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Property pre-launches ‘exposed’
With the police booking as many as 7 developers and builders for making pre-launch offers without getting licence or permission from the Town and Country Planning Department, Haryana, many investors may lose their hard-earned money, says
Bijendra Ahlawat
While the surge in real estate prices and the entry of private developers in the residential sector has thrown open vast opportunities for both the investors and buyers, this has led to some fallouts as well. A large number of people, who have invested their hard-earned money, could face the chance of a financial loss in view of the pre-launch offers made by many developers and builders without getting proper licenses or permission from the authorities concerned. The police has registered cases against seven building companies for allegedly violating these kind of rules and going for pre-launch schemes without the permission from the Town and Country Planning Department of Haryana. Though the first licence or permission to any private building company had been issued in 2004 by the department for commercial activity in this district, the number of applicants for seeking permission for launching commercial and building schemes here has crossed over 100, according to the sources in the department. The office of the Director, Town and Country Planning, which issues licences and change of land use certificate, has given licences to more than two dozen builders in the past one year. Though the total number of licences issued so far is not known, the number of applications for licences in the past about 24 months shot up when the land prices started soaring and the government announced some projects in the region. While many builders had launched the pre-launch schemes more than an year ago and a large number of people had applied for ownership flats or plots in many of the projects, the department appeared to have ignored the complaints of many people, who were apprehensive about the genuineness of such offers. After lying low and ignoring the complaints and requests for issuing a notice regarding the companies which allowed such an activity, the office of the District Town Planner (Enforcement) here had recently lodged a complaint against seven builders and construction companies for alleged illegal pre-launch schemes started by them. It is stated that these companies had violated the Section 7(1) of HUDA Act-1975, which states that no building company could go for pre-launch offer without getting permission from the department. The builders named in the FIR lodged on October 25, include Messrs Samrat Housing, R.P.S Infrastructure, Omaxe Construction, D.D Infrastructure, Parvati-Shiv-Ganesh Developer, SRP Builders and ERA, SRS project unit. While this development has led to concern and a sense of insecurity among many investors, the residents here have started contacting the offices of the HUDA and the Town and Country Planning to know the details and seek clarification. They were surprised why there had been a delay on part of the authorities concerned. It may be recalled that a story had been carried by The Tribune a few months back about such an activity. The factors mainly responsible for the sharp rise in land prices here include the construction of the Eastern and Western Peripheral Expressways originating from Palwal town. This was aimed at providing alternative routes for the traffic using the roads of Delhi at present to go to North and other important destination in the Northern region and other projects connected with industrial and commercial development. The development of industrial and commercial hub of Greater Noida and the proposed Taj corridor in neighbouring U.P. has given a shot in the arm to the real estate development in the city, claimed a property consultant based here. He said the rates of the raw agricultural land in Faridabad district, especially which was in the vicinity of the Municipal Corporation limits, had gone from 100 to 1000 times depending upon the location.
