Budget baffles builders

Construction industry reads between the lines as dust settles down, says R. Suryamurthy

The booming real estate sector had hoped that Finance Minister P Chidambaram would brandish his magic wand and unleash slew of sops, which would enable the common man buy the dream house at an affordable cost.

Booming economy, marred by upward curve in the inflation, might have cautioned the Finance Minister in the aam admi government to concentrate more on roti than on makaan in the Budget 07-08.

While, the Finance Minister has cleared reverse mortgage scheme for senior citizens, confusion prevails on small apartments, as silence on the much-expected Income Tax provision of 80 IB (10) has evoked mixed interpretations.

Small apartments

Under the section income earned from the construction of small apartments of the size of 1,000 square feet and less in Delhi and Mumbai and 1,500 sq ft and less in other cities, could avail 100 per cent IT exemption on profits (which ranges between 30 and 50 per cent). But the provision is to lapse from March 31, 2007.

Delhi-based developers like Pradeep Jain of Parsvanath Group and Ajay Khanna, director of DLF group, interpret this in a negative way - the Centre has not taken a decision to extend the benefit.

“I am told that as the minister has not said anything of extending 80-IB of the IT Act, it means the benefit continues till notified otherwise. The speech mentions continuing IT benefit to the infrastructure sector in Section 80-IA. Since housing and real estate is also construed as infrastructure and so, a few tax consultants believe the same benefit is applicable. There is no clarity on the issue,” says Jain.

“Though there are only a few developers constructing small-sized flats, the move to take away the incentive will rather discourage them to continue building them. This will affect the supply of such flats. It will affect property prices which will increase sooner or later,” says Niranjan Hiranandani of Hiranandani Developers.

Analysts were of the view that input cost in construction of small apartments is 15 per cent higher than for premium segment apartments. Per square foot price of premium apartments is higher than that of smaller ones. So, developers would obviously prefer to construct premium segment apartments.

Clarity on this aspect by the Finance Ministry would rekindle many to opt to buy their dream homes, already hit by rising home loan interest rates. But, they may have to bear with the differential excise duty on cement.

Sticky cement

The minister proposed reduction in the rate of duty from Rs 400 per tonne to Rs 350 on cement sold in retail at not more than Rs 190 per bag rate while increasing it to Rs 600 per tonne on cement that has a higher MRP.

J K Cement Group Executive President R. G. Bagla says: “The imposition of dual excise duty on cement in the Union Budget is uncalled for. Presently there is a mismatch in demand and supply of cement and the dual excise duty on cement will only lead to further increase in price of cement, especially for the big government projects and in fact for all consumers, where there is a stipulation that duties and taxes are as applicable. Market forces will decide whether the higher excise duty would be passed fully or partly to consumers.”

Industry players feel that the premise on which the price control is based is flawed as cement prices have gone up only 6 per cent on the compounded annual growth rate basis in the past 10 years and the cement sector’s contribution to the overall inflation in the economy is negligible.

Chairman of the Confederation of Indian Real Estate Developers Kumar Gera says: “Although the Finance Minister talked about reducing the cement prices, he actually made prices go up by hiking the excise duty on cement selectively. Combined with service tax at the rate of 12.5 per cent on commercial property, this could push real estate prices further.”

J.B Goel, Chairman, Express Builders Ltd, says the raised excise duty on cement to Rs 600 per tone from Rs 400 on cement, is disquiet, as it will raise the construction cost.

The proposal to bring renting of immovable property for use in commerce or business under the service tax net is a bit of a bad news, industry leaders feel.

Commercial rent

G. P. Savlani of the Confederation of Real Estate Developers Association in India says the levy of service tax on rental income of commercial premises, wherein the owner of the premises does not provide any service, is uncalled for. He only provides the vacant premises and the lessee carries out interiors, etc. on which, in any case, he pays the service tax. There is already a short supply of office space and currently the demand and supply is a total mismatch. Levy of service tax will make rental premises more expensive, which will ultimately be a burden to the customer.

Knight Frank (India) Chairman Pranay Vakil says extending service tax to rentals received from immovable property could be counter-productive. “It is possible that the tenant may refuse to pay the service tax at 12.5 per cent of the rent and the owners may be required to absorb the increase.

This will lower the owner’s yield and an investor may turn away from real estate. The domestic real estate venture capital funds, which have already put money into income yielding assets, will suddenly find the income going down by 12.5 per cent,” he says.

