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RE: Chennai Real Estate- News- 2

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COMPLAINANT TO PAY REVISED AMOUNT
Builder told to pay 3L for delaying handing over flat

Manish Raj TNN

Chennai: A realestatefirmthat delayed giving possession of an apartment to its buyer has been directed by the State Consumer Dispute Redressal Commission to pay 3 lakh as compensation.
In December 2012,Vijaya Padmanaban,an employee of Chaitanya Builders and Leasing Pvt Ltd,made an advance payment and booked an apartment in the project being built by her employer.She received the confirmation in the same month,after which she carried out interior furnishing work in the flat.Two years later,she resigned her job with Chaitanya Builders.The company sent her a note saying the flat was allotted to her at less than (the actual ) cost on an understanding of a long-term productive participation in the growth of the company.
The company also returned her cheques saying that her attitude to the companys assignments resulted in a loss of 2 crore in a project. Vijaya filed a complaint with the commission seeking a compensation of 20 lakh for deficiency in service,harassment,mental agony,and 15,000 for loss of funds.
Chaitanya,in its reply,said the complaint was time-barred and fell outside the purview of the commission.It said Vijayas negligence resulted in huge losses to the company and claimed she was trying to unlawfully take possession of the flat.Further,Chaitanya filed a civil suit and obtained an injunction order too.
The commissions bench said : It is well settled that all subjects relating tohousing construction are within the purview of the Consumer Protection Act.As there is continuing cause of action in not handing over possession of the flat in complete shape,it cannot be barredby time.
The bench said further evidence regarding the civil suit was not produced and the employment issue was irrelevant to the case.
The commission said : The failure on the part of the companytohandover possession ofthe flat to Vijaya in time amounts to deficiency in service. It directed Chaitanya to hand over possession of the flat to Vijaya and pay an amount of 3 lakh for deficiency in service,harassment,loss and sufferings undergone by her,besides 5,000 as costs. Vijaya has also agreed to pay the revised price quoted by the builder.She has been directed to submitthebalance amountover and above the initial payments.

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BEATING RUPEE BLUES
Luxe hotels plan dual-pricing for foreigners

Sushma U N TNN

Chennai: With the rupee falling sharply against the dollar making India an interesting destination for foreign tourists,luxury hotels are grabbing the opportunity to make a quick buck.
Industry sources say that top luxury hotels are planning to start dual-pricing,or twin pricing,where foreign guests get to pay lower tariffs than what they now pay.At present,foreign guests are given a dollar tariff,that is usually pegged 10-15 % higher than the rupee tariff applicable to Indian guests.The quantum of discount will vary on location and the hotel property,said sources.
All hotels have contracts or packages with tour operators and might not be able to bring this in with immediate effect.For individual travellers they could start this right away but for tourists coming as part of travel packages,it could come in from October this year, the source said.Luxury hotels import a lot of products and liquor,and this is one of the measures to cover costs, the person said.
It is an option that we will have to look at,even if we do other things to manage the rupee devaluation an official from a top luxury hotel said.
Today,hotels in several hill stations and tourism hotspots like Goa follow the dualpricing system,but with the rupee depreciation bringing more foreign tourists to several parts of the country,hotels are planning to bring this to metro cities as well.
This differentiated pricing apart,overall tariffs will fall,industry sources say.When business is coming in,companies will want to give discounts and make best use of whatever opportunity they have rather than lose business,so tariffs will go down further, a source said.
This comes at a time when the hotel industry is facing the slump due to economic slowdown,forcing luxury hotels in Chennai to offer rooms at as low as Rs 5,000.The economic slowdown has led companies to cut back on travel which impacts tariffs.
To top this,Chennai has seen a glut in supply of luxury rooms with new five-star hotels bringing in additional 1,300 rooms to the citys existing 2,000-room inventory,and the increased competition has caused luxury room tariffs to fall by about 15%.
Occupancy levels too have fallen.From the 70% occupancy levels that hotels in Chennai used to maintain,occupancy has fallen to 60%,and goes to as low as 45% for some hotels,sources say.

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Banks may extend edu loan tenure

Aparna Ramalingam TNN

Chennai: With the rupee continuing to hover near 64 to a dollar and 100 to a pound,many banks are contemplating extending the repayment period of educational loans taken by students to pursue higher studies abroad.
This would result in the EMI (equated monthly installment ) coming down, India Bank CMD T M Bhasin said.He also headed an Indian Banks Association (IBA) committee on educational loans.
Similarly,State Bank of Hyderabad may extend the repayment tenure for loans taken for higher studies abroad from seven to 10 years.Every attempt at restructuring would be looked into,including extension of loan tenure, MD of State Bank of Hyderabad,M Bhagavantha Rao said.
HDFC Credila has gone a step further.It plans to extend tenure to 15 years for select cases.A 10-12 year repayment is becoming the norm now.We are also extending it to 15 years for deserving candidates for larger loans on a case by case basis, country head of Credila Financial Services,Prashant A Bhonsle,said.
Here is the math: The average loan taken by students for a masters course in a rated university in the UK and the US can go up to Rs 30 lakh or $47,000 at todays exchange rates.The average tuition fees plus living expenses for a year-long masters programme in the US is $30,000 and in the UK it is 38,000 pounds.The interest rate on educational loans ranges from 11.5% to 14.25%,depending on the course,duration and university,which for a Rs 30-lakh loan would translate into an EMI of Rs 50,000 per month.
And with countries like UK imposing restrictions on work visa after studies as well as a bond of 3,000 pounds for a visa to crack down on illegal immigration,students will have no choice but to head back to India after completing their course.
This,coupled with the tepid job market in India,could compound the miseries of the borrower.Assuming a take-home of Rs 70,000 per month on a Rs 10-lakh offer and with an EMI of Rs 50,000,it would be really tough to meet other living expenses like rent,transportation,etc, Sanjoy Sircar,professor of finance,Great Lakes Institute of Management,said.
With the new semester just beginning in the US,personal finance advisors are of the view that students would require higher amounts of loans as the rupee has depreciated by almost 20% to the dollar since April this year.Thats because fee payments in US universities normally happen in installments.Either the student would have to take a top-up loan or cough up from his or her own resources, Kartik Jhaveri,director,Transcend Consulting,said.
But there is some silver lining too.Students who have taken a loan earlier for a masters programme and have completed their course and got a job in the US would now have to remit fewer dollars in EMIs towards the rupee loan taken back home.If the EMI were Rs 10,000,then the student would have to remit approximately $179 when the dollar was Rs 56/57 against the rupee.Now,because of depreciation,for the same EMI of Rs.10,000 the student will have to remit only $156 (@ Rs 64 for the US dollar), Bhonsle said.

Admin · Guru

Falling weighs on MNC royalty

Reeba Zachariah & Boby Kurian TNN

Mumbai: A falling rupee would squeeze the swelling royalty takeouts by multinational corporations in recent yearspotentially setting them back almost $1 billion from India annually.The choppy foreign exchange is frustrating MNCs which took the royalty route to maximize returns in a key growth market.
Indian operations of MNCs paid $4.5 billion in royalty payouts last calendar,with many hiking it further this year.But rupees 18% fall against US dollar and almost 19% drop against Euro threatens to put brakes on their royalty binge of recent years.Thats the riskreward factor MNCs take into account while doing business in any country.The reward is the enhanced growth and revenues and the risk is volatile currency,impacting profits and royalty, said Punit Shah,co-head of tax at consulting firm KPMG.
MNC arms increased their takeouts after India removed ceiling on royalty payable to the foreign parents four years ago,raising the heckles of nascent shareholder activism in the country.Royalty payments are usually linked to use of brands,marketing rights and technical know-how from the overseas parents to develop local engines of growth.
The payment is indexed as a percentage of the domestic rupee sales except in the case of sectors like automobiles where India is also becoming an export hub.Maruti Suzuki,Hindustan Unilever,ABB,Colgate-Palmolive,Bosch and Ambuja Cements are among the top six royalty paying companies.
MNCs riding on the domestic consumption story might offset the dent in profitability and royalty receivables by testing their pricing power.They have a dominant share of the profit pool and strong brands to effect price increases unless the sector is hyper competitive, said Sanjay Jain,director at Taj Capital,a New Delhi-based investment advisory firm.
Global consumer goods giants such as Unilever and Nestle unveiled a phased increase in royalty from their listed Indian subsidiaries,while their peers with privately held units and franchise operations effected similar moves away from the public glare.Fast food giant McDonalds,for instance,sought to increase the royalty from its Indian franchise Hardcastle Restaurants Private Ltd from 3% to 8% of the revenue by the end of the current decade.
Interestingly,MNCs that dominate Indias new age consumption story have fully owned subsidiaries,giving them complete control over royalty demands to boost return on equity in a market still demanding significant investments.There may be short-term setbacks on royalty,but the consumption-led companies may be better placed than manufacturing ones,to stave off the currency shocks, Jain added.

