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Hyderabad’s Harsh Realty
A plethora of factors, including soaring prices of cement, steel and iron and construction costs, higher interest rates, declining investments from NRIs due to falling value of US Dollar and resurgence of Telangana statehood demand, have contributed to the slow down in the real estate sector. The price of an undeveloped land on the Srisailam highway near the city, which had typically touched Rs 1 crore per acre last year has dropped to Rs 50 lakh per acre now. The land prices that had touched the stratosphere in anticipation of a string of projects around the city fell appreciably as some of them, including the ambitious Fab City, could not take off. The fall in salary growth for employees of IT and related sectors is also seen as a factor contributing to the slow down. However, real estate players with strong financial muscle continue to be optimistic about the growth, particularly focusing on niche areas like villas, luxury townships and gated communities. “There is no doubt that there are hiccups in the short-term but there is going to be a boom time both for the development and construction segments,” Y. Kiron, Chief Executive Officer of Suchir India real-estate developers, said. The recently inaugurated International Airport at Shamshabad on the city outskirts, the ongoing Outer Ring Road (ORR) project and over 40 Special Economic Zones (SEZs), at various stages of development are expected to fuel real estate growth in the long run. A big challenge facing the sector is the lack of availability of manpower like skilled plumbers, masons and electricians. Some experts argue that the boom witnessed in the sector a few years ago was artificial, leading to a large number of defaults in land deals. The sharp fall in the sale of apartments is also being attributed to steep hike in home loan rates. “The EMI per lakh has gone up from Rs 700-725 a few years ago to Rs 1,100 now. As a result, the repayment burden has gone up by 50 per cent. This has become unbearable for many salaried class people,” said Prakash Dharur, a central government employee. Apart from this, the prices of cement and steel are moving northward, making it things difficult for the builders as well. Despite these negative factors, international and domestic real estate players have big plans for the cyber-savvy city. Recently, Sunway Opus International Private Limited, a 50:50 Special Purpose Vehicle (SPV) formed by Sunway City Berhad of Malaysia and the city-based Opus Developers announced a residential township project - Opus Grand - with an investment outlay of Rs 1,680 crore. The project, coming up at Ameenpur near Bolarum on the city outskirts, will have 14 towers comprising 2,700 apartments each with a built-up area of between 1,200 sq ft and 1,800 sq ft. Besides, the 35-acre project boasts of around 80 per cent open space and a floating club house in the centre of a man-made lake. Sunway and Opus have already invested Rs 25 crore each in the project. The total cost of the project is spread over three phases, which would be funded at a debt-equity mix of 2:1. The first phase is scheduled to be completed in two years, Yap Chin Hua, Chief Operating Officer, Sunway Opus, said.
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City IT park trips on housing front
Jangveer Singh compares the Chandigarh IT Park with the one in Bangalore & finds that both have failed in providing affordable accommodation
The Chandigarh Administration seems to be falling into the same rut as the Karnataka government while planning its Integrated Technology Park even though it had studied the Bangalore model and vowed to learn from the mistakes committed there. The Administration had a golden opportunity to create a substantial housing facility in the Rajiv Gandhi Chandigarh Technology Park (RGCTP) but it preferred to go in for an elitist model which is set to deny entry to the very people for whom the Park is meant- the IT professionals. Parsvnath’s Pride Asia complex, which is coming up on 123 acres in collaboration with the Chandigarh Housing Board (CHB), is aimed at the “modern pharaohs” as its website itself claims and is being marketed with the adage –“entry only for those with identity”. The company is using only around 42 acres of the plot being developed by it for residential purposes while the remaining 80-acre area will be used for landscaping and other features, including an artificial lake. The residential complex is likely to give an elitist touch to the IT park and will also serve the noble intentions of the Administration to use the money so generated by selling units in it to develop spaces for the underprivileged. However, it does nothing for IT professionals who will be working in the park and who would have benefited the most in case the Administration had gone in for a much more moderate housing complex aimed at serving the interests of this sector. According to a spokesperson of Parsvnath developers, the company has sold less than 200 units out of a total of 1,310 units. These have been sold to Non Resident Indians (NRIs) in Canada and the USA through aggressive marketing. Besides this according to the company the client profile includes what it calls High Net worth Individuals (HNIs). This is easy to understand as the cost of a one-bedroom flat with a covered area of 625 feet is around Rs 55 lakh while a two-bedroom unit costs Rs 1.25 crore, a three-bedroom one above Rs 2 crore and villas from Rs 6 crore onwards. Such exorbitant rates are unheard of even in cities like Bangalore, which is often referred to as the IT capital of the