Lost opportunity

Ankur Srivastava, Managing Director, DTZ India says: “With the economy growing at a healthy rate, positive sentiment and only the shadow of inflation looming, this could have been an opportune time to initiate bold measures for long pending structural reforms in the sector. This opportunity appears to have been lost as no structural reforms like tenancy laws, land reforms, rationalisation of stamp duties have been initiated.”

Regarding the creation of mortgage guarantee companies, he says: “This proposed measure should see increased flow of funds for home loans through reduction in provisioning and cost of funds for banks. While this will help the retail home loan borrower and offset some impact of the recent interest rate hikes, the implementation and timing of the measure will determine final impact.”

“The double impact of service tax on rentals and MAT on STPI units could make SEZs more attractive. While clarity on SEZs is awaited, per current guidelines, units in SEZs will not have to pay either MAT or service tax. It would certainly be interesting to see how they emerge vis a vis STPIs as preferred locations for business,” he adds. —TNS



Cosy affair for hoteliers

Ruchika M. Khanna finds out that tax holiday will attract more players

Budget 2007 has brought cheers to the hospitality sector in the country. Buoyed by high growth rate, hoteliers feel that the proposals for the sector in the industry would give a new push to real estate and further their growth prospects.

Five-year tax holiday for two, three and four-star hotels in the National Capital Region is set to give a major boost to the real estate business. Other than these budget hotels, convention centres with a seating capacity of 3,000 in Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam Buddha Nagar (Noida) will also get all central tax exemptions. This holiday is only for the hotels that are complete and start operations in these cities between April 2007 and March 2010. Though the aim is to create an additional 20,000 rooms by the 2010 Commonwealth Games to be held in Delhi, the move is bound to give a major push to the real estate sector.

Delhi and its NCR presently has just about 8,000 odd rooms in the 24 five star hotels. The shortage of rooms here also means that the room tariffs are amongst the highest in the world. With hundreds of thousands of people expected to visit the country during the games, the tax holiday announced now is aimed to increase the room capacity in the region. Also, with focus now on economy hotels, the government has extended the tax holiday only to the budget hotels.

Undoubtedly, the industry is ecstatic about the move. Chairman of Ansal API Sushil Ansal says: “The Finance Ministers proposed tax holiday for two, three and four star hotels in the Delhi and adjoining areas, though focuses on Commonwealth games, will definitely help the sector grow,” he says, while adding that on an overall basis, the Budget has been neutral.

Parasvnath Developers, which is coming up with two hotels in Delhi, too is happy with the announcements. “This move would attract more developers here,” says a company official. The real estate major is coming up with a five star hotel in Dwarka and another hotel in East Delhi.

While the realtors in Delhi are happy, hoteliers in other parts of the country rue that these benefits have not percolated down. Manmohan Kohli, a Chandigarh-based hotelier, says that similar package should also have been extended to other places with huge tourism potential in the country.



HUDA’s extension directive sags prices

Speculators, allottees in a dilemma in Gurgaon, says Ravi S. Singh

The Haryana government’s decision not to allow extension for more than seven years to the plot holders/owners in Haryana Urban Development Authority (HUDA) sectors for construction of houses has effected a crash-down in prices in real estate relating to residential pockets.

The prices of the commercial sites, however, have not been affected by the change in the policy of the government.

In a recent meeting of the HUDA, chaired by Chief Minister Bhupinder Singh Hooda, the “extension policy” was revised. According to well places sources there were reservations against revision of the policy in some quarters of HUDA and the government.

According to Regulation 17 of HUDA (Disposal of Land and Building) Regulations framed under HUDA Act, 1977, a period of two years is given to every plot holder (to be reckoned from the date of “offer of possession”) for the construction of a house. There was a provision to grant a further extension of 13 years beyond the stipulated period of two years on payment of prescribed extension fee.

As per the new policy, henceforth no extension shall be granted beyond seven years (including the initial stipulated period of two years (2 plus 5) years) after “offer of possession”. It has been decided that all such allottees, who have already availed a period of seven years, or will have done so by December 31, 2007, shall have to get the building plan sanctioned and complete at least “minimum required construction” on their plots. Moreover, they will have to apply for “occupation certificate” by December 31, 2008.

In effect, the remaining allottees, who have not yet availed the maximum permissible period of seven years, to be reckoned from the date of offer of possession, may avail the seven years permissible extension of seven years on payment of prescribed rates of extension fee.

