Home-loan discounts add to festivities

Banks lower home-loan rates to cash in on the festive mood of customers during this festival season, discovers Manoj Kumar

Concerned by the slow down in growth of home loans after a sharp rise in interest rates over the past one-year, the banks are trying to woo the customers by offering discounts during the ongoing festival season.

The market leader, the State Bank of India, is offering 25-50 basis points discount on loans, while Punjab National Bank has cut rates by 25 basis points. In fact, apart from the home loans, these discounts are also available on other retail loans like car loans as well.

The State Bank of India (SBI) and Punjab National Bank (PNB) have announced 25 to 50 basis point discounts on their home and car loans for the next few weeks. Other banks are also expected to follow suit. One basis point is one hundredth of a percentage point.

This will offer temporary relief to home loan seekers who have seen the interest rate climbing to double digits after four years. ICICI Bank had, last month, offered home loans at 8 per cent for three years, against the prevailing 9.5 per cent. The offer was, however, restricted to Mumbai. The bank made this offer for certain properties after tying up with builders promoting the properties.

Admitting the slow down of high growth in the home loan market, Finance Minister P. Chidambaram has said, “ This slow down could be attributed to rise in interest rates besides other factors.” However, he added that due to rising income levels of the people and over 8 per cent growth in gross domestic product, it would not have a major bearing.

Market watchers said that by offering 0.25 per cent discount in interest rate, and 50 per cent discount in the processing charges on home loans, the PNB has set the trend, which is being followed by other banks.

Some other banks, in fact, have not officially cut in interest rates, but they are offering heavy discounts to the customers. Even the builders and financiers are also trying to in cash the festive mood of the clients by offering discounts and other benefits.

“We are already getting more queries for flats. There is an increased interest of customers during the festival season,” said a property dealer.

PNB has announced that interest on its floating rate home loan will be 25 basis points lower at 8.50, 8.75 and 9 per cent for repayment tenure of up to 5 years, up to 10 years and up to 20 years, respectively.

“For the festive season, we will offer concessions on all types of retail loans up to a maximum of 50 basis points. This offer will be available till the end of October,” said an official of the SBI adding that SBI normally targets the salaried class.

Notably, ICICI Bank had raised home loan rates by a full 1-percentage point in May and then in June. The public sector banks, too, had raised their lending rates across the board by 50-75 basis points in two phases during May-June.

Industry experts said the clients were keen on buying properties during the festival season a as number of buyers have announced festival bonus and interest-free loans to their employers.



Windfall for Dera Bassi farmers
Pradeep Sharma

Farmers of Dera Bassi are literally laughing their way to the bank. Close on the heels of Zirakpur, it is windfall for the Derabassi farmers with big realtors coming up with mega housing projects in the township situated on the Chandigarh-Ambala highway.

With at least two major real estate players - the Silver City and the Parsvnath - launching their housing projects recently, the land in villages of the subdivision has suddenly turned into a gold mine for the farmers, who never had it so good. This is a double bonus for farmers as the land in question is non-productive for agricultural purposes.

In fact, the big colonisers are making a beeline for this not-so-productive land in these villages, including Madhopur, Sheikhpura Khurd, Dadrala, Gulabgarh and Sadhemajra. The land, which had been selling for peanuts till last year, has suddenly turned into a golden goose and has been selling on a premium bringing smiles on the faces of the farmers.

Inquiries revealed that the land was selling for about Rs 1.25 crore to 1.5 crore per acre. The rate in the same area was about Rs 20 lakh per acre last year and about Rs 10 lakh in 2003, said Mr Sita Ram, a farmer from Madhopur.

Another farmer from Sadhemajra informed that it was a hand-to-mouth existence for a majority of the farmers as agriculture was rain-dependent in the area. However, with the coming of the real estate companies to Dera Bassi, even the marginal farmers have become quite well-to-do having all luxuries of life, including premium cars, within their reach now, he added.

Inquiries revealed that since large chunks of land are available at a cheaper rate in Dera Bassi than Zirakpur, the colonisers prefer to buy land here. And in the process, many small farmers, whose lands fall between two major chunks of land, stand to gain the maximum. The colonisers, it is learnt, are offering maximum rates to owners of the interlinking small pieces of land with a view to consolidate their large chunks and maintain continuity.

Explaining the sudden spurt in the land prices, Mr Sunil Bandha, general manager of the Silver City, which has launched the third phase of their mega housing project - Silver City Themes - recently said that with Zirakpur getting out of the reach of even the big colonisers, Dera Bassi was the next best bet for them. It is strategically located on National Highway. With the four-laning of the Zirakpur-Ambala stretch, including a flyover at Zirakpur, it would further cut the distance between Chandigarh and Dera Bassi, he added.

