Baddi bans property sale for planned development

However, experts claim this will hamper expansion and encourage investors to move to Uttaranchal, writes Ambika Sharma

The abrupt ban on sale of property in the prime industrial areas of Baddi-Barotiwala-Nalagarh has left both the financers and realtors in a quandary while the investors have welcomed the move. The ban imposed by the Financial Commissioner (revenue) puts on hold all sale, lease, mortgage, exchange and gift of land from November 25.

Large-scale sale and purchase of land had been going on in the area ever since 2003 when the central industrial package was announced. The local landowners had been selling agricultural land through the property dealers. Although the landowners minted lakhs but it was being felt that it was the realtors who benefited the most as they had passed only a small share of profit to the landowner. The sale of land through the general power of attorney (GPA) had become the most potent tool for transacting land. The lure of making a fast buck had enticed the local agrarian community to pass on their GPA to realtors.

A cursory survey of the area revealed that the realtors initially gave 10 to 25 per cent advance to the landowners promising to pay the rest soon after the sale of land. Later this percentage rose to as much as cent percent. The realtors paid the owners the entire amount, which was often much lower than the land’s selling value, and procured the GPA. They then further sold the land at much higher rates. So now with ban in place it is realtors and financiers like these who have been caught unawares. Not only have they got large sums of money being blocked in the process but also an uncertainty about the land value looms large in front of them now.

The large-scale sale and purchase, made on GPA, had also led to many fraudulent land sale deeds. The irregularities included sale of land to non-Himachalis, which is forbidden. The Revenue Department also detected revenue loss worth crores of rupees in the process.

The state CID Department has finally initiated an inquiry recently to look into the matter. According to senior officials of the CID department as many as 2,300 notices have been served to individuals, mostly comprising property dealers, for verifying their Himachali status.

The government was also facing revenue loss worth crores on account of stamp duty evasion. Since the land deals were registered on amounts much lower than actual deals, the stamp duty paid was also proportionately much lower. This too had accounted as a significant reason for this ban.

The move has been impelled by a number of other factors as well. The Town and Country Planning (TCP) Department had prepared a draft development plan in 2003, which specified land use in the area. The plan, however, lost its significance, as there was an influx of industries after the 2003 central industrial package. Lack of coordination between the TCP department and revenue department led to haphazard development. Many industrial units came up in areas, which were specified for green belt and open spaces. Even places, which were earmarked for sector roads, saw development of industrial units.

The TCP department had to grant a land-use change for allowing industrial activity on agriculture land due to this lack of coordination. The State Town Planner, Mr A.R. Sankhyan, while explaining the rationale behind this move said, “ The step to ban sale of land would help the department to devise a master plan for the area. The earlier draft development plan had been rendered ineffective due to large-scale industrialisation. The new plan, while enhancing the scope of the earlier plan, would incorporate the existing structures. The new plan would be applicable till 2021 and would include the entire area falling under the Nalagarh Baddi Barotiwala Development Area (NAABDA)”.

The current investors have ambivalent views on this ban. While it has been welcomed in the larger context as it would enable planned development, it has put a spanner in the expansion activities. Investors opined that since this was the only area where large-scale plain level land was available it would encourage investors to move to Uttaranchal.

The government agencies like Himachal Pradesh Housing and Urban Development Authority can, however, continue to acquire land for developing the area. This would bring about some planned development and would help offset the impact of haphazard development.

‘Mall prices to witness correction’

Real estate prices in shopping malls are likely to come down due to overcapacity of mall space in the market, according to consultancy firm A T Kearney.

“There is a projection of 300-plus malls coming up by next year. I see a minor correction in the mall real estate prices which currently far exceeds the retail prices outside the malls,” A T Kearney Principal, Consumer Industries and Retail Practice, Hemant Kalbag, has said. He was speaking on the sidelines of CII-India Retail Summit recently in Mumbai.