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Stark omissions in
Gurgaon master plan
The draft of the “Development Plan 2021 for Gurgaon-Manesar” (Master Plan) notified in gazette has come as a damp squib for the industrial circles as it has failed to address the main area of concern of residential space for industrial workers and labourers. This stark omission has rankled the public as well, concerned about the haphazard growth of Gurgaon and the villages surrounding it on account of mushrooming in the unauthorised settlements by industrial labourers and workers. The villages, where illegal settlements have come up and continue to do so, are now part of Urban Estate of Gurgaon. Not that this is the only area where the draft plan falters, but it is being considered a blunder which will soon come to haunt the Gurgaon authorities and its residents in a big way. The omission seems glaring especially when various industrial organisations have raised this issue several times in the past eight years. The oversight or the ostrich-like approach of the planners could be gauzed from the fact that while the draft gloats over the modernised aspect of Gurgaon, what with brand names in corporate world investing here, apart from projecting a population of 37 lakh by 2021, the plan maintains a deafening silence on the labour population. Also out of 58 new sectors that the draft creates, more than 40 are for residential purposes and eight are for industrial belt, apart from a good chunk of areas reserved for the commercial belt. The proposal for industrial and residential area is near about equal in geographical expanse to the present planned Gurgaon city. At present housing problem for industrial labour is an elephantine one. Due to lack of planning, the land mafia and other vested interest have set up unauthorised settlements for this class of society concomitant to industrialisation and modernisation. As the old adage goes, one can not have silk without the silkworms. The villages, where illegal settlements have come up could be seen in, are Badshapur, Manesar, Kasan, Kho, Baas Khosla, Kadipur, Daulatabad, Basa, Dundahera behind Sector 18, to name a few. The industrial workers need space and they are being forced to live in illegal settlements that prosper in the collusion with land sharks. This haphazard growth has also given impetus to incidents of crime as floating labour, including rickshaw pullers and other forms of labour class, mix around with genuine industrial workers and labour. As they come from various parts of the country (besides a good number of Bangladeshis!) the criminals in them remain unidentified. The problem is now snowballing. It is in this context that many shudder to think of scenario vis-à-vis the new growth of Gurgaon (expanded Gurgaon) as per the new Master Plan. Another major flaw in the draft Master Plan is the inclusion of trans-railway line areas in the “Residential Zone”(R-Zone). The villages that fall in this area are Daulatabad, Dhanawapur, Basai, Dhankot, Khedki, Bajghera, Babupur, etc covering Sectors 99, 102, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113 and 114. There is a strong exception to the inclusion of the areas under the R-Zone due to the fact that these areas are low lying and also have brackish water as sub-soil water. According to many, while these areas are much low when compared to the land surface of present Gurgaon city. No matter how much effort is put in, some strong glitches would stay and would be a perennial source of worry for prospective residents. The wide-ranging view is that the government/planners included these areas due to covert pressure. A good number of operators and land sharks had bought large chunks of land while the draft was being penned in government offices. The cost of the land before the draft was published was quite low compared to places surrounding Gurgaon city. However, with the publication of the draft, the prices have soared manifold. Also the draft plan has come as ticklish document as it does not make much provision for any green belt area. Ideally, there should be a green belt provided for four sectors as clusters. What the document shows is just one stretch of land of a green belt which divides Gurgaon and Manesar.
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Cashing in on nostalgia
NRI townships are the new rage among builders, says S. Satyanarayanan
As the country’s economy booms and continues to maintain a steady 8 per cent GDP growth, non-resident Indians (NRIs) are looking towards India for investments. A home in the land of their birth or parents is always the first option for them. Many real estate developers have come out with plans to meet this specific aspiration of the NRIs, who want to experience the living standards of Europe and US, yet feel the warmth and hospitality of their motherland. The builders are focusing on Punjab and Haryana in North for setting up such projects as a large number of NRIs in this part of the country belong to these two states. Geographically, too, they are closer to the national Capital. In Punjab, there is immense potential and a huge percentage of property is bought by the NRIs, who want to have a good and secure property after earning money in Europe or Gulf, says Mr L N Goel, chairperson of Suncity Projects. Suncity Projects, a leading real estate developer, in association with Santur Projects Private Limited is launching their luxury housing project in Panchkula with an investment of Rs 600 crore. “Located in Sector 20, the housing project has been conceptualised to offer a global lifestyle environment,” Mr Goel says. Spread over 25 acres of lush greens, the project will offer flats and penthouses in varying sizes, ranging from 1,850 sq feet in non-AC and 2150 to 6,300 sq feet in AC options. It will also have an exclusive club, sports complexes, mini-gym, primary school etc., he says. Mr Goel feels that the response to this project from the NRIs is bound to be good as it is located just 6 km from the airport and 8 km from the railway station, 3 km from Panchkula IT Park and 9 km from Chandigarh IT Park. “As the IT industry is shifting its focus to Punjab, top executives of MNCs want to set up their own base and hence a huge demand for high-end luxury apartments,” he said. On the other hand, real estate developers like Parasvanath Developers Limited, are also trying to cash in on the sentiments of NRIs from the region. “Every Punjabi NRI is keen to own flat or apartments in the state, so we are conceptualising properties which suit their requirements as well as have international standards,” Mr P K Jain, adviser to Parasvanath Developers Limited said. The company has got permission from the Chandigarh Administration to build a 1400-apartment housing complex adjacent to Sukhna Lake in Chandigarh. The yet-to-be named project will have 3, 4 and 5-bedroom apartments and also exclusive villas. The complex would also have swimming pool, a stadium, a water sport arena, multiplexes, shopping mall, a school and bus stand etc, Mr Jain said. “Old couples, who are residing in huge 8-kanal houses alone as their sons and daughters have settled abroad, are also showing keen interest in our project as it addresses their wholesome housing needs with fool-proof security,” he said.