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Taj launches first Gateway hotel in Chennai

TIMES NEWS NETWORK

Chennai: The Taj Group has launched The Gateway Hotel IT Expressway Chennai,its first hotel in the city under the Gateway Hotels & Resorts brand.
The Gateway brand,unveiled in 2008,caters to the upscale segment,targeting business and leisure travellers in south Asia,with room tariffs ranging between Rs 4,500 and Rs 8,500.
The 200-room property has come up on the citys IT corridor Rajiv Gandhi Salai at an investment of Rs 150 crore.It is the 24th Gateway hotel,and the first to be launched in a metro.
With this,the Taj group has over 2,200 rooms under the Gateway brand,bringing them close to Rs 350 crore revenues.
The hospitality group plans to set up about 20 more Gateway hotels over the next three years across cities including Tirupati,Corbett,Pune,Raipur,Kolkata,and Faridabad,at an investment of Rs 50 lakh a room.
Eight more will come up in the next 18 months and we will have 40-plus hotels in the next three years and double this in six years, Prabhat Verma,chief operating officer,The Gateway Hotels & Resorts said.

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5 years on, CMDA Second Master Plan adrift pending review

Committees have not submitted bi-annual reports for two years

On Monday, it will be five years since the Second Master Plan for the Chennai Metropolitan Area came into effect. However, the committees constituted for the review and monitoring of the plan have not met for the past two years. As a result, officials are unable to properly estimate the progress of work under the plan.

In 2008, the government constituted six committees to cope with changes in the Chennai Metropolitan Area. They were the committees on economy and employment, shelter, infrastructure, investment planning, land use and environment, traffic and transportation.

The committees were to advise the Chennai Metropolitan Development Authority (CMDA) and various departments on action to be taken to achieve the objectives of the Second Master Plan, prioritise policies, programmes and action plans recommended and advise the departments or agencies concerned to implement projects.

They were also torecommend detailed studies to be made for effective implementation of the programmes and action plan, frame detailed policies such as affordable housing policy and pedestrian safety, review the progress of implementation and recommend corrections, identify measurable indicators to evaluate and monitor the progress.

The committees were supposed to meet every three months, but have stopped meeting. Officials of Chennai Metropolitan Development Authority said that most of the members are due to be replaced but the Authority is yet to take action.

The Chennai Metropolitan Authority has not received any recommendations from the committees in the past two years.

As the Second Master Plan covers a span of 20 years, the review committees have a vital role to play in keeping the plan on track, officials said. “The committees’ job is to study if a project meets the criteria under the Second Master Plan and pave the way for suitable changes,” said an official of CMDA.

Most of the studies proposed to be carried out as part of the Second Master Plan have also not yet received funding. A few agencies have commenced study on some of the topics but many are yet to be covered. The studies were to cover topics such as income and employment in formal and informal sectors, land needs for informal and small-scale enterprises, rate of urban growth and level of investments in infrastructure, primary health care and incidence of diseases, school enrolment and vocational training needs and land availability for affordable housing.

With the completion of five years, the time is also ripe for a review of the Second Master Plan under the provisions of Town and Country Planning Act. CMDA officials said the next Authority meeting is likely to initiate a review.

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Home prices fall,builders don’t blink

Oversupply,Fiscal Slump Cited Causes

Rajesh Chandramouli TNN

Chennai: Oversupply,high interest rates and sluggish economic growth have pulled down residential prices in Chennai for the second consecutive quarter.
According to the National Housing Banks residential housing index or Residex,22 of the 26 Indian cities,including Chennai and Coimbatore,have seen a decline in home prices in the April to June quarter.
Residex for Chennai shows a 2.26% drop between January-March and April-June.Hyderabad was the worst hit with a 4.55% drop,while Kolkata lost 4.06%.Bangalores drop was a mere 0.92% while Mumbai shed 0.45%.Only Lucknow,Surat,Dehra Dun and Nagpur witnessed an increase in housing prices in April-June quarter.
Developers dont admit to a steep fall.Confederation of Real Estate Developers Association of India Chennai chapter president Sandeep Mehta said price has remained stable in the city in most locations.In some areas in the outskirts,where there is oversupply,sales have slowed down, he said.Many prospective buyers adopt a wait and watch approach.P Mini,an NRI,said,I looked at ready-tooccupy apartments on OMR.When I inquired,I got a feeling that there is scope for bargain.
Industry observers are keenly watching the scenario.The first signs of crashing prices are visible with developers offering schemes.We have to wait and watch how things pan out, said N Hariharan,office director,Chennai,Cushman & Wakefield,a real estate consultancy.He said that prices in the peripheral areas were falling like nine pins with nearly a 30 to 40% drop.Within Chennai,almost all corporation zones experienced a drop in index levels.However,Radhakrishnan Nagar remained unchanged,while Virugambakkam,Chepauk and Chetpet witnessed a marginal increase.Traditionally favourite housing locations witnessed steep falls.Ashok Nagar witnessed a 10.35% fall,Adyar and adjoining areas recorded 8.25% drop and Kodambakkam prices fell by 7.23%.In Coimbatore,Residex fell by 3.26% between January-March and April-June quarters.
While there is a slowdown in new home sales which is impacting prices,things have not come to a halt, said the chief consultant of real estate consultancy RECS Group,Rajesh Babu.He said that within the Chennai market,places like OMR and southern end of GST Road were overheated and exhibited tendencies to cool down.
With the rupee falling,NRIs have started inquiries for real estate deals.We are witnessing early stages of NRI interest in the market.Besides,with special schemes to attract buyers,only genuine end-user buying is happening, Babu said.

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Admin · Guru

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REALTY FEELS SLOWDOWN PINCH

Possible Price Correction As Demand Turns Sluggish,Stocks Pile Up & NRIs Show Interest

Prabhakar Sinha | TNN

The economic slowdown,inflation and steep interest rates have been dampeners for the real estate sector.But if these conditions persist,they can work to the advantage of home buyers especially in the National Capital Region and Mumbai where property prices have soared unreasonably high.A price correction is highly probable.
Developers with large unsold inventories of high-end and luxury units will have to lower prices as the current run of sales through innovative marketing and offers such as the 20:80 schemes are coming to an end, Shweta Jain,executive director of real estate consultancy Cushman and Wakefield,says.Despite lobbying with the government for incentives,developers say there isnt much hope of these coming,at least not until the elections due next year.
As the worsening economic conditions dampened sentiments,sales of residential and commercial assets hit a slowdown resulting in unsold inventories,choking builders cash flows.Premium segment sales crawled.In 2012-13 things worsened.Launches and absorption of residential properties in the top seven cities plunged by 37% and 23% during FY11-FY 13,aggravating the sectors structural problems,a Knight Frank report says.Developers were caught in a trap of ambitious expansion,decelerating sale,hardening interest rates,and weakening cash flows, it says.Their capacity to service debts further worsened.Fund inflow through FDI too dried up.
All this piled pressure on developers to cut prices.Theres an undercurrent to cut prices to push sales.Developers are short of cash.But this isnt yet visible on the ground, CB Richard Ellis MD Anshuman Magazine explains.Theres a demand for residential property.But,other than the poor sentiments,sky-high prices are slowing sales.
A developer explains: The problem lies with the fact that only parts of projects launched in the last three to six months are sold.The remaining inventory in the same project is unsold.The developer cant slash rates for the unsold units.If he does so,earlier buyers who purchased when the project was launched,too will ask for reduced rates.
Jain says despite poor sales,many developers are still holding on to their quoted rates and the declines over the past quarters are marginal,But there are expectations that prices would be lowered given the mounting cash-flow problem resulting from low off-takes,mounting input costs and debt servicing.
She says the scenario is especially true in the NCR and Mumbai where developers have launched major high-end and luxury projects.End-user driven markets in cities such as Bangalore,Chennai and Kolkata are still recording reasonably healthy transac tions as projects are priced more reasonably.
The market rates are likely to be first cut by inves tors who buy projects for the short term.Most of them bought around one to two years ago.Since then rates have appreciated by around 20% to 30% in the NCR and Mumbai.Now,with inter est rates rising and prices stagnating for at least three months,many are tempted to sell and exit.
An investor says theres little hope of prices going up in the next one year.At the same time,he has to pay 11% interest on investment thats if he borrowed money or lose a like amount in op portunity cost.Prices have appreciated since he bought the property and buyers are a lot fewer.So,the only way out is in cutting price and pulling out.Even then,Mag azine says,this will take a while to happen because in vestors are still hoping that prices will appreciate.
Builders are putting up a brave face and saying theres no scope of a major price slash yet.Input costs have skyrocketed in the last year and we work on low margins, Vineet Gupta,ED Ajanara group,says.If pric es have to be shaved,therell be no new launches,which will affect supply and in the long term,because demand is perennial,rates will rise Ultimately,realtors wont be able to build by cutting losses.