country, till around a year back. Even now one of the costliest flats sold recently in the central business district there fetched around Rs 3.5 crore. Villas being developed on the road near the new international airport in Bangalore, which is to start operation soon, are being sold for around Rs 4.5 crore now while those being marketed by top builders till two years back were selling for around Rs 1.5 crore. “In such light it is surprising that the Chandigarh Administration saw it fit to establish an elitist colony which will have nothing to do with either the development of the IT industry or its sustenance,” says Ajay Jasrotia, an executive. He said even now the need of the hour was to establish moderate cost housing in and around the IT Park on a priority basis so that IT professionals coming to work in the city could get affordable housing. Phase 1 and Phase 11 of the IT park are expected to provide direct employment to 30,000 professionals and an equivalent number are expected to be employed in Phase 111 of the project. The Chandigarh Administration maintains the jobs created will be augmented further as every single IT job creates three further indirect ones. The manner in which IT parks in Bangalore were developed with minimum housing like the one built by a Singapore-based consortium in Whitefield is an example of what can go wrong when the housing needs of prospective workers are not taken into consideration. The dreamy farming landscape of Whitefield was changed forever with hundreds of private developers building luxury projects close to the IT Park. With no government initiative to provide low to moderate cost housing in the area, IT professionals have to pay through their nose to stay close to their place of work. Similar was the case in Koramangla situated close to the Electronic City in Bangalore that has today become a concrete jungle with rents touching the roof. It is the high cost of living due to high rents which gets transferred to the employers eventually in the form of higher pays that has resulted in the IT industry choosing to migrate to tier II and III cities. Over pricing in Chandigarh thus may well kill the golden goose.
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GROUND REALTY Fancy bathtubs, showers and shower cubicles add that extra zing to a bathroom, writes Jagvir Goyal
Choosing bathtubs: Bathtubs of many sizes and shapes are available these days. While planning to install a tub, keep in mind that quantity of water consumed in a tub is many times the quantity consumed by a shower. For hair washing also, a shower is more convenient than a bathtub. And a shower is more hygienic than a bathtub as there is no sitting in soapy water. Tubs now used are of Extruded Acrylic and of oval, round, square and rectangular shapes. Tubs made of cheap material should be avoided. Tub material should absorb less heat from the water in it, should not discolour with time, should be easy to clean, scratch resistant and hygienic. Extruded Acrylic fulfils these requirements, so choose this material. Good brands include Oyster, Lauret, Jaquar, Roma, Madonna, Whirlpool and Woven. If space available is lesser, choose corner tubs. Size may be as small as 4'X4' and as large as 6'X3’ also. A 6’X3’ tub normally weighs 18 to 22 kg and has a capacity of 150 litres or so. Simple tubs cost about Rs 6000 to 11,000 while those provided with whirlpool jets cost about Rs. 1 lakh. Choosing showers: Many types of showers are now available. These include hand showers, overhead showers, body showers; rain dance showers and hydro massage showers. Further, different spray modes are available in these showers. These include soft spray, normal spray, turbo spray, massage spray, rain spray and whirl spray. Cost per shower varies from Rs 150 to Rs. 23,000. Purpose of bathing is to have a complete and satisfying bath. So choose an overhead shower coupled with a telephonic hand shower and avoid wasteful expenditure on fancy items. Shower location: Keep the shower rose in a corner and not in the middle of the wall. A shower at the centre leaves whole of the bathroom wet. If the space permits, prefer to have a 2.5'X2.5' cubicle for shower as a separate entity. Keep the walls of cubicle as semi-transparent to have the feel of full bathroom. Otherwise provide plastic curtains to create a shower enclosure. These days, providing shower cubicles in bathroom is becoming very popular. Cheapest shower: Try simple 4 or 6 inch diameter circular or octagonal overhead shower. A 4 inch dia shower should have 145 holes, each of 1.2 mm diameter. Fit the shower at least 2.1 meters above floor level or higher if the space permits. However, see that the minimum vertical distance between the point of shower and the placement position of water tank above is one metre. The more the distance, more will be pressure of water in the shower. Prefer a movable shower. Mixers for showers: Many people prefer to have a single mixer on the wall connected to both cold and hot water. Whenever you are choosing to provide such mixers on the walls, always keep the center to center distance of hot and cold pipe fittings as 165 mm as this distance allows perfect installation of mixers. All bath fitting manufacturers recommend this distance