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Fresh lease
The Union Budget 2008-2009 has given one more reason to senior citizens to cheer in the form of tax clarification given by the Finance Minister on the reverse mortgage scheme and bankers too are expecting a surge in the number of people coming forward to avail of this scheme, reports
Union finance minister P. Chidambaram had, in the last general budget (2007-08), announced a unique scheme of ‘Reverse Mortgage” for senior citizens which was touted as a remarkable means of ensuring old-age security. The National Housing Bank (NHB) had introduced the scheme post 2007-08 budget in association with some of the state-run Public Sector Banks. The unique product allowed a senior citizen, who is the owner of a house, to avail of a monthly stream of income against the mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan. In practice, however, the reverse mortgage scheme remained a non-starter because there was no clarity on the tax treatment of income streams. Are reverse mortgages to be regarded as income (attracting income tax), or as loan instalments (that cannot be charged to tax)? What about the appreciation in the house property? Is this to be treated as capital gains and taxed accordingly in the hands of the legal heir/heirs? What if there are no legal heirs? These issues being crucial, there were hardly any takers for this novel scheme. However, on February 29, while presenting the Union Budget 2008-09, Chidambaram clarified the tax issues by proposing to amend the Income Tax Act to provide that the reverse mortgage would not amount to ‘transfer’ and the stream of revenue received by the senior citizen would not be ‘income’. “The reverse mortgage scheme was notified by the National Housing Bank in the current financial year (2007-08). In order to clarify the tax issues arising out of the scheme, I propose to amend the Income Tax Act to provide that: reverse mortgage would not amount to “transfer” and the stream of revenue received by the senior citizen would not be “income”,” the finance minister told Parliament while presenting the budget, bringing cheer to many senior citizens across the country. “Yes. Indeed it is a welcome clarification. There were hardly any takers for the scheme. Despite being one of the first banks to introduce this scheme, we could do reverse mortgage to the tune of about Rs 50 crore only by December 2008. We expect a surge in it after this much-awaited clarification from the FM,” K Raghuraman, Executive Director of Punjab National Bank (PNB) told The Tribune. Reacting to the announcement, Ms Renu Sud Karnad, Joint Managing Director, HDFC Ltd, welcomed the latest move wherein a reverse mortgage would not be regarded as a transfer of a capital asset and therefore not attract capital gains tax. “Secondly, the loan amount would be exempt from income tax in the hands of the borrower,” she said. Ms Karnad, however, said “Unfortunately, no tax benefits have been extended to housing finance lenders as regards reverse mortgages.” After the reverse mortgage guidelines introduced by NHB, several banks and Deewan Housing Finance have launched the scheme for senior citizens. The banks that have launched the scheme are Punjab National Bank, State Bank of India, Bank of Baroda, Allahabad Bank, Indian Bank and private lender Axis Bank.
The Scheme
Under the scheme, the banks ensure lifetime income for the senior citizens, without alienating them from their property. The property owner surrenders the title of the property to a bank or financial entity. The bank will pay an agreed sum in regular instalments to the owner and his/ her spousefor a stipulated period. After their death, the legal heirs get the first right of refusal to purchase the property from the bank. The bank fixes the property price according to the market value and interest on the amount paid by the institution to the senior citizen. Failing this, the property is transferred to the financial institution. If there is any surplus after sale of the property mortgaged, after adjustment of loan and interest amount, then a refund will be made to the legal heirs.
