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Buyers and builders pin their hopes on the realty regulatory proposal, writes S. Satyanarayanan
Strong
economic growth, rising income levels, growing middle-class and improving transparency has brought resurgence for the Indian real estate sector. The increasing urbanisation, changing demographics and nuclearisation of Indian families have led to an unprecedented demand of housing units.
The lucrative returns ranging from 12 to 30 per cent coupled with cheap and easy availability of funds have seen people from all walks of life investing in the Indian realty. Furthermore, improving institutional framework and fiscal benefits have encouraged more and more players to enter the market. The list of investors includes high networth individuals, NRIs, financial institutions, private equity funds and retail investors.
An estimated $10 billion is expected to flow into the sector by the end of 2008. The increased flow of funds has resulted in various policy measures to check the gush of speculative money. However, amidst soaring property prices they have impacted the purchasing power of genuine buyers of residential units as well. This scenario has led to demand from several quarters for having a proper regulator authority for the real estate sector to weed of unscrupulous players and give this sunrise industry right direction and ensure transparency and credibility. While on one hand, there is a demand for regulating the real estate developers, so that they follow civic and land usage laws scrupulously, follow high standards and ensure transparency, on the other , there is even bigger demand for regulating the property dealers or property agents. There is an overwhelming demand among the end users and also the real estate players that the government should device a mechanism to regulate property dealers and agents like in western countries where a person can’t act as a property agent without a licence. This, they feel, will bring transparency in property brokerage in the country and also instil confidence among end users. “Regulatory Authority would be a welcome step, especially in view of the scale and pace at which the real estate sector of this country is growing. Though it is very difficult but still if the government could define parameters then it would be in the interest of public at large,” chairman and managing director of Omaxe Limited Rohtas Goel told The Tribune. “All development authorities should also be governed by the guidelines set by this authority. I feel the housing price index is just the beginning which has been introduced very recently by the National Housing Bank. However, it is yet to take proper shape and become workable at a large scale,” he said. Welcoming the idea to regulate brokers, he said: “It would bring a great deal of relief to the customers or genuine home buyers if you can introduce a system of approved or authorised agents/brokers. The percentage at various levels of deal should also be defined to encourage this concept.” He, however, said it would be difficult right now to predict whether regulatory mechanism will bring absolute transparency, but felt that it would definitely enhance credibility in execution of deals. MD of SNG Developers Avneesh Singh also favoured a regulatory authority for the real estate sector. “Real estate industry is generally perceived to be an unorganised sector. The idea of having an regulatory body is very encouraging and we welcome it whole heartedly. The move will boost the sentiments of the customers and will bring transparency and professionalism in the sector,” he said. “Real estate constituents such as brokers should also be brought under the regulatory mechanism. In fact, the idea of having licence for brokers will give a big boost to the image of this sector as it will help in professionalising the sector. In fact, Nardeco is already conducting short-term courses for people interested in this trade and in our view this course should be made mandatory for all persons willing to enter this sector as brokers,” Avneesh said. “Regulatory mechanism will definitely help the industry. The industry today is faced with numerous problems, which can be solved, to a certain extent by a regulating authority. The real beneficiaries will be the customers who invest their hard-earned money and are often taken for a ride due to lack of transparency,” he added. Assocham president Venugopal Dhoot, who recently released a study on real estate, asserted that “filtering unscrupulous players, instilling healthy competition and ensuring transparency are essential to ensure that real estate sector industry grows and remains attractive for foreign investment.” “The Telecom industry has benefited immensely due to the regulatory mechanism, and I am sure a regulator for the real estate sector would also prove beneficial,” Dhoot said.
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Another feather in Haryana’s cap First northern state from where IT SEZ will get operational,Aarti Kapur reports from Gurgaon
Haryana
will be the first state of North India where the first IT special economic zone (SEZ) at Gurgaon, will become operational by the end of this month.
Sources in the Industry Department said that three major IT giants which includes WNS global service, Genpact and Accenture have already occupied around 75,000 sq ft space in the first phase of the DLF cyber city coming up in the state.