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Prices in Katra soar due to pilgrim boom
Many leading hotel chains have made a beeline for Katra with expectation of the number of Vaishnodevi pilgrims to touch 1 crore in the next few years. Due to this the land prices have soared in the town which is the base camp for the 13 km uphill trek to the cave shrine of Vaishnodevi.
In fact land has become a scarce commodity as most of the locals are also engaged in rebuilding their ancestral houses into guest houses or hotels. The boom in the number of pilgrims has transformed the economy of the town where almost every household is, some way or the other, engaged in the pilgrim tourism trade. A number of luxury hotels are being built on the periphery of the town as a lot of high-spending pilgrims visit the shrine that is revered not only by people within the country, but also all over the world. As many as 59.25 lakh pilgrims have visited the shrine during the ten months between January and October this year. The figure touched over 62 lakh last year. A total number of 6,33,956 pilgrims visited the shrine last month, which was a record in itself. Around 23,000 pilgrims are reaching Katra every
day these days from various parts of the country. All pilgrims, bound for the shrine, have to touch the Katra town before proceeding for the cave shrine. Mr Arun Kumar, chief executive officer of the Mata Vaishnodevi Shrine Board, says that the Geological Survey of India has been asked to examine construction of another tunnel to the shrine so as to handle the increasing number of pilgrims. The local people have benefited following takeover of the shrine by the board that has regulated the flow of pilgrims and also taken steps to popularise the place. Just about three decades ago the number of pilgrims visiting the shrine was in a few thousands, but it has sharply increased following takeover of the shrine. Hotel rooms with prices ranging between Rs 200 per day to suites at Rs 9000 per day are available at Katra which is a big achievement in itself. Katra, which used to be a sleepy town a few years ago, is now bustling with pilgrims round the clock and throughout the year. The land prices have shot up to around Rs 30 lakh for a plot of 5400 square ft. on the periphery of the town. Many plots of lands are being purchased through benami deals as outsiders are debarred to own any property in J&K. Experts point out that the land prices would further shoot as the town is expected to be linked through the rail link next year. This would provide pilgrims a direct access to the Katra town. However, the town planners have seem to have no vision of a planned growth as there is haphazard growth of the town in all directions. The multi-storeyed structures are coming up within the town marring the beauty of the Trikuta Hills.