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...little to cheer about
The Budget has failed to extend major benefits to the realty sector, says
Realtors and developers have little to cheer about as the finance minister has failed to extend major benefits to the real estate sector. And along with this the continuing hammering of real estate stocks at the Bombay Stock Exchange and the realty index tanking the most among the indices during the past few days (the index fell to its lowest ever figure in over five months), the overall picture seems to be not so rosy in this spring season. Among the hardest hit stocks were Housing Development and Infrastructure Ltd., (by 9.35 per cent), India Bulls Real Estate (by 7.6 per cent), DLF Ltd.(by 5.11 per cent) and Akruti City( by 9.5 per cent). Real estate scrips have been falling with the RBI keeping the interest rates unchanged. So with the overall market sentiment being weak the real estate stocks too have performed very poorly. According to experts realty stocks fell as some developers were facing difficulties in selling large residential scape. While the prices of commercial spaces are likely to remain stable for the time being, the same cannot be said for residential property. As enquiries for houses in unmarked areas are falling, the builders may have to compromise on prices. Already in this scenario several major real estate companies have shelved their IPO plans. There were many expectations from the Budget like liberal policy on REITs (real estate investment trusts) and REMFs (real-estate mutual funds), introduction of value-added stamp duty. Some benefits for rental income and some reforms on FDI provisions, But, there were no such announcements in the Budget and real estate sector as such was completely ignored by the finance minster. The sector was in fact in need of some boost as it has been fast hurtling towards a plateau after touching dizzying heights in the last two-three years. Writer is a senior banker
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Lusting for Lucknow
Gulf NRIs are making a beeline for affordable realty deals in the ‘City of Nawabs’
“Property in Lucknow is very much a sought after option for NRIs in the Gulf,” said Sushanto Roy, head of Sahara Infrastructure and Housing, a leading real estate developer currently building several housing estates here. “There is a large population base of Lucknow working in Dubai and Middle Eastern countries that is looking for high quality life back in their hometown. “With profit overflowing in this sector, a large number of NRIs from Gulf countries are investing in residential property in Lucknow in a big way as an after-retirement option.” This was the reason why Lucknow properties were in focus at the Indian Property Show held in Dubai in December 2007. The show generated a huge response from Gulf expatriates for a property in Lucknow. “There are a large number of NRIs in Dubai who have shown interest in buying a property in Lucknow,” said Kunal Banerjee, president of corporate communications and marketing at Ansal Properties and Infrastructure Ltd, a prominent real estate developer in northern India. The company’s Golf Villa in Sushant Golf City in Lucknow priced at about Rs 25 million is primarily targeted at NRIs and high net worth individuals. The reason behind their interest is emotional attachment with the native land and future security sought by Gulf NRIs, say industry observers. Uday Sinha, director of GC Constructions, said: “With a large Muslim population and improving living standards, they (Muslim NRIs) find investment in Lucknow a sensible bet. “In fact, half the buyers in our residential project are from Dubai and the Middle East.” NRIs also find the lower realty prices in Lucknow much more attractive as compared to exorbitant property prices in metros like New Delhi and Mumbai. Sunit Sachar, chief operating officer in Uttar Pradesh for Parsvnath Developers, said: “With high-end luxury apartments and townships, Lucknow has all faces of luxury that an NRI can dream of at a much affordable rate compared to Delhi or Mumbai. “This, coupled with returns on investment, has attracted Gulf investors who are looking to combine their emotional needs with a sensible long-term investment.”
— IANS
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Energise your home positively
A magnificent bungalow, a beautifully designed house and public places give out vibrancy and vitality. The life energy flows smoothly and the people living in those spaces prosper and grow. But several times one notices that within a couple of decades, the same house or garden wears a deserted look, becomes dilapidated and the lives of the people living in it or frequenting that place experience a negative flow in finance, health and personal relationships.