In fact, Dera Bassi offers better infrastructural facilities than two other neighbouring towns of Zirakpur and Lalru. With the local Municipal Council, led by Mr Amritpal Singh, focusing on provision of basic amenities, primarily a sewerage system and drinking water in big way, Dera Bassi is emerging as the next destination for the colonisers and general public, Mr Bhupinder Saini, a Dera Bassi-based property consultant added.

Observers felt that the entry of the Silver City and the Parshavnath hasonly intensified the race among big realtors to grab the share in the Dera Bassi pie. With the tricity going out of the reach of the common man, Dera Bassi offers an “affordable option” for a majority of the salaried classes and small-time businessmen.

Besides this, the realtors are also offering luxury apartments and freehold plots to the affluent sections of society, including the NRIs, who form a major chunk of the investors in Chandigarh’s periphery.



Building bylaws needed for rainwater harvesting

The government should make it mandatory in the building bylaws to adopt rainwater harvesting in all structures, asserts Vishal Gulati

With the rise in population, changing lifestyles and rampant urbanisation the groundwater is being pumped out in large quantities to meet the ever-growing requirements of public and irrigation.

In majority of towns and cities, the maximum dependence is on tubewells. This has resulted in the depletion of the water table at an alarming rate.

Water management experts say the prevailing water crisis can be tackled only through concerted efforts both by the government and the common man.

At the government level, it can be tackled by making it mandatory in the building bylaws to adopt rainwater harvesting in all types of structures.

Studies conducted by the Chandigarh-based Central Groundwater Board, the Ministry of Water Resources, say that in 1951 the number of groundwater abstraction structures in the country was about 4 million. This has gone up to about 20 million now. Hence the groundwater withdrawal has increased by over 500 per cent in the past five decades.

Mr Sushil Gupta, Regional Director, Central Ground Water Board, says the only way to check the decline in water table is to recharge the aquifers by harvesting surface and rainwater.

For the common man, the easiest way to tap rainwater is through rooftop harvesting. For this, one needs to channelise the rain water from the roof tops (which is otherwise wasted) to a recharge structure.

He says the government should make it mandatory for the builders to adopt rainwater-harvesting measures not only in government buildings but also in residential areas.

Though the concept of rainwater harvesting is catching up in many states, there is a need to make it a mass movement in this region.

Mumbai, Chennai and New Delhi have made it mandatory for the builders to adopt rainwater-harvesting measures.

Harvesting techniques

  • For using rainwater for artificial recharge of groundwater, one needs to set up a special structure. There are a number of artificial recharge structure designs to choose from. The choice depends on the size of the catchment area or the rooftop area, average rainfall in the area and the depth of the aquifer in that area. For this, one can take the help of experts of the Central Ground Water Board.
  • Recharge well is like a tubewell with slight change in construction design as it is used for recharging groundwater rather than pumping it out. The water to be recharged is made silt-free by passing it through gravel filters.
  • This technique is suitable where the land availability is limited; aquifer is deep and overlain by thick impermeable strata. The approximate cost for adopting this structure is between Rs 20,000 and Rs 30,000.
  • Recharge shaft is like an open well filled with graded boulders, coarse gravel and fine gravel. The structure is suitable for areas where the shallow aquifer is located below clayey surface. It is suitable for group housing societies with expenditure from Rs 20,000 to Rs 70,000.
  • Recharge pit is suitable for recharging the shallow aquifer. It is generally 1 to 2 m wide and 2 to 3 m deep. It is suitable for small buildings having rooftop area up to 100 sq m. The approximate cost for adopting this technique is between Rs 1,000 and Rs 5,000.
  • Recharge trench is constructed where permeable strata of adequate thickness are available at shallow depth. It is suitable for rooftop area of 200 to 300 sq m. It is not advisable in areas where the water level is very deep. The cost of construction for adopting this technique is between Rs 5,000 and Rs 10,000.
  • Abandoned hand pumps can also be used for artificial recharge of groundwater. The arrangement is suitable for houses having rooftop area of up to 150 sq m. Even the running hand pumps can be used for this purpose. The approximate cost varies from Rs 1,500 to Rs 2,500.