The office order of HUDA headquarters with regard the change in the extension policy holds out a caution to the defaulters of resumption of their plots under Section 17 of the HUDA Act.

The cumulative effect has been a general scare on account of the government's bold decision to call the bluff of the plots owners. The general scare and the resultant fall in the price in the real estate in HUDA’s residential sector on account of the change in the policy is said to be due to the investments made by a large number of speculators and financers.

A realtor, Sumit Mudgil says about 90 per cent of those who have taken such plots are purely investors. Only 10 per cent of them are real users. According to the reports, there are a number of individual speculators who have made investments in more than one plots.

The general opinion in the real estate business is that there has been fall ranging from 20-25 per cent. For example, the rate in Sector 23 was about Rs 35,000 per sq yd. It has come down to about Rs 28,000 per sq yd after the announcement of the new policy. In Sector 9 and 10,the rate has come down to about Rs 10,000 per sq yd from about Rs 15,000 per sq yd.

In Sector 55-56, the rate has come down from Rs 45,000 per sq yd to Rs 42,000 per sq yd.

There seems to be domino effect creeping in as the rates in the “licensed areas”, where private builders are allowed to set up colonies, are taking a small dip.

According to official statistics, presently there are, in all, 7,690 vacant plots ranging from two kanal to two marlas, which will be affected by the new policy at the end of the stipulated period. They are spread over in Sector 4, 5, 5-11,15-IV, 7 and 7 Ext,9, 9-A,10,10-A,12-A,14,15-I,15-II,17,21,22-22B,23,23-A,30-P,31-32A and 41-P.

The popular opinion is that the price will further fall, and there is no scope for rise in the prices in residential quarters for some years. The reason being that as per the New Master Plan for Gurgaon-Manesar, there would be further expansion. Also, there was a scope for about 40,000 additional houses in the new master plan, which would see expansion of Gurgaon city and the development of nearby Manesar as a new township.



Situation ditto in Panipat

20 pc tumble in prices, says Arun Sharma

The revised extension policy of Haryana Urban Development Authority (HUDA) has hit the prices of plots in the open market hard. The prices have tumbled in the city by up to 20 per cent during the last fortnight and are bound to come down further in near future, feel real estate agents.

A plot measuring 500 square yards was being sold at a price of more than Rs 53 lakh in Sector 13-17 last month only, informs a property dealer from Sukhdev Nagar. Now the buyers are not available at the rate of Rs 45 lakh for the same plot, he says.

Similarly a plot of 10 marla in the same locality was available against Rs 23 lakh which was being sold at the price of Rs 28 lakh a few days ago only, adds Daulat Ram a property dealer of the city. He says buyers are not ready to pay Rs 24 lakh for a plot of 8 marla on the main road in Sector 18 which was in demand for Rs 27 lakh last month.

The fall in prices is the outcome of new extension policy of HUDA announced last month.

The move has forced thousands of people in the state in possession of plots for several years to rush towards the real estate agents for sale to avoid resumption resulting in a glut of seller resulting in slashing the prices of plots allotted by the government agency. Thousands of plots are under the threat of resumption by HUDA in the state in case the constructions on these is not completed by the end of next year. According to sources more than 3,000 plots are lying in the sectors of city and reports suggest more than five thousand plots in Gurgaon come under the ambit of the new extension policy.

However, at present the brunt of new extension policy is seen on the prices of plots allotted by HUDA only. The prices of plots at colonies being developed by the private colonisers are stable.

Private builders are set to reap the benefits of this new extension policy announced by HUDA, claims Manjit a property dealer at Sonepat.

The colonies being developed by private builders are not governed by any regulation under which a plot holder is bound to construct his house within a stipulated period forcing the investor of real estate to turn towards these housing projects, he says.



Only the fittest will survive

The time is right to invest in real estate, Opera-CCPL chief tells Pradeep Sharma

Stability spurs the real estate market and the recessionary phase may end with the formation of the new government in Punjab. This, coupled with the expected growth in global realty, should put the real estate market back on rails bringing cheers to the investors and end-users, says Ajay Vir Sehgal of the Opera-CCPL Group.

“In fact, this is the right time to invest in property, particularly on Chandigarh’s periphery, which is going to witness unprecedented growth for a variety of reasons, including strategic location, competition and entry of the major players,” Sehgal told The Tribune.