for effective use of mixers. Shower families: There are shower families available these days. A family of showers consists of an overhead shower, a shower arm, 4 to 6 body showers, shut off valves, diverters and outlets. Cost varies from Rs 60,000 to Rs 1.25 lakh. All these showers are installed at different levels, aimed at different parts of the body. Then there are shower panels available, costing Rs 30,000 to Rs 1.50 lakh. These panels are hung on a wall bracket and contain many sprays and jets at different angles. There are flexible hoses, lights, soap shelves etc also provided on the panels. Even a transformer and thermostat is provided in some of them to have water at required temperature, to create fog or rain and to generate moonlight. Next to shower panels are the ultimate shower temples which fall in the range of Rs 6 to 8 lakh. These shower temples are complete shower cabins, electronically operated and also having steam units, speakers for music, halogen lights, folding seats and even a surge shower that has a water-fall like effect on the person taking bath. Top brand is Hansgrohe of Germany, now freely available in India. Have one if you ever hit a jackpot. The writer is Deputy Chief Engineer, civil in PSEB and can be contacted at www.jagvirgoyal. com
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Real estate mutual funds
Developers also hope to exploit this new source of funds, writes S.C. Dhall
The issue of valuation and other details have been harmonised and both the Institute of Chartered Accountants of India (ICAI) and assets management financial institutions are satisfied with the results. Retail investors who do not have big chunks of money can diversify their portfolios now with a lower ticket size of investment. There is asymmetrical information in real estate so the valuer will have to arrive at capital value based on a combination of factors, including rentals. The REMF provide developers additional funds and improve the liquidity of the immovable assets. Real estate companies, till now, had domestic funding and in recent years money from overseas sources. Domestic funds have become increasingly tough to be accessed with the Reserve Bank of India’s move to control liquidity and banks cutting back on exposure in retail estate investments and overseas funds have been limited to large projects and this has left a major chunk of the industry untouched. REMF are seen as a relatively more accessible source without these limitations. The announcement, coming at a time when real estate players were anticipating a period of right cash flows and poor liquidity, is comforting for the industry. REMFs shall declare their daily net asset value and get their real estate assets valued every 90 days. A key factor that distinguishes Indian realty market from the stock or debt markets is its relatively localised nature. Companies active in the real estate space, rather than those used to managing equity or bond investments, may be better placed to get REMFs quickly off the ground in the Indian context. The fact that the SEBI has stipulated a five-year track record for realty players seeking to launch REMFs is a positive step, as only seasoned players will enter the fray. Real estate, as an asset class, is not familiar ground for India’s mutual funds, equity or at best combination products. This being the case, their entire investment team and security selection process has been built around selecting the best stocks and bonds for their fund portfolio. That the real estate sector has been a relatively recent entrant to the listed stock market universe also suggests that limited expertise may have been built by mutual funds in evaluating real estate markets and factors that drive it. Unlike stocks and bonds where assets can be acquired for one transparent and common price, realty assets are priced to a large extent on a case-to-case basis and tend to be very region and location specific. The stipulation which says that REMFs will be required to maintain a minimum 35 per cent investment in direct real estate assets, with not more than 30 per cent in one city and no more than 15 per cent in one project, are designed to avoid concentration risks in REMFs. REMFs may also require a much longer window to deploy the funds raised and thus a much longer gestation period, than is the case with their current debt or equity fund offerings. The daily NAV disclosures and listing requirements of such funds may also face a few challenges. Though NAV of such REMF are to be disclosed on a daily basis, as do the NAVs of existing equity or debt funds, every asset that funds place in a property fund’s portfolio will be valued by two independent valuers once in 90 days, depending on when assets had been acquired. New mutual funds can be launched by those in real estate business for more than five years, the funds would be close ended with the units listed on recognised stock exchanges. The writer is a senior banker
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Tax tips
Q. My father purchased an MIG House in Sector 11, Panchkula in 1983. He expired on December 20, 2007. He was the holder of Power of Attorney against the property, as property was not registered till the time of his death. I want to register this property in my and my mother’s name. The original allottee is ready to register the property in our name and I have already obtained a no objection certificate from the housing board.
