Poor roads, inadequate basic amenities and an overall neglect of infrastructure had stunted the growth of Baddi-Barotiwal-Nalagarh belt for the past several years. But with the new government showing positive inclination towards improving infrastructure, the realtors see this industrial belt blinking brightly on the realty radar, reports Ambika Sharma
Baddi Beckons
Better infrastructure to give thrust to property prices

Poor infrastructure and road network (above) have been a major hurdle in the way of realty boom in Baddi area in spite of hectic construction activity (left).
Poor infrastructure and road network (above) have been a major hurdle in the way of realty boom in Baddi area in spite of hectic construction activity (left). — Tribune photos by Pravesh Chauhan

With Himachal’s new BJP government showing positive inclination towards developing the much-needed infrastructure in the state’s industrial hub of Baddi-Barotiwala-Nalagarh, the hopes of the realtors regarding a boom in real estate sector have been revived. In fact, it was the virtual neglect of infrastructure which had kept the buyers away from this area in spite of crores of rupees being invested in the housing sector alone here.

While Chief Minister P.K. Dhumal has already taken up the issue of providing a budgetary provision for the expansion of Baddi-Chandigarh railway line with the union government well before the railway budget, the construction of alternate routes connecting Baddi to Chandigarh too are in the pipeline now.

All this has given fresh hope to realtors in the area who are expecting good returns in the days to come.

“There is adequate scope for the realty sector to bloom in this industrial hub which produces finished goods worth Rs 70,000 crore annually and utilises raw material worth Rs 10,000 crore”, commented a local real estate dealer.

“Add to this the large number of ancillary units that have sprung up in the area. All this presents a perfect picture of a flourishing economy. While a boost to business means added buying power and for young business executives it actually means interest in property related purchases,” opined another realtor. Moreover, being the lone new township being developed in the North, the rates of commercial complexes are among the cheapest here. While it has become virtually impossible for a middle class dealer to purchase a showroom anywhere in Chandigarh or its satellite towns, the lower rates here are attracting many to the area. 

A comparison of the commercial rates of real estate reveals that while a moderate commercial complex is available at a monthly rent of nearly Rs 15,000 to Rs 40,000 in the Baddi-Barotiwala-Nalagarh area, the same would cost nothing less than Rs 5 lakh in the Chandigarh and its vicinity. Similarly, a two to three bedroom flat is well within the affordable range of Rs 18 to Rs 25 lakh in the Baddi-Barotiwala area. The Chandigarh area has, however, made housing an exorbitant proposition for the middle class with a simple two to three bedroom flat costing nearly Rs 35 to Rs 50 lakh. 

Since a large number of investors as well as business executives working in the industries commute daily from Chandigarh and its surrounding areas, the demand for housing is immense. With spiralling realty rates in the city the dealers are now pinning their hopes on this class of business executives to invest here. It was the poor infrastructure which was acting as an impediment for the growth of realty here, opined a section of builders. 

A delegation of builders who recently met Chief Minister P.K. Dhumal are optimistic that the government will pay due attention to the lack of infrastructural facilities. Lalit Jindal, a realtor from Baddi says, “ If a positive impetus is given to setting up of schools and hospitals in the region, then real estate prices will gain a positive momentum. We were assured of a positive response from the Chief Minister and what builds our confidence is the fact that he is well aware of the shortcomings of the region. He has further assured the realtors of getting another package worth Rs 2,000 for the region which is a very positive development.

” With nearly 1,500 flats in the construction stage in the industrial area and renowned names like Omaxe, Amaravati, Suncity, Monal, etc., having projects here, the realty sector appears to be heading for a positive change, assessed real estate dealers.

Apart from improvement in the condition of roads, the setting up of facilities like schools and hospitals has finally begun and this would augur well for the economy of the region. 



The master plan of change

The Baddi belt will now be planned in a systematic manner. The master plan, the main tool to guide growth of the area will soon be enforced in the belt. The reference area for master plan is likely to be about 318 square kilometers. A plan for whole of the Baddi-Barotiwala-Nalagarh area will be prepared by the Baddi Barotiwala Nalagarh Development Authority (BBNDA).

Key issues to be addressed in master plan:

Land use pattern

The master plan will address various key issues related directly or indirectly to industry. The existing land use pattern and its maladies will be studied in detail. The new planning for efficient land use pattern will be chalked out besides suggesting a suitable re-development model for the existing core areas.

Traffic management

A detailed survey of traffic in the belt will be carried out and an efficient traffic system will be put into force and that will include:

a) Pattern of national and state highways, major roads, sector roads, arterial roads, ring roads, bypass roads indicating their existing widths and the proposed widening.

b) Areas to be earmarked for bus stands, truck stands, transport nagar, extension and development of railways if feasible.

c) Proposals for improvement of junctions, parking lots, idle parking etc.

d) Identify various bottlenecks in the smooth flow of regional traffic and work area-living area relationship besides suggesting mass transport system ideally suited for the area.