Officials associated in the project revealed that DLF cyber city is spread on 5 million sq ft of land, which come out to be around 26.5 acre. The first phase of the cyber city will have three blocks. Sources said that the space in the cyber city has been leased out to the companies at the prevailing price of Rs 85 per sq ft. Sources said that a number of companies are approaching to get space in the next two phases of the cyber SEZ, the construction of which had already been accomplished. Sources in the state government said that due to influx of projects, Haryana government is presently giving priority to companies vying for IT SEZs that is expected to complete by middle of 2009. The idea is to develop the region as Knowledge Corridor that would house IT companies. The sources categorically stated that most of these projects don't require large chunks of land and the state government was playing no role in land acquisition for IT SEZ. Major companies including Tata, Unitech, DLF, Ansals, Parvsnath and Emaar-MGF that are in the fray to set up IT-based SEZ are aggressively pursuing the projects. IT district manager M.K. Sardana said setting up of cyber projects in the state will help in increasing the annual growth rate of the IT industry manifolds. He told that last year annual growth rate of the IT industry in Gurgaon was 30 to 35 percent where as Nasscom stipulated the growth rate between 24 and 28 per cent. Sardana told that the expected growth rate of this industry this year was expected to be above 35 per cent whereas Nasscom targeted the national growth between 24 and 28 per cent. He said the state would achieve much higher target than expected if the private players in this industry take more initiatives. He told that last year 75 new IT companies set up offices in Gurgaon, which is likely to go up manifolds with the setting up of cyber SEZ city having high quality infrastructure. Sources in DLF stated that another IT SEZ in Sector 56 at Gurgaon would be operational by the mid of next year. Meanwhile, having bagged 70 per cent of the total formal approvals for setting up SEZs, IT and ITeS firms continue to rush for special economic zones. Of the 15 proposals listed for the BoA meeting, 11 were in the IT and ITeS sector, including those from TCS and DLF for their new projects in West Bengal and Uttar Pradesh. Of the 366 SEZs formally approved by the government so far, 257 are for IT and ITeS, accounting for 70 per cent. All big IT firms like Infosys Technologies, TCS, Wipro, HCL and Satyam have joined the SEZ bandwagon, commerce ministry data shows.
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GRound REALTY
Jagvir Goyal suggests eight checks before you go in for prefabs
We
are passing through a ‘ready to use’ era. The world has caught speed and readymades are preferred over raw materials to avoid all the fuss. There is ready to eat food and so are readymade clothes. Similarly, we now have ready to install shutters! Soon, everyone will prefer ready-to-live house instead of taking all the trouble of building a house.
Advancement in technology has made ‘Factory manufactured shutters’ come of age during the last seven years. Earlier, there were just two or three factories manufacturing them. Now, a milelong door and window expo can be held by the manufacturers. And there is a great improvement in the quality also. High cost has been a major factor that kept the consumer away from manufactured doors. But now, manufactured shutters are available at not much higher cost than that you would incur if you hire a carpenter to make shutters at site. So another option is open. If you plan to buy manufactured shutters, here are some guidelines:
Wood Many types of wood are being used in the manufacturing of doors. These include red meranty, yellow meranty, pine, mango, champ, shishum, ivory coast, CP teak, maple, white ash, steam beach, white cedar, Burma teak and rose wood. All manufacturers take the precaution of seasoning and treating the wood chemically. It is cheaper for them to season and treat the wood as they do it in bulk.
Colour High quality doors are being produced now. These carry high dimensional precision and finest finishes. These include solid wood, veneered, lacquered, laminated and hand-carved doors. Solid wood, veneered and lacquered doors are protected with PU coatings, which enhances door’s beauty to high levels and protects the wood from stains, water, spills and chemicals. Lacquered doors provide many colour options. The frames are also being manufactured by door manufacturers. Mostly, the chowkhat size is kept as 60 mm x 150 mm irrespective of the door being single rebate or double rebate. Manufacturers display all types of shutters and frames in their premises and it becomes easier for the house builder to choose the shutters he wants.
Reputation Always check the reputation of shutter manufacturers from some good engineer or architect. Some of the manufacturers try to use inferior wood and cover this lapse by providing attractive finish to doors. An engineer will be the best guide about a good manufacturer. Plus point of factory-manufactured shutters is that the joints and finish are excellent and wastage of wood is avoided. In woodwork done at site, wastage of 20 to 30 per cent occurs depending upon the sizes of wood purchased. The cost comparison of factory made shutters and those assembled at site should, therefore, be made by accounting for the wastage.
Guarantee If you go for factory made shutters, ask for manufacturer’s guarantee. A minimum 10-year guarantee is desirable. Your manufacturer will try to settle for a five-year one. Insist for a 10-year guarantee. If you don’t like any of the displayed designs, ask for production of computerised designs and select the one you want. For bedrooms and bathrooms, select solid wood panelled doors. For lobby and kitchen, select doors with glass panels.
