 |
|
| REAL ESTATE |
|
|
|
|
|
Mortgage in old age
The reverse mortgage scheme faces several hitches. For one, most property in the country is ancestral and governed by inheritance laws. This can cause legal hurdles
for banks to take possession of it after the demise of the borrower, writes
S.C. Dhall
A negative factor for the banks is the big deterring influence being wielded by the children of elderly parents wanting to opt for such loans. According to H.D. Singh, former general manager of the State Bank of Patiala, based in Chandigarh, the reasons for the slow acceptance of the product lies in the cultural roots of our society. Unlike in the USA or other western countries, the elderly in India want to bequeath their property to the children. Since many of the wards take care of their parents in old age, they feel that there is no need for reverse mortgage. While the reverse mortgage scheme is intended to be a security net for senior citizens, it has very little utility to a big majority of Indians. In the past few months, reverse mortgage has been touted aggressively as a product that will allow the elderly to unlock the value of their house. In fact, in the last two budgets, the finance minister had made a special mention about it. In the Union Budget 2008-09, the income earned from reverse mortgage was even exempted from income tax. Though a large number of banks and non-banking finance companies have launched this offer, the response has been rather lukewarm. One reason is the product has not been marketed well by the lenders. Besides, there is some ambiguity about property valuation, maintenance and repossession. Moreover, senior citizens are uncomfortable with the basic idea of leveraging their property. Though banks have been given targets, the branch staff, specially the managers, are not taking much interest in promoting the scheme because of the increasing volume of non-performing assets (NPAs) in view of a hike in the rate of interest. According to reports, only Rs 500 crore have been extended by banks across the country. Under the scheme, the loan can be given only on self-acquired property. But as most property in the country is ancestral and governed by inheritance laws, it can cause legal hurdles for banks to possess the property after the demise of the borrower. The SBI has given only around Rs 200 crore under the scheme, while the PNB has lent to a little more than 100 borrowers. A lack of awareness and society norms work against the scheme. Most people want their property to go to their children after their demise, rather than to the bank. Another reason why this scheme is not gaining popularity is that the monthly payments are low due to the prevailing high interest rate. If one owns a property worth Rs 13 lakh, the bank reduces the value to Rs 10 lakh after a cushion of 30 per cent. The banks give Rs 1690 or Rs 1700 for 15 years at the rate of interest prevailing in the market. Similarly, Dewan Housing, which was the first private company to introduce this scheme, gives Rs 2050 for the same property and for the same time-frame. The SBI gives Rs 225 per lakh for the same time period with the maximum payout being Rs 1 crore — Rs 22500 a month. It gives 90 per cent of the property value. And the onus is on the senior citizen to pay taxes and do regular maintenance of the house or property. According to planners, one should go in for reverse
mortgage only in case of dire need. The scheme is not picking up because the resistance from children is deterring elderly parents from availing themselves of the loans. There are a number of cases where the applicants have withdrawn applications after sanction of the loan, citing their sons’ objection as the reason. National Housing Bank (NHB)
officials say the product will take the next three to four years to evolve. It is a trial period for both the lenders and borrowers. Meanwhile, the NHB is awaiting the Reserve Bank of India’s clearance to set up a non-banking company for
mortgage guarantee as a joint venture with a foreign partner. Mortgage guarantee will be provided at a reasonable fee. While the guarantee would help mitigate the risk arising out of possible defaults for banks, it will be beneficial to borrowers as banks might consider reducing interest rates for those going in for
the guarantee.
