Confused Land Users

Shouldn’t responsibility be fixed, asks Maneesh Chhibber

Some questions, any answers? * Why did PPCB not make list of projects, whose NOC had been withdrawn, public? * Why did PPCB chairman Yogesh Goel refuse to make the list public? * Wouldn’t it have been the obvious thing to do to secure investors’ interests? * Will property prices increase? * Will Badal govt act against PPCB officials responsible for the faux pas? * What kind of suggestions will the chief secretary-led panel make? * Will they be enough to revive interest in the booming real estate sector?

The decision of the SAD-BJP government in Punjab to withdraw the change of land use (CLU) approvals granted to mega housing projects preceded by cancellation of no-objection certificates granted to many housing projects that are in the vicinity of industrial units is sure to deliver a body blow to the ambitions of the promoters of these projects.

But, in all the hullabaloo over who’s really responsible for the mess - Punjab Chief Minister Parkash Singh Badal has already blamed the poor policies of the previous Congress government for the steps - one thing that nobody seems to be factoring in is the loss that would be suffered by the common citizens, many of whom have invested their lives savings in these projects.

That the price-per-flat will certainly go up in the aftermath of the government move is an opinion shared by all and sundry. In the end, the increase will be handed down to the buyer, who will be expected to cough up more than the already-fixed price for the same property.

The builder can also be expected to pass on to the average buyer his own liability on the huge loan that he would have taken to undertake the project.

Even though the Chief Minister has asserted that fresh guidelines for setting up of residential projects in the vicinity of industrial units would be finalised soon, what remains unanswered is - what about the alleged violation of pollution norms, including watering down of pollution norms by the previous Capt Amarinder Singh-led government? It will be interesting to see what line the government takes to deal with this issue, which is already pending before a Division Bench of the Punjab and Haryana High Court.

It would be difficult, if not impossible, for the government officials to explain to the High Court how and why pollution norms have allegedly been given a go-by during the Amarinder regime. Why did the Punjab Pollution Control Board (PPCB) play to the gallery and agree to remove some of the stringent clauses while granting NOC?

That the present PPCB set up, headed by Yogesh Goel, an Akali appointee, is playing a questionable game is another point that needs to be understood. Why did the PPCB not make the list of projects, whose NOCs had been withdrawn, public? Was there a bigger gameplan in keeping the list under wraps? Didn’t the PPCB and the government think it necessary to inform the common public about the immediate danger of investing in these housing projects?

There are indications that between the period that the NOCs were revoked and The Tribune first published the report about the same, dozens of investors entered into an agreement with the builders to buy flats in such colonies/projects.

Shouldn’t some heads roll for the deliberate faux pas?

Another important thing that will be worth waiting for is how the government tackles the scathing observations made by the High Court Bench, which while staying the operation of the circular dated January 17, 2006, whereby certain relaxations had been granted to colonisers vis-à-vis pollution norms, had asked the Punjab chief secretary to inquire and submit a report as to how such an “illegal and unconstitutional” circular had been issued in the first place.

The Bench had observed that all norms had been thrown to the winds by the PPCB. “To say the least, the Board, instead of controlling pollution, is encouraging pollution by relaxing norms,” it had observed.

As of now, it seems safe to assume that the view taken by the High Court in the next hearings in the matter will now set the agenda on the issue.

Iffy buyers

Recent home loan rate hike has upset the budget of those who availed it, says Ruchika M. Khanna

Your dream house may not become a reality soon, courtesy the frequent hike in home loan rates. With the Reserve Bank of India (RBI) having increased the cash reserve ratio and inter bank short-term lending rates (repo rate), it is not just the loanee, but also the booming realty industry that is sure to feel the heat.

RBI had hiked repo rate to 7.75 per cent and cash reserve ratio to 6. 5 per cent last week (up by a quarter per cent). Though the RBI move is aimed at controlling inflation and suck out Rs 19, 500 crore from the system to help contain liquidity, yet the move will certainly adversely impact the real estate and industrial growth.

Following the RBI move, ICICI Bank, Yes Bank, UTI and HDFC have already hiked their rates of interest by 0.75 per cent to one per cent. It may be mentioned that ICICI and HDFC together have over 60 per cent share in the home loan segment. Though the public sector banks have not hiked the home loan rates so far, they are likely to follow suit over the next week.

Though the home loan rates now hover around 12 per cent, the floating rate of interest on home loans have almost doubled since October 2005. In 2005, the floating rates of interest were between 6.75 and 7.50 per cent because of the buoyancy in the market.

It may be mentioned that within a year, the home loan rates have been revised six times by the private banks and four times by the public sector banks. The latter had refrained from revising the home loan rates and borne the costs themselves. However, this time bankers say it will be difficult for them to absorb the hike in key lending rates and cash reserve ratio. They say they will have to pass on the hike to the customers.

This increase in home loan rates will not just lead to a number of people postponing their decisions to buy property. Even those who have availed home loans will now have to pay a higher EMI, thus rocking their household budgets. Realtors are scared that the hardening of interest rates would upset their business prospects as people will invest in fixed deposits, mutual funds or gold.