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Mall culture in backwaters of North
The retail revolution and mall culture coming up in the major cities of country, will soon sweep over the backyards in this prosperous region. It is not just the mall capitals of Gurgaon and Faridabad, or the upcoming mall capital of Ludhiana, but also the smaller and affluent cities like Bathinda, Patiala, Karnal and Hisar, besides Zirakpur, the peripheral town of Chandigarh, which will soon be flooded with shopping malls, multi-screen multiplexes and entertainment zones. With globalisation and socio-economic advancement gradually rising lifestyle benchmarks to world-class levels, these cities, too, will witness an era of modernisation once these malls come up. From the staid and sleepy, semi-urban environment, these cities will now leapfrog to the 21st century in style. Bathinda, Karnal and Hisar have emerged as the latest destinations for setting up malls. Satya Developers is coming up with a mall in Bathinda and an integrated township with a mall in Hisar, Indore and Kanpur. Cosmos Developers, too, is coming up with a mall in Bathinda, which too, will be in operation in about a year’s time. Mr Dinesh Aggarwal, general manager of Satya Developers, says that with the Cat-I and Cat-II towns in the country getting saturated in terms of mall development, the only place where the potential lies for expansion is these small cities. “We want to be the early birds making foray into the smaller cities. Places like Ludhiana, Jalandhar, Amritsar in Punjab, and Faridabad and Gurgaon in Haryana have many big players in the mall business, and it is a viable option for us to enter the smaller cities like Bathinda, Karnal and Hisar,” he says. “Most of the cities where we are coming up with a mall have a huge affluent class - be it agricultural class or industrial class. The NRI diaspora in these towns, too, would be an attractive clientele. So far, these NRIs rush to Ludhiana, Jalandhar and Amritsar for their shopping, but we will bring them the stuff they need, in their own neighbourhood. We want to give them world-class shopping facilities within their towns, rather than these people moving out to nearby large cities. Thus, we are coming up with a mall in Bathinda City Centre, which will have a four-screen PVR multiplex with a seating capacity of 1000, food court and all international brands selling their wares,” says Mr Satish Gupta, director, Amravati Infrastructure Developers, which is partnering with Satya Developers to set up the mall. The mall is centrally located and coming up on 100, 000 sq feet of area. It will have three levels of shopping area with an overlooking multiplex foyer.
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Home loans may get costlier, pressure on banks
The party for home-loan borrowers continue. But the Reserve Bank of India has asked banks to exercise caution while extending loans to the real estate sector. The mild, but stern warning in the central bank’s mid-term review of the annual credit policy for 2006-07 is bound to give sleepless nights to many.
In its credit policy, the RBI has raised the repo rate by 0.25 per cent to 7.25 per cent while keeping the reverse repo, the rate at which it borrows from banks, unchanged at 6 per cent. The credit policy says households could become overextended as reflected in credit card busts in several emerging economies. Secondly,large accumulation of debt could leave households prone to future interest rate/exchange rate shocks since banks have, in effect, transferred a large part of their market risks to households. Thirdly, excessive reliance on debt-financed consumption could turn out to be a serious problem if refinancing options dry up. Fourthly, moral hazard and adverse selection is a constant challenge facing banks. Fifth, housing markets continue to remain overheated and, therefore, a source of risk. RBI Governor Y V Reddy says that it has been reported that some banks, while lending for housing, are not fully transparent in indicating the circumstances and the factors governing the benchmark in respect of floating rates as well as in regard to reset clauses. The banks are urged to review all practices, which are less than fair or transparent. They are also urged to afford an opportunity to borrowers to obtain fair and transparent terms consistent with legal requirements and fair practices. With the warning from the central bank, especially those banks that have been lending excessively in the retail loan market and also those consumers who have been borrowing like there is no tomorrow, the rules of the game have just got tougher. “As far as consumer and housing is concerned, we have to be careful,” Indian Overseas Bank CMD T R Narayanswamy has said. Punjab National Bank, Bank of Baroda and the OBC have said there will be no impact on their lending rates as they have enough liquidity, but in the long run they have to focus on mobilising more low-cost deposits. Those banks having less liquidity will have two options before them, to mobilise resources from public through deposits or borrow from the Reserve Bank. Many weaker banks borrow from the RBI as it is not easy to mobilise adequate funds from public due to competition with bigger banks and the hike will increase their fund cost. Real estate prices in major cities have jumped by at least a third in the past year, raising concerns of a property bubble. Bank lending for real estate has surged, propelling total bank credit to annual growth of nearly 30 per cent — far above the central bank’s objective of 20 per cent for the year ending March 2007. Loans to real estate rose 84.4 per cent in 2005/06, making up 4.4 per cent of non-food credit growth. Housing loans grew 29.1 per cent and accounted for 14.6 per cent of non-food credit growth. The RBI began raising risk weighting on housing loans in 2004, making banks set aside more capital against property lending, and increasing provisioning requirements on advances in October 2005. In April, it left the rates untouched but raised the risk weighting for lending to real estate to 150 per cent from 100 per cent. This meant banks had to set aside Rs 13.5 for every Rs 100 lent to the sector. It also increased the level of provision banks had to make for commercial real-estate lending to 1 per cent from 0.40 per cent, making lenders set aside Re 1 for every Rs 100 lent on property. The net effect was that many banks raised their lending rates for home loans by at least 25 basis points and the State Bank of India raised its home loan rates by as much as 50 basis points. If the pace of home loans continues unabated, bankers feel that the Reserve Bank could take stronger steps by increasing risk provisioning for home loans above Rs 20 lakh yet again.