Suggestions for designing houses

  • Design the building in such a way that rainwater spouts should be minimum in number and should be in one direction of the building.
  • Landscape of the building campus should be given towards main storm drain in such a way that runoff of the whole campus should be available at one place and adequate space is given for the construction of recharge structure.
  • Storm drains should be designed in such a way that no sewage and domestic waste should get mixed to storm drains.
  • If colony-wise recharge structures are adopted it will be more economical. Therefore, while planning group housing societies, the provision for rainwater harvesting should be made at planning stage.



TAX tips
Capital gains tax payable even if you are not assessee
by S.C. Vasudeva

Q. My mother had owned a flat since 1980 at Ludhiana. We sold it for Rs 8 lakh in September 2006.

2. We had another plot, which we had bought in December 2004. This plot was on a joint registry in my mother’s name and me. We sold this plot at Rs 3.25 lakh in September 2006.

3. In September 2006, we purchased a plot in my name at a cost of Rs 8.25 lakh. This purchase is in my name as we need to construct house on loan. Can I take the benefit of home loan? Now my questions are:

1. What are all tax liabilities applicable to us (I and my Mother). My mother is a housewife and she has no income of her own.

2. Does my mother have to pay some tax? If yes, then how much, what types of tax and how can we have waver from them?

3. Can I get a gift from my mother for purchase of plot? If yes then how would I proceed, if no then how can I justify the purchase of plot?

A.N. Singh on e-mail

A. You have not indicated the source of funds from which the flats have been purchased. It is therefore presumed that the funds used were that of your mother.

The answer to your queries accordingly is as under: -

1. The value of the flat as on April 1, 1981 will have to be ascertained and indexed cost for the financial year 2006-07 will be worked out by applying the prescribed cost inflation index. The prescribed rate for financial year 2006-07 is 519. The said amount would be substituted for the cost and would be deducted from the sale price of Rs.8 lakh. The net amount would be taxable as long-term capital gains at the specified rate of 20 per cent plus applicable surcharge and education cess. The capital gains tax would not be payable in case the amount of capital gains is invested by your mother in her own name in the acquisition or construction of a residential house within the specified period.

2. Your mother can gift any amount to you for making an investment, including purchase of a house. The gift and acceptance thereof can be made for a movable property through exchange of letters.

Capital gains on property sale

Q. I have sold a residential plot on April 15, 2006 for capital gains of about Rs 10 lakh and deposited this amount in my savings bank account. I do not want to invest capital gains amount in certain bonds, but I intend to purchase a house for an amount equivalent to capital gains of Rs 10 lakh within 2 years from the date of transfer of plot i.e. before April 15, 2008. However, due to any exigencies or financial constraints, if I do not purchase house before April 15, 2008, what is the option available to me? Can I deposit tax on capital gains immediately before the completion of 2 years without any interest or penalty as the capital gains amount remained in my saving bank account for 2 years.

Raju Srivastava, Panchkula

A. Section 54 F of the Income-tax Act 1961 (The Act) dealing with the exemption of capital gains in case such gain is invested in the purchase or construction of a residential house provides that the amount of net consideration which is not appropriated by the assessee towards the purchase of residential house within one year before the date on which the transfer of original asset took place or which is not utilised by him for purchase or construction of a residential house before the furnishing of the return of income under Section 139 of the Act shall be deposited by him before the due date of furnishing the return of income, in an account with such bank or institution as may be specified under a scheme notified by the government. According to the scheme the amount of net consideration is required to be deposited with a bank in Capital Gains Scheme Account. The term ‘net consideration’ in your case would mean sale price of the residential plot less expenditure incurred only and exclusively in connection with the transfer of such residential plot. Any investment towards the purchase or construction of a residential house will have to be made by withdrawing the amount from such account. The section further provides that in case the amount so deposited is not utilised wholly or partly for the purchase or construction of a new residential house within the specified period, then the capital gains shall be charged as income of the previous year in which the period of three years from the date of transfer of the original asset expires.

In view of the above requirements specified in Section 54 F of the Act you will have to deposit the net consideration with a bank under the Capital Gains Scheme. This will have to be done before the due date of filing the return of income. In case you are not able to utilise the amount so deposited, the capital gains will be taxed in the previous year in which the period of three years expires from the date of transfer of the residential plot.

Exemption on instalment to housing co.

Q. I am in the process of being allotted a flat by a registered private housing company. Am I eligible for IT exemption on account of payment of instalments as per latest budgetary proposals?

Anant Krishnan, Malout

A. In accordance with clause (xviii) of Section 80C(2) of the Act, deduction is allowable for the purposes of purchase or construction of a residential house property where such payment is made towards or by way of any instalment or part payment of the amount due to any company or cooperative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him. Your query does not indicate whether you comply with the conditions specified in the clause. In case you do comply, you will be entitled to a deduction to the extent of Rs 1,00,000 from the total income.