Says Shiv Singh, a boxing coach with Sports Authority of India (SAI), who has availed a loan of Rs 15 lakh. “Home loans, which were very attractive two years ago, enticed people to buy homes, have now gone completely out of reach of the common man. The larger part of the salary goes into the EMI now, and leaves the loanee with little to make both ends meet”. His views are supported by Manmohan Lal, a retired officer of the Punjab and Haryana High Court, who had availed a loan of Rs 4. 60 lakh to build his house in Mohali two years ago. “My EMI increased from Rs 3,875 to Rs 3,980 per month. With the present hike, it will touch Rs 4,025,” he says , while adding that a friend of his had to ask for remittance from his son settled abroad, in order to pay back home loan.

Agrees S.C. Dhall, a banker in State Bank of Patiala: “The move will see a 25- 30 per cent fall in people availing home loans. As the EMI increases, the people will not be able to repay the principal amount, but only pay back the interest on the loans.”

India on Wienerberger’s cross hairs

Wienerberger AG, the world’s biggest brickmaker, plans to open its first factory in India next year as the country’s economic expansion and population growth boosts construction of new homes.

The Vienna-based company aims to open as many as 10 Indian sites close to major cities or towns within five years, Chief Executive Officer Wolfgang Reithofer said in an interview in London recently.

India’s $12 billion real-estate industry is expanding by 30 per cent a year, according to Ernst & Young. By contrast, US realtors expect new home sales to fall 10 per cent this year.

Rising incomes and urbanisation have fuelled demand for housing in Indian cities such as New Delhi and Bangalore, where prices have tripled since 2004.

Brick use is more widespread than in other Asian countries because of India’s colonial past, Reithofer said.

“India is the most interesting for me because it is a large population that’s brick-minded,” the 58-year-old CEO said.

“We have a lot of sites and ideas and we’re investigating how we should do it,” he said. — Bloomberg

Lofty hospitality
Starwood coming with Westin, Aloft to India

Starwood group, which operates leading hotels like Le Meridien, Sheraton and Westin, plans to rollout a chain of 15 Aloft Hotels in India within next three to five years.

With an average cost of $80,000 per room. Aloft Hotels could see an investment $192 million, though the company is yet to finalise its strategy.

“In 3-5 years, we want to start construction of all 15 hotels of our new brand Aloft. Investment per room is $80,000, excluding land and each Aloft will have 130-160 rooms.” Starwood senior vice-president Thomas J Monahan said.

All Aloft Hotels will be in partnership with real estate developers.

“Investment depends on how the talks with real estate developers turn out to be. If we find the opportunity, we are willing to invest in the country,” he said.

The company may invest in partnership with real estate developers or may only provide the management or brand name, he said.

The group has also decided to announce the famous Westin Hotel in India. However, officials declined to share the location.

“In the upcoming Westin, we will provide only management,” he said.

Initially, the group plans to open Aloft Hotels in Mumbai, Delhi, Pune, Bangalore and Hyderabad.

“We will be more interested in the new town areas of the cities, IT parks and office campuses rather than in the heart of the city,” Monahan said. — PTI

UK firm to park £250 m
H.S. Rao

A UK-based property investor plans to invest £250 million in India’s booming real estate sector in the next five years.

“In the next five years we are planning to invest £250 million in India,” Suchit Punnose, Director Investments of Red Ribbon UK Fund told PTI.

Of the total amount, £50 million would be invested in budget hotel chains all over India, £50 million in developing resorts in Kerala, £50 million in student accommodation and £100 million in commercial properties.

The first budget hotel would be commissioned in Cochin by July this year.

The company has identified land to build a 300-room resort in Kerala and the land acquisition would be completed in the next three months.

In addition, Red Ribbon UK Fund also have plans to set up a pre-fabrication building construction factory in Kerala “which we hope to use to rapidly expand our footprint in India,” the official said.

Regarding student accommodation, he said they would identify 50 top universities in India and build hostels and dormitories next to the campuses.

£1 million would be earmarked for each of the 50 sites, he added.

The company’s investment plans further include building of retail parks, keeping in view the requirements of leading blue-chip companies in India.

Paul Rodker, Director, UK Fund, said the rapidly growing Indian real estate market was now maturing through increased participation from domestic and international players, rising investor interest and a market-friendly approach.

Rodker said continuous urban migration and a booming service sector were pushing property values and rental rates ever higher in India.

“The Indian government’s decision to allow 100 per cent foreign direct investment and the entry of venture funds into real estate will add to the growth momentum already created by the availability of affordable mortgages and rising disposable incomes,” he stated.

Real estate mutual funds are now allowed to float in a move that industry observers believe will lead to the launch of structures akin to real estate investment trusts.

Last year £1.5 billion were raised by various companies for investment in India, Rodker said. — PTI

Out of common man’s reach

Jupinderjit Singh reports on how prices have shattered the dream of owing a house in Ludhiana

The great middle-class dream of owning a house in a posh colony, replete with modern facilities, has gone for a six in this industrial hub of the state. More so with the recent hike in the housing loan rates

Beginning from the ’70s, the government had carved and designed many colonies, especially with the middle-class segment of the society in mind. But due to the ever-increasing land prices, the same places are no longer affordable for the very section they were aimed for. Not even the high middle class.

As a result, the middle-class is being relegated on the outskirts, far away from the main hustle and bustle of the city. Incidentally, this section had been the focus of all finance and home loan schemes. But with huge finance required to own a house in a decent place, no one can think of paying heavy monthly instalments.