Nature preservation

The general landscaping and preservation of natural areas are among main features of the master plan. The special projects to improve civic amenities like water, drainage, sewerage and electricity will be implemented. Sectoral development The plan will suggest broad-based regulations for sectoral development within each sector of the location, height, size of buildings and structures, open spaces, courtyards etc. In addition to it suggestions on architectural control features, elevation and frontage of buildings and structures will also be made.

— Jagmeet Y. Ghuman 



Market crash may jolt realty prices too
Real estate will also feel the impact of stock market meltdown, says S.C. Dhall 

Equity markets are critical drivers of liquidity and money supply. Real estate prices, which had shot up because of easy availability of cheaper credit can see a correction now with the stock market scales going down. However, the prices may not decline much but according to experts the transactions could dry up.

Experts say realty prices are likely to fall by 15 to 20 per cent following a crash in the stock market. In the region the non resident Indians, who had invested in real estate heavily in the past couple of years are, however, not likely to immediately sell off the property so while there can be a correction in the prices of flats and independent houses the price of land in Punjab, especially in and around Patiala, Mohali, Ludhiana etc is not likely to fall considerably.

If there is a persistent correction in the stock market, it could negatively impact the property market. A.S. Oberoi, director of a financial institute, said the extent of fall in real estate prices depends on the fall in stock markets and persistent slowdown in capital markets for at least six months.

If liquidity dries up, the real estate market too would feel the impact. Meanwhile, the Reserve Bank of India has a decided to put on hold the approval for 30 foreign venture capital funds (VCF) wanting to invest in the real estate sector.

In a recent meeting the RBI has clarified that no approvals for VCFs will be issued since the union finance ministry is reviewing the policy of investment in the realty sector for both foreign direct investment and portfolio investments by foreign institutional investors.

RBI has suggested restrictions on investments by VCFs in sectors that are already developed and booming.

The RBI is also of the view that foreign direct investment in real estate should be brought under the approval route. Such an investment is currently under the automatic route for large projects.

RBI, it is understood, has been finding it tough to manage the large foreign capital inflows into the country. RBI has also kindled hopes of softening of interest rates in its monetary and credit policy which is likely to be announced later this month.

Worried about the rising inflow of foreign funds into the real estate sector, RBI has asked the union finance ministry to allow FDI into the real estate only after clearance from the foreign investment promotion board.

At present up to 100 per cent FDI is allowed in realty projects through the automatic route with certain conditions like a three-year lock in on investments and minimum capital investment of $ 5 million. RBI, however, wants real estate removed from the list of sectors where FDI can come in through the automatic route.

It has also been noticed that realty players are now eyeing the West for joint ventures to increase their revenue and reach. These tie ups are clean revenue sharing models wherein partners would invest in land. Joint ventures are purpose oriented and beneficial for both the parties. Recent market sentiments have led to an increase in activity for international marketing. It is by and large exploited for township projects and premium or luxury apartments catering to the needs of higher income groups.

The writer is a senior banker



HUDA’s assurance fails to appease allottees
Pradeep Sharma

With the Punjab and Haryana High Court "deadline" asking the Haryana Urban Development Authority (HUDA) to find an amicable solution to the imbroglio involving the registration of flats under the Haryana Apartment Ownership Act,1983, ending on February 10, the

stand-off between lakhs of allottees and HUDA is nowhere near resolution.

Even as both sides stick to their guns, the war of words between HUDA and the allottees is only going intensify in the days to come. With the Haryana government also adopting an ambivalent stand, no solution seems to be in sight to the vexed issue giving sleepless nights to the allottees comprising middle and lower classes.

In fact, the "arbitary and anti-people" decision of HUDA to ask the allottees to register their apartments under the Act after payment of stamp duty strikes at the very foundation of cooperative movement ."The single decision of the authorities had given a jolt to the cooperative sector which is likely to shatter the dreams of lakhs of persons", alleges BK Sanghi, president of the Haryana Group Housing Federation, who has been spearheading the agitation against the "irrational and ill-timed" decision.

Sources said there are approximately 2,000 acres of land under the group housing societies in Haryana in the districts of Panchkula, Panipat, Sonepat, Faridabad, Palwal, Gurgaon, and Rewari. Taking approximately 50 flats per acre and five persons per dwelling unit the total number of people affected would be approximately five lakh.

