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Towards sane acquisition
The year 2007 will be remembered as the year that changed forever the way land was acquired across the country ever since the Land Acquisition Act came into being in 1894. The single big truth that has emerged this year is that governments cannot forcibly acquire land from the owners for a purpose other than the one that is overtly “public” in nature. State governments, including Punjab, have realised that industrial projects, residential colonies and special economic zones are not “public purposes” and a time has come when the villager who is parting with his land has to be co-opted in the development process and made a shareholder in the profits. And
why not? For more than a century governments have been acquiring land and giving monetary compensation to the owners. The compensation is calculated on the basis of an average of the price at which land deeds were registered in the past three years. Added to this was a 30 per cent solatium or allowance for uprooting of the farmer. While everyone knew that the registration of land deals was generally done at much less than the market price, nothing could be done about it and as a result a farmer almost always got only a fraction of the prevailing market rate for his land. The farmer who gave up his land was, at the end of the land acquisition process, left with a substantial bank balance but no work, a state almost like compulsory retirement. Land acquisition led to unemployment and related social problems- crime and drug addiction. What the Punjab government, like many others, failed to realise was a rather simple fact. Land for a farmer is not just a source of income. It holds together a social edifice, which no amount of cash award can compensate for. Land, like they said hundreds of years ago, is the mother that held the family, the home and the hearth together. It is, thus, not unjustified that associations of villagers have been protesting against the acquisition of their land for the past several years in Punjab rendering implementation of any state-driven development project difficult. Now Punjab has no land to offer for any project. While IT companies and SEZ applicants have been told to buy their own land, a host of projects like the setting up of central university and IIM, housing for the weaker sections, IT incubation centres, sports complexes and bridging schools can never come up if there is no land with the government. The erstwhile Congress government in Punjab played a fast one on the agitating landowners when, in November 2006, they announced the “new” land acquisition policy. In fact there was nothing new about it. All that the announcement did was to tighten the land-acquisition process making it time bound. “In fact this announcement came as a blow to the agitators. Earlier, a landowner got some time to project his protest but the changes made in the policy did not leave any time for the farmer to react,” said D.P. Singh Baidwan, convener of the Kisan Hit Bachao Committee. The committee is spearheading one of the longest protests of farmers against acquisition of land in Punjab with their dharna now running into 1300 days. The November policy also provided that where land was acquired for a residential or an industrial estate, the owner would be given a developed plot in addition to conventional cash compensation. In case the project is not a residential or industrial one, the affected farmers would be rehabilitated under the National Policy on Rehabilitation and Resettlement laid down by the Centre. The Congress government’s offer of ‘plots and compensation for land’ was also not a new one. In 1996, newspapers in the state carried big advertisements with pictures of Rajinder Kaur Bhattal, the then Chief Minister offering two special schemes for the acquisition of land. The 1996 ‘land pooling scheme’ offered that for each one acre of the land transferred by the landowner to Punjab Urban Planning and Development Authority (PUDA), he would be given back approximately 1,000 square yards of area in the form of a developed plots. The landowner will have the option of encashing half the entitlement, which would be paid to him at the reserved price fixed for the area. Possession of the land would continue to be with the farmer till the land was actually required for development. The owner was free to either build houses or flats on the developed plot he got back or sell it further. The second scheme proposed that PUDA would acquire only 25 per cent of the entire area for urban development for building roads, sewerage and drainage lines, civic amenities etc. The landowner would develop the remaining 75 per cent of the area privately, whether individually or collectively. The owner could also retain or sell the remaining area as per his choice. The owners were further allowed to develop markets, private nursing homes, clinics and schools for further sale. “These two schemes were the fairest schemes ever offered by the government. But none of these ever saw the light of the day,” says Baidwan.