Sale of agri land within MC limits taxable

Q. I am a senior citizen. No pension. I have rural agriculture land in Amritsar district. This agriculture land is ancestral property as it belongs to my great-great grand father. No new purchase. It is under rural agriculture land category classified under Revenue Registration Fee of 6 per cent in force from 2005. I am going to sell this agriculture land. Please advise me on the following.

(a) Whether I have to pay any capital gain?

(b) Whether I am free to invest agriculture land money in Senior Citizen Scheme or any small saving schemes.

(c) Whether to construct a residential house is free and state investment limits.

Samarveer Singh

A. The capital gains on sale of agricultural land is chargeable to tax, if such agricultural land is situated in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000, according to the last preceding census of which the relevant figures have been published before the first day of the previous year or in any area within such distance, not being more than 8 km from the local limits of municipality or cantonment board, as the Central Government may specify in this behalf by notification in the Official Gazette. In case agricultural land is situated in an area, which is beyond the above limits, the capital gains on sale of such agricultural land would not be chargeable to tax.

You have the right to invest the amount of sale proceeds in any manner subject, however, to the payment of capital gains tax. However, in case you want to save the capital gains tax, you can invest the amount of capital gains in either (a) purchase of bonds notified for such purpose or (b) purchase or construction of a residential house within a specified period or (c) purchase of land for being used for agricultural purposes within a specified period.

Capital gains tax on agri land

Q. I have one acre of ancestral agricultural land in our village in Haryana, which is 15 km away from Thanesar (Kurukshetra). It was in the name of my father, who expired in 1992. My father had purchased this land in 1956. I will be selling it for Rs.6.25 lakh. I am an income tax payee pensioner. I want to know the status of money so received by me. Whether this will be exempted from tax being agricultural land or will it carry tax obligation. What are the tax obligations and what are the ways out to minimise the tax if any.

Ravinder Sharma, Kapurthala

A. The agricultural land owned by you in a village in Haryana will get covered in the definition of the words “Capital Assets” if the same is situated within a distance of 5 km from the Municipal Committee/Corporation of Thanesar in all directions. The distance as specified above has been laid down by the Notification No. SO 10(E), dated 6-1-1994, as amended by Notification No. SO 1302, dated 28-12-1999. In case the land so situated is not covered within the specified distance, any capital gains on sale thereof would not be chargeable to tax. However, in case the land is so covered within the definition of the words ‘Capital Asset’ the capital gains will have to be computed by taking the market value of the land as on April 1, 1981 which will be indexed in accordance with the Cost Inflation Index notified by the Government. The Cost Inflation Index notified for the financial year 2005-06 is 519.

You have also stated in your question that land was purchased by your father. Since you have inherited the land after your father’s demise, the tax will have to be paid by you. You have the option to invest the capital gains in the acquisition or construction of a residential house within the specified period. You can also invest the amount of capital gains in capital gains tax saving bonds. These bonds have to be brought within six months from the date of transfer of land.



IT-enabled real estate boom in Tamil Nadu
Arup Chanda

Due to increasing information technology (IT) activities in Tamil Nadu, even smaller cities like Coimbatore are witnessing a real estate boom in the state.

In Coimbatore modalities are being finalised to commence work on the much-awaited IT park on 29 acres of land in the city, which is expected to become operational in 18 months after start of the construction.

The proposed park would accommodate a tidel park on 10 acres of land with facilities by the TCS and Wipro in five and 10 acres, respectively. The process for floating the tenders for the Tidel Park would be finalised within 40 days. The 1.2 lakh sq ft tidel park, at a cost of Rs 250 crore, is a joint venture by ELCOT, TIDCO and Software Technology Park of India, and expected to provide employment to 10,000 to 12,000 persons.

Wipro would provide about 6,000 jobs and TCS around 5,000.The park, being a Special Economic Zone, would also have domestic SME players.

Tamil Nadu Government officials, who visited Coimbatore to assess the demand and progress with district officials and industrial associations, said they were looking for additional land to cater to the tremendous demand for space.

The Tamil Nadu Government is also building a 70-km IT corridor along the East Coast Road from tidel park in Chennai to Mahabalipuram at a cost of Rs 6000 crore to boost the real estate activities in the area.



Return of the native
Maneesh Chhibber

Over three decades after he left Shimla, where his family owns a successful hotel-cum-restaurant, Mr Chander K. Baljee is headed back to his roots.