“There will be overcapacity of malls leading to increased supply but less demand,” he said.

On the entry of foreign retailers, he said this would increase the supply chain and merchandising standards in the country.

“Retailers like Wal-Mart and Tesco will bring in best of practices in sourcing, merchandizing and logistics and help in elevating the standards of Indian retailing.”

India has about 300 million consumers and so it was an attractive market for any foreign retailer, he said. — PTI

Winter-proof your home
Shveta Pathak

Come winters and a little change in the interiors would ensure a cosy home. These changes, as per experts, can be done right from ceiling to flooring, upholstery, lighting and flooring. And as winters are all about bright hues, it is time to experiment with colours and textures.

A false ceiling, says architect Sanjay Goel of the Ludhiana Architects Association, would keep a room warm. “A false ceiling reduces the volume of room and hence keeps a room free from extremes of outside temperature. The heating systems, too, work better,” he says. These ceilings could be wooden or even made of gypsum or aluminium. The process is simple and does not involve heavy costs.

“In modern buildings double ceiling are a common feature. However, to instal these in our home, the average cost is between Rs 40 to Rs 100 per sq feet, depending on the kind of material used. In a medium sized room of about 150-200 sq ft the cost would range between Rs 7,000 and Rs 20,000.”

According to architects, false ceilings are equally good for summers especially for

those living on top floors particularly benefit by having these ceilings, as the AC becomes more effective.

Other options include installing wooden floorings for cosy interiors, claim experts.

If changing the flooring according to the season seems too farfetched and expensive, carpets are a less expensive way of warming up the interiors. “The thicker and more well woven the carpet, the better it is. Now a days shaggy carpets, which have long threads and leather carpets are quite popular,” said Mr Surinder Singh of Naveen Bharat Store, here.

Another aspect, which can beat the chill, is lighting. Yellow halogen lights give a warm effect. “I have installed yellow halogen lights in my office and now I don’t feel like using the heating system as it seems warm and cosy,” said Mr Navin Sharma, a local resident.

Another aspect to keep the winter at bay is by changing the upholstery. Heavy-textured curtains in bright shades and earthy tones give a cosy feeling to interiors.

Commonwealth Games spur realty development in NCR
R. Suryamurthy

The national capital region (NCR) is all set to witness exponential growth in the run-up to the Commonwealth Games in 2010. This will be the first time when India will host the games and only the second time the event has been held in Asia (Kuala Lumpur in 1998 was the first). The proposed dates for the Games are from October 3 to October 14, 2010, inclusive of the opening and closing ceremonies.

The Delhi Games Village is to be constructed as a low-rise medium development on a 40-acre site in the heart of the capital with a possible capacity for 8,500 athletes and officials.

The existing stadia will be used to house the following sports: archery, aquatics, athletics, badminton, boxing, cycling, EAD events, gymnastics, hockey, lawn bowls, netball, rugby-7s, shooting, squash, table tennis, lawn tennis, weightlifting and wrestling.

While there is no proposal to build new stadiums, existing ones are to be upgraded. To meet the shortfall in hotel room capacity; there are plans to build several new hotels. Innovative schemes of allowing the residents to accommodate guests in their homes are also on the anvil. Also plans are being drawn for augmenting the existing civic amenities and public transportation, especially the metro lines.

To meet the growing demands of the sporting events, the government and the private real estate developers have chalked out various plans to meet the ends. With little time left for the mega event, the NCR region is set to witness hectic realty development to meet the challenge and become the contender for hosting the ultimate sporting event - Olympics.

Not everybody is optimistic with the pace of development, including the Union Tourism Minister Ambika Soni, who admitted that there was shortage of 1.5 lakh hotel rooms in the country and the focus of new hotels would be in the NCR region.

