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Mega concessions become mega scandal
Recently, the Punjab government announced that if an industrial park project is large enough, even the draft master plan can be changed
Money can buy a lot. Even the sanctity of master plans. In a recent decision, the Akali-BJP government in Punjab announced a host of concessions for promoters of super mega industrial parks in the state. These include an appalling concession. If the industrial park project is large enough, even the draft master plan of the area can be changed to suit the needs of the industrial park promoter. Sources allege that the decision is scandalous and “tailor made” to suit certain promoters, and the windfall of concessions for the large promoters has left many medium and small-size promoters highly discontented. On the face of it, the concession policy goes all out to encourage the establishment of huge industrial parks spread over hundreds and thousands of acres. But a close reading of the concessions hints that it has been largely designed to “help” only a handful of top promoters. This special package of incentives for the development of integrated industrial parks includes reducing the area under industrial component for these projects while increasing the commercial component. The super mega projects have been divided into three categories. The projects, which are spread beyond 750 acres, fall in Category A. A project spread across 500 to 750 acres is category B and the one which spreads across 250 acres to 500 acres fall in category C. Category A projects need to keep only 40 per cent of the area as industrial and can use a maximum of 25 per cent area as commercial. The rest can be developed as residential. Category B projects would have 45 per cent as industrial, 20 per cent can be commercial and the rest residential. Category C projects can have a commercial pocket of 15 per cent, but 55 per cent of the area has to be industrial. For a normal promoter, only 10 per cent of the land can be used commercially, while 30 per cent can be used for residential purposes and the rest 60 per cent has to be used for industrial use. Promoters of these ‘super mega projects’ have also got a concession on the external development charges (EDC). The EDC, had been reduced substantially early this year and now with further discounts, these project promoters would get with paying peanuts to the government. A 50 per cent concession in the EDC to category A projects has been announced. For category B projects, the EDC concession is to the tune of 37.5 per cent concession and 25 per cent concession in EDC to category C projects. Similarly, a 75 per cent concession in license fee to category A projects would be given, 55 per cent concession in license fee to category B projects and 35 per cent concession to category C projects. The most shocking of concessions is the government having made the master plans subservient to the plans of the super mega projects. In case of Category A, the project would be approved irrespective of its land use position in the draft master plan or the local planning area till the master plan is finalised. The master plan prepared would be amended keeping in view the approved project. This move has immediately benefited a project promoter in Chandigarh’s periphery who was facing a host of problems in getting approvals. Some part of this project’s land fell within the municipal limits and some part was falling within the jurisdiction of the Punjab Capital Periphery Control Act. There is another eyebrow raising concession. If a promoter proposes to implement a lower category project, for example 250 acres project (C category), he would entitled to the benefits being granted to the promoter of that size of the project. If, however, he adds another 250 acres of land he would be granted incentives of B category of project. Similarly, for additional 250 acres, he would be granted the incentives for A category project for the entire area of the project. These benefits would be extended only if the additional land is contiguous to the already implemented/ sanctioned project. If the developer sets up another project on a different location, he would be allowed concession on license /permission fee as applicable to the project of one category higher than the project proposed, but no extra concession on the EDC of one category higher would be given. For example, if a developer has set up a project in A category anywhere in Punjab and he also sets up a project C category elsewhere in Punjab, then in case of category C projects, he would be get the concession on license fee for category B but on EDC he would get the concession of category C only. This move has also benefited a mega project group, which has already set up 1000 acre plus project across the state. This concession has saved several crores of the promoter, which on the flip side means a major loss to the state exchequer. “The whole list of concessions has been put together with certain promoters in mind. These benefits have been given to those who can pay. The rules remain unchanged for a majority of the promoters who are setting up projects on 100 to 200 acres,” said a promoter. The government has also allowed floor area ratio (FAR) three to category A projects, FAR 2.5 to Category B projects and FAR two to category C projects. What is unheard of is that the government has allowed the calculation of FAR based on gross acreage of the project and not just the plotted or ground coverage area, which is the norm. The project promoters have been allowed to sell all or part of the area they develop in various pockets. The promoter would have to construct on a minimum area specified within five years from the approval of the project. Category A projects would have to build a minimum of 25 lakh square feet of industrial space within five years category B project would have to build 17.5 lakh square feet industrial area in five years and category C projects would have to build 10 lakh square feet. The super mega projects have also been exempted from the payment of stamp duty and registration charges on the first sale of developed area and build-up spaces. No CLU charges would be taken for the industrial component. The developer would have to pay these charges for the commercial and residential components.