The strength of the cooperative group housing society is that all members are share holders for joint action in the procurement, construction and subsequent maintenance of the society. This membership is not saleable. It can only be transferred, argue allottees contending that the Act was not at all applicable to them.

Echoing same sentiments, Deepak Rai Walia, chairman of the Forum for Common Cause Society, which petitioned the high court resulting in HC directive to HUDA, doubts HUDA's intention to arrive at a "mutually-beneficial" solution.Giving an instance, Walia said despite the fact that the HC directed HUDA to give personal hearing to societies on December 10, the forum received letter on January 11.

How can the societies produce the record within such a short period, he asked. Ultimately, the personal hearing was put off to January 21. At the January 21 meeting with the representatives of the cooperative societies, HUDA chief administrator T.C Gupta reportedly assured that allottees that certain concesssions might be granted to the original allottees. However, what are the concessions needed to be seen, the wary allottees said.

Now wary of HUDA's motives, the federation had sent an SOS to the Haryana Chief Minister to intervene and form a committee under the chairmanship of a minister. The committee should include representatives of cooperative societies, HUDA, besides government functionaries to evolve a transparent mechanism for working out a solution acceptable to all.

Interestingly, the Act was brought into play to prevent the big national and international building cartels from swallowing up the prime lands in national capital region(NCR). Now, HUDA should take another look at the Act and its repercussions for the shareholders in the small cooperative group housing societies. It is an emotional issue and needs sympathetic consideration, the representation said.

Also, there is the execution of a tripartite agreement between the society, shareholders and the bank. HUDA sanctions and gives the permission to the society and to its member to mortgage the membership share to raise loans for the construction of dwelling unit by the society. The share certificate in itself is the valuable security for the bank under the auspices of HUDA. Thus, where the share holders have already raised large loans for purpose of construction of dwelling units, he or she may have to raise another loan to pay up the stamp duty or to leave the membership of the society, the represention fears. 
It must be highlighted that under Section 43 of the Cooperative Societies Act the societies had been exempted from compulsory registration of instruments. The society is owners of the land and allottees are only shareholders.

"However, if an individual becomes the owner then his welfare under the preview of the society ceases to exist. He has to fend for himself on an individual basis. The very premise of setting up of the cooperative society is thus defeated. How, can such a situation be envisaged by a responsible government, especially of the people, by the people and for the people," Sanghi asks.


Discrimination-HUDA style

Scenario 1: A citizen acquires a plot from HUDA. The conveyance deed is made on the cost of the land to construct a house. A completion certificate is obtained from HUDA. No stamp duty is levied on the construction costs.

Scenario 2: A citizen becomes a member of a cooperative group housing society. Land is acquired from HUDA and a conveyance deed is executed between HUDA and the society on the cost of the land. The society then constructs the requisite number of houses and obtains a completion certificate from HUDA.

Why then is stamp duty to be charged on construction cost from the share holder separately?



Internal audit weak in urban local bodies, says report
Prashant Sood

With the Jawaharlal Nehru Urban Renewal Mission (JNNURM) having put the urban local bodies (ULBs) on the path of reforms, the Urban Development Ministry is working on ways to strengthen accountability and improve their financial management as the municipal budgets are expected to increase substantially due to the infusion of funds under the mission.

A World Bank Study — Synthesis Study of Public Financial Management and Accountability, in Urban Local Bodies — which was released here recently highlights success stories in budgeting, financial planning and procurement and also points to the critical gaps.

The report was jointly released by M.Ramchandran, secretary, ministry of urban development and Rachid Benmessaoud, operations adviser, the World Bank India.

The report says that most ULBs face problems due to lack of capacity, improper staffing pattern and lack of standardisation. Pointing to legislative framework, it says most state Acts were not people-centric, promote archaic practices, focus more on compliance.

It says budget planning was not considered a management tool, and budget execution was characterised by large budget variances, rescheduling of budget heads and insufficient budget monitoring.

The report says that accounting and MIS has got impetus through JNNURM particularly in states implementing National Municipal Accounting Manual but it needs more support.

It says internal audit and control was weak and many ULBs lacked audit committees for oversight. There was lack of updated inventory registers and list of debtors. Public discolusre of audited accounts was desirable which will also lead to strong demand for accountability of elected representatives.

The report also outlines innovative practices adopted by states such as Karnataka, Andhra Pradesh and Kerala. It says small town of Kapra in Andhra Pradesh uses budgets for long term strategic planning.

The country’s urban population has grown five fold since 1947 and nearly 27 per cent of people now live in the urban areas. It is estimated that by 2040, nearly 50 per cent of the country’s population will be living in urban areas. Cities and towns in the country contribute 50 per cent to the GDP and 90 per cent to the taxes but most of the urban settlements face shortfalls in housing and water supply besides inadequate sewerage facilities, traffic congestion and growing pollution.