What is the legal process in registration? How to go about it? According to the allotment letter, allotment was of Rs 80,250. Conveyance deed will be 8 per cent of the allotment amount. Whether registration will be done on current market price of the said property? As there will be no exchange of money because we just want to register property in our name. The allottee is worried about capital gain. Do you think he or us will have any income-tax related problems? — Rajit Sud A.
It seems to be a case of inherited property. The conveyance deed should be executed for a sum, which was paid towards the acquisition of the flat. There should not be any liability towards the capital gains tax, since no transfer is involved in such a case. The conveyance deed duly executed should be tendered with the Sub-Registrar for the registration thereof.
Procedure for making conveyance deed
Q. My wife owns a 500 sq yd constructed residential plot in Ludhiana city. Construction work was carried out on this plot in 2002 by her own earnings. We have a son who is presently residing in USA and two daughters are in India. Now my query is: Whether under law it is tenable to gift this property only to my son. If yes, then what will be the best choice gift or making a Will. Also let me know the tax implications in both options. — Rajesh Thaman, Jamalpur, Ludhiana A.
Your wife has the right to gift the constructed residential house to your son. The gift would involve execution of a gift deed and the registration thereof with the Sub-Registrar’s office. The stamp duty would be payable on the market value of the property as on the date of the execution to the gift deed. There would be no gift tax liability in respect of such a gift. Your wife can also make a Will whereby your son will inherit the property after her death. It would be advisable to get the Will registered with the Sub-Registrar’s office. This would involve nominal charges for registration. In such a case there would be no income-tax liability.
I booked a flat...
... on April 29, 2004. The land was allotted to the society through an auction in October 2004. Expenses incurred on flat are as under: Self, Rs 3,39,876; bank loan, 7,80,000; electricity connection (Self paid), Rs 12,400; maintenance 07-08 (Self paid), 6600. (Total expenditure Rs 11,38,766). Sale proceeds of the flat, Rs 15,75,000. I want to know whether the sale of the flat will fetch LTCG or STCG as the date of allotment in share certificate is November 2004. But the date of possession is April 2007. The language of the share certificate is as follows:- This is to certify that the person named in this certificate is a Registered Shareholder of one share in the capital of the society subject to the Registered By-Laws of the Society (Each share is equivalent to Rs 100 only). If LTCG, then what is the tax liability in respect of the sale proceeds If STCG, what is the tax liability in respect of the sale proceeds, assuming that I am in 30 per cent tax bracket. — Neeraj Sachdeva A.
The facts given in the query do not indicate the date of allotment of the flat. The issue of a share certificate in a society does not lead to the allotment of flat because the share certificate could have been issued as and when application for membership was approved. The allotment of flat is normally made as and when the building is constructed. However, taking the date of first payment as the allotment date (i.e. 29.04.2004) the capital gain should be treated as a long-term capital gain. This is because the sale has been effected after three years of the date of allotment i.e. in April 2008. The tax liability on such long term capital gain would be worked out as under:- Indexed Cost: Rs 12,53,273
(4,60,441+ 4,09,292+ 3,71,140+12,400) Sale Consideration: Rs 15,75,000 LTCG: Rs 3,21,727 Capital gains tax on above would be payable at the rate of 20 per cent plus applicable education cess. I may like to add that in your case since the flat has been sold after taking possession and the period of holding of house property being less than a year, the tax authorities may take a stand that the gain is a short term capital gain. There are judicial decisions, which support both the views. The short-term capital gain would be without indexation of the cost and work out at Rs 15,75,000 11,32,276 = Rs 4,42,724. The same would be clubbed with your other income and taxed at the normal slab rates.
Renovation expenditure part of total cost
— Surinder Sharma, Chandigarh A.
The expenditure incurred by you for completion of internal doors, bathroom and transfer fee etc. will be included for the purposes of computing the total cost of the house property. The indexation for the original cost and the amount paid to the agent would be as under: (4,72,000 + 8,500) X 551=6,52,107. Since you have not mentioned the year in which the other expenditure i.e. on completion and transfer was incurred, it is not possible to compute the indexed cost. The capital gain arising on the sale would be a long-term capital gain. It would not be advisable to transfer the property for a lesser consideration. Instead it would be much better if the house were gifted to your son. The gift would involve payment of stamp duty and registration expenses. No gift tax would be chargeable on such a transaction.