Social security fund
At least 5 per cent of the total amount payable by the developer on account of EDC and license fee shall be levied as health and social security fund and recovered in addition to the EDC and license fee. His amount would be deposited in a separate fund to be established by the state government for health and social security schemes. The promoter would have to develop 10 per cent of the residential component in each project for the economically weaker section housing.
Industrial pockets
Industrial pockets can include convention centres, community centers, film and multimedia facilities, high-end education and health care centers, hotels, sports facilities and water bodies but not multiplex or recreational activities. The extent of additional activities in addition to industry, which may include IT, ITES, BPOs, KPOs, software development data processing and other industrial activities will be limited to 30 per cent of the total applicable area.
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Jawahar Camp: From a refugee camp to booming market
From a refugee camp to a happening market that has witnessed a boom in realty, the Jawahar Nagar camp in Ludhiana has come a long way.
Here the land was allotted to refugees free of cost after the painful Partition. Now, every square yard is worth over Rs 3 lakh. Owing to the popularity of the market, being situated in the heart of the city, the cost of every square yard has skyrocketed. From a picture representing impoverished refugees, it has defined its own story of realty boom in Punjab. It evolved as a commercial area, becoming the hub of wholesale “karyana” and retail vegetable market from a residential area consisting of one-room houses and hutments. Today, it stands totally commercialised with every 35 square yard house converted into three shops. Every shop is priced at a whopping Rs 1 crore and each small house that can be divided into three is priced at Rs 3 crore. Outlets here sell products like toys, confectionary, cosmetics, clothes, footwear, readymade garments, leather articles, terra cotta and utensils. But the major beneficiaries have not been the refugees. They could earn a few lakhs of rupees only when far-sighted traders pre-empted the boom. The industrial city began expanding in the 1980s, bringing the colony into the centre rather than being on the side. The fast-developing Kochar Market in its vicinity and fast-expanding Model Town all provided ready customers for traders. The location of the bus-stand right next to the market provided easy transportation for the movement of goods. It brought in traders from villages and towns, making the wholesale trade far more lucrative. While the houses on the main road were converted into shops, the other refugees settled in streets could not prove to be lucky. They continue to live in pathetic conditions. "Due to the boom, nobody is ready to sell a shop here. They
are expecting the price to rise manifold. Every trader in Ludhiana wants to own a shop here, given the rush of customers. The roads are always jampacked in this market due to customer inflow," said Sham Lal, a leather dealer in the area. He added the shopkeepers in the market had, of late, become so well-off that if a shop was put on sale, they would buy it so as to discourage any outsider, who would compete with them in their trade. He said the market came into being 25 years ago. "At that time, the original allottees sold a shop for Rs 2 to 5 lakh. There were some who sold these for Rs 7 lakh and used the money to set up a business and buy a house. Since they were allotted these free of cost, they thought it was a good bargain. They could not imagine a shop would be sold for Rs 1 crore just after two decades. They also feel dejected now." Though the place earlier grew as a cloth and vegetable market alone, the shopkeepers are now coming up with new ideas. They have started with exclusive shops like artifacts. "Earlier only essential commodities were sold here. Now we have set up a shop selling artifacts so as to attract the elite class also," said Rajeev Gagat, a shopkeeper. The boom in the market has given rise to parking problem. Several customers with cars have started visiting the place, forcing the authorities to seriously think about parking arrangements. There seems to be no solution in sight. It remains to be seen whether the traffic and parking travails would allow the prices of shops to jump further.