When the Akalis came to power early this year they continued with the ‘politics of announcements’ and declared that a farmer would be given an additional 30 per cent ‘uprooting allowance’ for the acquired land. That was literally pulling the wool over people’s eyes. This uprooting allowance or solatium is already provided for as a compulsory payment under the Land Acquisition Act. Whether the government intended to pay an additional 30 per cent over and above the solatium no one knew and no one bothered to clarify. The Akali government also set up a Cabinet sub-committee to finalise a new land acquisition policy. A group of officers visited Gujarat and their report pointed out that in Gujarat land for various projects was not acquired under the Land Acquisition Act but was undertaken by the local authorities. The Cabinet sub-committee, however, rejected the Gujarat model for the state allowing it to be implemented only on an experimental basis in two government departments. To be fair to the Cabinet sub-committee, the rejection was not unjustified in view of the very different land situations in Gujarat and Punjab. The Greater Mohali Area Development Authority (GMADA) has now come up with a fresh proposal. It has recommended that that Punjab farmers be given 80 per cent share in the value enhancement of their land following acquisition by government agencies. This share would be given to the owners in the form of developed residential, commercial or industrial plots along with some cash compensation. On a hypothetical basis, GMADA worked out that out of one acre, 1,900 square yards of land is developed for residential purpose, 242 square yards is commercially developed and 242 square yards is utlised for institutions. On an average Rs 1.35 crore per acre needs to be spent for development. The net estimated receipts after development would be Rs 2.8 crore. This implies that the value enhancement after development is Rs 1.45 crore per acre. This would be shared between the owner and the agency in 80:20 ratio to compensate the landowner. It was proposed that the landowner would be given a 500 square yard developed residential plot, 121 square yards of commercial plot and cash compensation equivalent to the balance entitlement of residential land at the reserve price fixed for the area. A final decision on the policy is awaited.
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Realty party to continue in 2008
The real estate sector, the market size of which is currently estimated at $ 15 billion, has been growing between 35 per cent to 38 per cent in the last couple of years as a result of which huge investments have poured into it. “From 2008 onwards, the real estate sector is likely to grow between 40-45 per cent,” ASSOCHAM says in its projects for the sector in 2008, adding that the sector could witness a slow down in metros and large cities by 2010.
“The real estate players are expected to focus more on tier I About 94 per cent of capital investment being made in the sector are in tier I cities of Mumbai, Delhi and Bangalore. As the land in metros has become costly and money got dearer, the developers are moving towards tier II and tier III cities, he pointed out. Quoting the Chamber’s projections, Dhoot said an estimated $10 billion is expected to flow into the domestic real estate sector by end of 2008. Of the total Foreign Direct Investments (FDI) in India 22 per cent is in real estate, because returns on real estate investments are around 22 per cent as against five to six per cent of world’s developed market, Dhoot pointed out. Currently, 100 world’s leading realty players have already found a foothold in Indian real estate sector and the investment outlook for the sector in 2008 remains positive. Significantly, despite high interest rates and stringent monetary policy environment, the realty remained bullish on Primary Market too during 2007 with an overwhelming 42.7 per cent of the total primary market funds going to the sector in the year. According to an AEP study, though the RBI and the government restricted the flow of external funds to real estate sector, they proved to be the most aggressive in raising money from domestic sources, particularly through initial public offerings (IPOs). As per the AEP study on “Sectoral Analysis of IPOs” conducted for the period January- Mid-December 2007, of the total Rs 34119 crore raised in the market, Rs 14,591crore went to reality firms, with bulk of the amount going to DLF (Rs 9187 crore), Housing Development and Infrastructure Ltd (Rs1707 crore) and Puravankara Projects Ltd (Rs 858.7 crore). The AEP study was done by ASSOCHAM Research Bureau for the calendar year 2007 (January 1 to December 15, 2007) based on the data available from the Bombay Stock Exchange, National Stock Exchange, SEBI and respective companies’ websites. There were 101 Indian companies which raised the money from IPOs across 29 sectors amounting $ 5.8 billion (Rs 34119.7cr). “Despite high interest rates, the real estates sector remained buoyant during the year 2007 primarily because of the strong underlying demand, aggressive marketing, entry of new players and upsurge in retail and multiplexes. This is reflected by the highest share occupied by the sector in IPO market during the year”, said Dhoot. There were around nine public issues in realty including IVR Prime Urban Developers Ltd (Rs 778.25 cr), Omax Ltd (Rs 650.94 cr), Brigade Enterprises Ltd (Rs 671.05 cr), Akruti Nirman Ltd (Rs 361.8 cr).