Prof K. T. Ravindran, Dean of Studies, School of Planning & Architecture, said “It is good that we are building huge infrastructure for the games, but every such mega event can have huge repercussions and leave negative legacies behind unless these created assets are successfully absorbed by the city in the long run. For instance, decades back Asiad games took place in Delhi, creating a white elephants for us, never adding any further benefits to the city.”

He also said that we could take lessons from Athens Olympics, where the thrust of the related development was to create long-lasting culture-specific infrastructure and build viable public-private partnerships.

“We have invested almost only half the amount allotted to us for planning for Commonwealth Games 2010, which is Rs 2,400 crore. This is against Rs 5,200 crore, which has were supposed to have spent till now,” said Prof N. Sridharan from the Department of Urban Planning, SPA, and wondered whether the projects would be completed in time.

Mr Dinesh Mohan, Professor and Coordinator, Transportation Research and Injury Prevention Programme, IIT Delhi, said fast-track approval was being sought for an 18.7-km-long metro link from Connaught Place to the International Airport in Delhi. This project, costing Rs 3,811 crore (Rs 38.11 billion), needs to be approved in a few days if construction was to be completed before the forthcoming Commonwealth Games to be held in the capital of India.

“The amount of public funds involved is huge and it is surprising that such an outlay is being considered without adequate public disclosure and an examination of alternatives,” he said.

Meanwhile, Ms Soni said the country faced a shortage of 1.5 lakh hotel rooms and efforts were underway to address this issue. Pointing out that India was gearing up to host Commonwealth Games in Delhi in 2010 and Asian Games in 2014 besides preparing to bid for Olympic games, she said that new hotels were being built due to this reason in the capital and Noida.

“In Noida, the hotels were being set up through public-private partnership. The government has a subsidy policy but it cannot be successful till land is available,” the Tourism Minister said, adding to address the issue, there was a proposal to create land banks.

Real estate developers observed that different legislative regimes being followed in different states encompassing NCR i.e. Delhi, Haryana, UP and Rajasthan had made all the difference in the way these regions were growing.

Mr Surender Gupta, president, Credai NCR, observed it is only Haryana Government, which allowed land to be acquired privately by a developer, which had helped in the fast growth of Gurgaon. This was unlike Delhi and UP Governments, which had kept the land in custody with them, creating hurdles for developers.

While UP and Rajasthan were proactive in making infrastructure available in terms of transport, roads, water and electricity etc., much before the process of land development started; Haryana had lagged seriously behind in this endeavour putting a strong bottleneck in further and a holistic development of the town of Gurgaon.

Meanwhile, the games’ success would brighten the country’s chance to host the Olympics and the government would leave no stone unturned to meet this end, even though they were running against the time.

Reliance Fresh kicks off with 11 pilot outlets

German firm Metro Cash & Carry, too, has joined the race, reports Ramesh Kandula from Hyderabad

Hyderabad seems to have become a launching pad for corporate giants to fine-tune their marketing strategies before they make a countrywide foray into the emerging retail sector.

Reliance Industries was the first to make a big splash in the retail market, launching a clutch of its 11 pilot ‘Reliance Fresh’ outlets in Hyderabad early in November.

Currently offering, what are called high-frequency shopped items such as fresh vegetables and fruits, bread, eggs, dairy products and ‘select’ grocery items, the Reliance stores will soon have a non-vegetarian section as well, besides sale of flowers, cookies, lifestyle products and even pharmaceuticals.

The Rs 25,000-crore agri and retail business venture of the company has bigger plans for the country; the object is to have one retail outlet for every 3,000 families across the country, which makes it as having one store within a radius of every 2 km.

The soft launch in Hyderabad would be followed by bigger versions in Mumbai, New Delhi and Ahmedabad, according to RIL chairman and managing director, Mr Mukesh Ambani. The RIL has been firming up plans for other formats - a chain of hypermarkets, supermarkets and department stores.

“We are test-checking the market here and based on the response, we hope to fine-tune our marketing strategy before we start more stores across the country,” Mr Raghu Pillai, president and CE (operations and strategy), said.