|
|
|
Return of the native
Home developers are wooing NRIs seeking to relocate in India Higher rate of returns in real estate investments, projects that comply with international standards and greater affordability apart from emotional reasons like owning a piece of the homeland are driving the NRI segment growth in
the realty sector in Bangalore. "Ma, is Chennai like New Jersey?" asks a cute toddler in a catchy overseas promotional advertisement campaign launched by a leading real estate brand
in India. The campaign reflects the current market trend among developers to come up with special campaigns aimed at targetting NRIs who want to ensure that they invest in homes with designs and amenities available abroad. "With good employment opportunities in India, more and more NRIs are looking at relocating themselves," says Shrikanth T, national head for sales and operations at portal property.com. "They want to ensure that the process is smooth, especially for their children. A lifestyle match is what these people are looking for when investing in property here." While some prefer contemporary designs, others search for homes that bring back memories of childhood or times spent in the courtyard of a village home. Amentities like a club, a sports arena, small green covers reserved for taking a morning or leisurely evening walk, a swimming pool, a fitness and activity centre for kids are features that NRIs are keen on. "Security ranks on top of their priority list, and so do after-sale maintenance issues. Many of these investors want to deal with developers who have a strong property management system," according to V. Nagarajan, editor and publisher of Priya Publications that brings out publications on real estate. "Value-added services are what these NRI investors look for while scouting for real estate here," he says. Shrikanth says various findings show that about 30 per cent of the NRIs are interested in luxury apartments, 20 per cent in villas, 15 per cent in plots and five per cent in farmhouses. Half of the NRIs are comfortable owning a piece of property anywhere in India, while 23 per cent are keen on houses in Chennai, Bangalore and Mumbai. About 20 per cent of them look at investments of Rs 1-1.5 crore and around five per cent are interested in properties worth Rs 4-5 crore. Interestingly, the cities that find favour with the NRIs are geography-specific. "Bangalore lists as high priority for NRIs from California, Kuwait and Saudi Arabia, while Mumbai is a favourite among those from New Jersey, New York, Hong Kong, Singapore, Kuwait and Saudi Arabia," says Nagarajan. According to a leading developer, owning a house in India is no longer a pipedream for many NRIs. "With strong economic growth, growing employment opportunities and development touching many sectors, NRIs are now keen to invest in their native land." Some developers have charted out special overseas promotional campaigns to sell their products. The Internet has also emerged as a popular medium for NRIs to gather information on properties for sale. Real estate developers are also coming up with special features. Projects with themes revolving around Spanish, Italian and old English architecture are finding many takers. Some projects also offer designs with a touch of the Mughal era o locales typical of an Indian region.
— PTI
|
||
|
Retirement Benefit
What are your plans for developing townships in north India? We are already developing an integrated township called CHD City at Karnal, spread over 200 acres, to be developed at an estimated cost of Rs 500 crore. Other than this, we are planning to come up with integrated townships in Ludhiana and Jalandhar and are in the process of finalising land deals. We have already firmed up plans to pump in Rs 1,400 crore into various projects over the next five years, including group housing projects in Vrindavan and Hardwar. This money will be raised from the market and the profits will also be ploughed back. Tell us about your retirement townships? Our retirement townships will be lifestyle housing projects for the retired people. The company aims to build resorts and luxury housing for people above 55 years at Karnal, Rishikesh, Mathura and Neemrana. We will be designing the resorts in consultation with an Australian expert and things will be finalised soon. We have proposed to inject a sum of Rs 1,200 crore in this project and intend to float a special purpose vehicle for it in which some other companies may also acquire a stake for funding purposes. These will be unique townships with provision of medicare and will also be disabled friendly. Since you plan to raise money from the market, are you a listed company? We are already listed on the Bombay Stock Exchange (BSE), but we are planning get listed on the National Stock Exchange (NSE). We plan to go public after the company is listed on the NSE. We hope to get a good response as we have delivered projects covering more than 700,000 sq. feet area and propose to develop a more than 10 million sq. ft. area in the next few years. The company’s turnover in the year 2007-08 was Rs 75 crore and the target for this year is Rs 100 crore.
|
||
|
Tax tips
Q. I bought a residential house in the name of my parents who are the joint owners thereof. The house was bought partly from the savings of my father as well as a bank loan in which I have been shown as a co-borrower along with my parents. Can I claim tax benefit on the interest paid? — Amarjit Singh, Ludhiana A. The deduction in respect of interest from the income chargeable under the head “income from house property” is allowable to a person who has acquired the property with borrowed capital. As the property has been acquired by your parents jointly, the deduction with respect to interest paid to the bank would be allowable to both of them. You cannot claim it.
Transfer issues
Q. My real brother was allotted a plot by PUDA and letter of intent was issued on 30.03.01. As the site was under litigation, the allotment letter was issued on 27.12.07 after PUDA won the case. The possession of the plot was given on 28.04.08. Till date, out of a total cost of the plot, which is Rs.9,37,500, only 25 per cent has been paid to PUDA and the balance has to be paid in six half-yearly installments. My queries are:- 1. I want to get the plot transferred in my name under family transfer option allowed by PUDA, which can be effected after paying the requisite fee. Please let me know whether there is any kind of tax liability for this. 2. After getting it transferred, I intend to sell it (It will again
be a transfer case). The current market price of the plot is around Rs 50 lakh. Please tell me the amount of tax liability on me and whether it will come under the preview of short-term or long-term capital gains. 3. Do I have to deposit the tax in this year’s return or as the rule allows I have the time of three years during which I can reinvest it? Also, suggest ways of saving tax. — Manjit Singh
Goraya, Mohali A. The answer to your queries is as under: (i) The transfer can be affected without payment of capital gains tax if the transfer is effected by your brother as a gift to you. (ii) The subsequent sale within a period of 3 years of the acquisition of the plot would result in a short-term capital gain taxable. Such gain would be added to your other income and taxed at the normal slab rates. The capital gains tax is required to be paid in advance as in respect of other income, on September 15, December 15 and March 15.