World Bank officials said better PFMA practices would lead to efficient use of public money, improved service delivery and greater transparency and accountability in the spending in ULBs. It will also improve their financial positions and their credit worthiness, making it easier for them to leverage funds from the capital marked for financing infrastructure needs.



Real News
Emmar MGF to raise up to $ 1.79-bn from maiden offer

Mumbai: Realty major Emaar MGF will enter the capital market to mop up anywhere between $ 1.58-1.79 billion through issue of 10.25 crore equity shares in the price band between Rs 610-690. The issue, likely the third-largest in the country’s capital market history after Reliance Power and DLF, will hit the market on February 1. The issue proceeds would be utilised for part financing acquisition of land, construction of ongoing projects and pre-paying some debt. “The Indian economy is growing and there is a shortage of housing units here. I guess it gives enough opportunity for all of us,” Emmar Properties Chairman Md Ali Alabbar told reporters here. The Dubai-based realty major has 41.9 per cent stake in the joint venture, while MGF Development Ltd of India has 53.3 per cent stake in the company. Emmar MGF has recently diluted some stake to IFCI at the upper band of the issue price. — PTI

New ICICI fund targets investors in Gulf

Dubai: India’s leading private sector bank ICICI has chosen Dubai for the global launch of a fund that will focus on India’s infrastructure and real estate sectors. A lot of investors from the Gulf are keen on investing in the country’s infrastructure which would need nearly $ 500 billion in the next few years. ICICI Group Global Private Clients unveiled the ‘IOPM Infrastructure and Real Estate Fund’, a first of its kind offshore close-ended thematic fund. ICICI Bank is the sole arranger for the fund, which would be available for ICICI bank global private clients on a private placement basis. Investment advisers to the fund would be under ICICI Bank’s asset management arm in India, ICICI Prudential Asset Management Co (IPAMC), headed by ICICI Prudential AMC Chief Investment Officer Nilesh Shah. Launching the fund in Dubai, Ashish Kehair, Head, Products and Strategy, Global Private Clients, ICICI Group, said, “With a staggering $ 500 billion planned investment in infrastructure sector in the next four years, and $ 50 billion investments in the real estate sector in the next three years, real estate and infrastructure sectors will propel the Indian economy into a different stratosphere and ensure double-digit GDP growth.” — PTI

HCC expects revenue of Rs 1,47,000 cr from Lavasa project

New Delhi: Hindustan Construction Company is expecting a total revenue of Rs 1,47,000 crore over the next 10-15 years from the ‘Lavasa’ hill station project being developed near Pune in Maharashtra. “The total revenue expected from the Lavasa project is Rs 1,47,000 crore,” HCC chairman and managing director Ajit Gulabchand said, adding the first phase would start in 2009-10 and all four phases are expected to be completed by 2020. The ‘Lavasa’ hill station project is being developed by HCC along with L M Thapar Group and Venkateshwara Hatcheries. Gulabchand said the investment would be about Rs 3,000-4,000 crore in the first phase. — PTI

Indiabulls Q3 net at Rs 303 crore

Mumbai: Real estate major Indiabulls Real Estate has posted a net profit of Rs 303.3 crore for the quarter ended December 31. The figures are not comparable with those in past year as the company was demerged in March, 2007 from Indiabulls Financial Services, the company said in a press note. The company has been shortlised as a qualified bidder for the Dharavi redevelopment plan and CIDCO’s integrated complex Seawoods Railway station project in Mumbai. The company is planning to partner with Strabag AG for CIDCO’s project, the release said. — PTI

Vipul registers 42 pc fall in net profit

New Delhi: Real estate player Vipul Ltd recorded 42.39 per cent decline in net profit at Rs 12.72 crore for the third quarter ended December, 2007 compared to Rs 22.08 crore in the corresponding quarter of the previous fiscal. The total income of the company increased 15.86 per cent at Rs 78.37 crore for the quarter compared to Rs 67.64 crore in the corresponding quarter, according to data available with the Bombay Stock Exchange. The company recorded total income of Rs 210.28 crore for nine months period ended December 31, it said in statement. Net profit for the nine-month period stood at Rs 32.71 crore, the statement said. PTI