An MBA from PAU, Ludhiana, and a first generation entrepreneur, Sehgal, who ventured into the realty market with Chandigarh Enclave, a 250-apartment residential-cum-commercial complex nearing completion in Zirakpur, says towns in Chandigarh’s vicinity like Zirakpur, Dera Bassi and Kharar, will always catch the fancy of the investors and end-users.

Professionals, who had missed the bus in the tricity, will continue to form the major chunk of the prospective buyers on Chandigarh’s periphery, Sehgal says.

With the motto of “honest pricing” Sehgal’s group is on a major expansion spree to provide housing to the educated professionals, who want a perfect balance in life, as there was huge demand for “quality housing” in India. A sprawling 19-acre mix-use residential complex having 800 apartments is stone’s throw away from Sector 20, Panchkula, and is in the advanced stage of completion.

Opera Central Park on a 12-acre plot at Dera Bassi will get off the block soon. The Opera Atrium Mall, comprising 10 lakh square feet area at Ludhiana, will mark the entry of the group in multi-floor, premium retail space venture and luxury hotel, he asserts.

The group’s belief in the trinity of quality practices, systems and genuine prices has paid dividends as the construction industry was unorganised till recently, Sehgal claims adding that it is the survival of the fittest now.



Boom time for Hisar realty
Sunit Dhawan

It’s boom time in the property market of Hisar and nearby areas of the region. The upswing in the prices of commercial as well as residential property is likely to continue for quite some time with a number of outsider investors targeting the city.

“The situation is such that almost any plot-owner wishing to sell it will get a handsome amount right away,” maintains a local property consultant.

As far as the HUDA sectors are concerned, the upsurge is more pronounced in Sectors 1, 4, 9 and 11 owing to the availability of transfer plots. Seeing the upward trend in the property market, the rates of plots in the upcoming Sectors 3 and 5 are also expected to be high.

Apart from the urban residential localities, the prices of agricultural land located on the outskirts of the city have also witnessed a sharp increase in the past few weeks.

According to the market buzz, investors from Delhi and other states are evincing a keen interest in the city in view of its convenient location and educated population.



Srinagar gets marriage complex

Ehsaan Fazili discusses about a convention centre that has been a trendsetter in the Valley

A unique complex with facilities for holding different social functions mainly the marriages, cultural and political events, has come up in Srinagar’s posh Sanatnagar area. This complex, known as Dr Sir Mohammad Iqbal Mini Convention Complex, started functioning last year much to the convenience of those living along the 15-km stretch on the bypass road between Pantha Chowk and Parimpora.

The necessity to create such a structure was also because of the high land cost in the residential areas, where people find it difficult to arrange accommodation for hundreds of guests on the marriage functions and other social events. Built on the Custodian land, the work on this unique complex, which is the first of its kind in Kashmir, was inaugurated by Jammu and Kashmir Chief Minister Mufti Mohammad Sayeed on September 24, 2005.

The multi-facility centre, completed at a cost of Rs 4.94 crore, stands as a three-storeyed complex with a plinth area of 1,360 sq feet with the interiors tastefully done, using wood. The ceiling is made of the famous Kashmir wood carving art, the Khatamband.

“Residents prefer to have smaller space for houses without having big halls or parks around,” says Mushtaq Ahmad Baqal, Estate Officer of the complex. The complex formally started functioning and hosting ceremonies eight months after the inauguration when the marriage season restarts.

The complex has come up in 13 kanals of the evacuee land being looked after by the Custodian Department of the Jammu and Kashmir government. It has five other pieces of land, which are being used by the construction of shopping complexes, residential flats and houses for the private parties on lease basis. The Department has also leased out 54 residential flats to the Estate Department of the Jammu and Kashmir government, which are being used for the accommodation of “durbar move” employees during summer months.

The mini convention complex or marriage hall, standing out as a unique complex, has building, lawns and parking space. It has three major halls, including one with a size of 60 x 40 ft and two others with a size of 50 x 30 ft. each. Two of these halls are rented out to the general public parties for organising marriage and other functions, while one hall has been exclusively kept for working restaurant. The department has provided all furnishing for these halls and other rooms on the first floor. The facilities include the space for Kashmir Chef, for cooking the Wazawan, with the facility of 10,000 litres of drinking water tank and a generator for power supply in case of the power failure.