— TNS
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Buzz on Bourses
Real estate developer Uppal Housing Pvt Ltd announced plans to start construction at its first multiservice SEZ property at Gurgaon in Haryana with an investment of over Rs 5,000 crore, company’s Managing Director Manish Uppal said.
Uppals’, which recently received government’s gazetted notification to start construction on 270 acre-SEZ, would fund the project cost both by internal accruals and debt and the final equity structure would be finalised soon, he said. The Capital-based group was also at the final stages of discussion with foreign investors who would jointly develop the property, he added. Construction at the SEZ project would start in the first week of November. The SEZ is expected to offer employment opportunity to over 75,000 people, besides providing an export potential of over one billion dollars within the next seven years. Besides, the Uppal Group has also got in-principal approval from the government to develop IT and ITES specific SEZ in Gurgaon spread over 60 acres.
— PTI
Unity Infraprojects Construction firm Unity Infraprojects Ltd. said its board approved setting up a wholly-owned subsidiary in United Arab Emirates to pursue construction projects globally. The company also plans to set up wholly-owned units for real estate development and Build-Operate-Transfer projects in India. Unity shares ended 2 per cent higher at 552.10 rupees in the
Mumbai market. — Reuters
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TAX tips by S.C. Vasudeva Q. I am lecturer in a government college. My annual income is Rs 1,94,274. I have invested Rs 73,075 under Section 80C under LIC, PLI, GPF and GIS. My queries are: 1. How much tax should I pay? Is there any interest to be paid also? Can I save my tax by investing some more money in any short-term plan? If so which plan should I opt for?. 2. My HRA is Rs 5,340. Need I show the receipt for this HRA amount to get less under Section 10 from the income? (Note - My earlier boss never demanded such receipt and the new boss wants it. I had read in your advice earlier that there was no need of HRA receipt up to Rs 10,000. Is there any amendment in the rule? Medhavrat, Kaithal A. The answers to your queries are as under: (1) On the basis of figures given in the query, your total taxable income would be Rs 1,21,199 (Rs 1,94,274 minus Rs 73,075). The total tax, including education cess, would work out at Rs 2,162 on such income. As the tax payable on your income is less than Rs 5,000, no interest would be payable for non-payment of advance tax. In case you do not file your return by the due date, interest under Section 234A of the Act would be payable at the rate of 1 per cent for the period of delay. There is no other method of saving tax by investing in short-term plans except that you can now get the deduction for making a fixed deposit with the scheduled bank for a period of not less than 5 years. This amount is, however, covered within the maximum limit of Rs 1,00,000/- provided under Section 80C of the Act. (2) For claiming the exemption of HRA, you are required to satisfy the Principal Officer who is authorised to deduct tax at source that you have paid rent for the residential house occupied by you at the place of service. The insistence for the receipt towards the payment of house rent therefore is for the purpose of obtaining a positive proof from the claimant and the Principal Officer has the right to ask for the same. I would invite your kind attention to my clarification published on 21.10.2006 in which I have pointed out that receipt to the extent of Rs 3,000 need not to be provided. This is on the basis of the administrative instruction issued by the Central Board of Direct Taxes. It seems you have wrongly read the figure of Rs 10,000 instead of actual figure of Rs 3,000. No rebate on purchase of plot Q. I am a Haryana Government employee and working in MD University, Rohtak, in the capacity of superintendent since 1990. I borrowed a sum of Rs 2 lakh from Punjab National Bank for purchasing a plot in a colony in Rohtak. I am returning the amount to the bank with interest every month. Kindly advise me if am I eligible for the relief under Section 24 on the amount of interest paid on this amount (Rs 2 lakh) and rebate on the Principal amount repaid. Subhash C. Taneja, Rohtak A. Section 24 of the Act provides for various deductions allowable from income from house property. One of the items covered in the aforesaid Section is the amount of interest payable on the borrowed capital where the property has been acquired, constructed, repaired, renewed or reconstructed with such borrowed capital. In my view, therefore, you are not entitled to a deduction of interest paid on the borrowings which borrowings have been utilised for the purchase of land as there is no income from house property in your case.