Parsvnath aims $15 billion investment in five years

New Delhi: Aiming to turn a ‘conglomerate’ from being a real estate major, Parsvnath Developers has announced an investment of Rs 60,000 crore ($15 billion) in next five years in diversified areas like SEZs, airports, express ways and retails business “We shall be bidding for upcoming airports like Udaipur, Greater Noida, Maharashtra and other states. Besides, SEZs will be another major investment area in the coming three to five years,” Pradeep Jain, Chairman of Parsvnath Developers Limited, told PTI. Asked about the source of funding, Jain, who started as a broker about 15 years back and grew to become India’s leading real estate developer, said “funding for new businesses will not be an issue... we shall leverage from our huge large land bank”. Among the major projects, Parsvnath would be focusing on development of SEZs, hotels, highways, retail and telecom, he said adding the company has 191 million square feet of developable area, including six SEZs.Though it has been denied entry into telecom business as Parsvnath’s application for Unified license was rejected by the Department of Telecom (DoT) last week, Jain said “we will get into telecom sector and our investment will be in the range of up to five billion dollars (Rs 20,000 crore)”. — PTI



TAX tips
Renovation expense is part of house cost
By S.C. Vasudeva

Q. I have purchased a new flat in Gurgaon and have incurred renovation expenditure. I have included the cost of such assets for claiming exemption under Section 54 of the Act. The assessing officer, however, is of the opinion that the said amount is not part of the cost of the house property but it is a cost of improvement and such cost of improvement, according to him, cannot be taken as cost of the residential house for claiming exemption under Section 54 of the Act. Please advise whether the action of the Assessing Officer is correct?

— Akash, Gurgaon

A. Section 54 of the Income-Tax Act, 1961 (which is referred to as the Act), provides that where a long term capital gain arises on the transfer of a residential house, and the assessee has, within the specified period of the date, on which the transfer took place, purchased a residential house then the capital gains arising on such sale would be exempt to the extent of investment in the purchase of the new residential house. In my opinion therefore the term ‘purchase’ should include other necessary expenditure to make the residential house habitable and taken together with the cost of the new house. The Hon’ble Tribunal in 83 ITD 649 has held that if a residential house is in a state of general disrepair and is not habitable, necessary repairs carried out to make the same habitable, would constitute part of the cost of the new house for the purpose of claiming exemption under Section 54 of the Act.

Investing in capital gains scheme

Q. I purchased a residential plot measuring 15 marlas for Rs 15,000 at the rate of Rs 1,000 per marla on 30.06.1981 and it is lying as such. Now I want to sell it off. I am likely to get Rs 15 lakh at the rate of Rs 1 lakh per marla, the amount may be slightly less due to brokerage and some other expenses.

Since I have no plans to undertake any construction, where should I invest the sale proceeds to avoid income tax.

Earlier, you had advised to invest capital gains in NHAI or REC. In the Tribune of December 29, 2007 you have mentioned that the amount can deposited in a bank under the Capital Gains Scheme which would be more convenient for me. Please let me know the capital gain in my case and whether or not I can deposit the same in a scheduled bank under the Capital Gains Scheme.

— D.K. Aggawala, Hoshiarpur

A. The reply to your queries is as under:

(i) The capital gain arising on the transfer of a long term capital asset will not be taxable if the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the capital gain in the long term specified asset. The term ‘long term specified asset’ has been defined to mean any bond, redeemable after three years issued after the first day of April 2007 by the National Highway Authority of India or Rural Electrification Corporation Limited. Accordingly, in case you want to save capital gains tax arising on the transfer of the residential plot, you will have to invest the amount of capital gain arising on the transfer in such bonds within the specified period.

(ii) The deposit in the capital gains scheme with a bank is to be made where the assessee is not able to utilise the amount of the capital gain or the net consideration as the case may be, in the acquisition or construction of a residential house before the date of filing the return, required to be filed for the year in which the capital gain has arisen. The money deposited in such account is required to be utilised for the acquisition or construction of the residential house within the period specified for acquiring or constructing the residential house. The deposit, under this scheme, would not entitle you to claim any exemption from the leviability of capital gains tax on the transfer of the plot.

IT return for senior citizens

Q. I am a senior citizen and my income is below the taxable limit. I inherited a residential house in March 2007, situated within municipal limits in Punjab. It is self-occupied and there is no rental income etc. from it. I have no other property of any kind in my name. I seek your expert advice on the following:

1. Is it compulsory for me to file IT return for assessment year 2007-08.

2. If yes, then on which form number.

3. What is the penalty for delay in filing the return, and how to avoid it?

— B.S. Saini, Gurgaon

A. In accordance with the provisions of Section 23 of the Act, the annual value of a self-occupied property is taken as nil. Therefore, in case your total income is below the taxable limit you need not file the return. I may add that in case your total taxable income becomes below taxable limit on account of the deductions(s) allowable under Section 80C of the Act, it will be obligatory for you to file the return in view of the proviso to Section 139 of the Act. In case you are required to file the return on account of the above reason, the applicable form number would be ITR-2. There would be no penalty in case you file the return by March 31, 2008.