After having proven his mettle in the hospitality business, independent of his family that runs the Baljees group in Shimla, Mr Baljee is currently scouting for properties in Himachal Pradesh, Punjab and Chandigarh to start four and five-star hotels.

He is the chairman-cum-MD of Royal Orchid chain of hotels, which owns many hotels in Bangalore, Hyderabad, Mysore, Delhi.

“Amritsar, Chandigarh, Shimla, Jalandhar, Gurgaon and Noida are our next destinations. We are looking at properties that we would like to develop. Our focus would be on 5-star business hotels and 4-star hotels,” he says.

A gold medallist from IIM, Ahmedabad, Mr Baljee is also in the managing committee of the Bangalore Management Association.

And money has not been a problem. Early this year his company’s maiden IPO for raising Rs 112 crore from the stock market, was oversubscribed 40 times.

Referring to the potential of the tourism sector in Himachal Pradesh, Punjab and Chandigarh, Mr Baljee said the Chandigarh Administration should aim at promoting the city as a “stopover tourist destination”.

“Chandigarh is a perfect place for business tourism, where business and sightseeing can be mixed. The Administration should concentrate on attracting business tourists such as conventions and company meetings,” he adds.

As for HP, Mr Baljee says, “Accessibility is a big problem in HP. But it can be easily tackled by developing small airstrips so as to allow small aircraft to land and take off. The government can even think of subsidising stay and air travel through chartered planes to attract foreigners and big spending Indians,” he adds.



Farmers shortchanged, land sharks grab the moolah

AP Government finds itself in trouble over Outer Ring Road project, says Ramesh Kandula

The Congress government in Andhra Pradesh has got bogged down in real estate controversies, as its land deals in recent times have acquired political ramifications.

Realty had turned into a major source of funds for the state exchequer, ‘transforming the government into the role of a broker’.

But when things came to a head the Rajasekhara Reddy government was forced to request a CBI inquiry into two of the land deals last week.

The government agencies had tasted the lure of real estate lucre when plots in up market areas like Jubilee Hills went up as much as Rs 1 lakh a square yard in the auctions conducted last year. Later, the government struck a gold mine when it auctioned a 5-acre piece of land in the Jubilee Hills area for a whopping Rs 335 crore.

Enthused by the response, the Hyderabad Urban Development Authority (HUDA) went on to auction agricultural land at Kokapet on the outskirts at Rs 15 crore an acre, yielding Rs 703 crore, but not before uprooting the local marginal farmers who had been cultivating the lands for years.

While the middle class resented the government for giving up its role of facilitator for providing shelter to the common man by building townships, the farmers rose up in arms when lands were acquired for the prestigious Outer Ring Road project. The state Opposition parties as well as some legislators within the ruling Congress strongly condemned the way agricultural land around the city was acquired from small farmers after paying them a pittance. What made things worse was the steep increase in land prices around the ORR project soon after.

The 159-km-long Ring Road, providing connectivity to various State Highways and National Highways, to by pass the city of Hyderabad, is an 8-line divided carriageway, being built at an estimated cost of Rs 3000 crore. The work has already started on the first phase of the project.

The local media had carried a series of reports on how the ORR alignments were changed to save the lands of some ruling party bigwigs, while smallholdings of poor farmers were forcibly taken.

The ORR project has turned into a major scandal with the Opposition parties alleging that poor farmers were being inveigled into selling off their lands for a song to real estate sharks, after they were issued acquisition notices by HUDA. Immediately after the sale was closed, the acquisition notices were withdrawn, benefiting the middlemen in crores of rupees.

The opposition alleged that while the farmers sold the land for anywhere between Rs 5 lakh to Rs 10 lakh for fear of acquisition, the land sharks, including some Ministers, later got as much as Rs 1.5 crore an acre for the same land.

Bowing to the criticism, Chief Minister Y S Rajasekhara Reddy has requested the Centre to institute an inquiry by the CBI into the land acquisition for the ORR project.

But in a bid to take on the Opposition, Mr Reddy also announced a CBI inquiry into the IMG land deal entered into by the previous Telugu Desam government. The Congress alleged that the Chandrababu Naidu government had parted with 850 acres of valuable land to a dubious sports development company at throwaway prices.

The ORR controversy has dampened the real estate fever that gripped the surrounding areas of the city. With doubts persisting on the completion of the project any time soon, not many want to take decisions to purchase plots in hundreds of lay-outs that have come up around the proposed ORR.