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Right choice
Satish Narula shares the ‘choose-right mantra’ for that perfect green look in urban landscape planning
The knowledge of the difference in growth patterns of plants is a must for an urban landscape planner. The entire flora available is in fact a selection from the wild, from the mountains, plains, temperate, tropical or subtropical regions etc. It is due to the nature of the habitat where these plants were growing wild that they adapted certain growth habits. It may have happened over thousands of years, but this aspect has to be understood and the planting, therefore, has to be judicious. In order to plan any place and location, it is thus a must that the planner should choose only those plants that are suitable for a given location. To decorate an avenue, we need a tree. While planning, a number of points like the width of the road, its status, whether it is a city road or a highway, does it have a potential and need for a future expansion etc, have to be considered. Most of the time it is seen that the trees are the first causality even when a small widening is affected. The trees are classified according to their potential spread and growing habit. There are tall growing, columnar, round canopy trees, spreading and semi-spreading types. Planning green cover for a highway is altogether different from the urban planning. For now we will talk only about the latter. When it comes to planting within the city confines, the consideration is that the tree should have a uniform growth habit with a minimum maintenance requirement. It should also have hard wood with limbs not prone to snapping during rains or storm. In the accompanying picture see the majestic height that the tree, Buddha’s Coconut ( Sterculia alata), has attained. It may grow up to 50 to 60 feet with a spread of about 20 to 25 feet only. You can grow this tree even at short distances to give continuity. These could be used along narrow roads. A very interesting fact about this tree is that its leaves are of different shapes and sizes. The tree is propagated by seeds. For a round canopy tree, there is nothing better than Moulsari (Mimusops elengi). The tree attains as much spread as its height and is a perfect umbrella tree. Planning a garden for partying? This tree is most suitable as a garden umbrella. It also bears white fragrant flowers (not significant) and orange berries. The tree is much disciplined and needs no training or pruning. The beauty of this tree is that you can even prune it to contain the size by cutting to give shape along its natural contours. For small garden avenues you can have tall growing trees. Those like Royal Palm or Bottle Palm ( Roystonea regia ) are the best for such purpose, especially when these are planted along the path leading to a place of emphasis. Ashok (Polyalthea longifolia var pendula) is also used by some. But keep in mind that it bends as it grows high. To reshape it, it has to be ‘restricted’ to a height of 10 feet. The writer is a senior horticulturist with Punjab Agricultural University at Chandigarh and can be contacted at satishnarula@yahoo.co.in
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Manpower crunch upsets construction companies
The real estate boom has increased the demand for construction workers manifold and hiring workforce is becoming a major task for construction companies. Shortage of construction workers has, in fact, slowed down the growth of industry in metros and major cities across the country. Special technically skilled manpower and project managers having all round knowledge are in short supply. There is 30 per cent shortage of specially skilled workforce. The demand for civil engineers, too, is much more than the available strength. Most of them prefer taking up jobs in the IT sector or accept lucrative assignments in the Middle East Civil engineering graduates don’t find these jobs lucrative because construction companies don’t pay enough and the jobs are also temporary. After a project is finished in one state the company moves to its project in another state leaving the workers behind. In most cases the workers too don’t prefer to shift unless they get good salaries and perks like in the IT companies. The findings of a study on the availability of skilled manpower in various sectors , commissioned by the Confederation of Indian Industry (CII) , have also confirmed this alarming trend. According to the CII study many major projects in major industrial belts are getting delayed by 12 to 18 months because of non-availability of workers. According to the study cities like Mumbai, New Delhi, Gurgaon, Chennai, Hyderabad, Bangalore and Kolkata are facing severe shortage of construction workers. It has also been pointed out that the construction sector will account for over one fourth of new jobs to be created in the next eight years. With pending projects and thousands of vacancies staring them in the face the developers are trying all tactics to get the required workforce. Plagued by this manpower crunch DLF, one of the biggest real estate developers in the country, is, in fact, planning to bring back 20,000 Indian labourers from the Middle East to work in its projects. This follows the Reliance Industries’ move of hiring nearly 40,000 Chinese workers to lay its gas pipeline. DLF has started hiring skilled labourers such as carpenters, bar-benders and electricians from China, Indonesia and Philippines. Chinese labour comes at a low cost and is more productive. If the plan of DLF to bring back 20,000 workers goes through, then it will be a one big homecoming for Indian labourers, who have been working in Gulf countries for the past three decades in order to earn higher wages. For bridges and other foundation work of big projects local firms are making tie ups with Malaysian firms to get the skilled workforce. Several Malaysian workers are working for Indian firms and in many cases even provide special training to local people. Manpower crunch is also hitting the engineering design consultants. Companies have lost not less than 25 to 30 per cent of their turnover due to lack of manpower. However, turnover is not the only casualty of this shortage as several construction companies have also been forced to lower their recruitment standards. The companies, which earlier had stringent qualifying standards, have now lowered the bar — for example they no longer insist on a first division and settle for candidates with second division. Secondly, they are no longer insisting on hiring engineering graduates only as diploma holders too are welcome. Now construction companies are also approaching educational institutions for job placements. So while on one hand the shortage of workers is alarming, on the other hand it also translates as a bagful of opportunities as it has opened up a sector with thousands of jobs just waiting for enterprising takers.