Transfer of flat in family member’s name

Q. I purchased a Chandigarh Housing Board flat on power of attorney on 22.06.2000. I got the flat transferred in my name in the housing board records on 25.09.2006. The following expenses were incurred for transfer in my name:

The original price — 4,72,000

Transfer fee — 95,875

Processing fee — 500

Conversion of lease fee — 5,830

Stamp Duty — 3,240

Processing fee — 300

Registry charges — 4,720

Kindly advise:-

(a) The actual date of purchase will be taken as 22.06.2000 or 25.09.2006.

(b) Whether all the above transfer charges would be included to compute the cost price.

(c) Cost price of the flat as on 31.03.2008 and how the capital gain would be treated.

(d) Can I gift the flat to one of my family members. In that case what would be the gift tax.

(e) Chandigarh Administration has waived off the stamp duty if a house is transferred within the family members would this apply in case I gift the flat to my son.

— Surender Sharma, Chandigarh

A. The answers to your queries are as under:

(i) The actual date of purchase would be taken as 22.06.2000 provided you have taken the possession of the flat on that date.

(ii) The transfer fee, processing fee, conversion of lease fee, stamp duty, procession fee and registration charges would form part of the cost of acquisition of the flat. The above charges would be added to the original price paid by you.

(iii) You can gift the flat to any of your family member but it would require an execution of the gift deed to be registered in the Registrar’s Office.

(iv) The gift made to a son should be taken a transfer to a family member. You should, however, check up with the Chandigarh Administration the meaning assigned to the term ‘family members’.



Slump in home loans
Growth rate is expected to fall to 15 per cent after two years of robust 30 to 35 per cent growth. While increase in interest rates has made common man wary, bankers too are exercising extra caution in disbursing home loans due to RBI’s policy measures, says S.C. Dhall

Sustained rise in property prices along with rising interest rates has resulted in a significant slowdown in the disbursement of home loans. The era of easy access to home loans appears to be over following the 300 basis point increase in home loan rates and increase in property prices. As a result, bankers expect home loan growth rates to be half this financial year. Home loan growth rates are expected to fall to 15 per cent after two years of robust 30 to 35 per cent growth. RBI’s policy measures can be taken as a signal to bankers to exercise caution on the real estate sector, including home loans. Banks have already started becoming more selective in providing home loans.

The proportion of monthly income being paid out as home loan instalments grew to more than 50 per cent for an average home buyer from around 34 per cent in 2003-04. The asset quality of the housing finance portfolio is likely to slide somewhat from the present levels. The number of borrowers considered “riskiest” by the lender, having loans with a maturity period more than 15 years and paying more than 50 per cent of their monthly income as EMIs had increased to 8 per cent from 3 per cent two years earlier. Banks have also altered the loan to value ratio. Till recently, borrowers could avail of loans of upto 90-95 per cent of the purchase cost of a residential property. Now banks are selectively moving to an 75 to 80 per cent loan to value ratio, the norms prevalent over three years ago.

The number of applications for home loans and registrations for new flats has also gone down. The stricter prudential norms for the real estate sector have pushed up property prices across the country. This has led to a drop in enquiries with builders and banks.

The declining trend has been noticed since the past six months. A recent report by Merrill Lynch has also said banks are beginning to shy away from mortgage lending owing to rising rates and emergence of stronger corporate growth opportunities.

High property prices are the main reason for a slowdown, since January 2007. While high interest rates do not contribute much to the cost of the property, they do compound the problem, said a general manager of a public sector bank. For both SBI and ICICI housing loans contribute as much as 50 per cent of the total retail loan portfolio.

The margins in the home loan industry are forcing some foreign banks to reconsider their product mix and some of these banks are scaling down their home loan business considerably.

ABN Amro bank is now concentrating on the loan against property business. Similarly Standard Chartered bank has also scaled down its home loan business because of low margins. Experts feel that leading private sector banks had spoilt the market by working on very narrow margins. And now they are aggressively into the business of disbursing loan against property.

Bank terms under MRTPC lens

The Monopolies and Restrictive Trade Practices Commission (MRTPC) has ordered an investigation into the non transparent way in which banks compute interest rates on home loans and how they discriminate between new and existing customers. Taking cognisance of media reports, the commission has asked its investigation wing - the director general of investigation and registration, to probe the alleged unfair pricing practices adopted by banks particularly for home loans. Presently banks are offering lower home loan rates to new customers while continuing to charge higher rates from existing customers.

A person opting for a floating rate -- believing that his interest burden would ease if the cost of funds fall, is deprived of the benefit. Many banks are raising interest rate whenever there is a slight increase in the cost of funds but at the same time they wait for a considerable fall in the cost of funds before slashing interest rates by even a small fraction.