Of the 11 outlets spread in an area of 2,000 sq ft to 4,000 sq ft in Hyderabad, most of the outlets are franchisees. “This is because we want to promote entrepreneurs all over the country,” said K. S. Venugopal, head, AP operations, and CE, customer solutions. He added that by the year-end, the company planned to have outlets in five other cities in AP - Vijayawada, Guntur, Warangal, Tirupati and Vizag.

The customer response has been so overwhelming that another six outlets have been added in Hyderabad on Saturday last, said Mr Srinath N C, chief manager.

Meanwhile, the German retailing giant Metro Cash & Carry, too, launched its first distribution centre in Andhra Pradesh and the third in the country in Hyderabad on November 30.

Spread over an area of 7 acre, the Rs 67-crore B2B distribution centre in Hyderabad has a selling space of 1 lakh sq ft, including a 20,000 sq ft temperature-controlled space to handle perishables, such as vegetables, fruits, dairy products, meat and fish. The store has a range of 18,000 products.

Set up with an investment of Rs 67 crore, the Metro operates as a B2B distribution centre, to obviate the restrictions on FDI in retail sector. The company has provided access cards to about 75,000 small and medium retailers, traders, hoteliers, caterers and other businesses to make bulk purchases from Metro.

TAX tips
Minor’s income of more than 1,500 can be clubbed with mother’s income
by S.C. Vasudeva

Q. Mrs Sita Devi is widow with one minor son aged five years. She has inherited a flat, which was given to her late husband in a family settlement. Now she wants to let it out.

(i) Whether both are the owners?

(ii) If yes, how will the share of rental income of the minor be treated?

(iii) Since rent will be about Rs 30,000 per month, can minor’s IT return be signed by his mother?

(iv) Whether minor’s share would be clubbed with his mother’s income.

N.C. Mishra

A. The issues raised by you would depend upon the date and terms of the deed of family settlement. If the family settlement has been made before the date of death of the husband and she has become the absolute owner of the flat by virtue of the deed of family settlement, the minor will have no legal right in the flat and therefore the questions raised by you would not arise. If the deed has been executed between the family members after the date of death of the husband, the answers to your question numbers (i) and (ii) would depend upon the terms of the deed. As to question no. (iii), as per a Supreme Court decision, mother is one of the natural guardians and can sign the papers on behalf of the minor. The provisions of Section 64(1A) do not contain any exception for the situation referred by you in the query and therefore the income arising to minor in excess of Rs 1,500 would be clubbed with the income of the mother.

NRIs, too, have to pay CG tax on house sale in India

Q. I had bought a house in Delhi in 1984 for Rs 5 lakh, which is currently priced at Rs 60 lakh. Now if I sell it I assume I do not have to pay capital gains tax if I am re-investing this Rs 60 lakh again in buying a residential house.

What happens in case of NRI, who is settled abroad and wants to buy a primary residential house abroad using the same amount of Rs 60 lakh, although this amount will be a mere down payment towards the actual cost of Rs 2 crore.

I understand when an NRI wants to repatriate the proceeds of the house abroad he has to pay taxes in India first and then only can get repatriated that too with a chartered accountant’s certification. In this case, the NRI is at disadvantageous position, because had he been re-investing in India itself then there was no capital gain tax but in case of repatriation although for the same purpose of reinvesting for buying house he is paying taxes.

Please advise how to avoid paying taxes in this scenario. Although India and America have bilateral agreement of taxes but I do not know that covers this part or not.