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GROUND REALTY Jagvir Goyal
Over and above, the availability of a large choice of flooring materials tends to cause confusion. Your architect recommends a few materials but never guarantees their long-term and problem-free performance. The situation is complex enough to turn your crazy. It is time to take cool decisions for final floor finishes as per your taste rather than imitating others. We will discuss all these materials in the next few write-ups. But before that to consider is one thing — common to all floors, the base. It is the base that decides the long-term performance of final floor finish. It must be strong and laid well. To ensure that, here are a few guidelines: Earth filling: While preparing the base for floors, remove the vegetation and organic growth from the ground to avoid its further growth under the floor. Lay earth over the ground and well compact this earth filling. On the ground floor, always keep the top level of earth as 9 to 9 ½ inch below the top of the floor. This depth is to be filled with 4-inch thick sand, 4-inch thick lean concrete, ½" to ¾" thick mortar base for tiles or marble followed by the final flooring. Lay the earth in not more than 6-inch thick layers, sprinkle it with water and ram each layer well. Well sprinkle anti-termite solution over each layer of earth. The solution may be prepared by taking 0.5% Heptachlor, 1.0% Chlordane and 1.0% Chlorpyrifos and mixing these with the water. Otherwise, Chlorpyrifos solution can be purchased, diluted and sprinkled. Be liberal in providing this treatment. A re-check: Before laying the sand layer above the earth laid below floors, recheck that vertical DPC provided on the inner face of outer walls and extended up to 50 cm length of inner walls is intact. This is very important to avoid rise of dampness in walls at a later stage. Repair the DPC with 1:3 cement sand mortar if found damaged anywhere. Apply bitumen or water-proofing compound coat over the repaired DPC when it becomes fully dry. Marking levels: When the plastering of walls has been completed, mark the finished floor level and floor reference line on the walls. This is very important to maintain accurate level of floors. For this, first transfer the decided floor finish level from the reference pillar to the main wooden frame or “chowkhat”. Make another mark on the door frame at a height of 1.5 feet above the finished floor level. Transfer this level to all door frames in the house by the use of water level. Now transfer this level to all plastered walls by using thread and chalk. This is your floor reference line in all rooms. Your finished floor level is 1.5 feet below this level. Wherever you want to provide slope in the flooring, that can also be marked on the floor base with respect to this line. Whenever you want to depress the floor by ½" inch, like bathrooms and kitchen, this reference line will again be helpful. Sand filling: While laying the flooring for the ground floor, keep the thickness of sand layer provided over earth layer 4 inches. Note that sand layer can't be substituted by earth layer. The provision of sand layer will avoid the settlement of floors. Otherwise, cracks may appear at the junctions of floors with walls at a later stage. Choose clean and dry sand not having clay lumps in it. To compact the sand layer, don't flood it with water. This water will travel down to the earth layer and create slushy material below the floor. Frequently sprinkle water over sand layer and compact it well. Concrete base: Provide 4 inches thick lean concrete base over the sand layer and compact it well to create a uniform base for laying flooring. Before the laying of lean concrete is started, ensure that floor reference lines have been marked on the walls by using water level. Using water level is the most accurate method for laying floors to correct level. A skilled mason knows well the importance of accuracy in the marking of these reference lines. Well compact the lean concrete by the use of rammers. Use 1 : 6 : 12 mix of lean concrete. Prefer to use 38 to 40 mm size brick ballast than stone ballast. Level marks: After laying the concrete base, provide reference marks on it with the help of floor reference line. These marks are known as Thiyas. `These help in providing required slope to floors or maintaining the dead level. Never allow the masons to use the concrete base as the reference point. Many masons do that and measure the thickness of floor from the base to fix level marks. This is most inaccurate method and generally adopted by masons due to its easiness. Provide a slope of about 1 in 48 in verandahs, bathrooms and kitchens and toilets. Preparing base: Always clean the top of lean concrete (called base course) with a wire brush before the start of laying the topping over it. Clear it of all the muck, debris and mortar deposits. Make it rough to have a good joint with the final floor material. Use the stiff bristled broom for doing that. Allow lean concrete to set well for five or six days. Wet it well with water before laying the mortar bed over it. Though thickness of mortar laid over base course has to be ½" to ¾", see that it does not exceed 1 inch anywhere. If it exceeds, add some of 10 mm size coarse aggregate to the mortar in that portion. The floor base developed by following above guidelines will be a strong one, laid to right lines and levels. Flooring laid over it shall prove good and trouble-free for the house builder. Go ahead. Happy building! The writer is deputy chief engineer, civil, PSEB. He can be reached at www.jagvirgoyal. com
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Cheaper Pak cement gives companies tough time
With volumes of imported cement from Pakistan increasing in the domestic market, this cheaper substitute is all set to give local manufacturers a run for their money.