Admin · Guru

KOLKATA
Premium segment hit but no dip in prices

Subhro Niyogi | TNN

Small builders are feeling the heat.Many are offering 5%-7 % discounts to recover money stuck in projects.The top end of the market where apartments cost over Rs 1 crore has witnessed a softening.Premium projects are under pressure.There arent enough buyers for apartments priced at Rs 8 crore-18 crore.One can bargain for a 10%-12 % discount in this segment, Pawan Agarwal,director of NK Realtors,the regions largest realty firm,says.Most high-end projects are spread across south Kolkata.In places where the price is less than Rs 10,000 a sq ft,major devel opers are holding firm to their price lines.There has been no price dip in formatted developments.In housing stock under Rs 6,000 a sq ft,there is still an upward trend, Jitendra Khaitan of realty firm Pioneer Properties,says Developers of several 5-6 storeyed buildings popping up off Lansdonwe Road,Deshapriya Park Christopher Road,VIP Road,Lake Town and Kankurgachi have hiked prices by 5% this year following strong demand.

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JAIPUR
Citys property scene not in pink of health

Srikanta Tripathy | TNN

Five years after a turbocharged growth that saw property prices more than double,realty developers say the slowdown is beginning to trigger a price correction.Rates can come down by 10% in the shortterm and the market will remain stagnant for 12-18 months.
Today,flats are overpriced by 30%.The end-user demand has dipped.Investors occupy 70% of the market.The slowdown and high interest rates will make it unsustainable for investors to hold on to property for long.A correction of 10% in the short term is likely.Thereafter prices may remain stagnant for 18 months, says Nagen Choudhary,general secretary,Township Developers Association of Rajasthan.The rupees freefall has not translated into any significant rise in NRI demand, Choudhary adds.
A two-BHK flat in the city which cost Rs 20 lakh in 2010 is now worth Rs 50 lakh, N K Gupta,chairman of Manglam Group,says.
Even if there is a price correction,it wont be deep.The citys fundamental strengths wont change because of a temporary slowdown, Ajay Modi,a realty firm director,says.

RBI advisory on 80-20 scheme will hit sector

Prabhakar Sinha | TNN

The RBI advisory to banks not to disburse the entire home loan amount ex tended under subvention scheme upfront to developers will cause problems for the re alty sector.It will affect both buyers and developers.
As property sales slowed down because of rise in in terest rates,many develop ers went with this financing scheme.Buyers were told to pay EMI on home loans up to 80% of the house cost after getting possession.In the in tervening period,the builder paid EMI on buyers behalf The buyer had to pay only 20% upfront at the time of booking
MD of Gurgaon-based BDI Group Sumit Berry,which launched a project under the subvention scheme,said the formula helped buyers who couldnt afford the double EMI-and-rent burden.This scheme was a blessing for de velopers too,for they could draw reluctant buyers whod otherwise shy away consider ing the double load.
The RBI move will pose im mediate problems for projects where such schemes were prevalent,said Anshuman Magazine,chairman and MD CBRE (South Asia).He said banks should instead ensure due diligence and assess risks before funding builders under these schemes.Many builders recovered subvention cost by jacking up apartment prices.
Chief operating officer of Bangalore-based Nitesh Es tates Ashwini Kumar said the scheme was popular and cus tomers had started demanding financing under this formula as a precondition for booking.
Given this backdrop,the feeling in the market is that the RBI advisory will affect the sector.CMD of NCR-based Supertech Ltd R K Arora said The customer will be the greatest sufferer.The only source of funds available to the developer is sought to be denied.This will leave many projects in the lurch.
Arora said this decision,at a time when the sector is reel ing under problems from high home loan rates and steep prices due to high input cost will further added to the woes of the customers,Arora said.
But Parsvnath group chair man Pradeep Jain welcomed the step to link loan disbursal with construction.It will streamline the sector and curb delivery delays and restrict developers from diverting 80% loan amount to other project.

The 80:20 Deal

In a first,builders designed a funding scheme where buyers pay 20% upfront,and the rest on possession The developer handles the monthly installments for a period of say,two years,with the assurance that buyer will get possession by then RBI has disallowed scheme WHY RBI NIXED THE OFFER It advised banks to link housing loans with construction stage of a project Move a bid to contain banks exposure to risky real estate Will force banks & developers to be more transparent On 80:20,developers get home loans,construction loans.Home loans are cheaper Move could force developers to give discount upfront

MUMBAI
Maximum City sees no big price cuts soon

Rajshri Mehta | TNN

In early 2013,a central Mumbai realtors son was set to join his fathers busi ness.Then,the slowdown set in.The family patriarch asked the youngster to go abroad for higher studies For 8 years,real estate pro vided stability and growth Now,its struggling.I expect the market to remain slow for two years.Its better my son uses this time to finish his studies, the developer says After last decades growth surge,developers have fewer takers.The Mumbai Metropolitan Re gion (includes Mumbai) has 48 months of unsold inven tory,the June 2013 data by real estate research consult ant Liases Foras shows.
Theres been no price correction here.Developers hiked prices at an average of 4% in the past year, Pan kaj Kapoor,MD,Liases Fo ras,says.Between 2008 and 2013 mid-range property in Mumbai saw a 20%-50 % capital appreciation.Capi tal values of high-end prop erties increased 40%-85 %.
Bulk of the residential demand is in the affordable mid-range segments,which remains largely unmet.In these segments sales have remained stable,depending on location,features and prices.There has been no price slash or big discount, Sanjay Dutt,executive MD,Cushman & Wakefield,says.
Although there are some signs of corrections in some speculator-driven markets,buyers should not expect major price corrections as witnessed post-2008.Corrections will be marginal in the suburbs and emerging micro markets.Established micro markets will remain stable in the next 6-12 months, Dutt adds.
Concurring with Dutt,chairman,Mayfair Housing Pvt Ltd,Nayan Shah,says developers now struggle for bank finance and pay higher costs for capital from other sources.Input costs have risen.Developers are in no position to cut prices beyond 2% to 5%.The slowdown is more to do with doubts in the public mind on the safety of investments and performance of projects.Once a buyer is convinced,he books a flat.This decision period has increased from 15 days to 3 months, he says.
Sluggish sales have forced firms to cut costs.Developers are launching smaller units to keep overall ticket sizes down.Shailesh Sanghvi,director,Sanghvi Group,says: We believe buyers will soon shrug off their wait-and-watch policy.Companies may offer discounts of about Rs 200 per sq ft in coming festive season.

BANGALORE
Post IT boom,60,000 units unsold

Anshul Dhamija | TNN

This city has over 700 residential projects comprising apartments,villas,row houses and plots amounting to 1.82 lakh units under development.An inventory of roughly 60,000 units remains unsold.Of these 80% are apartments and 10% plots,property consultant L J Hooker says.
The J L Hooker report shows that in January-June calendar of 2012,the city clocked an absorption rate of around 3,774 units a month,in line with what Bangalore absorbed post the IT boom.Since sales have slowed,the existing inventory could take 16 months to clear.Over the last two quarters prices havent changed,an indication of a softening in buyer sentiment,in line with the overall economic environment, Prashanth Sambargi,partner,Mars Realty,says.
Farook Mahmood,CMD,Silverline Group,a well-known city realtor,says while residential prices arent showing signs of cooling down as yet,sales are sluggish.But Bangalore remains Indias cheapest market.For the quality one gets,its absolute value for money.
L J Hooker estimates show the average price of a 2-BHK or 3-BHK flat in June-end moved up margin ally by 3% over the December 2012 period.While the average per sq ft rate in December was Rs 4,432,in June it climbed to around Rs 4,556.
Nagaraj Reddy,president Kar nataka chapter of real estate industry body Credai,says the city has around 600 ready-to-move in residential units priced between Rs 7,500 per sqft and Rs 10,000 per sqft.These comprise penthouses and large 3,000 sqft-plus units that remain unsold.
Given the rupee depreciation Bangalore has seen a fair amount of NRI buying.While,the expec tation was that NRIs would flock to pick up properties,realtors say that hasnt yet happened.

