Genuine or just an eyewash?

A major casualty of the current global meltdown has been the real estate sector. With uncertain job scenarios and companies cutting costs across the board to tide over recessionary trends, buying a property is lowest on the priority list. Making do with what you have is the new mantra with focus narrowed down to keeping the job in hand where spending is tightly reined in.

Luring such an unwilling customer requires more than perfunctory corrections in pricing and developers are undoubtedly aware of this. The last few months have seen a range of freebies and incentives offered to tempt the buyer.

Thus, offers like “buy a flat and get a kilogram of gold free” or “opt for a free site,” “buy a farm land and get a farmhouse free” are no more a product of imagination. Of course, offers such as these raise doubts about units actually getting constructed and delivered on time, questioning the prudence of investing in such ventures.
Sustainability

Some offers do appear genuine, the cost built into the unit offered for sale, yet others fail to have economics and sustainability in place. The question arises, is the customer being sensible to fall for such offers. Is the price quoted genuinely marked below market rates?

Says Girish Puravankara, Managing Director, LGCL, “Our offer of 30 per cent below the prevailing market rate for our villas was possible through smaller profit margins, good planning, low overheads and an efficient team.” According to him, there is no case of falsely luring customers as they are well aware of existing prices and quality expected.

“This is especially the case in a recessionary market as compared to a boom period when not many checks are done before purchase.” The villas are to be built with 98 per cent efficiency in the usable area with no compromise on quality to accommodate the lower price, he adds.

Concurs Parag Sen, V-P, Sales and Marketing, Golden Gate Properties, “Typically our margins are less and we reduce cost through innovation and low wastage. Besides, our volumes make our pricing competitive.”
Goodwill money?

Construction cost remains the same throughout the country for a given level of quality, he says. The high price differential is attributable partially to goodwill money charged by established developers and the unwillingness to pass on to the customer any reductions in cost. Incidentally, the developer offers value-added promotions such as furnishings for the finished apartment at a marked down price of 30-35 per cent.

“The discount is offered by the brand that sells the furniture. We work out a deal with them on a no profit-no loss basis,” he adds.

With the bleak market scenario deterring even customers who want to graduate from an apartment to a villa from doing so, the Alliance Group recently came up with an innovative option of exchanging an old apartment for a villa in one of their upcoming projects.

“We believe in innovation in product and sales and this exchange was a result of that in tune with today’s market conditions,” says Manoj Namburu, Chairman and MD, Alliance Group.

As for piling up of stocks in the form of unsold apartments impacting liquidity of his venture, he is quick to add the exchange offer is open only for the first 50 units. “We ensure sustainability of our projects by not only making prices realistic but progressive where the first set of units is sold at cost price and the rest at a higher rate in relation to their level of completion.”

Referring to the severe liquidity crisis in the residential market, Anurag Mathur, Managing Director, India, Cushman Wakefield, says, “Developers are facing severe resource crunch with sales at an all-time low. Some of the freebies offered to push sales are genuine while others a mere eyewash. The discounts are significant in fresh projects.”

He points out that these discounts and freebies are more to do with lesser-known projects though the future may see this extended to reputable ones. As for determining the realistic price of a unit, he uses late 2005 or early 2006 prices as the benchmark for getting good value on a purchase.

Indicating correction of prices started in early February, Amit Bagaria, Chairman and CEO, Asipac, says, “The bottom of price correction is bound to be hit in the next 5-6 months.”

According to him, while price correction would not exceed 30-40 per cent, those yet to correct their prices will do so in the coming months while those who have will be unable to reduce it further, given cost considerations.
Volume sale

“Increase in margins by top builders to 50-60 per cent has prompted buyers to shift to lesser known developers who have realistic margins. The present crisis is not merely of low demand that has dipped by 20 per cent but of huge increase in volume on the supply side.”

As for sustainability and genuineness of the freebies and discounts offered, he feels the best deal would be in terms of payment while liquidity factor is solely dependent on individual builders.

Adds Koshy Varghese, MD, Value Design Built,

“Any price correction should be realistic, based on cost considerations. Any discount or offer should be sustainable to prevent the project from running into problems.” Sums up Guru Prasad, Joint MD, Chaithanya Projects,

“To develop a sustainable model, the incentive should be a price cut that affects EMI positively. Innovative schemes can lead to trouble, more so where projects are large and risks equally so.”

A garden with a pond is complete

Water is the elixir of life for all the living beings. Apart from being the basic sustenance factor for greenery, water can also shelter various kinds of beautiful plant-life. Those who have seen and experienced the splendour of the aquatic greenery will vouch for the same. Apart from nurturing plants, water bodies complementing the home garden will offer a diversified landscape and relief to the eye.