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Realty trusts reign The Securities and Exchange Board of India issued draft regulations on REITs on December 28, 2007, a step welcomed by retail investors, but certain tax and transaction details need to be worked out in detail to make SEBI move effective and profitable for investors and to open up the way for REIT regime in India, says S.C. Dhall The Real Estate Investment Trusts (REITs) are likely to bring stability in prices and provide the realty sector better access to institutional and retail capital. The SEBI proposal is a right step in creating new avenues for investors. But the success of the REITS will, however, depend on the taxation structure for the entity as well as the incidence of tax for the investor. According to experts, because of the rapid pace of construction, India will soon have a critical mass of assets that would allow a REIT market to form. Experts believe that REITs could be the perfect investment vehicle for personal pension plan or in the case of saving for children’s higher education. The SEBI has announced guideliness for schemes under the proposed REITs. Banks, public financial institutions, insurance companies and corporate houses can be trustees of REITs and the trust and the management company are required to be registered with SEBI and they should have a minimum net worth of Rs 5 crore. REITs will be close-ended and the schemes will be compulsorily listed on stock exchanges. Before launching, the schemes should also be valued by a principal valuer empanelled with SEBI. As per draft guidelines, no real estate investment trust, under all its schemes, can have exposure to more than 15 per cent of a single real estate project or 25 per cent of a project developed or owned by a group. REITs are allowed to invest only in real estate which are income-generating projects. REITs are likely to curtail the black money in the property market since buyers usually invest unaccounted money in property. REITs will create a new investment class with transparent practices and disclosures. This will open opportunities for the property developers to raise funds in the domestic market. The scheme has come at a time when country’s few real estate players- DLF Embassy group and Unitech, planning to raise $5 billion from the Singapore stock exchanges through REITs in the early 2008. Real estate is an asset class that has grown rapidly and why keep the small investor out because he does not have enough capital to purchase land? The category of investors in REITs will be slightly different. In the beginning small investor may hesitate to enter this scheme. Investors in this scheme will be people investing, staying the course and taking their money out after a while, and people who are looking more for appreciation than income. REITs first made their appearance in Australia in 1971. General Property Trust (GPT), probably Australia’s most successful property trust has returned around 15 per cent annually since 1971. In the USA REITs have given on an average annual returns of 13 per cent over the past two decades. Dividends in the USA have almost alway grown at a faster rate than consumer prices. Singapore has a very friendly regulatory regime. Singapore provides corporate tax exemption on trusts, but it has also completely waived dividend tax for all individual investors and cut the withholding tax for financial institution investors to 10 per cent from 20 per cent. It is giving very good returns to investors. An Ernst and Young report pegged the global market capitalisation of REITs at over $ 608 billion and is rising fast. South Africa has also given returns of over 30 per cent in the past three years. The USA has a large REIT market with 253 public REITs. The ultimate test for whether REITs will succeed will be taxation treatment. Those markets that have not given favourable tax treatment to REITs, the product has not taken off because investors need to see the capital gains angle. The additional tax attractiveness of the product by way of appropriate tax treatment is something that the Ministry of Finance will have to decide. If tax benefits are extended under this scheme, the way the real easte is growing in the country, this is going to be not just an attractive product, but it will bring some discipline into the real estate industry. SEBI is likely to bring through this product a certain discipline that is tried and tested in other countries. According to experts REITs, particularly if the legislation is properly structured have a beneficial effect on a country’s propety market. If a REIT market is underpinned by appropriate legislation, REITs will have a price stabilising effect on the market. REITs are essentially passive investment fund vehicles whose investors are predominantly insitutions. REITs also open up realty market to a broader and deeper category of investors — Smaller institutions and individuals who have a chance to invest in high grade real estate. It is very successful in Singapore and Hongkong while China does not have yet a REIT law. This investment will improve the property industry’s transparency.
