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Soaring high
Riding high on NRI and non-Punjabi investors’ interest, the property prices in Ludhiana, the industrial hub of Punjab, have shown a steady growth over the past six months, says
Shveta Pathak
Is the real estate boom bubble going to burst soon? This is the million dollar question for almost every investor and the past six months have in fact given the jitters to many in the state as there have been reports of a slowdown in the sector. But if high value property deals are any indication, the slump in the real estate sector in the past six months seems to be nothing but an illusion in the case of Ludhiana. An auction by Greater Ludhiana Area Development Authority (GLADA) of 5,107 square yard plot on Ferozepur Road fetched an enormous Rs 77.11 crore, translating into Rs 1.51 lakh for a square yard. That might have captured limelight for the kind of money involved but the city is witnessing good business in property, particularly commercial segment, on a regular basis. While rates of most commercial sites are hovering at a high of Rs 40,000 to Rs 60,000 per square yard, in case of malls obtaining space would cost nothing less than Rs 50,000 to Rs 1 lakh per square yard. Several property developers admit having revised their rates more than twice in the past six months. A notable point, though is that while Punjabis in general are maintaining a low profile, it is either the NRIs or people from other states who are investing heavily in real estate here and are in a way responsible for keeping the real estate boom alive. “Property prices actually never came down. Buyer profile, of course has changed and people are concentrating on buying property within octroi limits. As far as we are concerned, we have revised rates of our flats twice in the past six months. There has been an appreciation of 10 to 25 per cent within this period,” said Deepak Singal of Deepak Buildcon.
Heavy investments in property are being attributed to growing interest of leading business houses in Ludhiana resulting in opening up of new ventures like malls et al and high growth potential. Entry of a large number of leading brands in apparel, housing accessories and other fields are indicative of the interest of investors. While appreciation in housing sector has been relatively lower, between 5 per cent and 20 per cent, depending on the location, in case of commercial sites the upward movement has been significant. “Commercial sites are in great demand as people think that success probability of a new venture in this industrial hun of Punjab is much higher than that anywhere else. This has led to the appreciation. The increase in rates, however, is not as steep as it was a year ago. But it has also not slowed down as much as it was being projected. The main difference now is that people are looking for property within the city. “There is a high demand for shops in malls and at other commercial sites,” remarked Sanjay Goel of Ludhiana Architects Association. The ones in property business, however, point out that this time the number of investors from within the state is much less. According to dealers, buyers in Punjab made major investments during the previous real estate boom and are not opting for investment options where the money involved is not very high, like capital market, jewellery and banks. NRIs, in particular are very keen on investing here and so are corporates. “The number of investors from within Punjab is less than one-third of the total. A wide majority of those investing here now are NRIs and a lot of investment is coming from Delhi and corporates in other states that are considering Punjab for their expansion plans,” said Gulshan Sharma of GK Estates. The coming days, feel developers and agents, would record a further upward movement . “We are expecting more liquidity from this month onwards. While industries like hosiery, which have performed well this time, have begun getting their payments, NRIs also make major investments in December and January,” added Kumar.
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The ascent continues
Office rentals in prime commercial locations in leading Indian cities and other Asian markets continued to rise in the third quarter this year as local businesses expand, a global consulting firm said today. “Overall demand for office space in Asia’s major commercial centres remained robust, with demand from expanding local businesses and non-finance related occupiers increasingly significant in many Asian markets,” CBRE said. The realty consultant, however, said prime office rents did not change significantly over the preceding quarter in major Asian cities, although some upward pressure was seen in quality buildings in prime locations. Citing examples, CBRE said, ABN AMRO’s widely reported lease renewal at Sakhar Bhavan in Nariman Point, Mumbai at a considerably higher rent of Rs 500 ($12.25) per square feet (psf) per month has raised rent expectations in the CBD (central business district) and most landlords now quote rents in excess of Rs 400 ($9.80) psf per month. The CBD areas of the country such as New Delhi, Mumbai and Bangalore the demand for office space was robust. Leasing momentum was also strong in the National Capital Region. “The high rentals being demanded for office space in the major cities of India is indicative of the fact that our supply is not matching up to the increasing demand for prime office space,” said Anshuman Magazine, chairman and MD of CB Richard Ellis, South Asia. “Our recent report on global rents shows Mumbai commanding the second highest rents in the world, second only to London. While this is reflective of a booming economy, it also highlights the lack of prime office space in the country,” he added. According to CBRE Research’s semi-annual Global Market Rents survey, which tracks the world’s most expensive markets as well as markets with the fastest growing rents over the past 12 months, Delhi ranks eighth in the most expensive office markets of the world. In the category of fastest growing office rents, Mumbai ranks third with 55 per cent jump in last 12 months, while Bangalore is at sixth place with an increase of 49 per cent. New Delhi is at 12th position with 34.3 per cent jump in office rental in last one year. Singapore led the list of markets with the fastest growing office rents with occupancy costs rising by 83 per cent during the past year.