On the first floor, there two royal suites with a tariff of Rs 3,000 per day and two Classic rooms with a tariff of Rs 1,500 per day. There are 10 more rooms on the second floor with a tariff of Rs 1,200 per day. An amount of Rs 30,000 is chargeable for a mini hall on a marriage function and Rs 45,000 per day for the main hall. “All other facilities required at the time of marriage functions are provided by the department, and people find it easy and affordable,” says Mushtaq Ahmad Baqal.

There has been an earning of Rs 10.50 lakh during the first year of its functioning so far, which is a clear indicator of the trend to be followed in other parts of the city and urban centres of the Kashmir valley.



Banks extending repayment period
S.C. Dhall

No doubt on the appeal of the Finance Minister, public sector banks have decided to hold on interest rate on home loan at current rate but keeping in view the scenario — annual closing in March 31, it is not possible for public sector banks to hold on interest of home loan. Public sector banks have been forced to rework their margins.

Since all public sector banks have increased their fixed deposit rates touching 9.50 per cent, it is not possible for them to extend home loans at 10 per cent. It will be a loss proposition. Annual closing is just a month ahead and the banks are likely to suffer a huge loss.

Defaults have already started increasing, especially in the home loan segment, and it around 7 to 9 per cent. Defaults on home loans are rising, but banks are being much more accommodative, even offering to extend the repayment period to lessen to EMI burden.

The HDFC and ICICI have already extended the repayment period to 20 years on a case-to-case basis, especially in those cases which are running regularly. Other private sector banks are mulling this idea.

There are various aspect that come into play such as the borrowers repayment capacity and asset-liability mismatch. Banks are talking to borrowers and taking decision accordingly, to extend the repayment period. The home loan EMI have climbed up 25 per cent, thanks to the frequent rate hike and floating rates on home rates have gone up by 3 per cent to 4 per cent in three to four years.

In absolute terms, banks gives two option to the borrowers. One is a increase in tenure and other is the increase in EMI.

A hike in the EMI often involves administrative hassles as it involves change in the post-dated cheques.

Until and unless borrowers income is rising, it will not be possible for him to hike the EMI. Banks have almost stopped extending loans under fixed rates.

Usually borrowers repay their home loan in 10 to 15 years to save interest on loan.

Bankers consider the increase in the repayment period as a proactive step to prevent more and more home loans from turning bad in a rising interest rate scenario. The same lenders just over a year earlier would unilaterally increase the EMI to keep the repayment period unchanged.

Even some of the public sector banks have started to reschedule EMI.

— The writer is a senior banker



Greater Hyderabad with better facilities

The proposed mega-project is driving up the property rates in the surrounding areas, says Ramesh Kandula

Real estate is expected to receive a boost with legal decks being cleared for the formation of Greater Hyderabad by the Andhra Pradesh High Court.

It was in July 2006 that the Andhra Pradesh Cabinet had approved the creation of Greater Hyderabad and proposed to invest Rs 800 crore to strengthen the infrastructure.

The judgment has come at a time when the real estate sector in the city was witnessing a slump, considered by many in the industry to be the much-needed correction after prices spiralled in the recent past.

The state government is now all set to create a mammoth metropolitan area of 725 sq km, which is presently restricted to 175 sq km.

This will be achieved by merging 12 surrounding municipalities and 8 villages in the neighbouring Ranga Reddy and Medak districts. After the merger, the population of Greater Hyderabad would increase from the present 35 lakh to above 55 lakh.

The move is expected to have a cascading effect on the real estate industry in the city, as the surrounding municipalities, which have become notorious for woeful and totally inadequate infrastructure, will get the much needed attention from the city planners.

To cite an example, Kukatpalli and Serilingampalli municipalities have witnessed tremendous growth in terms of construction activity because of their close proximity to the IT district of Hyderabad.

However, while the prices of apartments in these areas has touched Rs 3,500 per sq ft, most of them lack even such basic facilities as proper underground drainage system. Most of these areas look decayed with over-flowing drains, potholed roads, pigs, rotting garbage and unhealthy environment.

According to a study by the city-based Administrative Staff College of India, slum population in the Municipal Corporation of Hyderabad limits is only 18 per cent while it was around 61.27 per cent in the surrounding municipalities. Living standard was deteriorating day by day because of this. Population growth in the outskirts was 7 per cent annually whereas it was only 1.9 per cent in MCH limits.