Water bodies in the garden may include fountains, artificial waterfalls, or small ponds, all rendered more elegant if decorated with pebbles, rocks, and lighting. Apart from plants, they can also have fish, snails and other small creatures, sharing a symbiotic relationship with plants.

Choosing the appropriate spot could be the trickiest job while venturing to have an aquatic garden. Almost all the water plants need good amount of sunlight to live and hence, the spot should be exposed to sun at least for five to seven hours in a day. And also, care should be taken to see that the pond does not fall into the shade of any tree or undergrowth.

“The pond could be natural, dug up in the ground and equipped with perennial source of water. In such case, there will not be a need for pots. In case there is no such naturally viable spot, one can build a concrete one or use a plastic tub. One can even dig up sufficiently and cover the area with thick plastic sheets to hold water. In any case, one should use only fresh water and not saline water,” informs an official from Buddha Purnima Project Authority.
Variety of plants

The number of aquatic plants one can display obviously depends on the space available. However, one should be cautious to fill only 50 to 60 per cent of the surface with plants, so as to avoid cluttering.

Aquatic plants can be of many types depending on their growth specifications. Prominent among them are floating, partly emerging, marginal, and submerged.

Floating plants, as their name suggests, float about in water and do not require root penetration for survival. Most of them have weed-like growth and hence, need to be restricted manually. Water hyacinth and Pistea are the best example of the floating plants. Partly emerging plants are the ones that have their roots entrenched in soil, while the leaves and inflorescence are above water. They offer a beautiful sight to behold. Water lilies and lotuses are examples of the partly emerging plants.

Emergent plants, in some cases, could be taller and have their stems visible above the water. Submerged plants are the ones that remain beneath the water surface. Mostly aquarium plants, they do not offer much visual appeal, yet are instrumental in curbing algae growth by consuming excessive nutrients. They also produce oxygen during daytime and are known as Oxygenators.

Trees such as Salix babylonica, Barringtonia and Bottle Brush varieties can be planted on the edges of the pond by virtue of their tolerance to water logging. These are known as marginal plants and include palms such as Nipah (Nypa) fruiticans and Ravenea palms.
Useful tips

While natural ponds can have the plants in the soil, pots could be used to accommodate the same in the concrete ones and plastic tubs. Alternatively, the container may be half-filled with soil.

“Heavy soil should be used for the aquatic plants with choice mix of horse manure or chicken manure. Algae should be removed from time to time. Periodical replenishment of water is must,” informs the official.

Those desiring a mix of partly emergent and emergent plants may use pots fixed atop a perch (bricks or inverted pots) as per convenience. One can also use ornamental fish to clear the algae. They will prove to be an effective deterrent to insects and mosquito larvae.

Private trust can be formed through a Will

A trust can be created orally by the author of the trust and it may be done in the presence of the trustees and the beneficiaries and terms of the trust will also be specified orally. For the sake of certainty, oral trusts have to be confirmed by sworn affidavits made by the author of the trust and the trustees. Normally, such trusts do not exist in practice as there will be a lot of uncertainties relating to the matters governing the rights and responsibilities of the trustees, beneficiaries etc.
Normal trusts

The second category is where the shares of individual beneficiaries in the net income of the trust and in the net assets of the trusts on dissolution are definite and are clearly indicated in the instrument of trust itself. For the sake of convenience, we can refer to them as “Normal Trusts.”
Discretionary trusts

The third category will be where the individual shares of the beneficiaries are not specified in the instrument of trust and the trustee or trustees are given the option or discretion to divide the net income of the trust among a set of beneficiaries (indicated in the instrument of trust) at any proportion or ratio as the trustees may deem fit and proper. Such trusts are called “Discretionary Trusts.”

A Private Trust can be formed through a Will also. It will come into effect on the death of the person who creates it or on a date with reference to the death of the person. Such a trust is called a “Testamentary Trust.”

A trust also can be declared by a person, as the author, during his life time itself but can be made to come into effect only on his death or on any date with reference to his death.

A normal trust by itself is not taxed to income tax on its net income and only the individual share incomes of the beneficiaries are taxed in the hands of the beneficiaries independently. However, the trustee will fill the returns of income of such beneficiaries as a representative assessee for and on behalf of the respective beneficiaries, by virtue of provisions of Section 160(1)(iv) of the Income tax Act, 1961.
Rate of tax

The rate of taxation applicable is the rate at which the beneficiaries total income including the share income from the trust will be taxed. On the other hand, a discretionary trust as well as an oral trust will be assessed in the name of the trust itself at the maximum marginal rate fixed under the aforesaid Income Tax Act 1961.

The maximum marginal rate means the highest rate of tax fixed for an individual at the highest slab including surcharge on income tax, if any.