Many builders in the Baddi-Barotiwala-Nalagarh industrial are making use of this substitute. While a domestic cement bag is available for price ranging from Rs 220 to Rs 230, a cement bag from Pakistan costs around Rs 198. “It is a neat saving of nearly 10 per cent per bag when we calculate the entire cost of construction. We end up saving as much as 5 per cent on the project money,” observes a builder who is coming up with a Rs 40-crore project at Baddi. With cement contributing nearly 30 to 35 per cent of the costs, a saving of even 5 per cent means a lot to a builder. On the quality aspect too, builders appear satisfied, as they assert that this cement has quality matching the best in the country. With the procedure to import this cement being simple, a builder desirous of importing it has to obtain an import export code (IEC) from the Reserve Bank of India. Since it barely takes 48 hours to procure this code, the hassle involved is minimal, observed a builder who has availed this opportunity. Once an IEC is in hand, all one requires to do is place an order through the agents and the cement is made available at the doorstep at Rs 198 per bag. Its easy availability has started making a dent on the sales of domestic manufacturers. Ambuja Cements which has a major market share in the region, however, feels that the Pak cement’s contribution to the total sales is not much. The company’s GM handling technical operations Ajay Pathik says, “Despite being a cheaper option its contribution to the market share is almost negligible and the entry of this imported option has posed no threat to the domestic players.” While contesting the quality claim of Pakistani cement, Pathik adds, “Its used only for limited applications like plastering or brick work and competes nowhere with the domestic cement in terms of quality.” Echoing similar views, an official of JP Cements says, “ It’s just a temporary phase where this imported cement is finding some users in the market. Its use in the market is limited and it does not appear to be having any impact on the market.” Marketed by limited brands, it’s non-consistent availability is what has obstructed its growth in terms of volumes, opined a builder. “A positive fallout of this import is, however, the fact that the price of the domestic cement has halted at Rs 230, which was otherwise slated to go up by nearly Rs 50 to Rs 70,” says Gopal Singla, a cement distributor. “Since as much as 8 to 9 per cent of the market share in Punjab is being consumed by this imported brand it has made the market leaders to re-think on price hike,” he adds. Many users, meanwhile, term its quality as the best among ordinary Portland cement. An exporter D.S.Sangha from Mohali, while dwelling on its technical aspect, said, “With no fly ash and a pure amalgamation of clinker/ limestone, this cement offers more strength. Further, it takes less time for its setting and hence leads to less consumption.” On the flip side, with the hike in the freight by the Railways and an overwhelming demand in the market, its supply has failed to keep pace with the demand. Further, with poor logistic support in Pakistan, the import has remained limited.
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Booming realty market woos UK investors
Buoyed by a vibrant real estate market, investors in Britain are increasingly preferring India for investment, seeking higher returns on the back of a slowdown in Britain's realty market.