This can be due to the fact that when the house was originally built the plants in the north, east and west were not fully grown. At that time the life giving energy of the sunlight flowed freely and entered the premises in abundance. As the plants grew into huge trees, their foliage blocked this flow of morning sunlight and its life-enhancing energies. In its place, over a period of time, negative energies start gaining ground and with this the problems and stress of the inhabitants keeps on increasing. The energy balance of a building or house is of prime importance as it directly affects the health, energy and professional output of its residents. The Yin and Yang or the negative/positive or male/female energy levels of a place are the direct result of the background and lifestyle of its residents. Sunshine, plants and flow of air are the life forces and source of energy. Hence the need to plan a house to be able to channelise maximum energy from the natural elements to be able to constantly cleanse and energise the building and give life energy to the residents. Thus it is important to lay emphasis on the correct placement of plants, trees and foliage while planning landscaping for any building. Proper landscaping can play a major role in enhancing the health, prosperity and happiness of the inhabitants. Slope of land is an important aspect of landscaping. Land should be higher towards the south and sloping in the northern and eastern sections. Slope should be from west to east and south to north. If you are planning to have artificial ‘hills’, then these should be in the southern direction. No thorny plants or ugly, frightful sculptures should be used in any landscape. While landscaping the choice of plants, placement of trees, fountains, lights, sculptures etc too are of prime importance. The bigger and taller trees like Asoka, mango, guava should ideally be planted on the south and south west side of a house or building. Avoid trees on the eastern, western and northern sides. Lawns should be designed with planned patches of seasonal shrubbery and small flowering plants like petunia, garden nasturtium, lilies etc. Potted plants like palm etc should be strategically placed to create the effect of perennial greenery. Large trees like mulberry etc should not be put in the centre. Lawns should be located in the northern and eastern sides of a building. Locate swings, fountains, pools etc in the north and east. Fountains should be made of marble or a material which improves with time. The effect of life giving energy can also be taken indoors by having potted ferns and small plants in rooms.
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6 Indian realtors make it to Forbes’ richest list
India’s booming realty sector is turning out to be a cradle of billionaires, with six entrepreneurs led by DLF’s K.P Singh figuring prominently on Forbes World’s Richest List and together notching a net worth of nearly $48 billion.
As per the Forbes 2008 World’s Billionaires List, which was released on Friday, six real estate developers from India featured among the richest, each with a net worth of at least one billion dollars. DLF chairman Singh leads the pack of Indian realty billionaires with net worth of $30 billion and is ranked eighth in the global list consisting of 1,125 persons. Unitech’s Ramesh Chandra ranks 86th with a net worth of $9.6 billion. Singh and Chandra have improved their rankings from 62nd and 114th, respectively, in the last year’s Forbes list. Chandra is followed by Rakesh Wadhawan of HDIL with a wealth of $2.7 billion. Niranjan Hiranandani and Rajan Raheja, real estate developers from India’s financial capital Mumbai, were placed at the same rank (573) with a net worth of $2.1 billion dollars each. Sobha Developers’ PNC Menon (897th) also found a place on the coveted list with a net worth of $1.3 billion.
— PTI
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Share in property gifted to sister
by S.C. Vasudeva Q. I am settled in America for the past 25 years. My father died 10 years back and transferred his house to my mother by Will. Now my mother has gifted the house to my sister. Can I claim my share in the property through court or not? — Amit Kumar A. The facts in the query are not complete as it is not clear whether the house which has been inherited by your mother was a self-acquired property of your father or not. Further, the contents of Will executed by your father regarding the devolution of the house to your mother are also not available in the query. Presuming that the property was a self acquired one and your father had made a Will in favour of your mother giving her absolute powers to deal with the property in any manner she liked, it would not be possible for you to question the gift of the property by your mother to her daughter (your sister). Rebate on home loan and house rent Q. At present I am working in a public sector undertaking in Jalandhar City. I was transferred to Jalandhar in July, 2007. At present I am staying at Jalandhar alone in a rented house and paying Rs 2500 as rent per month from July 2007 onwards. I own a residential flat at Mumbai for which I had taken loan from a bank in 2003 and my family is staying there. I am paying EMI to bank every month and I am claiming tax benefit against interest to the tune of Rs 1,50,000 and benefit under 80CCC towards principal amount. My query is : Apart from the tax benefit which I am claiming since 2003, under house loan from bank towards interest as well as principal amount, whether I am entitled to claim benefit towards rent I am paying to my landlord at Jalandhar from July, 2007 onwards, if so under what clause and what are the tax benefits. — Pikle, Jalandhar A. In accordance with the provisions of section 80GG of the Act, you are not entitled to the deduction of the house rent paid at Jalandhar. This is because the above said Section contains a proviso that in case any residential accommodation is owned by the assessee at any other place which is in his occupation and the value of which is being determined as a self-occupied property, no deduction shall be allowable under the aforesaid Section to an assessee for the amount of rent paid for his accommodation at a place other than that where the house is owned by him.