The writer can be contacted at sc@scvasudeva.com
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Realty Bytes
New Delhi: Budget hotel chain, Choice Hotels India, plans to open 20 new hotels adding about 1500 rooms across India, with an estimated budget of around Rs 600 crore in the next two years. The hotel chain has signed management contracts with real estate developers for opening 20 hotels across the country, taking the total to 45, Choice Hotels India (CHI) Chief Executive Officer Vilas Pawar told PTI. CHI is also increasing its manpower to 4,500 from the current 2,500 as the total number of rooms managed by it would also reach up to 4,000 in the next two years. Out of the proposed 20 hotels in the future, the company would operate three in the National Capital Region and five in Punjab.
— PTI
INOX multiplex at Faridabad
New Delhi: After Fun cinemas, Movie Times cinemas and Adlabs, the latest to make a foray in NCR is the INOX Group, the second largest multiplex chain in India, with the setting up of a multiplex in the neighbouring town of Faridabad. The INOX group opened doors of its Faridabad multiplex, located at the 5 lakh sq ft Crown Interiorz Mall on Delhi-Mathura highway, earlier this week. The first of its kind, the four-screen multiplex has a capacity of 1,108 seats and is the largest in Faridabad. Speaking about INOX foray in the NCR, the COO of INOX Leisure Ltd, Alok Tandon said, “'Luxury is the cornerstone of INOX Faridabad”. Currently, INOX operates 23 multiplexes and 80 screens in 18 cities making it the only national multiplex chain.
— UNI
IVR Prime to invest Rs 686 cr in residential projects
Mumbai:
Real estate firm IVR Prime Urban Developers will invest Rs 686 crore for the construction of high rise residential apartments in Andhra Pradesh. The company would invest Rs 386 crore in the 9.6-acre gated community project at Kukatpally in Hyderabad, comprising a built up area of 1.325 million sq ft and a parking area for 1,200 cars, the company said in a filing to the Bombay Stock Exchange. Meanwhile, the company would also put in Rs 300 crore in real estate development project at Visakhapatnam, comprising 1,500 affordable independent homes. The total built up area of the venture is around 1.22 million sq ft. The company’s ongoing projects include the Thyme Park Project at Bangalore, which is spread over an area of eight acres, built at a cost of Rs 110 crore. The total built up area of the project is going to be 5.26 lakh sq ft, out which construction of 1.41 lakh sq ft is completed.
— PTI
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After having a dream run for the past few years the realty sector in Hyderabad seems to be hitting the harsh realty now. The real estate boom had been triggered as soon as the city was labelled the next IT destination of the country. As mega bucks flowed in via major multinational IT companies, the land prices soared. But correction seems to have finally set in as the astronomical prices of land in and around the capital of Andhra Pradesh appear to be mellowing down now due to a number of factors. There has been a sharp fall in land registrations and the auction of government land too has been evoking a lukewarm response from developers.
While the “Telangana sentiment” has put brakes on land transactions and sent alarm bells ringing among real estate developers, the growing interest rates on home loans have also served as a dampener for the middle class and upper middle class buyers.
In the last few episodes, basic planning concepts for bathrooms and choice of best bathroom fittings were discussed. Here are a few more valuable guidelines on bathtubs, showers and bidets in view of their increasing use:
The notification issued by the Securities and Exchange Board of India (SEBI) of the amended guidelines for real estate mutual funds (REMF) has been hailed in the market, as it opens up doors of opportunity for the common investor to take advantage of the real estate market where otherwise only huge sums of money had to be invested through private equity.
My queries are as follows:
Q. I purchased a Chandigarh Housing Board flat on PO on June 22, 2000 and shifted in it on January 1, 2001 after completing the internal works. I got the flat transferred in my name in the housing board record on September 25, 2006. The following expenses were incurred for completion/transfer in addition to the original price: Rs 4,72,000; commission, renovation expense and registry charges: Rs 2,65,965. I wish to sell the flat this year by December 2008. Kindly advise: Whether all the above expenses are included in the original price to reach the actual purchase price. Whether the gain would be LTCG or short term capital gain. Whether it would be legal to transfer the flat to my son by taking a nominal profit. Whether it would be treated as a sale or transfer of property within the family, in case it is given to my son by taking nominal profit.