PTI
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It’s time to rationalise Stamp Duty system
Real estate in India is the most unorganised and graft-ridden sector which, if regulated properly, can act as a major growth vehicle. The registration system needs most of the reforms to check evasion and, in turn, black money and inflation, says
R.P Malhotra
Real estate in India is the most unorganised and graft-ridden sector. If regulated properly it can act as a major growth vehicle, can generate ample employment opportunities through 250-odd industries ancillary to the construction sector and thus can bring overall prosperity to the rural masses. Registration system needs most of the reforms to check evasion and in turn black money and inflation. State revenue authorities have a system of fixing minimum collector rates of property for the purpose of registration. Though well aware, the authorities fix these rates well below the prevailing market prices. Undervalue sale deeds generate hoards of black money. These rates are targeted for certain quantum of stamp duty revenue with sustainable increase year after year even during recessionary conditions. Collector rates are increased with decline in stamp duty revenue due to comparatively less transactions in recessionary conditions. Why should there be a need for fixing minimum collector rates for registration purpose? Should there be a compromise on transparency to fetch more revenue? And that, too, at the cost of central exchequer. Why should a system not be devised to get the execution of sale deed on the prevailing market rates? Even if the seller is ready to accept the full value by cheque, the purchaser dictates his term for registration at collector rates as he will have to cough up three to four times more stamp duty. And if even purchaser is ready to pay the full value by cheque, the seller sees the other way around to evade the capital gains tax. Black money, three to four times the cheque payment so generated, creates inflation and goes unaccounted evading direct taxes to the tune of 33 per cent. Taxation structure should be rational enough to attract voluntary compliance. More so it should be uniform all over the country. For instance stamp duty in Punjab was lowered from 12.5 per cent to six per cent during Beant Singh regime. The rate was enhanced to nine per cent indirectly by adding three per cent social security cess during Capt Amrinder Singh regime. In addition the purchaser also has to pay one per cent registration charges maximum of Rs 10,000. Whereas, in Chandigarh it is five per cent with Rs 1,000 maximum as the registration charges.
A tradeable commodity
Stamp duty’s compounded structure, too, attracts evasion. Real estate is now a tradeable commodity. For other commodities the indirect taxes like sales tax, CST, service tax and excise duty are borne by the end-user of the product; the dealer or a trader acts as a collecting agent of the government as registered dealer. In the newly introduced Value Added Tax regime, tax is added on every stage of transaction for value addition only, finally to be realised from the end-user. On the contrary a trader in real estate has to pay the stamp duty for each subsequent sale where each subsequent purchaser on each transaction pays the stamp duty. The trader is forced to circumvent the registration by indulging in GPA transaction incurring loss to both state as well as the central exchequers. Such transactions, with many loose ends, are dicey and turn into disputes. The Union urban ministry is coming up with the realty regulatory Bill. The sector needs to be organised for trading. The obsolete registration system shall have to be done away with by replacing it with easy hassle-free title transfer policy. It is suggested for licensing competent private agencies to do the title search for legal validity of ownership of a property and issue transfer certificate on a nominal transfer charges not beyond a certain upper limit. Unlike corrupt revenue officials, these agencies shall ensure the transactions on full market value and shall be accountable to law for any fraudulent, underhand and undervalued transactions. Transparency created by such like policy shall curtail black money generation to a considerable extent besides bringing growth to the sector and earning huge revenue through capital gain and income tax. Surcharges like social security cess should be replaced with other user charges to be imposed on public at large to generate revenue for the local bodies. State government may charge transaction tax on the value addition of each subsequent transaction of a property. A builder, for instance, after paying full transaction tax on the land deal shall get credit while selling flats to individual purchasers who shall pay transaction tax on the value added to the cost of land. A policy of registering dealers desirous of trading in the real estate for the purpose of tax collection may be introduced for smooth and transparent trading. Reports are that Rajasthan government is contemplating de-materialising property titles in the state to facilitate online trading. If that happens, there shall be no place for underhand and undervalued transactions and dispute-free transactions will be ensured as minutest detail of the property shall be available with the realty stock company.