Andrew Fassnidge, managing director of Navyroof.com, a company that highlights investment opportunities in the most upcoming areas of India to the UK investors, said: "All economic indicators project a bright, sustainable future for India. In the past two years alone, property prices in India increased by 70 per cent." India is also seen as an attractive destination due to the Indian government recently relaxing rules for foreign investment in the housing sector. Merrill Lynch consultants have predicted a 700 per cent increase in the Indian property market by 2015. Meanwhile, except in several areas in London, property prices all over Britain have recorded at least a 2 per cent drop in the last year due to the credit crunch, and a further fall in prices is predicted. British citizens of Indian-origin are increasingly investing in places such as Gujarat, Gurgaon, Bangalore, Chandigarh, Pune and Jaipur. In order to guide NRIs for purchasing property, Indian builders and property agents often organise exhibitions here. The latest to organise exhibitions is the Housing Development Finance Corporation (HDFC), which would organised a two-day show called "India Homes Fair" here soon. About 18 leading developers, including Ansal, Unitech, from India will showcase flats and villas at the event. Renu Sud Karnad, joint managing director of the HDFC, said: "Home buying is a tedious process. As pioneers in housing finance, we have well understood this need and have thus organised this exclusive event to guide our NRI customers so that they take an informed decision."
— PTI
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Tax tips
Q. I purchased a flat at Zirakpur in January 2006 in instalments. I have paid all instalments, but now the builder is asking me to pay service tax @ 4.12% of the total sale value in view of the condition of the allotment letter that allottee shall be responsible to reimburse the company for making any payment of taxes levied or leviable by PUDA, Central government, or Punjab government or any authority as the case may be from the date of allotment, before giving me the possession of the flat.
I have come to know from one of my friends that the service tax is to be paid by the builder/ contractor/ sub-contractor himself and he cannot charge the service tax from the allottee. Now my queries are as under: Is it true that the service tax is to be paid by the builder/contractor/ sub-contractor himself and not by the allottee? In case the builder insists on charging the service tax from me what action can be taken against him in order to get the possession of the flat without paying the service tax. From where can the copy of authentic rules be obtained regarding the payment of service tax. — Anurag Jain, Panchkula A.
The answers to your queries are as under: In respect of service tax, the liability to pay the same is on the service provider whether or not he has collected the service tax from the service receiver. In such a case, you have no other option but to go to the court of law for the purpose of seeking relief. There are quite a few publishers who have published books on service tax like Taxman, Bharat Laws Service etc. You can buy books published by anyone of them for the purposes of understanding the law.
Division of commercial property
Q. My father has commercial property in a metropolitan city under the HUF status. He expired on June 23, 2005, leaving behind his wife, two sons and two daughters. All children are married. One daughter expired on February 2, 2003, leaving behind two sons. My father had not made any Will. Who are the legal heirs of property? What is the share of legal heirs in the property? — S.K. Verma, Chandigarh A.
The Hindu Succession Act 1956 has been amended by the Hindu Succession (Amendment) Act 2005. The Amendment Act came into force w.e.f. September 9, 2005. By virtue of the above Amendment Act, daughters have been given the status of a co-parcener and, therefore, would become entitled to a share in the joint family property owned by a family governed by Mitakshara Law followed in the northern part of the country. However, on the basis of the facts given in the query it is noted that the death of the Karta took place on June 23, 2005 and in my opinion, therefore, the provisions of the aforesaid Act prior to the amendment would become applicable to a joint family property. Accordingly, 3/4th share in the property would devolve by survivorship on the surviving members of HUF, meaning thereby that HUF would be 3/4th owner of the property. One fourth share in such property would devolve on deceased’s wife, two sons, daughter and two sons of the deceased daughter. This is in accordance with the proviso to Section 6 of the Hindu Succession Act 1956 which existed prior to the amendment. The aforesaid opinion is based on my understanding of the law. I would, however, suggest that this being a civil matter, you should approach a civil lawyer for the final opinion.
Interest income on sale of ancestral land taxable
Q. My wife sold her share of ancestral property and the sales proceeds, received by A/c payee cheque in her name, were deposited in the joint (either of survivor) savings bank account in my name (first name) and my wife’s name (second name). Later on, a major portion of the sales proceeds was invested in term deposits in the same bank in a joint (either of survivor) account in my name (first name and wife’s name (second name). My query is:- Whether the interest accrued from the term deposit in question will be clubbed with my income for calculation of income tax payable by me because the first name is mine in the bank account or will it be considered income of my wife along with the long-term capital gains etc. because the money invested in term deposits actually belongs to her? My wife is a senior citizen and not income tax payee, but this year her income is likely to exceed the taxable limit due to the LTCG receipts. Is PAN card mandatory for filing the return and on what form number? — B.N. Chaudhary, Karnal A.