Besides, all major national and political parties since the ’70s have been watering down the dreams of owing a decent house through various schemes and promises of special colonies. The already rich ones seem to be reaping the benefits of the scheme.

Only those who had bought the house before the ’90 can afford to live in colonies like Sarabha Nagar, Gurdev Nagar and Bhai Randhir Singh Nagar, the three posh colonies of the city. Many of them have sold off the property. Those remaining here are easily distinguishable. They still live in single-floor houses, amidst towering newly constructed houses, villas of industrialists and high-ranking government official. They appear distinct with modern architecture

When the improvement trust had begun offering plots in these colonies two to three decades ago, attractive schemes were floated. With base price less than Rs 15, plots with average size of 400 to 600 sq yards were easily available for persons with average income.

“Today, not even those categorised as higher middle class can think of owning a house in Sarabha Nagar, the biggest and best colony of the city, along with other colonies,” says D S Sharma, a retired section officer who had taken a plot on instalments way back in the ’70s in the colony.

Recalling how easy it was to own a plot and house in that era, he said the monthly salary was not more Rs 1,000. “A plot was available roughly between Rs 15 and Rs 40 per sq yard in Sarabha Nagar. The cost of living was not high and the savings were enough to go for investment.”

“However, today, salaries may range between Rs 10,000 and Rs 30,000 for middle class and higher middle class but the cost per sq. yard of land has escalated up to Rs 40,000 to anywhere what the seller demands. If one goes for a loan, the monthly instalment will be more than Rs 50 lakh per month,” he calculates.

Surinder Singh and his wife earn nearly Rs 40,000 per month. Their parents, government retirees, awe at the salary figure. Yet, the couple is distressed, “We want to live in a good colony but the prices are out of our control. We can even give half of our collective salary as instalments but yet get a house on the outskirts only. Those colonies are far away from the main city, offices, schools and markets,” they rue.

The family was trying hard to find even less than 100 yards plot in the posh colonies. More distressed than them was the mother of the man, “In the ’70s, we were getting a 600-yard plot at Rs 18 per sq yd in Sarabha Nagar. Me and my husband lived in Patiala and had no intention to move to this city. I never knew that my son would have to pay huge amount as rent to live in the same colony and also dream about owning a house here.”

Prices have, in fact, exploded, going beyond a common man’s reach during the last five years. A plot, worth around Rs 65 lakh in 2002 was sold at Rs 1.25 crore in Block-I. The owners can demand any amount with no government system to check the prices. Most of the recent sales have been benami also.

A survey by Knight Frank, a global property consultancy firm also points at the huge price rise. In a countrywide survey, it found real estate prices in Ludhiana, Chandigarh and Jaipur were in the over-valued zone. In Ludhiana, for instance, where at least 10 malls are in various stages of construction, commercial property rates have soared from around Rs 1,700 per sq ft two years ago to around Rs 4,000 per sq ft

It also found out that the commercial land rate has increased to approx. 200 per cent in last one year. The residential land value in the past decade has increased by more than 500 per cent.

Unless the government comes out with some strategy to check such high price rise, there does not seem to be much hope for this section of the society, which is undoubtedly the biggest consumer market.

Housing unaffordable, says Ficci

Strict monetary measures initiated by the RBI since April 2006, coupled with a sharp increase in real estate price, has shattered the dream of middle class to own a house. Policymakers should make available loan at an appropriate rate, says Ficci.

The leading industry chamber also said that the demand for housing, which was propelled by economic reforms, has once again come to a standstill due to high interest rates. Housing loan cost going up by almost 4 to 5 percentage points.

Housing has been a key driver of economic growth in several countries. Any adverse impact on housing growth could have a serious impact on the overall economic growth. A quick look on the statistics shows that the housing loans exposure in India is much lower compared to other countries. The ratio in India is merely 4 per cent of GDP as against 54 per cent in USA, 57 per cent in UK, 14 per cent in Thailand, 17 per cent in China.

Also, the net NPA in housing is less than 2 per cent, which is much lower than other segments. — TNS Delhi

Estate talk
Make farmers partners in growth

R. Suryamurthy talks to managing director of Raheja Developers

Special Economic Zones (SEZs) has now become special exclusion zone, which have deprived farmers of their land resulting in widespread anger and protest. The killing of 14 persons in Nandigram, the political storm over the creating of SEZ in Reliance in Haryana and furore over these zones in rest of the country has forced many to rethink on the need to create such zones.

However, in the midst of these controversies, multi-product SEZ on 5,000 acres of land near Manesar-Dharuhera and the sector specific SEZ in Gurgaon on 327 acres of land being developed by Raheja Developers has proceeded with little resistance from farmers.

“It is the inclusive approach of viewing farmers are partners in the development of SEZ that we have so far succeeded,” says Navin M. Raheja, managing director of Raheja Developers.

He says farmers, who have been associated with the land, should be made partners in the development for any SEZ project to succeed. “We believe that is the only way forward,” Raheja emphasises.

The company has promised employment, compensation and equity participation to villagers by way of agreement with landowners. With this policy we are setting new standards in the land acquisition policy, he says.

He says most of the controversies have arisen because government has acquired land for the industry. “The government should come into picture only as a facilitator and acquire land to provide contiguity,” he says.

While a majority of the farmers have sold their land, a sizable proportion of them, around 40 per cent, have given land on long-term lease to Raheja and they have become stakeholders in the project.