DELHI/NCR
Builders have no choice but to slash rates

Suhas Munshi | TNN

The tumbling rupee and drying liquidity may bring in a productive spell in NCRs realty market,experts say.The biggest gainer from this crisis will be the mid-range property segment.
Consultants say while the rupee crash led to a rise in construction costs and the liquidity crunch has forced developers to slash prices.
With property costs falling across NCR,realty experts say for those with spare capital,nows the time to buy.
Prices have dropped by 5% to 10% in south Delhi and by a smaller percentage in parts of Gurgaon.Experts say this could be the beginning of a trend thatll last till the rupee rebounds.Till then,builders will have no bear the brunt of cash crunch.
NCR is now,what can be called a buyers market.Costs escalating,sale price isnt.Theres been a price correction in the past few months.The mid-range segment has seen the severest impact.Itll continue for some time, says Lalit Kumar Jain,chairman CREDAI,Indias apex body of builders.
Jain adds the weakening rupee is drawing NRIs.They now have greater purchasing power,and inquiries should start turning into deals in a few weeks time.Real estate consultancy Cushman and Wakefield corroborates this.If the rupee maintains current levels,developers will see more interest from NRI buyers, says Shveta Jain,executive director (residential) Cushman & Wakefield India.
Property developers say they havent seen such a slump since 2008.Developers say with every five-rupee rise in diesel cost,they shell out Rs 115 extra per square foot.Profits will further be shaved off with cost of steel expected to go up by about Rs 1500 per tonne.
The falling rupee impacts cost directly.Many materials are imported,in high-end projects particularly, says Arjun Puri,director,Puri Constructions.

PROPERTY PANGS

When R Saraf (name changed) of Mumbai was retrenched last November,he cancelled the booking of his flat.The realtor took to 4 months to process his cancellation.The bank continued charging EMI.The realtor refused to pay me the current market value.The refund came with a mere 9% interest.He still owes me money, Saraf says.
In early 2013,banker Yogi Brahmbhatt got the mandate to invest in Mumbai real estate.Impressed by a project,he booked eight flats.He made an initial payment of Rs 11 lakh against each costing over Rs 2 crore.Later he realised with a loading of 65%,the price was higher than the Rs 22,500 a sq ft he paid.He immediately cancelled the bookings.
SR Sahu,a retired professor,decided to set up home in Mumbai.He and his son booked two 2 BHK flats in 2003 for Rs 35 lakh each.In 2007,the building was nowhere near completion.Sahu wants to cancel the booking,only if I gets the Rs 1 crore plus market value.The developer is offering Rs 40 lakh.He should give me a flat of equal size or refund me at current market rate, he says.

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CHENNAI
Realty bites: Chennai sales not express

Jayaraj Sivan | TNN

The first residential realty market to rebound in early 2010 from the 2008 slump experienced a 200% plus appreciation over the past three years.But Chennai isnt insulated from the present downturn.Builders,who a year ago sold 30 to 40 suburban units a month are struggling to touch double digits.Statistics put out by realty market analysts are often disputed by builders.A study by consultant Jones Lang LaSalle is worth noting.Chennais unsold housing stock stands at a bothersome 45,000 units,it says.Indias apex body of builders,Credai,disputes this.Credais Prakash Challa says: We did a count of completed unsold flats in Chennai and suburbs.Its about 4,500.JLL apparently counted projects on the outskirts without checking how many were complete.A builder who started an 8,000-apartment project a year ago,will take eight years to complete it.Its unfair to list 8,000 units as unsold when the first phase construction of 1,000 flats is still on.
Even in a slow market,some builders do volumes.City builder Akshaya got 241 bookings for a new project in August over four days.It was below his target of selling all 600 flats.
NRI enquiries are up by 40% since the rupee slide in May,but not many are converting into sales,says T Chitty Babu,chairman of CREDAIs grievance redressal committee.

Admin · Guru

Cant charge flat buyers for parking,rules Mumbai consumer forum

Pay and use best option

The ruling of a Mumbai consumer disputes forum that property developers cannot charge flat buyers for car parking space fails to account for ground realities.With the number of cars in Indian cities growing with each passing day,paying for parking space ought to become the general norm.This is also the only way to prod people towards public transport.Sure,the quality of public transport needs to improve substantially.But this will only happen if more people use such options and demand better services.As it is,cities like Delhi and Mumbai are already reeling from an acute shortage of parking spaces.
It is in this context that paying for parking space becomes relevant.It needs to be borne in mind that developers of new residential properties receive little or no help from municipal authorities.In fact,many of these residential complexes are self-contained units with independent provisions for water,power and parking spaces.In such a scenario,it is only fair that developers are allowed to sell designated parking spots.On the one hand the move will force people to rethink buying more cars,while on the other,current car owners wont have to hunt for parking spaces on a daily basis.
Since parking space is scarce and valuable,its best to apportion it through the market.Otherwise developers will pass on the cost of parking space through other means,and the person who parks a large number of cars will pay the same as the person who parks none.Moreover,chaos will ensue when parking spaces are common.Lack of parking space in Indias metropolitan cities often leads to clogging of roads with cars even spilling out onto busy thoroughfares.Disputes over parking frequently turn into ugly fights,creating a law and order menace.Paying for parking is the only alternative.

Dont charge buyers extra

Pyaralal Raghavan

The verdict restraining developers from charging extra for parking lots is very encouraging.This is because it is fair from a legal point of view.It is also backed by sound economic logic.Let us look at the legal aspect first.When a developer sells the rights of a flat to a buyer he charges not only for the carpet area of the flat which is for the exclusive use of the buyer but also for all common spaces and support structures built into the project.
This includes cost of staircases,corridors,lifts,fire fighting equipments,streets,lighting,sewage disposal systems,periphery walls and all other spaces mandated by the building rules,including parking spaces.In fact most states have laws and regulations that mandatorily require adequate parking spaces for securing project clearances.Builders incorporate all these costs into the market price of each flat they sell.So there is absolutely no legal basis to charge separately either for parking slots or for the use of approach roads or fire-fighting equipments all of which are included in total project costs.
Allowing builders to price parking slots separately is also bad economics especially at a time when demand for parking slots either doubles or even trebles in a very short span.This is because the developer,who has a natural monopoly over supply of parking slots,has absolutely no incentive to maximise supply.Like Coal India,whose monopoly rights allows it to charge maximum coal prices and also reduces its incentive to raise coal supply,the developer too will hold down supply of parking slots so that he can charge maximum prices for each parking slot.Free parking spaces however will ensure that flat owners can at least attempt innovations like multilevel parking to maximise the number of parking slots and improve supply.