Fair market value Q. My wife got a 400 square yards plot from a registered co-operative house building society in Ludhiana in 1978 through its membership card. The plot was transferred by giving a sum of Rs 15,000 to the real plot holder in 1978. However, no such record is traceable with the society. The development and maintenance charges to the tune of Rs40,000 were given to the society from 1986 to 1995 from my accounts. By transferring the plot in my name in 2001, the membership of society stands in my name. No money transaction was involved. Today the sale price of this plot is Rs50 lakh. Kindly advise me on the following points. 1. What is the fair market price and how is it derived at? Can the plot purchased in 1978 be evaluated at that fair market price? Is it necessary or advisable to have the fair market value today also? Is it not mandatory to calculate the present value by multiplying the price of 1978 by the ratio of price index of today and that of 1978? How do the two options stand co-related? 2. The plot has been transferred (deemed sold) twice i.e. in 1978 and 2001. If I opt to sell the plot now how these two transactions are going to effect? This sale is also going through transfer of membership. How such capital gain tax can be minimised? 3. Can I get a loan against this capital gain amount invested in tax saving bonds, having a lock in period of 3 years? Varinder Singh,
Model Town, Ludhiana A. The answers to your queries are as under: 1 The Act defines fair market value as under: "Fair market value", in relation to a capital asset, means - (1) The price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (2) Where the price referred to in sub-clause (1) is not ascertainable, such price as may be determined in accordance with the rules made under the Act. The fair market value for the plot purchased in the year 1978 can be determined by obtaining a valuation report from an approved valuer. For the purposes of computing capital gains the fair market value as on 01.04.1981 can be substituted at your option instead of the cost price of the plot paid in the year 1978. 2. It has been clarified by you in the query that no money transaction was involved when the plot was transferred to your name in 2001. Presuming that the plot was acquired by your wife from her own sources in 1978, the transfer in your name will have to be considered as a gift to you by your wife. The capital gain arising on the sale of such a plot will be taxable in the hands of your wife in view of the provisions of Section 64 of the Act. The period of holding therefore would be considered from the date on which the said plot was acquired by her and therefore fair market value as on 01.04.1981 may have to be ascertained for the purposes of computing the indexed cost as well as the capital gain arising on the sale of such capital asset. The capital gains tax can be saved only if the capital gains are invested either in the purchase of tax saving bonds within the prescribed time or invested in the construction or acquisition of a residential house within the prescribed time. The capital gains tax saving bonds cannot be sold or transferred within the lock in period and even the obtaining of loan against security of such bonds is prohibited by the relevant Section i.e. 54EC of the Act.
No capital gains tax in time-bound period Q. I am an owner of a residential house property, which I am going to sell in December 2006. I expect that a long-term capital gain of about Rs 8 lakh would be earned. I intend investing about Rs 5 lakh in the purchase of a house property and Rs 3 lakh in the construction of the first floor to the house, the single-storied house that I am going to purchase as aforesaid. I expect that the construction would be completed by 2007. The property would be used by me for residential purposes. Can I get the exemption from capital gains if the said procedure is followed for utilising the capital gains earned on the sale of the capital asset? Aniket Verma, Panchkula A. In accordance with the provisions of Section 54 of the Act, an assessee is entitled to the exemption from the taxability of capital gains if he fulfils either of the two conditions i.e. either purchasing a house property within 2 years or constructing the house within 3 year. Section 54 of the Act does not contemplate two kinds of relief. It only provides for the fulfilment of two alternative conditions. If both the conditions were satisfied within the stipulated time, the assessee would be entitled to the relief as provided by Section 54 of the Act. In my view therefore you would be entitled to the exemption under Section 54 of the Act. I am supported in my view by Calcutta High Court decision quoted in 7 Taxman 239.