The land developers on their part plans to provide free education to two of peasant’s children, provide training to two members of the family to be employed as skilled workers in the kind of industry that would come up in the zones.

Raheja says the company will be investing Rs 10,000 crore over the 10- year period in developing the two SEZs. The total outlay in both the SEZs would be over $2.2 billion over a decade-long period.

The SEZ will provide a boon for the IT/ITES, electronics, auto and its ancillaries, biotechnology, textiles and garments, education, medical tourism, gems and jewellery, food processing, pharmaceuticals, construction, tourism and retail industries.

He says the company will focus on sector-specific SEZ in the next two to three years like engineering after getting the final approval. IT/ITeS, pharma and a few other sectors would be the focus in the third and fourth phase of project completion by the company.

On generating resources for the project the company could float a special purpose vehicle (SPV) that could be listed with alternative investment market of the London Stock Exchange. The advantage of listing with AIM is that it does not require a minimum public share holding, prior trading record and minimum capitalisation.

He says several global leaders have shown interest in the project and are ready to invest substantial sum.

Designing the Valley

Ehsan Fazili meets an architect who has won awards for inimitable work

With the passage of time and involvement of modern technology and expertise, the concept of construction, including houses, places of public utility and commercial complexes, has witnessed a sea change in Kashmir.

The Valley’s weather conditions and the prevailing unrest are the two major factors that have left a mark on the real estate sector.

There had been a pause in the pace of construction during the ’90s, but it has been going on at jet speed during the past five years, particularly in and around Srinagar city, with increasing migration of people from the rural areas.

This has necessitated the utility of modern technology and architectural expertise in view of the decreasing availability of space for residential houses.

“Earlier, there had been no concept of engaging architectural engineers, but people now prefer to engage professionals,” comments Tariq Fazili, an architectural engineer who holds over two decades of experience in his chosen field.

Tariq, an architecture zealot since childhood, got his B.Architecture from REC, Trichi, in 1986. Though there are about 45 to 50 such experts in this state, Tariq’s endeavours have earned many distinctions.

He has the distinction of getting awards on Kashmir Urban Haat at Government Central Market (2005) and war memorial at Badami Bagh Cantt. (1997).

Apart from designing a number of houses, Tariq has also rendered services in six projects of the Jammu and Kashmir Police, and as many projects of the University of Kashmir, State Projects Construction Corporation, and other state and central government works and industrial units.

His company, Tariq and Associates, has been handling designs of residences, offices, commercial, hotels and industries works with specialists from various disciplines under one roof to offer services in construction programmes in diverse fields. These include architectural designing, documentation, project management reports, surveying and site selection, interior designing and details, and structural designing and detailing.

He opines that the scenario in the real estate sector has changed in Kashmir over the past two decades.

Spacious and big houses, mainly made of wood and mud, have become a thing of past, opines Tariq, adding that there had been no concept of utility of space and aesthetics in Kashmir over the past.

Even as the wood and mud has given way to RCC structures, these are not adequately suited to the weather conditions, but are preferred for easy availability of the material and other facilities.

“But due to the changing scenario people look for utility and aesthetics of their structures,” he adds.

Tariq points out that architecture in Kashmir is different to that of the hotter zones. Residential houses in Kashmir offer a different structure in view of the unique cultural background, he avers.

“Our buildings have also to go with local landscape that varies from place to place,” he comments. Another important feature is the height restriction as no building can be built over four floors, except that of the Civil Secretariat, constructed four decades ago, which has seven floors.

He suggests the government should provide untapped areas around Srinagar for residential purposes to check congestion in the interiors.

India Inc welcomes SEZ move

Leaders of the Indian industry welcomed the government’s move to lift a freeze on approving new special economic zones (SEZ) and clear 83 pending proposals.

The Confederation of Indian Industry (CII) said in a statement that it “supports the concept of SEZs and hopes that the decision to put an end to compulsory land acquisition by state governments and limiting the size of SEZs will end the ambiguity about the future of SEZs”.

“The state industrial development corporations may now use land already earmarked for industrial purposes for creation of these SEZs,” it added.

Underlining that SEZs are here to stay, The Federation of Indian Chambers of Commerce and Industry (Ficci) said “SEZs have an important role in today’s competitive environment.” It also said the decision taken by the government will clear all ambiguities regarding SEZs.

The Associated Chambers of Commerce and Industry (Assocham) lauded the government’s decision to restrict the size of the SEZs to 5,000 hectares, as it would help in settling recent controversies regarding land acquisition SEZs.

“The clearance of the proposals to set up SEZs with a limit on multi-product zones at 5,000 hectares and the discretion to the states to lower the size below this limit will give flexibility,” said Ficci. — IANS

Jumping the red line

Special cell needed to monitor residential development in rural areas, suggests Lalit Mohan

The unplanned development in the rural areas is putting pressure on the public resources. The farmhouse trend in the rural areas is gathering popularity. More and more people prefer to construct houses in fields (popularly known as deras) rather than the red line area (lal dora area, earmaked for houses) of villages. The trend is more prevalent in the rural areas near urban centres.

This is putting tremendous pressure on public resources. Though according to rules the public facilities cannot be provided to farmhouses constructed in the fields yet political will prevails. Over the years, local politicians, in order to please the voters, have constructed roads and provided other basic facilities to the farmhouses.