Main door If you are not choosing factory-made shutters, let the main or outer door be factory made. Keep it of large size to add elegance to your house. Choose a double-leaved door, preferably with carving or decorative glass. Select attractive design for panels instead of simple rectangular panels. Keep the colour scheme of other doors and windows in view while choosing the factory made main door. Prefabricated main entrance shutters certainly prove costlier but the same finish and look can’t be achieved at site. Only a visit to a door manufacturer’s premises will make you undergo the spell that factory made shutters can cast.
Flush doors In case you plan to have factory made flush doors in your house, choose solid core type decorative flush doors. The core of these shutters has block board or particleboard or medium density fibreboard (MDF). A frame of wooden stiles and rails is fabricated to hold the core. The face may be of plywood or particleboard or block board. Go for commercial or veneered decorative plywood face. Ideally, the particleboard used in core should not swell by more than 5 per cent when tested as per IS 2380. But you can’t check that and you have to rely on manufacturer’s guarantee. The plywood panels are fixed by gluing under pressure in a hot process method. To ensure quality, see that the shutters carry IS 2202 mark. Flush doors may be totally blind ones or with an opening of 6” x 10” at the top or even with a Venetian opening at the bottom. Choose the blind ones or those with opening at top. Venetian openings at bottom gather dust, don’t get cleaned and look ugly. Get these doors fixed with mortise locks and latches?
Cost idea The rates of factory-manufactured rates obviously vary with the kind of wood used in their manufacture. Some prevailing rates are given in the accompanying table.
Variety Another kind of factory-manufactured doors have come to the market. These are moulded raised high-density fibreboard panel doors. The framework of these doors is of mango or similar wood while the core is filled with solid poplar wood. These doors are covered with PVC laminate. These doors are comparatively cheaper than other factory manufactured doors and their cost lies around Rs 85 to Rs. 200 per sq ft BIS has recently issued IS 15380 for such doors. Look for IS mark while buying these doors and negotiate over their price and guarantee period as their long-term performance is yet to be seen. Happy building! — The writer is SE (civil), PSEB. His website is www.jagvirgoyal.com
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HRA exemption and housing loan deduction can go side by side
Q. I am working in Gurgaon and claiming house rent allowance for the rented house occupied. I intend to buy a flat in Chennai, a place to which I belong. I want to self-occupy this house. The place would also provide residence to my parents. I have raised loan from bank for buying the said flat in Chennai. Can I get a deduction of the house rent allowance as well as of the interest on the loan raised for buying Chennai property?
— G. Murali Krishnan, Gurgaon A. The house rent allowance received by an employee is exempt under Section 10(13A) of the Act if the same is actually incurred on payment of rent in respect of residential accommodation occupied by the assessee. The exemption is limited to the amount to be computed on the basis prescribed by the IT Rules, 1962 (the Rules). Even if a salaried employee owns a house in the same city where he is living but is actually spending amount for occupying a rented accommodation, the exemption for house rent allowance can be claimed by him subject to the extent provided in the Act. The interest payable on the loan raised for acquiring a property is allowable as deduction from income from house property under Section 24 of the Act. In my view you can claim the exemption of HRA to the extent allowable to you as well as claim deduction for the interest paid on loan raised for acquiring a residential house. Simple interest Q. Thanks for giving remarkable reply of my queries, published in The Tribune dated September 10, 2007, under the heading, Yearly simple interest, simple interest per annum are same . I shall be highly grateful to you, if you give answer of another query arising from your reply. How to calculate interest per annum on the amount of compensation of land (land acquired under compulsory Land Acquisition Act.) under this Act. Section 28, 33, 34 deals with calculation of interest. 1. Possession of my land taken by the authority on January 1, 1990, and collector assessed compensation of the land of Rs 1,00,000 in 1994. A part payment of Rs 10,000 paid on April 1, 1993 and Rs 50,000 were paid on May 30, 1994. The court further enhanced compensation to Rs 1,50,000 in 2003. Till date, the due amount has not been paid. Kindly let me know how to calculate interest in such a case. i. Interest @ 9 per cent per annum from January 1, 1990 to December 31, 1990 ( 1st year) on the amount of Rs 1,50,000, which works out to be Rs 13,500. Amount due as on January 1, 1991, was Rs 1,63,500. ii. As per the Act, interest @15 per cent per annum will accrue from next year i.e. from January 1, 1991 to December 31, 1991. On which amount should the interest be calculated for next year and so on? — Kuljeet