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FIIs allowed to participate in Parsvnath’s IPO
Delhi-based real estate agency Parsvnath Developers Limited would float an initial public offer within the price band of Rs 250 and Rs 300.
Managing director of Parsvnath Developers Sanjeev Jain told reporters in New Delhi that the price would be discovered through the book building route. The IPO would open on November 6, and close on November 10. Jain said the company was also looking for development of real estate in West Bengal, and also eyeing the SEZ sector. Parsvnath had appointed Enam Financial Consultants Private Limited, JM Morgan Stanley and DSP Merrill Lynch as book running lead managers. The FIIs have not got an opportunity to participate in any of the real estate IPOs so far, while there have also been confusion over the regulatory framework for FII participation in real estate issues, the bankers said. However, according to information available in Parsvnath’s Draft Red Herring Prospectus, FIIs are permitted to participate in the IPO process of the company. The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry had clarified in May, that the FIIs can participate in the issue, followed by a similar clarification from the Reserve Bank of India in the same month, the prospectus said. However, as per the current regulations, no single FII can hold more than 10 per cent of the company’s post-issue paid-up capital, while the FII holding limit might be raised to 100 per cent with approval of the board and shareholders by way of a special resolution. Parsvnath IPO includes the usual benefits for the FIIs such as dividend income being exempt from tax and taxes at concessional rates for income arising from securities, the prospectus said. The company had originally planned the IPO for May, but it was delayed due to a sharp correction in the market. With recovery on the bourses and the market scaling a new peak, along with the continuing strength in the real estate sector, the IPO is expected to generate significant interest among investors. Earlier, DLF Ltd, which was estimated to raise more than Rs 15,000 crore in the country’s largest ever public issue, was pegged as the first real estate IPO that could attract significant interest from FIIs However, the company had to abandon its IPO plans in August and is currently in the process of reviving its plans to enter the capital market soon.
— PTI
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Realty market on high growth curve
Low interest rates, modern attitudes to home ownership, economic prosperity as well as a change of attitude amongst the young working population from that of “save and buy” to borrow and buy and liberalised foreign development investment regime these all have contributed to this boom.
As per reports the Indian real estate sector is likely to emerge a 50 billion industry by the next couple of years. The real estate has also emerged as the hottest sector for private equity players after IT. The higher appreciation that the real estate sector has given, has most private equity players quite excited about it. In 2004 most companies have reported astronomical growth in profitability on the back of rising property prices. In 2005, the industry grew at around 30 per cent. Now companies have lined up projects, which are more than two to three times the size they have completed in past five years. Once the government puts into place land reforms and addresses the challenges facing the real estate sector, this sector has the potential to contribute immensely to the country’s GDP. It is estimated that India to experience a demand and supply gap of 18 million housing units by 2010. This apart commercial real estate demand is expected to be around 350 million sq feet, of which the IT and organised retailing sector should contribute around 300 million sq feet. Sensing this huge opportunity, the market has seen increased interest following the FDI relaxation and the government’s SEZ policy. The average age of a new homeowner is now 32 years as compared to 45 years a decade ago. The real estate sector will continue to derive its growth from the booming IT sector employees/professionals, since 60 to 70 per cent of the new construction is for the IT sector. Home affordability has also doubled in the last five years. Due to rise in income levels and relatively benign property prices till recently, the affordability of homes for buyers — defined as the property price divided by the annual income of the borrower — has improved significantly from about 11 times in 1997 to 4.5 times in 2005. The average household income in urban areas has grown at a compounded 10 per cent in nominal terms over the last decade. By 2010 people earning
approximately Rs 1 lakh a year are expected to constitute 48 per cent of the total earning population. (The writer is a senior banker) |
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