A link road constructed to a farmhouse costs lakhs to the department. In the rural area, the funds from the Mandi board or public works department are used to construct roads to private mansions or farmhouses.

During the stint of the previous government, the assembly constituencies of Chief Minister Capt Amarinder Singh and PWD minister Pratap Singh Bajwa were privileged. In his own claims, the former PWD minister had said that over Rs 300 crore had been spent in his constituency for link roads and bridges. Almost all farmhouses or deras in his Kanuwan constituency were connected by roads.

The funds spent on the roads were through the loans provided by Nabard for the development of planned roads. However, at the whims of the politicians the officers diverted the funds for roads to private mansions. Now the people of the state would have to pay the interest of such loans that have been spent.

Similar is the case for providing drinking water by the water supply department to such isolated houses. The water supply department authorities, when contacted, said they were facing acute problems in hilly areas. Even in the hilly areas, people are now constructing houses at distant places in their fields or orchards rather than the residential areas earmarked for housing purposes. Due to pressure from the local leaders, the department at many places had to lay pipelines in kilometres for a single or two to three houses.

The electricity board is another department that has to face the brunt of such unplanned development.

The people of rural areas have their own logic for resorting to construction of houses in fields. They allege that lal dora (areas marked for residential purposes) in villages have not been increased by the revenue authorities since long. The land around the lal dora is very less and costly. Families are multiplying in villages and there is pressure on the existing land. So, people construct houses on their own agriculture land away from the villages.

The government was allowing planned development around the urban centres. However, there is no such scheme in rural areas. Farmers who want to lay colonies in the surrounding areas of their villages have to seek permission from PUDA despite the fact that the authority has nothing to do with the development of rural areas.

The government should form special authority that monitors residential development in rural areas to buckle the trend of unplanned development. The authority can lay the norms for housing development, keeping in view the needs of rural areas or villages and allow the farmers to develop colonies there.

The trend of constructing houses in the fields had increased in late eighties. However, such isolated houses became easy target for the militants to strike. They used to take shelter in such houses and the people had to face the ire of police officials. Due to this, the trend was subverted. With the return of normalcy in the state trend has again picked up.

The government should take step to curb the trend that is causing loss of crores to the state exchequer.

Hiring the best

Mall makers want to be a cut above the rest, says S. Satyanarayanan

Mall culture is sweeping the country and many major real estate players have hopped on to the bandwagon. With too many players, developers are focusing hard on creating concepts to carve a niche for their projects and attract the best retailers to do business with them.

Besides, they are engaging top architects and planners, not only to imbibe international experience, but also to ensure that a world-class property is created. Big developers are also engaging professional research groups to help them on concepts, location, business projections and expansion scopes.

One of the big real estate players, AerenR, which has launched several concept-based projects, recently started Punjab’s first theme destination mall, Festival City, in Ludhiana.

The concept is based on various festivals of India and the architecture revolves around this very theme.

“We are the first one to introduce destination mall concept in India. This concept will keep us well above the cluster,” AerenR’s COO Sudhir Mathur told The Tribune.

“The Festival City will have different shades of colour which will reflect the brightness of Diwali, the spirit of Dusshera, the joy of Makar Sankranti, the elation of Baisakhi and the colours of Holi,” he said.

While the concept has been developed in association with RTKL (UK) Ltd and value addition to the property is being done by Achal Katari Architects, he said big retailers, like Shoppers Stop, had already booked space in it.

Amit Khaneja, vice-chairman of Collage Group, which is coming up with Viva Collage entertainment mall in Jalandhar, strongly feels that a research and knowledge-based approach is essential to make malls a success story.

“Our research tells us that more than concrete structures, it is the volume and the velocity of the flow of people, merchandise, energy and money that will be the driving force behind building successful retail and real estate concepts,” Khaneja, whose company has engaged one of the India’s leading retail consultancy firms KSA Technopak to conceptualise the project, said.

“Along with the good concept, a nice architectural blend is also essential to strike a balance between the consumers aspirational levels and value seeking nature,” he said.

The Collage Group has engaged RSP Akitek, based in Kuala Lumpur, Malaysia, for design and Architecture of the Viva Collage entertainment mall, which is being positioned by the company as an integrated shopping complex.

Malls race against time

The Indian retail space is set for an interesting showdown - retailers are seeking fast completion of shopping mall projects to meet their expansion targets, but are also wary of intense competition this mall-mania could lead to. Malls are expected to emerge as major drivers of the Indian retail sector growth story, for which lack of quality space has long been a major deterrent, analysts believe.

The entry of giants like Reliance Industries, Bharti Walmart, Aditya Birla Group, Tatas as well as expansion plans of Pantaloon and Shopper’s Stop are driving the demand for shopping malls to untouched territories.

Lack of quality space should no more be a deterrent to the growth of organised retail as mall space has risen in the past few years and is expected to rise even further, retail sector analysts at Merrill Lynch believe.

However, anecdotal evidence suggests mall developers are running behind their delivery schedules, Merrill Lynch’s Vandana Luthra and Manish Sarawagi said.

Making the situation even more complex, the retail sector is set to witness intense competition if by a remote chance the projects are completed on time, the analysts wrote in a report.

A further surge in competition could dampen the growth momentum in this sector, which is already battling with issues like huge cost pressure arising from increased salary costs, rentals and interest rate hikes.