Real estate developers maintain that if the government puts in place effective mechanism to curb unplanned growth in these surrounding areas, then there is scope for healthy boom in the realty sector. Since 550 sq km that is being added has a population of only 20 lakh (against 175 sq km of the city having 35 lakh), the land is vast and thinly populated and offers good scope for planned development, they say.

With better infrastructure, roads, bridges, drainage and sanitation in surrounding villages and municipalities, townships are expected to witness a boom in these areas as people would prefer to stay beyond the crowded city areas. The positive sentiment is already driving land prices up in the areas falling under Greater Hyderabad.



GREEN house
No dry welcome this!

Satish Narula tells about pliant trees and charming cacti that can enchant while greeting a visitor

Bottlebrush has a natural bow and is suitable for planting near the entrance
Bottlebrush has a natural bow and is suitable for planting near the entrance. — Photo by the writer

To say it with flowers is the traditional way of conveying feelings on different occasions. Such feelings can also be expressed in a subtle manner by certain other plants at the entrance of an establishment, be it a house, society premises, school, college or even at the entrance to a flat in multistoryed buildings! Entrance to the house speaks volumes about occupants.

Bowing to the guest is a traditional welcome gesture. Horticulturists have, however, found certain tree species that bow naturally and are suitable for planting near the entrances. Bottlebrush is one. The peculiar posture of the tree seems to welcome the visitors. The tree derives its name from the shape of its bloom that is the bottlebrush look alike. The spectacular flowers, botanically speaking, the exposed brightly coloured scarlet stamens as spikes, four to five inches or so in length, appear at the terminal ends of the branches that hang down in a humble posture. The leathery foliage is also ornamental as the leaves shine at the upper surface and are silvery underneath. They seldom dirty the floor. In case when the tree becomes too old or grows too high, it can be headed back and the appearance of new growth gives the stub a ‘bonsai’ look. The tree flowers twice, around March and September.

Another such tree is the Weeping Willow. It extends long strands of twigs that seems to emerge from the middle of the tree. They gain height and then bend vertically downwards to touch the ground. You cannot miss the sight of the majestic beauty of the tree. This tree sheds leaves during winter. That is the time when you can also contain it by pruning. Near the entrance to complexes, like resorts, dwelling colonies, office complexes, and one can go in for bamboo clumps. They can be planted, interspersed with each other.

You can highlight your house entrance by planting some profusely flowering plant or by training a climber. A well-manicured shrub of mussaenda at eye level near the entrance makes an excellent specimen. It starts giving colourful bracts from end of April till the end of November after which it sheds leaves and can be pruned to train. Make sure you do not plant any such tree at the entrance that sheds leaves often. Also the trees at such locations should not be spreading and cause unnecessary shading. In that case you will not be able to sustain any other growth under them or in the near vicinity. For those living in flats on upper stories, palms are excellent plants to cheer up the visitors. Space permitting they could also be planted along the driveway in the house. Areca palm is most suitable.

A true gardener is always a man with open mind. Do not be carried away by the misleading statements of ‘experts’ who advice against planting cacti in the house or near the entrance. Some of these have excellent architectural beauty and be sure there is nothing against these wonders of nature in shastras. At the time, when shastras were written, there was no cactus in India. You can enjoy the beauty of their shape, form, colour variation and above all, the blooms with sparkling colours and forms only if you are free from the fangs of taboos and whips. And if presence of thorns is some criteria to declare cactus a taboo, then how do bougainvillea, roses, chorisia, some of the citrus species plants and many more justify their presence. ‘Cacti makes home a desert’ is the fear spread by those who caution against growing cacti in the home garden or near the entrance. It is a misplaced belief, feel the lovers of cacti. They say that even in the deserts, cacti are the potent signs of life and support hundreds of other lives too.

— The author is a senior horticulturist.



Radio jigs to realty tunes

High inflation, ever rising home loan rates and escalating property prices notwithstanding, the good old radio is smiling all the way to the bank, thanks to the advertising spends of real estate and retail companies.

According to a study by marketing research firm TAM Media, advertising revenues for the radio industry crossed the Rs 500-crore mark in 2006.

In fact, radio sector’s growth in advertising revenue at 58 per cent is the highest for any single medium. Last year, radio industry had a total advertising revenues of Rs 505.3 crore as against Rs 320 crore in 2005, the study says.

Fuelling this growth is the enhanced spending by retail and realty companies, coupled with other local advertisements, which contributed over two-third of radio’s total ad revenue in the metros, the report said.