Admin · Guru

SEZs losing significance as de-notification requests rise

High Costs,Taxes Force Developers To Rethink Plans

Rajesh Chandramouli TNN

Chennai: Special economic zones (SEZs),by definition,were meant to be regions developed to generate more employment and focus on production for exports.But now,SEZs seem to be a burden for the developers themselves.The number of requests for de-notifications and extension of time to commence operations of SEZs has been rising at every meeting of the board of approvals for these zones.
For instance,at the August 30 meeting of the board,there were seven de-notification requests and 12 for extension of timeline to begin operations and one for cancellation.There were only two requests for new SEZs.At the previous meeting held on June 12,there were three de-notification requests and 23 extension requests and none for new SEZs.
Exports from SEZs are also falling.Of the Rs 4.05 lakh crore worth exports from India in the April-June quarter,only 27.97% came from SEZs.For fiscal 2012-13,SEZs had contributed 29.12% of all exports worth Rs 4.77 lakh crore.
There are no great advantages in setting up a SEZ in India anymore,especially after change in tax laws post 2011-12, the CEO of a multi-product SEZ on the outskirts of Chennai said.The introduction of 18.5% minimum alternate tax or MAT and the dividend distribution tax or DDT has spooked investors from setting up new export zones.
Sentiments on SEZs have been muted for a variety of reasons,including curbing of exemptions,MAT and DDT,perceived regulatory concerns around migration,aggressive tax administration and other business issues such as higher costs of operations,operational flexibility,ever-changing visa norms and ageneral slump in demand for goods and services, Aravind Srivatsan,executive director,tax and regulatory services,PwC India,said.
During April,the commerce ministry reworked SEZ rules,whereby land requirements were reduced.In August,the official notification of this said that the minimum land area requirement was halved to 500 hectares for multi-product and for sector-specific SEZs,it was halved to 50 hectares.There will be no minimum area requirement for SEZs by information technology firms.They will,however,have to adhere to minimum built-up area requirements varying from 25,000 sqm to 100,000 sqm,depending on the location of the zone.
Today,SEZ as a concept is terribly skewed in favour of IT/ITES sectors.Of the nearly 392 notified SEZs,only 173 are exporting,of which less than 20 are multi-product while the rest are focused on IT/ITES, an industry official said.

DITHERING & DELAYING

At the Aug 30 meeting of the Board of Approvals,there were 7 de-notification requests,12 for extension of time to begin operations,1 for cancellation and only 2 requests for new SEZs At the June 12 meeting,there were 3 de-notification requests,23 extension requests and none for new SEZs Of the Rs 4.05 lakh crore worth exports from India in the April-June quarter,only 27.97% came from SEZs

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Admin · Guru

LEGAL FACILITIES TO MODIFY EXISTING REDEVELOPMENT PROPOSALS

GAJANAN KHERGAMKER sheds light on the legalities involved,particularly the process of obtaining a No Objection Certificate (NOC),when a building is slated to go in for redevelopment

It isn't that incentives in FSI are offered only to fresh proposals.Even existing proposals,housing societies of landlords or occupiers,may convert their earlier proposals in accordance with the modified regulations,provided the redevelopment scheme is in progress and has not been completed,i.e.where full occupation certificate is not granted.
The additional FSI is provided only subject to submission of a licensed structural engineer's certificate for structural stability.The submission must ascertain that the building is designed to take the additional load for constructing additional FSI,if granted.It should also certify the feasibility for structural modifications,i.e.it should be feasible to convert the tenements earlier proposed with 180 sq ft carpet area into tenements of 225 sq ft carpet area.
A higher FSI does not automatically become permissible in cases where construction is already underway as per old plans,unless a provision was made in the plans,foundation,etc., for the subsequent increase in area of rooms or the number of floors,without endangering the structural stability of the buildings.
In order to simplify the cumbersome process for granting NOCs for redevelopment,the procedure of issuance of letter of intent,prior to the issuance of NOC,has been completely omitted.It is no longer necessary to obtain a letter of intent.Now,the landlord or co-operative housing societies or occupiers can directly submit their proposal for the redevelopment of their old cessed properties in A to G wards of Mumbai but as per the prescribed format attached,along with the required documents and information.
After the proposal with complete documents is received,it will be scrutinised by the board and an NOC for redevelopment will be granted after the board is satisfied that all requirements are fulfilled by the applicant and after an approval has been given in the MBRRB meeting.For each proposal,a scrutiny fee of 5,000 or whatever amount is fixed by the board from time to time,will be charged.
After all the documents have been received along with the application and all the legal and technical requirements have been completed,the NOC will be issued within three months.In case,even after this,the NOC-holder fails to start the redevelopment work within 12 months from the date of issue of the NOC,the board reserves the right to cancel the NOC.
The NOC-holder is expected to complete the construction of new buildings for the rehabilitation of old occupiers within 30 months from the date of issue of the NOC.Should he fail to do so,the extension to the time limit of 30 months may be granted by the board,depending on the merits of the case and on payment of an extension of fee of Rs 5,000 or an amount as decided by the board.
On being granted the NOC for redevelopment,the onus of carrying out repairs to the old cessed buildings at his own risk and cost,whenever such repairs are deemed to be necessary as decided by the repair board,rests on the NOC-holder.
An Occupation Certificate (OC) for the free sale buildings will be given after all the old occupants,including those who may be staying in the repair board's transit camps,have been rehoused in the newly reconstructed buildings.
Concessions/benefits granted by the government vide its notification dated January 25,1999,are quite attractive and make the scheme for redevelopment of old cessed properties economically viable.The benefit of the new scheme of redevelopment is expected to be exploited on a large scale by landlords and co-operative housing societies,thereby aiding the replacement of old and dilapidated cessed buildings with new,well-lit,ventilated and selfcontained flats.

Admin · Guru

What happens if a lender takes over a project

It is not always a setback for buyers because the project may get completed faster

AMIT SHANBAUG

Last month,the State Bank of India took over a housing project in Kolkata because the developer had defaulted on repayment of dues to the tune of 176 crore.The Teen Kanya project was promoted by the Bengal Shelter Housing Development,a joint venture in which the state housing board has 49% stake.Therefore,its repossession by the SBI has come as a shock for the 400-odd families that have invested in the project.Most of the buyers had put money in the project because the state housing board was involved.The project is only half complete and the investors are now contemplating legal action to safeguard their investments.
The incident brings into focus the RBIs decision to stop builders from offering 80:20 schemes.Under these schemes,the buyer services only 20% of the loan for the property while the developer pays the interest on the balance till the property is ready.The RBI warned that if the developer defaults on the interest payment,the buyer would suffer because the loan was in his name.
What are the options available to a buyer in such a situation.Legal experts contend that the lender does have first right over the project.Let us look at the issues involved.

When can a lender take over a project

When they take a loan,developers need to provide personal or corporate guarantee and other securities.Often,the property being developed is the collateral for the loan.
If a developer defaults on repaying the instalments towards principal or interest and the guarantor also fails to fulfill his commitment,the bank has every right to take over the project from the developer, says Shobhit Agarwal,managing director,Capital Markets,Jones Lang LaSalle India.

What are the legal options before the buyer

According to Mumbai-based lawyer Vinod Sampat,buyers must verify when the property was mortgaged to the bank.Developers take loans to fund the construction of the project.In that case,the land and its original documents are kept as mortgage with the bank against the loan, he says.The bank then issues a no-objection certificate to the developer for the sale of flats in the project to recover its loan.All the clauses are mentioned in the agreement the buyer signs with the developer.One must read all the clauses at the time of booking the property, he adds.
However,a developer cannot mortgage the project after he has sold off the apartments.If he has done so,it amounts to cheating and a criminal case can be filed against him.When the investor is already the owner of the property,how can the developer mortgage it to another party asks Sampat.However,if the developer had mortgaged the property before the flats were sold,the buyer will be in a soup.

Does repossession mean trouble for buyers

On the face of it,it appears that repossession of the property will hurt the interest of the buyers.However,if the construction has got delayed because the builder was facing a cash crunch,then repossession by the lender actually benefits the buyer.The funding issue could get resolved because after taking over the project,the lender would want to sell it at the earliest to recover its dues.
The bank can either sell the property to another developer or appoint a contractor and complete the project.Either way,the buyer may get possession of the purchased property quickly, adds Agarwal.
The bank may also restructure the loan,which means either offering more money against additional collateral or increasing the loan tenure.The bank could even infuse fresh funds into the project if it feels that it would help the project get completed and enable it to recover its money.

What should the buyers do

The rights of the buyer do not change with the change in ownership of the project.The buyers can opt for paying the remaining dues to the new owner,in this case the bank,and get possession once the project is completed.In case a buyer wants to sell the property,there is no restriction on doing so.
If the buyer has taken a housing loan for the property,he needs to ensure that his EMIs are paid on time.If there is no default on payment of instalments,he will continue to enjoy all his original rights.