In the current scenario, the competition would intensify only after delivery of new malls and competitive pressure in terms of sales realisations is less of an issue given lack of appropriate real estate, the analysts believe.

According to Merrill Lynch, if the new malls come up as scheduled, the competitive threat for existing retailers like Pantaloon and Shoppers’ Stop would be particularly intense.

A recent survey by ICICI Property and Technopak suggests that malls will account for half of the total organised sector retail space demand in the next five years.

According to ICICI Property study, India can accommodate 1,000 new malls across 500 cities and towns.

There could be over 350 malls here by the next year, out of which about a third are coming up in and around Delhi and Mumbai, real estate consultancy firm Knight Frank believes. — PTI

GROUND REALTY
Plot shopping

Jagvir Goyal guides on what to look for while buying a piece of land for residential purpose

Buying a residential plot is often once-a-lifetime investment. A simple house on a good plot is better than a palatial house on a poor plot. So take care of a few important points given here:

Location

While deciding where to buy a plot, keep three things in mind: location, location and location. This is one real governing factor. Of course, the location is to be decided as per the budget, home and work circumstances yet try to find your piece of land in or around a city that is progressive, with clean environment. Note that whenever you are buying a plot, you buy environment and neighbourhood along with it.

Urban estate

Take care that the plot lies in an urban estate of a development authority, an improvement trust or any other such government body. If it lies in a private colony, the colony must be approved by the government concerned. This single step takes care of many aspects, the major being that the area is residential on the District Town Planner’s map. If the area is residential, only then is a licence given to the coloniser. Never buy a plot in an unapproved colony even if the coloniser assures that the approval will soon be accorded. Some byelaws must exist in the area, imposing restrictions on the height, projections, proportions etc. These are in your benefit only.

Development works

See that the external development services exist or under development in the colony. These include roads, water supply, sewerage, drainage and street lighting. An undeveloped locality invites many unforeseen problems. Also, you never know how heavily these services, whenever provided at a later stage, will cost you. Best is to choose a plot in an area where development works stand completed.

Direction

Though it is difficult to choose direction as the plots these days are planned back to back, prefer an east or north-facing site. It will bring good sunlight and air to the house. Prefer a free hold plot. If buying from an individual, examine and be doubly sure that the title of the plot is clear. Prefer front width of plot not lesser than 45 feet. See that the plot area does not fall in the easement rights of the government. Easement rights allow the government to lay pipes or erect poles.

Construction period

Check the time available with you for getting the building plans prepared, getting them passed and for construction work. Government bodies allow certain time period for construction after the offer of possession of a plot. If you are buying a plot from some person, make a check that this time limit is not going to expire. In that case, the moment you complete the deal, the pressure of building a house on it to avoid resumption of plot will be on your head.

Approaches to plot

Choose a plot that has good and motorable approach to it. This will help in unloading of material right on the spot and their carriage from a distance shall be avoided thus saving cost of labour on this account. Also check that the plot is not located near an open drain.

Avoid low-lying area

Don’t choose a low-lying plot. If unavoidable, pay lesser for it as extra cost for filling work and heavier foundations is to be incurred. A low-lying site or plot causes extra expenditure due to the extra filling work involved. The foundations too shall be heavier as these must be taken below the natural ground level. However, if you are planning to build a basement, then such a plot can be availed. See that the area should not be water logged. A basement in a waterlogged area is always prone to dampness and termite attack. Also, if the area is water logged, the foundations will be heavier due to less bearing capacity of soil. Therefore, always avoid a plot in waterlogged area.

Plot dimensions

Save cost by choosing a plot that allows right layout of the building. For a given plinth area, the cost of a house or building will be least when its perimeter is least. So a square building will have lesser cost than a rectangular or an irregular building. Also, lesser the number of offsets, lesser is the cost. Thus, if you are not so particular about the shape or elevation of the building, tell your architect or engineer to save here. See that length of plot is not more than double the width of the plot.

Check the soil

See that the plot is not in a filled up area. Such soil may settle down with time in a differential manner, causing cracks in the building. Look for a plot with sandy soil as such soils have better bearing capacity. Also see that no deep-rooted trees exist around the plot. With time, their roots may affect the foundations of the house.

High-tension wires

Avoid buying a plot over which high-tension electricity wires are passing. Sometimes, these wires pass over an open area and minimum height norms are also met by the transmission line authorities. Later, when the area comes under development, these wires, transmitting strong electromagnetic radiations, may fall too close to a built up house and prove dangerous.

Go ahead. Happy buying!

The writer is Superintending Engineer (Civil), PSEB. He can be reached at www.jagvirgoyal.com

TAX tips
Explaining indexed cost of acquisition
By S.C. Vasudeva

Q. What is meant by the indexed cost of acquisition for a long-term capital asset? For computing such indexed cost, please let me know the method of computing such indexed cost.

— Raghubir Singh, Ambala

A. Explanation (iii) to Section 48 of the Act defines the term “indexed cost of acquisition” as the amount which bears to the cost of acquisition, the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on April 1, 1981, whichever is later.

Similarly, indexed cost of improvement is defined as an amount which bears to the cost of improvement, the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the year in which the improvement to the asset took place.