Singh Sodhi,Chandigarh A. The provisions of the Land Acquisition Act, 1894, as reproduced in the query prescribe the rate of interest payable by the government. The interest, in the absence of any clarification in the Act, would be taken as simple interest. It will continue to be calculated on the principal amount of Rs 1,50,000. Accordingly, the interest from January 1, 1991, to the date up to which the amount is paid would be calculated @ 15 per cent on the amount of Rs 1,50,000, being the unpaid amount. Ancestral property Q. I sold a 4-biswa (200 sq yards) plot in July 2007 within ‘lal lakir’ (residential area) of my village in rural area for Rs 2 lakh. This is an ancestral property bequeathed by our forefathers. There is no information about its purchase date or price paid. Kindly inform me about LTCG accruing thereon. — B.S.Grewal A. In accordance with the provisions of Section 48 of the IT Act, 1961 (the Act), the income under head ‘capital gain’ is computed by deducting the cost of acquisition of the capital asset, cost of any improvement thereto and the expenditure incurred wholly and exclusively in connection with such transfer from the sale price of the capital asset. In case of inherited assets, the cost is deemed to be cost for which the previous owner acquired it. It seems the asset became the property of your forefathers before April 1, 1981, and, therefore, you have an option to get the deduction from the sale price for the fair market value of the capital asset as on April 1, 1981. If that be so, it will be essential for you to get such fair market value ascertained. The same will be indexed for the purposes of calculating capital gains. The indexed period would be computed by taking the year of acquisition of the capital asset by you and the year of sale of the asset. Long-term capital gain would, thus, be computed by deducting such indexed cost from the amount of Rs.2 lakh being the sale price of the house. It is not possible to compute the amount of capital gain as the details of fair market value as on April 1, 1981, and the period of holding by you are not given in the query. Gain scheme Q. I had sold a house on June 31, 2005, for Rs 15 lakh and earned a long-term capital gain of about Rs 10 lakh thereon. I purchased a plot in July 2005 for Rs 12 lakh and sold the same in December 2005 for Rs 15 lakh. The due date for filing the return in my case for the assessment year 2006-07 was July 31, 2006. I deposited the amount of capital gain of Rs 10 lakh in the capital gains scheme account before the last date of filing the return i.e. before July 31, 2006. Can I get the exemption in respect of the long-term capital gain earned on the sale of my house, as I did not deposit the same amount of capital gain that was earned on the sale of the house? — Rajeev Gupta, Ambala A. On the basis of the facts given in the query it is clear that you have deposited the amount under the capital gains scheme account which had not been appropriated towards the acquisition/construction of the residential house within the specified period. The language of Section 54(1) and 54(2) of the Act does not warrant that there should be direct nexus or live link between the amount of capital gain and the amount deposited under the capital gains scheme account. In my view, therefore, you should be entitled to claim the exemption under Section 54 of the Act for 2006-07. I may add that in case you do not utilise the said amount for the acquisition/construction of the residential house within the specified period, the capital gain deposited under capital gains scheme account would be taxable as a long-term capital gain in the year in which the period of three years expire from the date of the sale of the house.
No tax on loan taken from relatives Q. I have a tax-related query. I have taken home loan from HDFC Limited and want to repay it partially by borrowing the money from my wife/relatives/parents. Please tell me, if there shall be any tax liability for that borrowed money. How can that borrowed money be taken? I mean on whose name should the cheque be prepared? Should it be on the name of HDFC Limited or can it be in my name also. Are there any documents required to be prepared to show that money has been borrowed. — Ankur Singha, Mohali A. The replies are: 1. There is no tax liability on the amount borrowed from your wife/relatives/parents. 2. It will be better to borrow the money by way of an account payee cheque, which should be made in your name. The same should be deposited in your bank account. The loan to HDFC should be repaid by issuing a cheque from your bank account. 3. It would be in your interest to execute a document so as to have evidence with regard to the granting of the loan to you by such relatives.
The writer can be contacted at sc@scvasudeva.com
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Computers are being used to design Kashmiri carpets, says Ehsan Fazili
Have
you ever thought of a weaver, who makes curtains, wall hangings and carpets, getting computer-savvy? This is what is exactly happening in Kashmir, the state known for carpet weaving and exquisite craftsmanship.
Interior decoration around the world is all set to be redefined as traditional carpet weaving switches over to computer-aided design in Kashmir.