Plot progress
Q. I am an 85-year-old single woman and I need your advice as under: 1. I had purchased a plot in Faridabad in installments starting in 1968 and continued till 1973. The plot was registered in my name in 1987. What will be my date of acquisition for tax purpose? How will this be indexed? 2. I sold the said plot in June 2008 and have started the process of purchasing a plot in installments from HUDA. If I complete the payment to HUDA within three years of the sale of my original property will there be any LTCG? I do not plan to construct any building on the said new plot during this period. Will it be necessary to construct a house within 3 years to avoid LTCG? 3. While purchasing the new plot, I have added the name of my nephew as a joint holder though is not contributing any amount in the purchase. What will be its implication on the LTCG in this case? — Raj Kharbanda A.
The answer to your queries is as under: (i) The date of acquisition would be that on which you took the possession of the plot. (ii) The reinvestment of the sale proceeds in a residential plot would not enable you to claim exemption from the capital gains tax. In case you want to claim it, a residential house property should be constructed within three years of the date of transfer of the plot. (iii) It would be advisable not to add the name of your nephew as a joint holder of the plot.
The writer can be contacted at sc@scvasudeva.com
|
||
|
Wooden Expression Jagvir Goyal Wooden floorings have been around for the past 150 years but with many upswings and downslides. However, these have never been written off. People tend to like products with a natural look. Since 2000, there has been a consistent rise in the use of wooden flooring in bedrooms and living rooms. Keeping in view the present trend, almost all builders are now using wooden flooring in the bedrooms for its elegant and warm look. Architects and engineers count it under luxury segment of specifications. Living rooms too if provided with wooden floors, look stylish. If you plan to use wooden flooring in a part of your house, the best option is to choose wooden laminates. These are durable, can be fixed easily, resist termite and dampness, are easy to maintain and a variety of natural shades and colours are available. Consistent orders placed by the builders over the last 4 years have fuelled the wooden laminate industry. This has benefited the customer as better laminates are now available at lower prices. To choose cheap, best and durable laminates, here are a few guidelines: Area: Use wooden flooring in the bedrooms and the drawing room. If you can’t afford to provide it in all bedrooms, let it be there in the master bedroom at least. Provide wooden skirting with laminates. Thickness: Wooden laminates are available in many thickness levels. Choose a minimum of 9 mm thickness. The more the thickness, the better is the flooring. However, the cost of laminates increases with their thickness. Choose 9 to 12 mm thick laminates. Important features: Choose high-pressure laminates that’re scratch-free, wear ‘n’ tear-resistant and stain resistant. Look for the sound reduction feature. Wooden laminates have a High Density Fibre (HDF) core with a solid wood covering on both sides. These are produced in many grades like residential use, commercial use and heavy commercial use. Residential grade is AC3 while heavy commercial grade is AC5. Manufacturers have developed AC3, AC3 +, AC4, AC4+, AC5 and AC5+ classes. AC3 Grade has no backing material while higher grades are provided with a cotton type sheet backing further backed by a sound-proof sheet backing. Choosing grade: Though AC3 grade is termed as residential usage grade, prefer to AC4 or AC4+ laminates for your house. The higher the grade, the costlier the laminates. However choosing a AC4 or AC4+ laminate will be worth its cost. These will resist stains, scratches by pets, fading and dampness. These are burn resistant also. Cost factor: While AC3 grade laminates cost around Rs. 60 per sq ft to Rs 70 per sq ft, AC 4 grades cost around Rs 70 per sq ft to Rs 100 per sq ft and AC5 grades cost between Rs. 100 to Rs 200 per sq ft. Some manufacturers provide a separate sheet to be inserted below AC3 grade laminates when the buyer can’t afford to buy AC4 or AC5 grade laminates. These rates include supply as well as installation costs as suppliers keep their own skilled labour to finish the job themselves and to avoid any complaint at a later stage. More about grades: AC4 and AC5 grades suffer no damage even if soft or hard wheels are run over them. Sometimes, there are apprehensions that heavy double beds provided in the bedrooms cause extra load on the laminates exactly below the legs. No damage to the laminates occurs at these points as the laminates rest on a solid base below it. Suppliers also provide guarantee against any such damage. Shades: Laminates come in many shades like matt oiled, textured and