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Hotel industry goes big in small cities
Spiralling real estate prices in urban areas, shortage of spaces in big metros and rising demand for “affordable” holiday experience among middle-income domestic tourists, were leading to a growth in the mid-segment category of hotels in tier II and III cities. “The real estate prices in the metros had gone up several folds and constructing hotels on these expensive plots was turning out to be a very costly proposition,” Fortune Park Hotels Ltd President Suresh Kumar told PTI. According to Pawan Verma, Executive Chairman (Operations) ITC Ltd, out of the total cost of setting up a hotel in a metro, 40 per cent constituted land-cost. In comparison, the land prices in tier II and III cities were far lesser, leading to lower costs in setting up a hotel. This was one of the major reasons for players in the mid-segment hotel industry turning to tier II and III cities for new projects, said Verma. Shortage of availability of huge acres of land in the urban areas in comparison to the easy availability in semi-urban areas was another factor that was propelling the growth in the mid-sized hotel segment in these cities. “Getting land in the big cities was a major issue,” says Suresh Kumar whose company has set up several hotels in tier II and III cities and has planned similar such projects in other smaller cities across the country. The growth in the number of domestic tourists was also major factor, he said. As against the nine and a half million foreign arrivals, the number of domestic tourists was over 20 million, out of which a considerable chunk belonged to the middle income group looking out for an “affordable holiday”, said Pawan. “This middle-income group, which was growing annually, was looking out for ‘getaways’ at a nearby locations. They were not looking for a very lavish affair or anything that was
exorbitant but something that was enjoyable but yet affordable,” said
Pawan.
This segment mainly looked for features like “hygiene, affordability, safe and secure accommodation coupled with good cuisine but not necessarily fine dining experience, when zeroing on hotel accommodation,” said Pawan. “They did not expect too many frills but yet were not ready to compromise on certain facilities,” said Suresh. “Affordability and accessibility”, were the key words among this group leading to a growth in such mid-sized hotel in tier II and III cities, where land was relatively cheaper and so were the other facilities,” he said.
The increase in the number of such hotels in the cities had also been triggered by the growing propensity of people living in the tier II and III cities to “spend more on hotels and holiday packages”, said Suresh. “We are witnessing a ripple effect,” said Suresh. “As the economy takes major strides, fashion, lifestyle and consumer behaviour pattern is changing. This indirectly has led to consumers now opting to go on short vacations and staying in hotels. This change in mindset and desire to go out and spend some time in hotels is driving the growth,” he said. The mid-sized segment was the fastest growing one in the hotel industry and the key players in this field were pumping investment to cash on this growth, he said. Fortune, which is currently present in cities like Jaipur, Jamshedpur, Vapi, Vijaywada, Madurai, Shirdi, Pune, Darjeeling, Ooty and Tirupati, is planning to augment its presence in other tier II and III cities in keeping with the growth.