All this has been made possible by the Indian Institute of Carpet Technology (IICT), set up in Srinagar, to provide technical support to the regional carpet industry. This autonomous institute, in collaboration with the Union Ministry of Textiles and the Department of Jammu and Kashmir Industries and Commerce, is all set to explore the arena of home decoration and carpeting. The institute has set up a digital carpet- designing studio, the first of its kind in the Kashmir valley, to aid carpet weavers. The Centre-sponsored Rs 545 lakh project is working on providing technical support to the regional carpet industry. It is involved in design creation development, while not ignoring traditional taleem to carpet weavers. “All these are computer designs,” says Zubair Ahmad Mir, director of the institute, pointing his finger towards a few delicate designs. The institute is located at Bagh-e-Ali Mardan Khan on city outskirts. Computer usage has elevated the weaver, who now sits on chair rather than floor. “The industry has appreciated the initiative,” says the director. “We are working on providing technical service to the industry by laboratory testing, dyeing, providing colour recipes and help through the reference books,” says the director. The traditional role of naqaash, who outlined the design on a graph paper has been minimised. Thus, with the help of software, designs are being automatically converted into taleem, a coding language that a weaver reads while weaving a carpet. The computer technology has also made the changing of shades easy while a “weaver comes to see a design before he makes it”. There can be millions of combinations converted into taleem. Thereby the work of taleem maker is also made easy. The studio enables weavers to design a carpet in a short time, just for a nominal fee of Rs 1,000. It also helps to protect the design, conceptualised by weavers, as their sole intellectual property. “The aim is to introduce and integrate the use of digital technology towards enhancing the production and trade of the regional carpet industry”, the director says. Kashmir carpet, whose price shows a wide variation between Rs 500 and Rs 50,000 has a dedicated market abroad.
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Realty to be $90 b business by 2015, says Assocham
The
base of Indian real estate market, growing at 30 per cent, is likely to touch $90 billion by 2015 from the current level of $14 billion and help economy continue to grow between 9 to 10 per cent, according to a study.
The additional requirement of 370 million sq. ft. of space in urban areas by 2010 by IT, ITeS, financial services and organised retail alone has still made the real estate most lucrative providing returns ranging from 20 to 30 per cent. “While $10 billion is expected to flow the sector by end 2008, by 2010, it might reach $15 billion every year,” says Assocham. Repealing the Urban Land (Ceiling & Regulation) Act, 1976, rescind of the Rent Control Act and increasing floor-area-ratio would give further boost to the sector, the report said. Improving transparency and study Indian economy has already attracted new players such as high networth individuals (HNIs), and financial institutions and more than 100 private equity players. The report said, IT and ITES, banking and financial services have, in particular, created a huge demand for office space. IT and ITES alone is expected to require 150 million sq. feet across urban India by 2010.
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Scanty infrastructure, abundant rentals Influx of temporary workers has jacked up house rents in Panipat, says Vishal Joshi
Gradual
growth of the industrial activities in this commercial township has propelled rents in various residential pockets of this poorly developed area. The town, located along the GT Road, is witnessing a heavy rush of “shifting population” but has miserably failed to provide quality shelter.
According to those engaged in the real estate business, local house owners are minting money by renting out their premises. The town has witnessed a great demand of rented accommodation by temporary migrants who reach here for short-term assignments in various industrial units.
Model Town, a posh locality, is the most sought-after place in the town and rents have reached exorbitant levels. There are sectors developed by HUDA but owing to the poor development and lack of basic infrastructure these estates have failed to attract “outsiders”. Interestingly, a majority of the agents in the township too offer services to search for rooms in Model Town and Sector 11 and 12, the oldest urban estates. An expensive posh colony, located on the outskirts of the town, is preferred only by the top-class executives. In the absence of sufficient infrastructure, various sectors are not being preferred by the settlers. A random survey of the Model Town reveals that a majority of house owners have either altered or extended their residences to “create” added space to rent out at higher price. Dwelling units with two rooms in the township starts Rs 5,000 onwards but do not promise quality living. Real estate agents admit that the town commands comparatively higher rents due to limited worth living places. But due to the gradual increase in demand, property agents expect that rents would gradually go up. There are scores of industrial projects, including IndianOil refinery, NFL, elevated highway project and the upcoming petrochemical hub. Hundreds of industrial workers reach here every month on short-term assignments. An agent informed that various units prefer hiring the entire houses for workers. Since these units pay the rents, there is no bargaining and the house owners are paid as per their wish.
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