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Think before you plant
Medicinal or ornamental, big or small, there are a number of points to be noted while planting trees along roads and avenues, advises Dr Satish Narula AS new townships, estates and institutions are coming up, there is much stress on environment development and planting. But usuallly not much planning goes into matching the species of trees with the function that they are supposed to perform in a particular setting. As a result one often sees that instead of providing green cover these trees become a source of problems. Before it is too late to mend faults in doing so, let us plan what to plant and where. People are looking for their roots and so are the gardeners. Going by the present day demand, the horticulturists have started looking for flora that is both ornamental and medicinal to satisfy the ‘medicinal plants’ hype. But the use of various plant species especially trees needs careful handling. When we think of planting trees of medicinal value, some of the names that come to the mind immediately are arjun, jamun, neem, amaltas, harad, bahera, lahura etc. While some of these trees are valued for their sturdy nature, others are used for shade and fruit. But in the over enthusiasm of mass planning and planting sprees all pros and cons of planting a particular species are ignored. Let us take up few of these for their merits and demerits. In fact if you want to make a tree extinct, tell about its medicinal value to the people. Mahatma Gandhi could read this about a century back when he said ‘mother earth has sufficient for man’s need but not for his greed’. Let us take the case of Arjun tree. This tree has a long life span, sturdy main trunk with medium leaves and provides a reasonably good shade. In Chandigarh, these trees can be seen along the Dakshin Marg and along the road separating Sectors 27 and 28. But as soon as the word spread that its bark is good for heart, people started removing it with all sorts of implements subjecting the trees to slow death. The irregular damage caused to the trees has become a breeding place for borers that not only damage the bark but also hollow the tree trunk from within making it prone to limb breakage when strong winds blow. Moreover, giant seed pods ripen and fall on the ground during monsoons choking the sewerage. Let me caution those who are removing and using the bark powder. These trees are exposed to tonnes of traffic pollutants as they are so close to the road. So what the people are consuming as a medicine is nothing but poison. In some of the avenues in Delhi you will find about a century old neem, jamun, or jamoa trees. No doubt these are indigenous trees and put forth good growth in no time but during fruiting, the falling fruit completely messes up the area around the tree. Moreover, the limbs of jamun tree are so brittle that they break during monsoon even with the weight of fruit and moisture. Neem seeds falling on ground not only make the place slippery but at times also spread an offensive smell. With problems such as these it is not a wise idea to plant such trees along roads and avenues. An ornamental tree like amaltas is good tree for planting as avenue tree. During summer, it puts forth hanging bunches of yellow blooms when there is no foliage on trees. The tree is medium in size and can fit along comparatively narrow roads. Lahura also falls in this category. It is also a medium growth tree and bears bold and attractive blooms during summers. Harad and bahera are good shade trees possessing those characters as are desirable for recommending as avenue trees.
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Relief in LTCG tax under Benami Transactions Act by S.C. Vasudeva Q. Recently, me and my wife purchased a flat in Chandigarh for which the complete amount was contributed by me. Does Section 3 of the Benami Transactions (Prohibition), Act 1988 give me relief regarding the payment of long-term capital gains tax qua my wife as under the above provision wife and unmarried daughter are excluded from the applicability of the above Section? Is the above proviso to Section 3 of the Act relevant for calculating the LTCG Tax? — Gur Rattan Pal Singh A. Section 54 of the Act provides that in case the capital gain arises from the long term capital asset being a residential house, and the assessee has within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, then the capital gain arising on such transfer, instead of being charged to income-tax as income of the previous year, shall not be so charged, if the cost of the residential house so acquired is equal to or more than the capital gain so earned. The important words used in the Section are “the assessee has purchased” and therefore in my opinion the purchase of the residential house should be in the name of the assessee (i.e. in your name) so as to claim the exemption of the capital gains from taxability. In my view, the provisions of Benami Transactions (Prohibition) Act, 1988 deal with the acquisition of properties in the name of a benami and the Act prohibits such transactions. However, Section 3(2) of the said Act carves out an exception for the wife or the unmarried daughter. The aforesaid sub-section provides that in case the property has been purchased in the name of the wife or unmarried daughter and unless the contrary is proved, it is presumed to be for the benefit of wife or the unmarried daughter. The reliance on this Section may not enable you to get the desired benefit. However, since the property, on the basis of facts given in the query has been purchased in your as well your wife’s name, you should be entitled to the exemption to the extent of your share in the said property. Paying tax on premium
Q. Suppose one gets some premium after selling his property and the person wants to pay tax on that money (premium money) also, then can one voluntarily pay tax on that money. — Anil Kumar A. The facts given in the query do not clearly indicate what is meant by the receipt of premium after the sale of property. The premium in general parlance is known as “Pugree” which is paid or received on vacating a rented premises. Such amount is now taxable as a capital gain in view of the amendment to Section 55 of the Act. In case premium means extra money received on the sale of property, which is not disclosed in the sale deed, you can include the same as part of your sale consideration, in case you can prove that aggregate of the amount declared in the sale deed and the ‘premium’ represent the correct sale price of the property.
