investments, which are not recorded in the books of account, if any, maintained by him for any source of income;

b) The assessee offers no explanation about the nature and source of such investment and;

c) The explanation offered by him is not in the opinion of the assessing officer satisfactory;

The onus of proving that the investment was made by the assessee and which is not recorded in the books of account is thus on the assessing officer. If he is not able to prove so, the addition can be sustained. The Hon’ble Tribunal in the case of ITO vs. JKK Textile Processing Mills (38 ITD 178) (Madras) 178 (Special Bench), has held that where the assessing officer has not established that the assessee has paid anything more than what is recorded in the books for construction of the building or there is no material on the record suggestive of such expenditure having been incurred, no addition could be made.

3 years’ clause

Q. I had constructed a residential house a few years back. I had claimed an exemption on the capital gain earned on the sale of residential flat held by me by investing the capital gains on the construction of the residential house. I have been advised by a vaastu shastra expert that the newly constructed house is not good for my family. I, therefore, intend selling the same within three years of the period of construction of the old house. What would be my tax liability in this regard?

— B.K. Das, Patiala

A. If the new residential property is transferred within a period of three years from the date of completion of construction, the amount of exemption given earlier would be taken back. In such a case the capital gain on transfer of new residential property will be calculated as follows:

Sale consideration of the new residential house: A

Less: Cost of acquisition (original cost of construction of new residential property - Exemption given earlier under section 54 of the Act): B

Short-term capital gains A - B

Short-term capital gain so earned will be added to your other income and brought to tax on the normal slab rate.

Amount in bank

Q. I had sold a plot of land in February 2005. I was interested in constructing or acquiring a residential house property within the specified time limit and accordingly, I had deposited the net consideration within the prescribed period in an account with the State Bank of India under the notified scheme for making the investment in future. However, it seems it would not be possible to acquire/construct the residential house property within the specified period. What would happen to the amount invested under the scheme with the State Bank of India?

— Himanshu Kumar, Nabha

A. In accordance with the requirement of Section 54F of the Act, the amount deposited in a bank account under capital gain scheme, which is not actually utilised by the assessee for the purchase or construction of the residential house property within the specified period, the amount so deposited, in the bank account shall be charged as income of the previous year in which the period of three years from the date of the transfer of the capital asset expire. You would be entitled to withdraw the unutilised amount in accordance with the scheme.