Admin · Guru

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600CR VALUE

PVP,RMZ top bidders for Blore Four Seasons

Boby Kurian TNN

Bangalore: South-based film financier and real estate investor PVP Ventures has emerged as the top bidder to acquire majority shares of Goldman Sachs in Indias second Four Seasons hotel project in Bangalore.
IT park developer RMZ Corp is a close contender,also short-listed by the Wall Street bellwether.
Goldman Sachs is expected to decide on the preferred bidder within a fortnight,said people directly familiar with the matter.The investment banking giant is inclined to go with a developer,which could tilt the scales in favour of RMZ,they added.
Hyderabad-based PVP,named after its founder and serial entrepreneur Prasad Vara Potluri,has bid over Rs 400 crore.RMZ Corp has offered about Rs 350 crore in bids fired less than ten days ago.The two offers value the hotel project at Rs 550-600 crore,including about Rs 180-crore debt,and has come below the asking price.
PVP recently financed multi-lingual Kamal Hassan-starrer Vishwaroopam and also owns Hyderabad Pistons in the Indian Badminton League.RMZ is backed by Baring Private Equity Partners India and Qatars sovereign wealth fund.
PVPs top bid,a decision that was taken at the eleventh hour by the promoters,follows the macro trend of Andhra moneybags investing in Bangalores real estate market,given the continued haze over the future status of Hyderabad.Estimates suggest that Indias IT capital has seen an investment inflow of $100-200 million across real estate asset classes from AP investors and NRI Andhraites.
Goldman Sachs,which owns an almost 74% stake in the delayed project,held talks with the two shortlisted bidders before taking a final call on the exit plans.Investment bank MAPE is running the sale process.
The rupees 14% decline in recent weeks also weighs on Goldmans plans to sell the troubled nearly one-million-sqft project,which also has branded residences where Bollywood actress Deepika Padukone and Infosys co-founders have booked homes.
While Goldman would like to see a bid closure at the earliest,various approval issues concerning the project have cropped up,prompting RMZ to put conditional clauses,which include obtaining height clearances including from HAL Airport authorities.
RMZ declined to comment,while Potluri did not respond to text messages and calls at the time of going to press.
Other bidders like Mumbais Oberoi Realty,Tishman Speyer and Vatika Group have dropped or submitted bids that are significantly lower after the due diligence.The Bangalore project was supposed to be the second Four Seasons property in India when launched in 2008.
Goldman Sachs move to exit the project comes at a time when Indias high-end hotel room tariffs have dropped by 40%.

-- Edited by Admin on Thursday 19th of September 2013 07:38:32 AM

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Kannur airport lands in runway trouble

Rehab On KIAL Land Shortens Strip From 3,400M To 3,050M

Sangeetha Nair | TNN

Agoof pertaining to rehabilitation of affected families has forced the Kannur International Airport authorities to shorten the length of the runway from the originally proposed 3,400 metres to 3,050 metres.
Surprisingly,the families coming in the way of the project were rehabilitated before the runway was proposed.As a result,Kial is in a jam as it cannot ask the people to make way,instead is forced to make amends for the folly.Ideally,the families should have been rehabilitated only after the runway orientation was finalised.
The detailed project report submitted by Kials erstwhile consultants,Cochin International Airport Ltd (Cial),points to the planning error.This means that the rehabilitated people may have to be moved again if the runway needs to be extended in future.
On a detailed investigation,it was found that this alignment resulting in the additional acquisition for approach-lights will be affect 35 houses,and also a few rehabilitated houses on the Kial land.Thus the alignment of the runway is proposed as 07-25."a project report said.
Houses in the additional acquisition area for approach lighting are avoided.But rehabilitated houses in the Kial land will still fall in the proposed land for approach-lights, says the detailed project report submitted by Cial in April 2012.
Cial sources said around 11 rehabilitated houses at Kallerikkara stand right at the end of the north-east runway.They are not an obstruction but may be affected if the runway is extended,according to civil engineers employed with Cial.
The airport will not be able to handle an A380 aircraft the runway is planned now.Airlines will have to determine whether they will have to fly widebody aircraft with less people and baggage because of the infrastructural limitations.
Kannur International Aiport Limited managing director,G Chandramouli,said Kerala Industrial Infrastructure Development Corporation (Kinfra) and the district collector acquired land and proposed sites for rehabilitation.
Kinfra managing director,S Ramdas said,We consulted every person for who we were acquiring land.It is a joint effort,especially when the work involves a third party.Kial could have made its case with the district collector.I cant look out for runway orientation.That is Kials job.
A civil engineer from Cial who worked on the project,said,We did not wish to make any changes to the runway as it was situated in a cutting area (undulated land that can be cut rather than filled for better runway stability).Filling land will increase the cost and time, he said.
The decision to keep the runway at 3,050 metres is only part of the first phase of development,as we are running short of funds.We can extend the runway to 3,400 metres in the next phase of development in some 15-20 years, said K S Shibu Kumar,deputy project director,Kial.
Kannur International Airport (Kial) is being set up by a government-led consortium and on a public-private-partnership (PPP) basis and build-own-operate (BOO) model,with 26% of equity remaining with the government of Kerala,23% with public sector undertakings,2% with other institutions promoted by the government of Kerala and remaining 49% with private individuals and institutions.

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Flat buyers to pay 2% more for registration

Govt Makes Construction Agreements Between Builders And Home Buyers Mandatory

TIMES NEWS NETWORK

Chennai: People buying new apartments in the state will now have to pay 2% additional registration charges as the state has made registration of construction agreements signed between builders and buyers mandatory.
So far only the undivided share of land (UDS) was registered at sub-registrar offices,for which the government charges 5% stamp duty,2% surcharge (for development of local bodies like corporations and panchayats ) and 1% registration fees.Overall,for registration of a new apartment under construction,the buyer pays 8% of the value of UDS for registration.The construction agreement was never registered earlier.
Hereafter,the buyer will have to pay an additional 1% stamp duty and 1% registration fees on the cost of construction.Also,the construction agreement has to be registered at subregistrar offices within 120 days of signing the agreement.Without a registered construction agreement,UDS will not be registered.Necessary amendments have been made to the Registration Act and the new rules came into effect on October 1.Construction agreements signed till September 30 will not fall under the purview of the amended Act.However,developers and home buyers who claim exemption from the additional registration charges will have to provide proof before sub-registrars to show that their agreements were signed before October 1,said an official.
Confederation of Real Estate Developers Association of India (CREDAI ) Tamil Nadu chapter president N Nandakumar said,In terms of cost,there is an increase which customers have to bear.But there is a reward in the form of better title for their assets.Till now,a registered deed used to be created for a new building only when resale of the property took place.A first buyer never used to get a title deed for his constructed immovable house in the state,unless the builder or the buyer insisted on registering the property after completion of the project.The only registered document one used to hold was the one for the UDS.

Times View

Making registration of construction agreements mandatory is a right step forward,taken with a view to providing better title deeds to apartment buyers.However,even with the present amendments to the Registration Act,Tamil Nadu has fallen short of providing title deeds to buyers for constructed apartments.In most other states,registrations of undivided share of land and constructed apartments are done together,at the time of handing over the flat to the buyer.Tamil Nadu needs to follow the same practice.The state should also reduce the stamp duty for registration from the present 7%,as prescribed by the Centre while disbursing funds under the JNNURM,to keep it uniform across the country.

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Will you have to pay VAT on your flat? SC ruling to push up property prices

14 Oct, 2013, 02.41PM IST

By: Abhishek Jain

A recent Supreme Court ruling on the applicability of VAT could push up property prices across the country.

According to a recent verdict by the Supreme Court, the sale of a property that is under construction would be liable to value-added tax (VAT).

The ruling could have far-reaching ramifications for the real estate industry as well as property buyers. In the case of L&T versus State of Karnataka, the apex court held that the pre-construction agreements for sale of immovable property would qualify as 'works contract' and, therefore, VAT would be payable on the transaction.

It is likely that the judgement will push the states' VAT authorities to tax all transactions for properties that are under construction. This could also include the real estate transactions concluded in the past few years.

The judgement was pronounced by a larger bench of the Supreme Court, so the verdict shall be considered the law of the land until it is overruled by a constitutional bench of the apex court.

Though the case related to real estate operations in the southern and western parts of the country, the principles enunciated in this judgement are likely to impact the real estate industry throughout the country, which, in turn, would result in higher prices of property.

It is pertinent to note that this judge ment is merely an interpretation of an existing law. So, its applicability is likely to be with retrospective effect. The state VAT authorities may cash in on this opportunity and demand tax dues on past transactions from real estate players by invoking the extended period of limitation. While it is not possible to quantify the exact impact of judgement on the real estate industry, if implemented with retrospective effect, the demand for tax and interest is likely to run into thousands of crores of rupees.