— PTI
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Real Estate Investment Trusts
London: New property investment vehicles were hailed a success on Tuesday, a year after their inception, despite share prices tumbling around 40 per cent. More than 75 per cent of Britain’s major listed property companies converted to real estate investment trust (REIT) status during 2007. There are currently 17 UK REITs with a total market capitalisation of more than 25 billion pounds. The REITs regime exempted eligible quoted property companies from corporation tax, ending the double taxation of the sector and making it attractive to investors who want to hold tax-efficient indirect property investments in their portfolios. A minimum percentage of investments in these closed-end vehicles, typically around three-quarters, must be held in rental-income producing real estate assets. REITS must distribute 90 per cent of their income, which might be taxable in the hands of investors. However, a torrid year for property share prices has severely dented the investment trusts, wiping an average of around 40 per cent off their value. The share price of all 17 UK REITs declined in value during the year, according to data from the sector’s campaign body Reita. Programme co-ordinator Dave Butler said: “UK REITs have been a real success, even despite significant market volatility which has hit the property and many other stock market sectors in the past year. “Property is, and should be about, long-term investment for income and growth, not just about short-term prices. “The ability of REITs to provide long-term predictable income is a major attraction for investors and the benefit of liquidity, that is inherent in the REIT structure, is becoming ever more obvious.” The EPRA UK real estate index gave a total return of 35.5 per cent per annum between 2003 and 2006, a figure that hit 48 per cent in 2006. Patrick Sumner, chairman of Reita, said low interest rates, strong rental growth and the anticipation of UK REITs led prices to overshoot, which led to “some sharp profit-taking” at the start of 2007. “The fall in property share prices in 2007 has to be seen in the context of strong, in retrospect excessive, performance in the previous four years,” he said. “2007 was just one year in an infinite future for the UK REITs regime and we shouldn’t judge it on the basis of one rather extraordinary year.” The body expects investors to return to the UK commercial property market and yields to stabilise this year. It also expects to see the launch of a number of new, specialist
REITs. — Reuters
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Unitech among top 10 pvt cos on bourses
Mumbai: Real estate giant Unitech has joined the club of country’s top 10 most valued private companies, following a six per cent surge in its share price. The scrip gained Rs 29 to settle at Rs 538.20 on the Bombay Stock Exchange on January 2, taking its market cap to Rs 87,371 crore. Unitech is the second real estate firm to enter the top 10 list after DLF, the country’s largest real estate firm. DLF’s market cap on Wednesday stood at Rs 1,84,000 crore. Unitech moved ahead of Housing Development Finance Corporation and conglomerate ITC, to join the club of top 10 companies in the country. The market valuation of HDFC stood at Rs 86,091.44 crore with its share price gaining over four per cent to settle at Rs 3,057.55, while ITC’s valuation was Rs 83,280 crore. The market cap chart of private firms is topped by Reliance Industries with a marketcap of Rs 4,16,000 crore. It is followed by DLF, telecom major Bharti Airtel, Reliance Communications, ICICI Bank, Larsen & Toubro, Reliance Petroleum, TCS and Infosys. Overall along with the public sector firms, Unitech is at the 18th rank in terms of market capitalisation.
— PTI
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Income from subletting is not rental income by S.C. Vasudeva Q. I am living in a rented house. The house was taken on rent about 30 years back at a very low amount of rent. It is a large accommodation and I have therefore sublet a portion to another person. I had declared the rent received from this portion as rental income but the Assessing Officer has not accepted my claim. Is the contention of the Assessing Officer correct? — Vivek, Jalandhar A. Income under head “income from house property” is taxable under the said head only if the assessee is the owner of the house property. Thus the income from sub letting is not taxable under Section 22 of the Income-tax Act 1961 (The Act). Such an income would become taxable as income from other sources under Section 56 of the Act. Accordingly in your case, the income from subletting will be assessed as income from other sources and you would not be entitled to a statutory deduction of 30 per cent against such income. The stand taken by the Assessing Officer is correct and is in accordance with the provisions of the Act. Exemption
justified
Q. I own a residential house which was constructed about 15 years back. I have purchased a bigger house in a better area and have invested the capital gain earned from the sale of the earlier residential house within the specified period of two years. I have already shifted to the new house but the sale deed in my favour is yet to be registered. Will the capital gain so invested in the new house be exempt from tax though the sale seed is yet to be registered in my favour? — Amrit Aggarwal, Jalandhar A.