An instrument of a private trust shall contain: the name and description of the author of the trust; the name and description of the trustee or trustees; the sum of money or property including immovable property declared as trust property duly described in detail in a separate schedule; the operative portion of the instrument of trust formally declaring the creation of the trust and the trust property; the name and description of the trustees, their powers, authority, rights and responsibilities.; the name and description of the beneficiaries and the nature, scope and extent of the interests of each of the beneficiaries, including their rights to assign their beneficial interests in parts or as a whole to and in favour of third parties.; the duration of the trust.; the mode and manner of determination and dissolution of the trust and the mode and manner of division of trust property among the beneficiaries of the trust; the mode and manner in which the instrument of trust itself can be amended. The schedule shall contain the details of the trust property and in the case of immovable properties, their clear descriptions, dimensions, boundaries and locations.

Developer asked to pay monthly rent to flat owner

In a recent verdict, the Andhra Pradesh State Consumer Disputes Redressal Commission (APSCRDC) ordered a developer to refund the monthly rent to flat owner, as the former refused to hand over the flat. The Commission also upheld the decision of Visakhapatnam District Consumer Forum-I on compensation to the customer.

Nagari Parameswara Rao, a resident of Visakhapatnam, was a member of a group of 20 Low Income Group flat owners. The group entered into a contract with Sai Thirtha Constructions for development of the place. According to the deal, the developer has to return a three bedroom flat along with car parking place and other facilities to the owners. Mr. Parameswara Rao passed away in June, 2003. Since then, the developer refused to hand over the flat in spite of execution of sale deed. Mr. Rao’s wife Ch. Vijaya Lakshmi Parameswara Rao filed a case in the District Forum requesting to direct the developer to pay Rs.2,000 for monthly rent from October, 2003, the month she was supposed to get possession, along with damages and court costs.

The developer resisted the case by arguing that Mr. Parameswara Rao was supposed to submit the land title to them and Ms. Vijaya Lakshmi had to pay Rs.20,000 towards the charges of underground drainage and municipal water connection.

However, there was no evidence provided in support of these arguments.

The District Forum directed to hand over the flat to the customer along with Rs.78,000 for loss of monthly rent, compensation of Rs.25,000 and Rs.1,000 towards court costs. The aggrieved company contended the decision in the State Commission.

It argued the District Forum should have directed the complainant to hand over the land title deed to them, besides the payment of Rs.20,000 towards the underground drainage and municipal water charges.

However, State Commission upheld the decision of the lower forum as the arguments of the builder were not substantiated with any evidences. It directed the builder to deliver possession of flat, besides payment of compensation and rent.

It also ordered Ms. Vijaya Lakshmi to hand over the original title deed to the builder on the date when flat is handed over to her. Time given for compliance was four weeks.

K. VIJAYA BHASKARA REDDY

Shamirpet is the new hot spot

Shamirpet happens to rank high among the emerging real estate hot spots of the city suburbs these days. Once known only for the lake and deer park, the vicinities of Shamirpet have in the last couple of years underwent a metamorphosis making it a preferred destination.

A lot of residential and commercial projects are changing the landscape in and around the place. Existing projects and future prospects plus an affordable price tag has in a way, helped Shamirpet score positively with the middle class in particular.
On global map

Emerging as a Biotech Hub, the place has won a position on the global map. The state-of-the-art Biotech Park has been earmarked here in three phases over hundreds of acres.

The ICICI Knowledge Park developed and maintained by ICICI Bank apart there are other projects being taken up by APIIC. A spread of 25 acre is also to be developed as SEZ by Parswanath Developers. Rough estimates suggest that 62 companies are already functional here with a good enough workforce. The upcoming projects include Giga City in 2,000 acres, DLF in Jawahar Nagar, Genome Valley and Tata Chemicals.

The other major infrastructure taking shape includes a new bypass from Biotech Park II to Biotech Park III, Manjeera water supply up to Biotech Park III, ORR, six lane express highway from Parade Grounds to Shamirpet. It is in this backdrop, Desire Estates and Property (Ph. 9246156109), has come with a project aimed at middle class.
Clear title

With clear title, it is next to Biotech Park Phase III and is spread over 20 acres. On offer are plots of 200 sq.yds with a price tag of Rs.1,450 per sq.yd. Assured are basic amenities including gated community, blacktop roads, underground drainage, club house and swimming pools and ‘vaastu’ compliance, according to the promoters.

T.L.S.

Home loan @ 6.5 p.c. interest?

The benefits available for home loan repayment under the Income Tax Act, 1961, if appropriated towards the interest paid on loans, will bring down the effective interest to 6.5-7 per cent. Here is an effort to substantiate the same.

The income tax benefits available for home loan borrowers are:

Under Section 24 of the IT Act 1961, interest paid up to Rs. 1,50,000 is set off as loss from salary/business income, for self-occupied property (if property is acquired earlier to April 1, 1999, interest up to Rs. 30,000 per annum is allowed).