The answers to your queries are as under: The interest income on the sales proceeds of your wife’s ancestral property would be taxable in her hands. Even the long-term capital gain, if any, arising out of such sale, would be taxable in her hand. She must obtain PAN for the purpose of filing the Income-tax return so as to reflect the long-term capital gain earned on the sale of her share of ancestral property as well as the interest on the term deposit. The PAN is mandatory for the purpose of filing the income tax return.
Tax on sale of immovable property
Q. I am a senior citizen and my annual income from pension, bank interest is about Rs 85,000. I intend to sell my share of the ancestral land, which is expected to fetch LTCG of Rs 6 lakh, after deducting the indexed cost etc. from selling price of land in question. I do not intend to invest this amount to save tax in any manner. The LTCG tax at the rate of 10.6% comes to Rs 63,600. I am told that I have to pay Rs 63,600 as LTCG tax even when my annual income clubbed with the LTCG tax is below the taxable limit for senior citizens. If your reply is in affirmative, do have I to obtain PAN Card before filing the IT return? What is the relevant form no. to be filled in my case? — Kamla Devi, Gurgaon A.
The long-term capital gain tax on the sale of a capital asset in the nature of immovable property is chargeable @ 20% plus applicable education cess. The rate chargeable for assessment year 2008-09 (year ending 31.03.2008) would thus be 20.6% on capital gain of Rs 6 lakh. The long-term capital gain being Rs 6 lakh as per the facts given in the query, it is not understandable as to how your total income after taking into account long term capital gain would be below the taxable limit. In my opinion, therefore, you will have to file the tax return and also obtain the Permanent Account Number for the purpose. The relevant form in your case would be ITR-2.
Division of capital gain not possible
Q. I shall be grateful if the following questions are answered: Which view should I take, if I consider the gain as LTCG, is it favourable for me? However, the view that it is STCG favours the Income tax department. Are there any judicial orders on the basis of which it can be considered as LTCG? Since the date of allotment of land to the society is Oct, 2004, and the date of possession of flat is April, 2007, is it possible to bifurcate the gains in two parts i.e. in respect of land – LTCG and in respect of building on it – STCG. If the answer to point no. 3 is yes, how is it possible as the society can provide only the total cost of the land and total number of flats built thereon with area wise specifications? There is also no bifurcation available towards the cost of land and structure thereon, in respect of each individual, in the payment made to the society by the individual. Whether the interest paid to the bank in respect of home loan be added to the cost of the flat. I have claimed the deduction in respect of 1/5th of interest paid for the financial year 2007-08. I would not be able to claim the balance amount, as I will not be in possession of flat in the financial year 2008-09. — Neeraj Sachdeva A.
The answers to your queries are: The decision on this issue would depend upon you. In the following cases, the date of allotment was considered for the purposes of treating the capital gain as a long-term capital gain: Jitender Mohan vs. ITO (2007) 11 SOT 594 (Delhi) ITO vs. Prem P. Tharanee 3 ITD 482 (Bombay) It is not possible to bifurcate the capital gain in two parts, as you have been allotted the flat only. In case of flats constructed by the societies in Delhi, the land is owned by the societies and the transfer of land is not envisaged generally to the flat owners. The interest paid to the bank in respect of home loan cannot be added to the cost of flat, as the same has been claimed as deduction from the income from house property under Section 24 of the Act. The interest for financial year 2008-09 is not claimable as you have sold the flat. The writer can be contacted
at sc@scvasudeva. com
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Often, the flooring work of a house or building is taken up at a time when your patience is already under test, the contractor is in a hurry to complete his assignment and catch a new one and your expenditure seems to be exceeding your estimate.