Inherited property and HUF share Q. My query is based on the following assumptions a) A, B and C are three brothers who have purchased lands jointly out of their own resources. b) The lands were subsequently got divided amongst the three brothers and their respective sons through court. c) Subsequently one of the sons of one of the brothers died and his share in lands was transferred in the names of his legal heirs i.e two sons and a widow. f) One of the legal heirs sold his share of the land and earned long term capital gain. Please clarify whether the long-term capital gain earned belongs to his HUF capacity or not. Please give citations. — Ram Parkash, Sirhind A. On the basis of the facts given in the query, the long-term capital gain earned by the legal heir who inherited the house from his father will be taxed in the hands of the legal heir only. The Supreme Court in the case of CWT vs. Chandersen (161 ITR 370) (1986) has held that property inherited by a person from his father who had acquired such property from his own resources would not be in the nature of an HUF property.
The writer can be contacted at sc@scvasudeva.com
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Gas geysers Warm up to safety concerns LPG-powered geysers have become popular but a little laxity in their use and installation can be fatal, warns Jagvir Goyal Recent years have seen a consistent switchover from electric geysers to gas geysers, power cuts being the main reason behind this shift. Along with this these geysers are also more economical. Almost 70 per cent of new constructions are now opting for gas geysers in bathrooms. Almost all PG accommodations have restricted their power backup systems to fans and lights only and have replaced electric geysers with gas geysers. Due to this hundreds of gas geyser manufacturers have come up all over the country. Prices are competitive, geyser size is compact and LPG consumption is quite less. People are able to arrange LPG filled cylinders without a problem. Water temperature can be varied by adjusting outflow. There is no fear of short circuit or electric shock. A bucket of instant hot water is available in 4 to 5 minutes. Thus, gas geysers appear to be an ideal choice. But most of the people are unaware of the negative aspects of using these. Danger Involved
Gas cylinders can be seen hung over the window projections in many houses. However, turning the gas regulator off is very important when the geyser is not in use. Instances of gas leakage have been noted and in some cases, have even proved fatal. The moment the tap is turned on, the leaked gas catches fire and the bathroom user is dead before he even realises what has hit him or her. Therefore, care has to be taken to see that gas regulators are turned off after every use.
Installation
Under no circumstances should the geyser be installed inside bathrooms. As the geysers are used in winters, bathroom windows, if provided, and the ventilators are in a closed position. Exhausts are switched on only when the seats are used, and not during bathing. So practically, no ventilation is available and while using the gas geyser combustion of gas takes place inside the geyser producing harmful gases.
Lethal Strike
Gas geysers don’t strike the user immediately but on prolonged use of bathroom. As there is no ventilation in the bathroom, the carbon monoxide produced during prolonged use of geyser strikes the user rendering him/her unconscious. Oxygen depletion in the bathroom leads to the production of carbon monoxide and inhalation of this for five minutes can render a person unconscious. Thereafter, the personal health of an individual comes in picture. A person with robust health survives the attack despite remaining unconscious, while weaker and older people are not able to survive for more than a few minutes.
Geyser Specifications
China made gas geysers have flooded the Indian markets and are cheaper and good looking. However, there are chances of their not being safe for use. Most of these geysers are brought in from China in parts and assembled in India. There has been a consistent demand for laying some standards for gas geysers and recently the Bureau of Indian Standards has issued IS 15558 - 2005 for domestic water heaters for use with LPG. BIS doesn’t recognise the word ‘geyser’ and all geysers are termed as water heaters by it. So always look for IS 15558 mark while buying a gas geyser.