polished finish. Natural wooden shades such as Cherry, Oak, Walnut, Beech, Pine, Maple, Birch, Mahogany are available. Dark shades look sophisticated and hide dirt. Light shades look modern and spacious. Choose as per your liking. Size and quality: The standard size of laminates is 8” x 47.5”. Choose dual lock tongue and groove design panels as these get locked with one another with a click and don’t need any glue. Prefer to buy laminates that conform to EN 13329 specifications. This is important because in such laminates, thickness swelling is not more than 12 per cent in any case. Also, these laminates are able to withstand abrasion and don’t get faded with time. Fixing precautions: See that floor base below laminates is perfectly level. In fact, the supplier himself ensures it to be exactly level as otherwise he is going to attend complaints at a later stage. Always prefer to apply anti-termite solution coating to the floor base before fixing laminates on it. Further, see that the edge of the laminates butting the walls is vertical and not tongued. End mouldings: Always choose to provide mouldings at the ends of laminate flooring. These round off the floor ends and save the laminates from damage. Provide quarter round mouldings at the junctions of walls and laminate floor. Sometimes, a small gap is left between the laminate floorings provided in two rooms. Cover this gap with T-shaped laminate moulding. Use reducer moulding at the junction of laminate flooring with other types of floorings such as tiles and marble. These mouldings provide a smooth transition from one floor to another. Nowadays, suppliers like Pergo have developed an innovative 4-in-1 type moulding which can be used for any of the four different applications and the user can avoid the trouble of working out quantities and buying several types of mouldings. Manufacturers: Among reputed brands are Pergo, Kahrs, Span, Berry, Junckers (all imported), Merino and BVG. Most reputed manufacturers give 50 years or lifetime guarantee for their laminates. Unitex provides wooden laminates at very competitive rates. Bargain hard, for good discounts on listed prices are available. Strike a deal for complete supply and fixing job by the manufacturer. Check a manufacturer’s service record before placing an order with him. Take care: Once you have provided wooden flooring in some rooms, ask the supplier to give it wax treatment. It will seal the joints. Never use water to clean the wooden floors despite a manufacturer’s assurance. Use damp cloth to wipe it. Use a vacuum cleaner sometimes to clean the corners. Don’t buff a wooden laminate flooring nor drag heavy furniture over it. Go ahead. Happy building! The writer is deputy
chief engineer, civil, PSEB. He can be reached at www.jagvirgoyal.com
|
||
|
JMD group announces Ludhiana project
A leading property developer of the country has formally announced its master project, the JMD Regent Square, in Ludhiana. Located on Sherpur Chowk, it claims to be the first corporate park in Ludhiana with substantial office space. It will have state-of-the-art architecture and will be spread over 2.1 acres. The project seamlessly integrates the commercial and retail components in an aesthetic world-class ambience and is expected to be completed by
September, 2009. It will have features of international standard like centrally airconditioned, high-speed elevators and escalators, 100 per cent power back-up , ample parking space,
24-hour security and integrated fire-fighting and fire-alarm arrangements Says Sunil Bedi, “We chose Ludhiana for its unique status in the commercial hierarchy of cities. It is a place which has established itself as an industrial hub and gives its denizens ample purchasing prowess. This is the strong reason why JMD Regent Square has been conceptualised in Ludhiana.”
— TNS
|
||
|
TN to construct 22,000 houses
The Tamil Nadu government proposes to construct 22,000 houses across the state at an investment of Rs 2,000 crore, state minister for revenue and housing I. Periasami has said. "Of the 22,000 houses to be built by the Tamil Nadu Housing board, 5,000 houses will be constructed by the end of this year", he said. About 1,000-2,000 houses would be constructed in areas like Foreshore Estate and Valasaravakkam, he said. The Tamil Nadu Housing Board currently holds Rs 200 crore while the remaining funds would be generated by floating tenders, Periasami
added. — PTI
|
||
|
Despite an aggressive advertisement campaign — through hoardings, newspapers and TV commercials — by banks across the country to promote reverse mortgage loans for senior citizens, these have not really picked up, primarily due to a lack of enthusiasm among legal heirs of aged property owners.
Elaborating on their expansion plans in the region, R.K. Mittal, chairman and managing director, CHD Developers, tells Ruchika M. Khanna that several retirement townships for senior citizens are
in the pipeline too.