It has also been noticed that banks and financial institutions readily reduce rates while negotiating with new customers to beat competition from the rivals. Existing customers are often left out from such interest rate cuts. Besides banks also charge penalty if the customers pre pay the loans. Banks maintain that they have genuine difficulty when funds allocated over long period are paid back prematurely. Existing customers are feeling the pinch from a short escalation in their interest burden.

Projects to house more

Meanwhile, the Government of India is understood to have asked the state governments to permit a higher population density for housing projects.

The move is aimed at bringing down property prices by allowing the creation of more housing units on every acre of land. At present density norms in various states allow 1 acre of land to be inhabited by 200-600 persons which translates into 40 to 120 units. Even if this is relaxed by 25 per cent developers would be able to construct 50 to 150 units on the same area without much additional cost.

This demand of the real estate sector has been pending for a long time. It will help in optimal utilisation of the available land resource. This is part of a series of initiatives that the urban development ministry has taken up for addressing the issue of affordable urban housing. It has given to understand that some states in South India have already implemented the guidelines. States in North India are, however, yet to follow more floor area ratio. The floor area ratio is the ratio of the total floor area of a building on a certain location to the size of the land of that location. Various limits are imposed on the ratio.

The writer is a senior banker



Hindware enters organised retail

Hindustan Sanitaryware and Industries Ltd is planning to enter the organised retail sector and will invest Rs 250 crore over the next five years to set up 50 stores across the country. The company has incorporated Hindware Home Retail Pvt Ltd (HHRL) as a subsidiary to enter into the home interiors speciality business with a new brand — EVOK.

“The home interior solutions market is estimated at nine billion dollars with annual growth forecast of 15-20 per cent. To tap this market, we plan to open 50 large formats over the next five years with an investment of Rs 250 crore,” HHRL vice-president and business head D.K. Jairath told reporters here.

The company would open a chain of speciality stores with three different formats — living, kitchen and bath domains- across 25 Tier I and Tier II cities targeting middle and mid-upper segment of the society.

The size of the stores would vary from 8,000 sq ft to 30,000 sq ft. HHRL would open the first store at Faridabad in the national capital region in February, Jairath said.

“The stores’ population will eventually be scaled up to a pan-India retail footprint of 1.2 million sq ft with a target revenue of Rs 400 crore in the next five years,” he said. Jairath added the company plans to have about 100-120 stores in the next eight years.

The EVOK stores would showcase contemporary furnitures and furnishings, bath products, modular kitchens, flooring, lighting and lifestyle home accessories. — PTI



LIC invites bids to consolidate its real estate portfolio

The Life Insurance Corporation of India (LIC) is planning to consolidate its real estate portfolio across the country. “Expression of Interest is being invited from professional consultancy organisations for consolidating our real estate portfolio,” LIC said in an advertisement.

The consultancy entails feasibility study, including techno-economic viability assessment of expected growth potential and investment opportunities in sectors like commercial, housing and retail for fresh acquisition, it said.

Besides, making fresh acquisitions of land, the insurer also intends to develop existing vacant plots and redevelopment of old properties. LIC is interested in acquiring properties in tier I and II cities for own use and for investment purposes, it said. For development of unencumbered plots at Kolkata, Jaipur, Chennai, Kanpur and Ahmedabad etc some new locations might be added in future, it said. The consultants would be required to identify suitable properties for investment and would advice purchase of property which would be beneficial for the company.

LIC had forayed into real estate business in 2005, in a bid to get more returns from its properties.

The last date for submission of bids is January 25. — PTI



A little bit of extra caution and attention to details at the time of laying water supply pipes can save a lot of sweat and money later, says Jagvir Goyal
Conquer the fear of leaking pipes

One thing that every house builder dreads is a leaking water supply line which can lead to chipping off of the plaster and brickwork to expose the leaking pipe for repair work.

The job renders the bathroom or kitchen inoperative for a day or two. Too much of dust and debris make one’s heart cringe and the repaired wall and plaster never give the same original look and finish.

Sometimes, this minor problem leads to repainting of whole of the bathroom or kitchen. To avoid the trepidation, care must be taken during the laying of water supply lines to keep the joints 100 per cent leak proof and to pressure-test the pipe network so that no pipe bursts under pressure. Here are a few guidelines:

Basic points: To avoid this most troublesome problem of leakage from concealed pipes, some builders are again reverting to the ‘unconcealed’ pipe system these days. There is no doubt that the unconcealed pipes look ugly. And if you prefer to have concealed pipes then make the concealed system trouble proof by taking these four precautions - choose the pipe material carefully; take extra care in making pipe joints leak proof; allow a minimum rather no pipe to run below the floorings and frame and keep an exact layout drawing of laid water supply lines.