The provisions of Section 54 of the Act are very clear in this respect. In case the possession of the house has been taken by the assessee, the exemption from the taxability of capital gains earned on the sale of a residential house which is invested within the specified period for the acquisition of the new house cannot be denied. In this connection you may refer to a decision of the Bombay High Court in the case of CIT vs. Dr L.N. Nagda (211 ITR 804) (1991). It has been held in the said case that the exemption under Section 54 of the Act cannot be denied in case where the possession of the house has been taken but the sale deed is yet to be registered. Further the definition of the word “transfer” in the Act having been changed to take into account the parting of possession for consideration as a transfer, there is no reason that the exemption should be denied to you.
Sale of flat
Q. I am a native of India but live in the UK. I own a flat in Delhi, which I got from my father. I am planning to sell the flat. The buyer stays in Delhi. I do not plan further investment on receiving the money. What would be my tax liability if I sell the flat. — Randhir Singh, Delhi A. Your query does not indicate the period for which you as well as your father have held the flat which you intend to sell. If the flat has been held for more than three years by you or your father, the same will be a long term capital asset. For determination of long term capital gain, the cost of such flat should be known. If the flat was purchased prior to 01.04.1981, and cost of the house is expected to be less than the fair market value of the house as on 01.04.1981, you have the option to adopt such fair market value for the computation of the capital gain. As these basic facts are not indicated in the query, it is not possible to determine the long term capital gain and the tax payable thereon.
Mortgage Debt
Q. I being the only son have inherited a residential house in Jalandhar from my father, who had mortgaged the same to a bank for meeting the cost of construction of such house. At the time of his death, a sum of approximately Rs 20 lakh was due to the bank. I am employed in Mumbai and would not like to shift from there. The house in Jalandhar is, therefore, not likely to be used by me. I am also not interested in letting out the house and would like to sell the same after taking due permission from the bank. Would I be entitled to the deduction of the amount of loan due to the bank for the purposes of computing the capital gains? — K. Singh, Faridabad A. The Supreme Court has, in the case of R.N. Arunachalam vs Commissioner of Income-tax (227 ITR 222), held that where a property has been mortgaged by the previous owner during his life time and the assessee, after inheriting the same, has discharged the mortgaged debt, the amount paid by him for making the payment towards the mortgage amount should be regarded as cost of acquisition under Section 48 read with Section 55(2) of the Act. You would thus be able to claim the deduction of amount due to the bank for the purpose of computing the capital gain.
Sale proceeds in instalments
Q. I have sold a plot to one of my relatives in June 2007 who has agreed to pay the consideration in 15 equal half yearly instalments. Proper documentation has been made in this regard and I would be receiving eight instalments till March 31, 2008. Am I supposed to pay capital gain on the sale of such flat computed on the basis of each instalment or the capital gain will have to be computed by taking the total into consideration? — R.K. Prasad, Gurgaon A. Capital gain is attracted the moment, a person has acquired the right to receive the price on the transfer of a capital asset. It is not necessary that the consideration should have been actually received. Therefore, even if the full value of consideration agreed upon is received in instalments in different years/months, the entire value of consideration will have to be taken into account for computing the capital gain which becomes chargeable in the year of transfer. Accordingly, in your case, you will have to compute capital gains by taking into account the entire consideration. The capital gains tax would thus be payable in assessment year 2008-09. The writer can be
contacted at sc@scvasudeva.com
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The real estate sector, which saw a boom time in the calendar year 2007, is expected to remain buoyant during 2008 too. One of the leading Industry Chambers, ASSOCHAM has projected that the realty sector could notch up a year-on-year growth of 40 per cent to 45 per cent in 2008 over the previous calendar year. 
For a horticulturist urban planning means a variety of locations to plan for. The locations may include a park, a highway, a market place, an institute, an industry or even a small street. This kind of planning requires utmost care and a thorough knowledge of different species of plants. A little slip in the choice of flora in the beginning may be a cause for regret a few years down the line when these plants start growing to their potential height and spread.