“Cost inflation index” for any year means such index as the Central Government may, having regard to 75 per cent of average rise in the Consumer Price Index for urban non-manual employees of the immediately preceding previous year to such previous year, by notification in the official gazette specify, in this behalf.

The Central Government has notified the “cost inflation index” for the purpose of computing the long-term capital gains. The index for the financial year 2006-07 is 519.

DTAA with USA

Q. Kindly refer to your reply for an enquiry to tax liability for the sale of a house by NRI in India dated March 31, 2007. Please let me know the tax liability in the USA of the sale proceeds of house by the NRIs in India. As per your reply, the NRI seller will have to pay the property gains taxes in India, since the seller is a USA resident and will have to report the profit in the sale of property in India to the USA income tax department also.

Is there dual taxation agreement between India and the USA?

— H.S. Puri

A. India has a double taxation avoidance agreement with the United States of America. Article 25 of such agreement provides that in accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a resident or citizen of the United States as a credit against the United States tax on income, the IT paid to India by or on behalf of such citizen or resident. As to the taxability of capital gains in the United States, it will be better for you to ascertain such taxability from an expert in the United States, who would be able to guide you on the latest position of the levy of capital gains tax in the US.

Farm operations

Q. On a barren piece of land, falling within UT periphery, I raised fruit trees by putting fertiliser and engaging a full time gardener-cum-chowkidar. The trees have started giving fruits but are yet not marketable, being of a very small quantity. Now I have sold the land and has some LTCG. I want to know:

1) Shall the pay paid to the full time gardener-cum-chowkidar be taken as expenditure for calculating the investment made? There are no receipts of payment.

2) Shall the expenditure made on purchasing the plant saplings at different occasions and the on the purchase of fertiliser be taken as investment made? No purchase receipts have been kept.

3) Shall the expenditure made on labour in making the pits for the plants and the labour used to remove wild growth from near the plants at different occasions and in pruning and spraying the plants be taken as expenditure? These activities have been done by engaging additional labour to help the regular gardener. But no receipts are kept of the expenditure.

4) Shall the payment of electricity bills to run the electric motor-pump to water the plants and for light in the chowkidar room be taken as expenditure.

5) I have been visiting the land every now and then by my car. Should the expenditure incurred on such journeys be taken as expenditure.

— Raghubir Singh, Chandigarh

A. In accordance with the provisions of the Section 10 of the IT Act, 1961 (The Act), in computing the total income of a previous year of any person, any agricultural income shall not be included. The expenditure incurred by you on the agricultural operations specified at paragraph 1 to 5 would be deductible while computing the agricultural income. The non-availability of supports for the expenditure incurred by you will definitely be a hindrance in allowing the deduction of such expenditure. However, as you did not earn any income from the agricultural operations, the expenditure as incurred can be carried forward for adjustments against future income, if any on agricultural operations. Such expenditure however, cannot be allowed as deduction for computing long-term capital gain. This is because Section 48 of the Act provides for deduction of expenditure incurred wholly and exclusively in connection with the transfer of the capital asset or the cost of any improvement to the property, which is being sold. In my view, therefore, no deduction of such expenditure can be claimed against the long-term capital gain.

Dividing land

Q. I shall be grateful to you for answering the following query:

We seven brothers acquired 14 acres of agricultural land by partition, in a village, which is about 3 km from the city limit of Sangrur (Punjab). A considerable sum has been spent in 40 years to remove sand dunes to develop the land. The collector’s rate is Rs 5 lakh per acre. Kindly let me know cost of acquisition for purposes of capital gain, if any.

— B.S. Agarwal

A. The facts given in the query are not complete. The nature of partition has not been explained. It is, therefore, presumed that the reference to the partition is in respect of partition of property made on a total partition of Hindu Undivided Family (HUF). In such a case where the capital asset becomes the property of an assessee on such partition, the cost of acquisition of the asset is deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of assets incurred or borne by the previous owner or the assessee as the case may be.

The term “previous owner of the property” has also been defined by the Section 49 of the Act. According to such section, the term “previous owner of the property” in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) of Section 47 of the Act. Clause (ii) pertains to capital asset received on partition of a family.

The cost of acquisition has been defined in Section 55(2)(b) of the Act as under:

“where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of Section 49 of the Act, and the capital asset became the property of the previous owner before April 1, 1981, means the cost of the capital asset to the previous or the fair market value of the asset on April 1, 1981, at the option of the assessee.”

On the basis of the above provisions, the previous owner in your case would be taken a person who acquired the property otherwise then by partition. In case the capital asset became the property of such person before April 1, 1981, the fair value of the property as on April 1, 1981, shall be taken. In case such acquisition was after April 1, 1981, the cost of the capital asset on the date of acquisition would be taken. The cost of acquisition for you would thus be computed in the aforesaid manner.

Capital gains

Q: I have sold a plot of land, which was a long-term capital asset. I already own a residential house. Can I invest the capital gain earned on the sale of plot in the buying or construction of a residential house?

— Babu Lal, Nawanshahr

A. Section 54F of the Act provides that in case an individual or Hindu Undivided Family (HUF) transfers a long-term capital asset other than a residential house and he acquires or constructs a residential house property within one year before, or within two years after the date of transfer of such long term capital asset or constructs and completes the construction of a residential house within three years from the date of transfer of the long term capital asset, no capital gain shall be payable on such transfer. Under this section exemption is available only if on the date of transfer of the original asset, the taxpayer does not own more than one residential house property other than the new house. He should also not purchase within a period of two years after such date or construct within a period of three years after such date, any residential house other than the new house. Accordingly, in case you comply with the above conditions, the capital gain earned by you on the transfer of plot, which as per your query is a long-term capital asset shall be exempt from tax.