The trend is benefiting not just the old channels, but also even the new stations.

“Though we are just four months old, we are getting more advertisements from local and national builders than from any other sector and the realty sector,” K P Vasen, CEO of HT group’s FM Channel Fever 104, says

He says the channel’s largest source of revenue when calculated on annual basis could easily be the real estate firms and retail players.

Interestingly, the other major source of advertising revenue for radio is its nemesis - the television.

According to the TAM study, TV promos accounted for about 12-15 per cent of the overall revenue earnings by radios and for over 15 per cent of the ad duration. This makes it the single largest contributor, the study said.

Industry players, however, rule out the theory that radio advertisements are growing at the cost of television.

“Over 30-35 per cent of our ad revenue comes from local retail and real estate developers, who constitute a major chunk of local advertisers and were never major advertisers on TV channels,” Radio One station manager Murli Muktapuram said. — PTI



Opacity hits growth

Direct investments in the Asian real estate sector has the potential to grow robustly in the long term, but infrastructure and lack of transparency would pose a challenge for the global investors, especially in India, a study says.

“With an asset base directly exposed to the macro growth story that draws so many institutional investors to the region, Asian real estate offers a gamut of possibilities at every stage, from nascent market to a mature developed economy,” an Asian Venture Capital Journal report on Asia real estate sector says.

However, the sector’s progress is hindered by volatility, immaturity and market opacity, which may act as a deterrent for the potential investors, the report says.

“At the moment, we’ve about $800 billion market cap of real estate stocks in this region,” world’s leading real estate services and money management firm, Jones Lang LaSalle CEO Asia Pacific Peter Barge said.

He says rising GDP in the region is spurring trade, which, in turn, is a key driver for infrastructure, logistics, warehousing, research and development parks.

“Equivalent trends appear in office assets, and above all, residential and retail, playing to the urbanisation and consumer growth stories,” he says.

According to a real estate retail environment research firm, Taubman Asia President Morgan Parker, mature markets like Japan, Australia, Hong Kong and Singapore represent approximately 80 per cent of all Asian real estate, while the remaining 20 per cent is comprised of emerging markets, predominantly India and China. — PTI



Buzz on Bourses
Venture-funded realty firm

Bangalore: Prakash Gurbaxani, well-known entrepreneur with experience in a wide variety of industries, has announced the launch of his new venture, QVC Realty, which was stated to be the first venture-funded real estate company in India. Gurbaxani, along with 10 members, will form the core management team of QVC Realty, a company press note said. The company will operate in about 12 markets, including Tier I cities like Mumbai, Delhi/NCR, Bangalore, Hyderabad, Pune and Chennai and Tier II ones like Kolkata, Chandigarh, Nagpur, Vadodara and Cochin, it said. — PTI

Satra Prop to set up hotel

New Delhi: Satra Properties India Ltd has said it will set up a five-star hotel at an investment of Rs 175 crore. To be spread over an area of 1,75,000 square feet, the project, Satra Palace is expected to be completed in three to four years time. However, the details on location of the hotel were not divulged by the company. The company also said it has finalised a deal for acquisition of 94 cents of land at Marine Drive, Kerala for a consideration of Rs 6.5 crore. — UNI

Nagarjuna to raise $180 m

New Delhi: Nagarjuna Construction Company Ltd has said it will raise $180 million by issue of equity-linked instruments. The company has received members’ approval for raising funds by issue of equity shares to qualified institutional buyers, global depository receipts (GDRs), foreign currency convertible securities (FCCBs) and other permitted securities. the members have also accorded their approval to increase the investment limit by fiis in the shares of the company to 74 per cent from 49 per cent. — UNI

Alfa Laval bids for Indian arm

Stockholm: Engineering group Alfa Laval has said it had made a public offer worth about 700 million Swedish crowns $99.2 million to buy most of the remaining shares in its Indian subsidiary. The planned purchase at Rs 875 ($19.81) per share would lift its stake in Mumbai-listed Alfa Laval India to 90 per cent from 64 per cent, the group said in a statement. — Reuters

Mantri to invest in IT parks

Mumbai: Real estate major Mantri Realty plans to set up six IT parks in Maharashtra at an estimated Rs 1,300 crore. The parks, to be developed over 137 acres, will be set up in Nagpur, Sangli, Kolhapur, Solapur, Nanded and Latur. Land has already been allocated to the company by the Maharashtra Industrial Development Corporation (MIDC), company chairman Sunil Mantri said here. Mantri Realty's focus on Tier III cities is part of a well-thought out strategy. — PTI