Supreme Court ruling on the applicability of VAT to push up property prices

Buy constructed property

What this also means is that buyers may be better off purchasing fully constructed property compared with the one under construction.

Till now, constructed property has attracted only stamp duty, while the one under construction has also invited service tax. Now, the latter will also be subject to VAT.

It would be interesting to see how developers recover the VAT and interest from buyers, especially for past transactions.

While the robust contractual documents signed at the time of sale may empower the developer to recover the additional burden of VAT from the flat buyer, it may not be easy to recover the amount from the buyer if the possession has been handed over. There may also be cases where the original buyer has sold the flat to someone else and moved to another location. Tracking down such buyers will be an additional difficulty.

Besides, the valuation itself will be a challenge. The Supreme Court has specifically held that only goods incorporated by the developer after entering into an 'agreement to sell' the immovable property under construction would be subject to the VAT levy. It will not be easy to compute VAT on such a transaction.

This spells more trouble for an industry reeling from the slowdown in sales, rising inventories and dipping margins. It may be advisable for the real estate industry to engage with the state governments to arrive at a commercially feasible solution to settle the past tax dues, and a workable scheme for the payment of taxes (say, a composition rate of 1% in Maharashtra) in the future. This can help avoid undue litigation.

Setting off the input credit

Another aspect that merits the consideration of the real estate industry would be the manner in which it can set off the input tax credit of VAT paid on the procurement of raw material, against its output VAT liability for the past and the future.

It appears that the Supreme Court has ignored the fact that the sale of flats is already subject to stamp duty on the entire transaction value, as opposed to merely the value of land. Levying VAT on such transactions would now lead to multiplicity of taxes on the same transaction value.

Apart from this, the developers need to brainstorm to analyse the various schemes for payment of taxes available both under the Central and state tax laws, and decide a way forward appropriately.

Given the complexities of the issues, it is likely that the future will witness a series of litigation between the revenue authorities, the developer and the flat buyer. Needless to say, the biggest loser in the entire transaction chain will be the buyer, who will have to bear the burden of the increased cost.

The writer is tax partner, EY. Saurabh Agarwal, senior tax professional, EY, also contributed to the article. These views are personal.

-- Edited by Admin on Wednesday 16th of October 2013 08:13:38 AM

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அடுக்குமாடி குடியிருப்புகள் வாங்க கடன் வழங்குவதில்

வீட்டு வசதி நிதி நிறுவனங்களும் புதிய விதிமுறையை பின்பற்ற வேண்டும்

தேசிய வீட்டு வசதி வங்கி உத்தரவு

சில்பி சின்ஹா

மும்பை

வீட்டுவசதி நிதி நிறுவனங்களும் அடுக்குமாடி குடியிருப்புகள் வாங்க பொதுமக்களுக்கு கடன் வழங்குவதில் ரிசர்வ் வங்கியின் புதிய விதிமுறையை பின்பற்ற வேண்டும் என தேசிய வீட்டு வசதி வங்கி (என்.எச்.பீ) உத்தரவிட்டுள்ளது.

ரிசர்வ் வங்கி

ரிசர்வ் வங்கி சென்ற மாதம் ஓர் அறிவிப்பை வெளியிட்டது. அதில் “ரியல் எஸ்டேட் நிறுவனங்களின் அடுக்குமாடி குடியிருப்புகள், வீடுகளை வாங்குவதற்கு தனிநபர்களுக்கு கடன் வழங்கும்போது அந்த வீடு எந்த அளவிற்கு கட்டி முடிக்கப்பட்டுள்ளதோ அதற்கு ஏற்ப வங்கிகள் கடன் வழங்க வேண்டும். முழுவதும் கட்டி முடிக்கப்படாத வீடுகளுக்கு முழுத்தொகையையும் கடனாக வழங்க கூடாது” என தெரிவிக்கப்பட்டுள்ளது.

ரியல் எஸ்டேட் துறை சார்ந்த 80:20 அல்லது 75:25 என்ற திட்டங்களில் பொதுமக்களுக்கு கடன் வழங்கப்படுகிறது. இதன்படி வாடிக்கையாளர்களுக்கு அனுமதிக்கப்பட்டுள்ள கடனில் 80 சதவீதத்தை ரியல் எஸ்டேட் நிறுவனங்கள் வங்கியிலிருந்து பெறுகின்றன. வீட்டை கட்டி முடித்து வாடிக்கையாளரிடம் ஒப்படைக்கும் வரை ரியல் எஸ்டேட் நிறுவனம் மாதத்தவணை வட்டியை வங்கிக்கு செலுத்தும். ரியல் எஸ்டேட் நிறுவனம் தவணைத்தொகையை செலுத்த தவறினால் வாடிக்கையாளருக்கு எதிர்காலத்தில் இதர வங்கிகளிலிருந்து கடன் பெறுவதில் பாதிப்பு ஏற்படும்.

கடன் தொகை

எச்.டீ.எஃப்.சி. நிறுவனத்திடமும் 75:25 திட்டம் உள்ளது. ஆனால் இந்நிறுவனம் கட்டிடம் எந்த அளவிற்கு கட்டி முடிக்கப்பட்டுள்ளதோ அதற்கு ஏற்ப கடன் வழங்கும். இதுகுறித்து எச்.டீ.எஃப்.சி. நிறுவனத்தின் தலைமைச் செயல் அதிகாரி கெகிமிஸ்திரி கூறுகையில், “80:20 மற்றும் 75:25 திட்டங்களை ரிசர்வ் வங்கி தடை செய்யவில்லை. ஆனால் கட்டி முடிக்கப்படாத நிலையில் ரியல் எஸ்டேட் நிறுவனங்களுக்கு முழு கடன் தொகையாக வழங்க கூடாது என தெரிவித்துள்ளது” என கூறினார்.

ரிசர்வ் வங்கியின் அறிவிப்பை தொடர்ந்து இந்தியா புல்ஸ் நிறுவனமும் இதுபோன்ற கவர்ச்சிகரமான கடன் திட்டங்களை நிறுத்தியுள்ளது. எல்ஐசி ஹவுசிங் ஃபைனான்ஸ் நிறுவனம் 80:20 திட்டத்தை விரும்பவில்லை என தெரிய வந்துள்ளது.

Admin · Guru

நியாயமான இழப்பீடு கிடைக்க வகை செய்யும்

நிலம் கையகப்படுத்தும் சட்டம் ஜனவரி 1-ந் தேதி அமல்

மத்திய மந்திரி ஜெய்ராம் ரமேஷ் அறிவிப்பு

புதுடெல்லி, அக்.16-

நியாயமான இழப்பீடு கிடைக்க வழி செய்யும் நிலம் கையகப்படுத்தும் சட்டம் ஜனவரி 1-ந்தேதி முதல் அமல்படுத்தப்படுவதாக மத்திய மந்திரி ஜெய்ராம் ரமேஷ் தெரிவித்தார்.

நிலம் கையகப்படுத்துதல் சட்டம்

நிலம் கையகப்படுத்துதல் தொடர்பாக 1894-ம் ஆண்டு ஆங்கிலேயர் ஆட்சியின்போது கொண்டு வரப்பட்ட சட்டம்தான் அமலில் இருந்து வருகிறது. இந்த சட்டத்தில் நிலம் கையகப்படுத்துதலால் பாதிப்புக்கு ஆளாவோரின் மறுகுடியமர்வு தொடர்பாக ஏதும் குறிப்பிடப்படவில்லை. இதே போன்று அந்த சட்டத்தில் பல குறைபாடுகள் உள்ளன.

எனவே மத்திய காங்கிரஸ் கூட்டணி அரசு இது தொடர்பாக புதிதாக ஒரு சட்டத்தை இயற்றி பாராளுமன்றத்தில் நிறைவேற்றியது. இதற்கு ஜனாதிபதி பிரணாப் முகர்ஜி கடந்த மாதம் 27-ந்தேதி ஒப்புதல் வழங்கி விட்டார்.

மாநில அரசுகள் கருத்து

119 ஆண்டு காலமாக நடைமுறையில் இருந்து வரும் நிலம் கையகப்படுத்தும் சட்டத்துக்கு மாற்றாக, புதிதாக இப்போது இயற்றியுள்ள சட்டத்தை அடுத்த ஆண்டு ஏப்ரல் 1-ந்தேதி முதல் அமல்படுத்தலாம் என மத்திய அரசுக்கு சில மாநில அரசுகள் யோசனை கூறி உள்ளன.