Anshul Jain

A. In accordance with the provisions of Section 54 of the Act, it is the amount of capital gain earned on the sale of a house, which is required to be invested in the acquisition/construction of a new house within the specified period. The specified period for buying a new house is one year or before two years after the sale and for construction of a new house it is three years after the date of sale. Your presumption that the entire amount of Rs 60 lakh will have to be reinvested in acquiring/constructing a new house is not correct. Though the Section 54 of the Act does not state in as many words that the investment of capital gains in the acquisition/construction of a residential house should be made in India, yet it can be very much deduced from the provisions of its Sub-section (2) which provides for the deposit of unspent amount in a separate account in specified institutions in India and the objectives behind the section, the exemption should be available if such investment in a new house is made in India. I may add that recently Ahmedabad Bench of the Income Tax Appellate Tribunal Bench D in Leena J. Shah vs. ACIT Baroda (6 SOT 721) (AHD) has held that the benefit of Section 54F of the Act cannot be availed in case the investment of capital gain earned on sale of a capital asset other than a residential house is made in the acquisition of a residential house outside India.

The capital gains tax is payable by all assessees irrespective of their residential status if the house property is situated in India. There is thus no discrimination between the residents and the non-residents. You can save the capital gains tax by investing the capital gains in the acquisition/construction of a house in India within the specified period. The Indo-US treaty does have provisions for allowing the benefit where the tax on the same income is paid in either of the countries.

Remittance to NRI account

Q. I am an NRI and have a plot in India, which I want to sell and buy a house in India. Is it possible for the purchaser of the plot, who is an NRI, to remit the money to my NRE account? I can then use that money to buy house in India.

Anil Dhawan

A. It is possible for the non-resident Indians to remit the money to your NRE account if the payment towards the sale of your house is made in foreign currency. It may, however, be a difficult proposition, as registration for sale of property will have to be done in India and stamp duty will have to be paid in Indian rupees.

Landlady’s husband can’t claim HRA exemption

Q. I am an employee in a company and have taken house-building advance from PNB for my own home. I am paying monthly instalments towards the repayment of such advance.

(i) Can I issue house rent receipt to my husband so that he can avail HRA exemption. He is a government employee. I will include this house rent as my income.

(ii) Limit amount for tuition fee of children.

Sangeeta Chowdhrie

A. Section 10 (13A) of the Income-Tax Act 1961 (The Act) dealing with the exemption of HRA provides that the section would not apply where the residential accommodation is owned by the assessee or where the assessee has not actually incurred any expenditure towards payment of rent. It may be possible to claim that technically you comply with the above exceptions, but I am doubtful whether it will be possible to convince the department as well as an appellate authority that a husband can have a relationship of landlord with his wife. I may add that Karnataka High Court in case of Patil Vijay Kumar vs. Union of India (151 ITR 48) has held that to claim such a deduction the relation of landlord and tenant must exist between the payer and the payee. You should therefore be prepared for the litigation on the subject. The provisions of Section 80C of the Act provide a total deduction to the extent of Rs 1,00,000 towards the payments/contributions to various scheme. One of the items covered under the aforesaid section is the tuition fee. There is no sectoral limit and such tuition fee would be covered within the limit of Rs 1,00,000 specified by the aforesaid section. Further such deduction is restricted in respect to any two children of the assessee.

Resolve firm’s partnership to save tax

Q. We are receiving income from godown rent for a firm having four partners. We are giving 35 per cent tax on income taken from a Punjab Government agency. How we can change this firm into co-owners or any way to reduce the tax as we are paying tax on firm’s basis we have no other income from this firm.

Please clarify whether we can dissolve this firm and whom should we inform about this issue.

P.C. Malhotra

A. The Partnership Act 1932 defines partnership as a relation between the partners, who have agreed to share the profits of business carried on by all or any of them acting for all. The basic test for the existence of a partnership is the carrying on of business. Since no business is being carried out by the firm, it can be assessed as an association of person by tax authorities. I would suggest that immediate steps should be taken to dissolve the partnership and by virtue of the dissolution deed the partners can be given one-fourth of the property in lieu of their shares in the partnership. I may add that this would attract the provisions of Section 45(4) of the Act and the firm shall be liable to pay capital gains tax with reference to the fair value of the godown.