Aussie firm clinches deal

Sydney/New York: Australia's Centro Properties Group has agreed to buy New Plan Excel Realty Trust for about $3.4 billion in cash, accelerating the group's push into the United States. This marks Centro Properties' third US purchase and it said in a statement that directors of New Plan had unanimously recommended the offer. Last year, Centro concluded the purchases of Kramont and Heritage real estate investment trusts. — Reuters



TAX tips
Landlord husband, tenant wife relationship untenable
By S.C. Vasudeva

Q. I am an employee of a private firm. I am receiving HRA from the company with which I am employed. I intend obtaining a receipt for the payment of house rent from my spouse who is the owner of the house so that due exemption under IT rules is allowed. Will I be taking a correct step and whether I would be allowed such benefit?

— Janaki Devi, Jalandhar

A. Section 10(13A) of the Act dealing with the exemption of house rent allowance provides that 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 exception, but it is doubtful whether the assessing officer as well as an appellate authority would agree 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 may, therefore, face difficulty in getting such deduction.

Section 80C

Q. I am employed with a nationalised insurance company and presently posted at Ludhiana. As I would be retiring within a period of two to three years, I purchased a small plot in Ludhiana for constructing a residential house. I have taken a housing loan of Rs 15 lakh from a bank. I am paying interest as well as principal toward repayment of my loan. The construction is in full swing and the house will be completed by December 2007/ January 2008. Am I entitled to claim the deduction of interest and repayment for the principal amount as deduction from my total income?

— K.B. Kamboj

A. The installment payable towards the repayment of loan borrowed for the construction of house is deductible against your total income under the Section 80C of the IT Act, 1961 (the Act). The deduction under Section 80C is limited to a sum of Rs 1 lakh in respect of all items of payment / deduction as specified in the said section. The interest payable on loan borrowed for construction/acquisition of house property is deductible under the Section 24 of the Act i.e. income from house property. Such interest would be allowed as deduction in five equal installments against income from house property.

No-profit sale

Q. I had purchased a 5-marla residential plot at Sonepat, Haryana, from HUDA. The installments are being paid but the possession thereof has been handed over. I intend selling the same on no-profit no-loss basis and invest the money in a flat being constructed by DLF in Gurgaon. Could you please explain my tax liability in this regard?

— Udhav Kumar, Panipat

A. As you intend selling the property on no-profit no-loss basis, apparently there is no tax liability. However, I would like to invite you kind attention to the provisions of Section 50C of the Act. This section has been made applicable w.e.f. assessment year 2003-04. According to the said section, where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a state government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed, be deemed to be the full value of consideration received or accruing as a result of such transfer.

It is not evident from your query whether the state government has notified any value to be adopted for the purpose of payment of stamp duty in Sonepat. In case the provisions as aforesaid are attracted, the capital gains tax will have to be paid on the difference between the cost and the value so adopted.

Sale agreement

Q. I had entered into an agreement of sale regarding my residential house. According to the agreement to sell, the buyer was to get the sale deed registered in my favour within a period of six months of the date of the agreement. However, the period of six months has passed and the buyer has not approached me for the execution and registration of the sale deed. The possession of the house is still with me. Will the amount of advance receipt against the sale of property be taxable in my hands?

— Kishan Pal, Patiala

A. According to the Section 51 of the Act, where any capital asset was on any previous occasion, the subject of negotiations for its transfer, any advance received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the fair market value thereof, as the case may be, in computing the cost of acquisition. In your case, therefore, the earnest money received will not be taxable in the year in which the amount has been forfeited. However, the said amount would go to reduce the cost or fair market value of the property as the case may be.

Rebate on gift

Q. I have sold a plot of land which was inherited by me from my father. I would like to gift the entire amount received on the sale of such plot to my major son. Do I get some rebate in respect of such gift?

— Bupesh Tiwari, Ropar

A. The sale of plot of land would involve the payment of capital gains tax which should be paid in advance on September 15, December 15 and March 15 of the year in which the sale takes place. This is in accordance with the provisions of Section 211 of the Act. There is no rebate allowable under the provisions of the Act in respect of the gift made to a major son. However, such a gift would not be treated as an income in the hands of your son on account of an exemption provided under the said section.