Friendly Features
Gas geysers turn on automatically as soon as a tap is turned on. These geysers have an automatic battery-operated ignition which gets activated by the water flow as soon as the tap is turned on. The cold water runs through a copper tube heat exchanger and gets heated by the gas burner installed below the copper tube. When the water is turned off, the valve allowing flow of gas to the burner also gets turned off. While buying a gas geyser, in addition to IS 15558 mark, look for the following features also: Flame failure protection; overheating safety system; water safety device; battery operated automatic ignition; oxygen depletion sensor; burner regulator; automatic timer.
Warning Mechanism
Addition of a carbon monoxide warning mechanism to the geysers shall be an ideal thing. Formed due to incomplete combustion, carbon monoxide is a colourless and odourless gas. Unless there is a mechanism in place to sense its excessive presence and indicating the same to the user of geyser through an alarm bell, the user can’t know about its presence. Studies show that its binding with haemoglobin’s is more than 200 times than that of oxygen. Therefore, it has an instant toxic effect on the human beings. Though geyser makers put a warning on the geysers that the area of their installation should be kept well ventilated, the users hardly pay any attention to it. A carbon monoxide warning mechanism thus is essential.
Ban Use in Hotels
Use of gas geysers in hotels, paying guest accommodations and other such areas should be banned. Otherwise these buildings should not be allowed to install the gas geysers inside the bathrooms. There are chances that gas cylinders or geysers in these buildings are not switched off and remain on. In most of the hotels, bathrooms hardly have a good ventilation plan. So there is no logic in taking chances. Writer is Director Estates, PSEB, and can be reached through www.jagvirgoyal.com
Precautions
Don’t install gas geysers inside the bathrooms. If you can’t get the geyser shifted outside, keep the bathroom well ventilated, use an exhaust during bathing and with geyser on, avoid prolonged use of bathroom. Keep the gas regulator off while the geyser is not being used. Turn it on just before going for a bath. Don’t switch on the geyser before using the bathroom. Use a safe gas geyser. Look for IS 15558 mark on it. Install gas geyser at such a height that the knobs can be operated easily and flame can be seen. Don’t ever conceal a gas geyser in a wall or ceiling or closet etc.
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Beware of bank botch up
Want a home loan for your dream house? Chances are that banks may misplace your house documents, leaving you high and dry Sudhir Bawa had taken a home loan from a multinational bank and repaid it, but when he sought the original sale deed papers back from the bank, he was told that his property papers were lost. “I had taken Rs 900,000 as home loan from HSBC Bank in Connaught Place in 2000. By 2002 I had repaid the loan. But the bank apprised me that the original sale deed papers were lost,” said Bawa, a consultant with an international pharmaceutical company. The bank, however, washed its hands of the matter by lodging an FIR at the Connaught Place police station. “They informed me by a letter and then merely got an FIR registered. However, they refused to compensate me for the loss caused by the bank’s carelessness. If the documents get into the wrong hands they can easily be misused,” Bawa added. Bawa had to eventually sell off his property at a lower price, bearing a loss of over Rs 1 million. “This is sheer negligence on the part of the bank and they are liable to compensate the loan applicant,” said lawyer Manjeet Singh Ahluwalia. Lawyers handling consumer matters also agree that though such cases are not the norm, banks are averse to granting compensation to the aggrieved. “Banks are generally not inclined to compensate the loan applicant, leaving him with no recourse but to move court. This unnecessarily adds to the backlog of cases,” said Sugriv Dubey, a lawyer. Last year, the State Consumer Commission slapped a fine of Rs 500,000 on Citi Bank for misplacing the original documents of the property of Prem Narain Gupta. Gupta, a resident of east Delhi, had taken a loan of about Rs 700,000 for renovation of his property valued about Rs 15 million in 2001. “Once a service provider resorts to such a procedure that a loan applicant has to deposit the original deed and not the certified copies of the title deed, he has to exercise utmost care and caution in the safe preservation of documents,” the commission had said in its order.
— IANS
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Saeed Anwar, an NRI from Dubai, wanted a house in his hometown Lucknow. He bought two plots for Rs 3.5 million ($880,000) in 2005, which are together worth Rs 30 million today. With returns as high as this, many Gulf NRIs are investing in the city’s real estate.