HRA benefit
Q. I am a salaried person living and working in Chandigarh. I am not getting the benefit of HRA and I am residing in a rented accommodation and paying a rent of Rs 3500 per month. Will this amount be totally deductible from the total income or some percentage of it, when I am getting 20,500 salary per month. — Avnesh Verma A. The provisions of Section 80GG of the Act deal with the deduction in respect of rent paid by an assessee who is not entitled to any benefit of house rent allowance. The deduction under the said Section is allowable subject to the following conditions: (i) The rent paid is in excess of 10 per cent of the total income of the assessee before allowing any deduction under the aforesaid section (ii) The rent paid is in respect of accommodation occupied for the purposes of his own residence subject to declaration in Form No. 10BA (iii) The assessee or his spouse or minor child or Hindu Undivided Family of which he is a member do not own any residential accommodation (iv) The assessee being an employee is not entitled to HRA from the employer (v) The maximum deduction allowable is (a) excess of amount of rent paid exceeding 10 per cent of salary, (b) 25 per cent of the total income or (c) Rs 2,000 per month whichever is less. On the basis of figures given by you, presuming that the salary represents your total income, the amount of deduction allowable in your case would work out at Rs 17,400 for the year provided you comply with the requirements specified at (i) to (iv) above. The writer can be contacted
at sc@scvasudeva.com
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Urban land Act repeal not to soften prices
Mumbai: The repeal of Urban Land Ceiling Act (ULCA) by the Maharashtra government would make large parcels of land available for development, but property prices are not likely to come down in the near future, feel realtors. Prices may at best stabilise in the near-term and even if a downward movement takes place, it would be only after two-three years when some of the land released due to ULCA’s repeal gets developed, they said. “One must not presume that there will be an immediate excess supply of land. I expect land to become available in phases and hence, I don’t envisage an immediate correction or fall in prices of real estate,” Housing Development and Infrastructure Limited’s
(HDIL) Managing Director Sarang Wadhawan said in Mumbai. Across Maharashtra, the impact of ULCA repeal will be minimal in terms of prices, he said. Citing the example of the NTC land which was opened up sometime back, Wadhawan said one thought that land prices would soften but this did not happen. Besides, much of this land was used for the commercial segment, he said. Hence, even if some of the land now held by a few big corporates was to become available for development, it may not help soften prices, he said. Realty developers felt that while prices were unrealistically high in Mumbai and to some extent in Pune, shortage of commercial space in Mumbai would keep prices firm. “In Mumbai, there is virtually no commercial supply while demand is tremendous. A runaway spiral in prices may not be witnessed, but I expect prices to hold firm,” Sunteck Realty’s chief Kamal Khetan said. In Pune too, prices may not soften, felt Shashank
Paranjpe, Managing Director, Paranjpe Schemes (Construction) Limited. He did not subscribe to the view that large parcels of land would suddenly become available for development.
— PTI
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Parsvnath bags 160 cr project
New Delhi: Parsvnath Developers Ltd has won the bid to develop a commercial project on 18,632 square metre of land worth Rs 160 crore, including land cost in Greater Noida. “The project will be a landmark development in the area and will house renowned national and international brands, serving as one-stop shop catering to the needs of all segments of society,” Parsvnath Developers Ltd chairman Pradeep Jain said. The saleable area would be about 3.6 lakh square feet with expected revenues over 300 crore spread over next three financial years, the company said in a statement.
UNI
ITC to set up India’s largest hotel in Chennai
New Delhi: Besides opening three hotels in Bangalore, ITC Ltd will set up the country’s largest hotel that will spread across eight acres in Chennai at an investment of Rs 1,000 crore by 2010. The hotel will have 850 rooms.
UNI
DLF, Fortis JV agreement delayed
New Delhi: Operational issues have delayed the execution of a joint venture agreement between real estate giant DLF and Ranbaxy Group healthcare chain Fortis to set up about 15 hospitals in the next five years entailing an investment of Rs 3,000 crore. “Ideally, it should have happened two months back but still discussions are going on (with DLF),” Fortis Healthcare MD Shivinder Mohan Singh said in Jaipur. He said the delay was mainly on account of inability to inspect the proposed project sites.
PTI
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All-Brahmin real estate venture in Hyderabad In a throw-back to the old days, plans are on to recreate the ambience of “Agraharam”, an exclusive Brahmin colony, near Hyderabad. The modern-day “Agraharam” comes with a complete package-an integrated township comprising supermarkets, hospital, engineering and medical college, a temple and community halls. However, the ownership is restricted to the members of Dhanwantari Foundation, an organisation working for the welfare of Brahmin community. The project is coming up on a 1,200-acre land near Siddipet in Medak district, about 70 km from the city. To be named “Dhanwantari Agraharam”, the venture is claimed to be run on a no-profit-no-loss basis , ostensibly to strengthen unity among the community. The plots are being sold to members at Rs 150 per square yard, much below the market value. “We are not looking for any commercial gain. We felt the need to provide housing to community members who do not own a house, or who want to live away from city life. Registration process in case of 140 plots has been completed,’ said S.Phani Kumar, an office-bearer of the foundation.
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