See that all pipes are concealed in the walls only and the pipe layout is so designed that no pipe is carried below any flooring. Know that lesser the number of joints in water supply network, lesser are the chances of leakages. For concealed pipes, ducts or recesses may be provided in the walls instead of chase-cutting of walls. Such ducts or recesses can be suitably covered with removable covers. In such a case, a leaking pipe will not demand any dismantling of plaster and brickwork.

Line drawings: In general practice, water supply line drawings are not drawn for a house. The architect simply shows the position of fittings in bathrooms, kitchen, lawns or elsewhere and the line and location of pipes is left to the plumber. During the construction of house, make an effort to draw exact plans of water supply lines by noting their position in the courtyard and in the walls.

Note exact height of horizontal pipes above the floor and exact location of vertical pipes. Transfer the sketches to fair drawings and keep these handy. Later in life, whenever there is any leakage anywhere, these plans will save a lot of chiseling and repair work.

Employ a skilled plumber: Never allow bending of GI pipes. Instead, use bends where necessary.

Never allow heating of GI pipes. It will destroy their galvanizing.

Tell the plumber to tighten each joint by using wrench and to make it watertight. Here, the skill of the plumber comes to the fore. That’s why the plumber chosen must be very skilled and should be chosen after checking his past record.

Instead of believing in plumber’s words, visit the houses where he has worked previously and talk to the house owners to check if they are facing any leakage problems. If yes, choose another plumber. You can’t take chances here.

Fixing pipes: Don’t bare the pipe threads till the time of their fixing in position. Damage to threads is to be avoided to make the joints water-tight. If joints get damaged, their re-threading by use of dies may result in loose joints.

Pipes should be run either horizontal or vertical. Don’t run pipes in an inclined manner.

There will be problems in joining inclined pipes. Wherever a pipe is to be buried in the ground, it should be painted with bitumen. Prefer to lay sand around it.

Joint material: Use best quality cotton yarn thread in the joints. Never allow the use of jute or hemp instead of cotton yarn. Laxmi is a known brand of thread used for GI pipe joints. Use of yarn should be kept as minimum as possible. Unnecessary winding of yarn over pipe threads will result in loosening of joints after some time. Use best quality white lead available at about Rs 50 per kg for smearing over the thread.

Plumber should make a paste of dry red lead mixed with moist white lead and boiled linseed oil. This mixture settles the yarn well into the pipe threads. Otherwise, yarn has a tendency to rise and loosen itself.

Right angles: There are concealed stopcocks to be fixed in the pipelines. In addition, some Tees are to be inserted in them to screw in nipples or other fittings at a later stage. Check all these Tees and specials to be perpendicular to the pipeline. Otherwise, later on, the CP fittings will look obliquely placed or a gap will exist between their wall flanges and the walls.

To check this, prepare a couple of threaded pipe pieces and screw them into the Tees and check them to be at right angles to the wall.

Crossing the walls: Sometimes, a pipeline is to be taken across a wall or slab. In such a case, always use a sleeve for the pipe with length equal to the thickness of the wall or slab. Keep the diameter of the sleeve sufficiently large to easily pass the pipeline through it. For example, for ½” pipeline, use 1” diameter sleeve. Never allow a bend in the sleeve. Let sleeve be also from a good quality IS 1239 pipe so that it doesn’t rust with time.

Testing: Final water supply network should always be tested under pressure to check any leakages. This testing should be done before filling the chases in masonry walls and finishing them with plaster. Once the water supply lines have been erected in position and all pipe grids have been completed, ask the plumbing contractor to test the system under pressure and show it to be leak proof. Don’t allow concealing of pipes unless pressure testing has been done. Sometimes, plaster work is taken up in parallel in the bathrooms or kitchen and wall chases cut to lay the pipes are filled and finished after erection of pipes. Tell the plumber in advance that this is not to be done unless the water supply network has been tested and made leak proof.

Method of testing: For pressure testing of water supply lines, a pump is used to pump-in water at a pressure of 200 feet of water or more. A gauge erected on the pump gives the water pressure reading. Check this gauge to have zero error or its initial reading should be noted. If possible, see that it has been calibrated by a good test house. The pressure testing should be done with gauge showing a reading of 6 kg per Ask the plumber to fill up the pipe network slowly. This allows expelling out of air and a phenomenon called water hammer doesn’t occur. Ask to maintain water pressure in the pipes for one hour at least. Thereafter, with the pressure maintained, check that no pipe or joint should have even the slightest leakage.

Take care and happy building!

The writer is Director, Estates, PSEB, he can be reached at