Buzz on Bourses
Trent-Xander agreement

Mumbai: Indian retailer Trent Ltd has said it has entered an agreement with private equity firm The Xander Group Inc. for an institutional retail real estate fund in partnership with Indian developers. Trent, a Tata group company, would have anchor tenancy rights and manage the portfolio with Xander, it said in a statement. “The arrangement will be of considerable help to Trent in its growth plans in the retail sector, including through its current formats like Westside, Landmark and Star India Bazaar,” it said referring to its department stores, bookstores and hypermarkets. It did not disclose financial details. — Reuters

Embassy for Singapore bourses

Singapore: Indian property developer Embassy Group has roped in Singapore’s Mapletree Investments to help it launch a real estate investment trust, or REIT, on the Singapore Exchange, sources close to the deal have said. The REIT will be the first in the city-state based purely on properties in India where capital values have soared on demand for call centres, research facilities and IT plants. Bangalore-based Embassy has a large portfolio of business parks and office buildings. — Reuters

IHG signs 6 contracts

New Delhi: UK-based InterContinental Hotels Group (IHG) has signed six contracts for managing hotels to add over 1,500 rooms. The company said it has signed deals with different real estate developers, including the Poonawala Group, KGA Group, Vascon Engineers and Indroyal Group. It, however, did not disclose the value of the deal. As per the contract signed, IHG will manage two properties in Pune, two in Kochi and one each in New Delhi and Hyderabad. — PTI

Istithmar pact for hotels

Mumbai: Istithmar Hotels, part of Dubai World holdings, UAE government owned investment company has announced investments of more than $400 billion with Britian based Easy Group to build a chain of EasyHotel’s in 17 countries including India. Announcing the development, Joe Sita, Chief Executive Officer of the Istithmar Hotels said,” this was done in an attempt to tap the growing demand of budget hotel accommodations around the world. India is a growing and significant market. “Six hotels currently planned over the next five years are in Mumbai, New Delhi, Chennai, Kolkata and Bangalore,” he said. — UNI

99acres inks pact

Chandigarh: Real estate portal 99acres.com and Builders Information Bureau (BIB), an industry forum for builders in India have signed a memorandum of understanding to exclusively partner in organizing exhibitions, seminars and conferences in India and overseas. These would be focused on various aspects of the real estate industry such as retail, FDI, and also in recognizing outstanding work done by corporates and individuals in the industry. — TNS

DLF projects for Chennai

Chennai: Infrastructure major DLF Ltd has said the company was developing three major projects in the city, with one IT park coming up in a notified SEZ area. A 6.6 million sq ft IT park, 2.4 million sq ft residential township and 1.3 million sq ft of retail mall is being developed here, DLF Commercial Developers Chairman A.S. Minocha told reporters here. The DLF IT park would come up in a notified SEZ area, spread over 41 acres at an investment Rs 2,500 acres, he said. The residential township would be coming up at Old Mahabalipuram Road while the retail mall would be completed by 2009. — PTI

Hotel Campton on Tatas radar

New Delhi: Tata Group’s Indian Hotels Company Ltd has said, it in partnership with financial investors, will acquire San Francisco-based Hotel Campton Place for $60 million. The cost has been arrived at after including estimated transaction costs. The company has received its board’s nod for the takeover, which is now subject to other statutory approvals. Indian Hotels, which also owns Taj brand of hotels, said it proposes to acquire Campton Place through its wholly-owned US-based subsidiary. — UNI

AIG, RMZ sign deal

Mumbai: AIG Global Real Estate and RMZ Corp, one of India’s leading corporate real estate developers, have agreed to create an equal joint venture to develop commercial and office space in key cities across India and to evaluate hospitality development projects throughout India. The joint venture will also seek to engage leading international hotel chain operators in connection with the management of its hotel properties. Recently, the AIG Global Real Estate-RMZ venture had made a successful bid for an 11-acre plot in Chennai for Rs 298.10 crore. It plans to develop 1.5 million sq ft of office space on the acquired property. — UNI

Satra Prop plans mall

New Delhi: Real Estate developer Satra Properties India Ltd is in the process of setting up a Rs 500 crore retail and entertainment complex in Mumbai. The construction of the project, Dream the Mall, is going in full swing and will be over before the scheduled time of October. The 0.8 million sq ft complex will be home to more than 500 shops, anchor measuring 1,00,000 sq ft, an indoor entertainment zone, snow park, and a five-screen multiplex. Leading brands have already signed the lease in the signature mall, which is part of 27-acre layout. — UNI

Parsvnath hotel for Shirdi

New Delhi: Real estate firm Parsvnath Developers Ltd has said it will invest Rs 20 crore to build a 3-star hotel at Shirdi. The 58-room hotel, which will be spread over a total area of 50,000 sq ft, will become operational in the next two years, the company said in a press release. Parsvnath, which has a presence across 46 cities in 17 states, had developed 5.7 million sq ft of area till fiscal 2006. Currently, it has projects aggregating to a saleable area of over 134 million sq ft, it said. — PTI