அப்படி அடுத்த நிதி ஆண்டின் தொடக்கத்தில் புதிய சட்டத்தை அமல்படுத்துகிறபோது இந்த சட்ட அமலுக்கு தேவையான உள்கட்டமைப்பு வசதிகளை ஏற்படுத்த கால அவகாசம் கிடைக்கும் என அவை தெரிவித்தன.

ஜனவரி 1 முதல் அமல்

இருப்பினும் இந்த புதிய சட்டம் மக்களுக்கு மத்திய காங்கிரஸ் கூட்டணி அரசின் புத்தாண்டு பரிசாக ஜனவரி 1-ந்தேதி முதல் அமலுக்கு வருகிறது.

இதுபற்றி மத்திய ஊரக வளர்ச்சித்துறை மந்திரி ஜெய்ராம் ரமேஷ் கூறுகையில், “நிலம் கையகப்படுத்தும் சட்டத்தின் நிச்சயமற்ற தன்மையை குறைக்கிற வகையில், அது குறித்த அறிவிக்கையை விரைவில் வெளியிடுவோம். இந்த சட்டத்தை ஜனவரி 1-ந்தேதி முதல் அமல்படுத்த முடிவு எடுத்துள்ளோம்” என கூறினார்.

மத்திய அரசு இந்த புதிய சட்டத்தை புத்தாண்டு முதல் அமல்படுத்த முடிவு எடுத்துள்ளதால், மாநில அளவிலான நிலம் கையகப்படுத்துதல் மறுவாழ்வு மறு குடியமர்த்தல் ஆணையம் உள்ளிட்ட 6 உள் கட்டமைப்புகளை ஏற்படுத்த வேண்டிய தேவை ஏற்பட்டுள்ளது. நிலம் கையகப்படுத்துதல் தொடர்பாக எழுகின்ற பிரச்சினைகளை இந்த ஆணையம் கையாளும்.

நியாயமான இழப்பீடு

இந்த சட்டத்தின் வரைவு விதிகளை மத்திய அரசின் ஊரக வளர்ச்சித்துறை அமைச்சகம் 2 தினங்களுக்கு முன்பு வெளியிட்டது. அதில் புதிய சட்ட அமலாக்கலுக்கு தேவைப்படும் கட்டமைப்பு வசதிகளை ஏற்படுத்துவதற்கு மாநில அரசுகள் உடனடி நடவடிக்கை எடுக்குமாறு கேட்டுக்கொள்ளப்பட்டுள்ளன.

புதிய சட்டம் அமலுக்கு வந்தபின்னர், ஒரு நிலம் அரசாலோ, அரசு அமைப்புகளாலோ கையகப்படுத்தப்படுகிறபோது, அதற்கு நில உரிமையாளர்கள் நியாயமான, நேர்மையான இழப்பீட்டு தொகை பெற வழி பிறக்கும் என்பது குறிப்பிடத்தக்கது.

Admin · Guru

Investor Rakesh Jhunjhunwala buys six Mumbai flats for Rs 176 crore

EW DELHI/MUMBAI: Billionaire investorRakesh Jhunjhunwala on Monday bought half of a seafacing building, comprising six plush apartments, in Mumbai's upmarket Malabar Hill area owned by Standard Chartered Bank, for Rs 176 crore, more than two persons who knew details of the open bidding, told ET asking not to be named.

Investor Rakesh Jhunjhunwala buys six Mumbai flats for Rs 176 crore, property value in south Mumbai drops

The Ruias of Essar group, Shapoorji Pallonji Mistry, Adi Godrej, Pranav Mody and Venugopal Dhoot— all have homes here. The combined net worth of residents of Malabar Hill is around $30 billion. (Image: Rakesh Jhunjhunwala)

Jhunjhunwala told ET that he did not want to confirm nor deny the development. A spokesman for Standard Chartered declined to comment. A spokesman for property consultant Jones Lang LaSalle, which was the transaction advisor, also declined to comment.

This is the fourth high-value transaction to take place in south Mumbai over the last few months.

In May this year, YES Bank BSE -5.02 % CEO and managing director Rana Kapoor had bought a residential building on Altamount Road from Citibank and GlaxoSmithKline for Rs128 crore.

In June, glassware manufacturer Borosil bought a seafacing duplex for Rs 43 crore.

In September, a duplex in Darshan Apartments on Mount Pleasant Road was sold to the Bulchandani family for Rs 57 crore

The who's who of the business world stays on Malabar Hill. The Ruias of Essar group, Shapoorji Pallonji Mistry, Adi Godrej, Pranav Mody and Venugopal Dhoot— all have homes here. The combined net worth of residents of Malabar Hill is around $30 billion.

Former residence of Mohammad Ali Jinnah and residents the Maharashtra governor and chief minister are also located in this area. Standard Chartered and a number of other companies such as Citibank, Hindustan Unilever BSE 0.83 %, GSK, Bank of America andHSBC have owned many apartments in prime south Mumbai localities that were given as incentives and perks to their mid to top-level executives in the 1950s and 1960s.

With that culture long gone, these companies and banks have resorted to monetising such properties.

In the last few years, Citibank has sold over a dozen apartments in Mumbai—five apartments in Colaba's Harbour Heights building and one each in NCPA Apartments on Nariman Point, Meher Apartments on Altamount Road and Kanti Apartments on MountMary Road in Bandra. In 2011, Standard Chartered and HSBC sold a five-storey residential apartment block, Bishopsgate at Breach Candy to real estate developer Peninsula Land for Rs 272 crore.

HUL BSE 0.83 % recently sold its apartment block in Worli, called Gulita, to Piramal Realty for Rs 452 crore and has now looking at selling 55 apartments in prime south Mumbai's neighbourhoods of Nepean Sea Road, Altamount Road, Cuffe Parade, Malabar Hill and Colaba for over Rs 300 crore.

ET has earlier reported that while property appreciation in Sobo, as the area is fondly called, has dropped to 10 per cent from 30 per cent two years ago, rental yields have fallen by more than half.

"Inventory has increased in the last two years, but sales are not happening at the same pace," said Ashok Narang, partner at real estate property firm L Lachhmandas & Co. Besides falling re-sales, rental yields too have come down from 3 per cent-5 per cent in 2008-11 to 1 per cent-2 per cent in 2011-13.

"As of now, the rental yields in south Mumbai are even below 3 per cent and it makes no sense for an investor to come in," another broker said. With prices of properties not rising as fast as they did in the peak years, investors and speculators had gone out of the market.

Admin · Guru

IT upswing to pay dividends for Bangalore realtors

Sobha Developers and Prestige Estate have gained investor interest after reporting strong sales for the September quarter, beating the gloom in the realty sector..

By Jwalit Vyas, ET Bureau | 11 Oct, 2013, 06.20AM ISTBangalore-based real estate developersSobha Developers BSE -2.38 % and Prestige Estate have gained investor interest after reporting strong sales for the September quarter, beating the gloom in the realty sector.

Over the last one month, shares of Sobha and Prestige have gained 27% and 19%, respectively, compared with an 8.6% rise in the CNX Realty index and a 5.6% gain in theNifty as a result of strong operating performance. For the three months to September, sales for Sobha Developers grew 20% year-on-year to Rs 632.2 crore, while that for Prestige Estate, sales went up by 31% to Rs 1,150 crore. Sales for both were driven by volumes and price realisation per square feet, indicating the strength of Bangalore's property market.

In a recent report, Cushman Wakefield had pointed out that the city would benefit from its growing IT industry, especially after the sharp fall in the rupee. A report from real estate data base company PropEquity shows this to be true — Bangalore has now become the leading metro in terms of residential as well as commercial inventory absorption, ahead of Mumbai, the National Capital Region, Chennai and Hyderabad. Absorption rate measures the strength of the demand. Both companies are also ahead of their FY14 guidance numbers in terms of sales, cash collection and launches. Prestige Estate's first-half sales and cash collection was 53.4% of the guidance, while its launches were 66% of the guidance.

The two companies also have strong balance sheets. Debt-to-equity ratio for Sobha is 1.5, while that for Prestige, it is 1. Going forward, debt for both firms is likely to increase but their debt-to-equity ratios will remain the same. In addition, the debtservicing ratios of the two companies are also higher than that of other realty firms.