For rented out property, entire interest paid is deductible from taxable income after computing the rental income. If loan is availed for house renovation, interest up to Rs. 30,000 p.a. is allowed as deduction.

Under Section 80C, home loan borrowers can claim deduction up to Rs. 1,00,000 from taxable income on the loan repaid during the year (along with specified saving instruments).

The entire PEMI interest amount (the interest amount paid during construction period), is allowed as a deduction under Sec. 24, equally over five years (20 per cent of total interest paid), starting from the year in which the construction is completed.
Registration cost

Under Section 80C, along with other specified savings and home loan repaid, the amount spent for stamp paper and registration cost on registering house property up to Rs. 100,000 is deductible from total income.
An instance

Let us analyse the benefits for Ashok, who is working in a MNC with a taxable income of Rs. 900,000 p.a. He needs to pay income tax of Rs. 180,250 as per the slabs applicable for assessment year 2009-10. Plus, there is education cess of 3 per cent on the income tax payable. 10 per cent surcharge, if the taxable income is Rs. 10 lakh and above.

For female assessee, the ceiling is Rs. 180,000.

For senior citizens, ceiling limit is Rs. 225,000.

As per the income tax slabs, his income tax burden comes down to Rs. 133,900 (including education cess) from Rs. 180,250, a saving of Rs. 46,350.

If this saving of Rs. 46,350 is appropriated towards interest paid on home loan, the effective interest on home loan reduces to 8.67 per cent.

Mr. Ashok can also claim deduction up to Rs. 100,000 towards the principal loan amount paid.

Since he was burdened with a whopping EMI of Rs. 34,773, he could not save in other specified instruments such as Provident Fund and LIC premium.
Deduction

By claiming deduction of Rs. 100,000, his taxable income got reduced to Rs. 650,000. And as such, his income tax burden got reduced to Rs. 103,000, thus earning him additional savings of Rs. 30,900. If this additional saving of Rs. 30,900 is appropriated towards interest paid on home loan, the effective interest on home loan reduces to 7.12 per cent.

Build up evidence base in your own interest

n consumer disputes, it is always imperative to set legal process in motion at earliest date possible. Writing letters to the company to build an evidence base, serve them with legal notice and filing the case at consumer fora ought to be taken place quickly. Otherwise, consumers would lose the interest compensation as the fora consider the date of legal notice, date of complaint or date of verdict as the base date to award interest on amount of the incurred loss.

A recent verdict by Visakhapatnam District Consumer Forum can vouch for this.

Although the verdict was in favour of the consumer, she could get interest compensation only from January 2006, the date of legal notice, while she had paid money to the builder in July 1995.

“Delay in filing case will not only cost interest compensation, but at times, the cases also can be rejected for taking such a long gap from the date of incident,” said C.V.L. Narasimha Rao, an advocate and consumer rights activist.
Registration

L.T. Vineela joined in Sai Kanaka Durga Layout of GPR Housing Pvt. Ltd., Visakhapatnam in March 1995.

She paid Rs.36,800 towards the plot with in four months but it was not registered in her name in due time.

In spite of a legal notice, the developers failed to register the site with an approved layout from Municipal authorities or to refund her money.

In April 2008, she filed a case in the District Forum seeking a direction to the builder to refund Rs.36,800 with interest of 18 per cent per annum from July 1995, Rs.1 lakh towards damages and court costs.
Compensation

The forum observed that the builder received substantial amount from the customer, but could not get approval from authorities to register the plot and it was nothing but deficiency in service.

It ordered the builder to refund Rs.36,800 with 12 per cent interest per annum from January 6, 2006, the date of legal notice, to the date of realisation and Rs.7,000 for compensation along with Rs.1,000 for court costs. Time given for compliance was four weeks.

To avoid pitfalls in compensation the consumers should move to the court at earliest date possible and seek the compensation they deserve.

The icing on the cake

Since a major focus of the real estate activities in coming days is expected to be in the extended areas of the Hyderabad Metropolitan Development Authority (HMDA), a decision has been made to reduce the developmental charges in these areas by 75 per cent.

The recently constituted HMDA in its first meeting chaired by the Chief Minister Y.S. Rajasekhara Reddy, who also is the HMDA Chairman, reviewed the issue of developmental charges for the extended area and decided to reduce it by 75 per cent here on the rates prescribed in G.O.Ms.No. 439 dated June 13, 2007 of Municipal Administration and Urban Development.
More teeth

The meeting also discussed and decided on delegation of development control powers to the local bodies. For properties coming in the HMDA area, it is decided to delegate these powers to the Commissioner, Greater Hyderabad Municipal Corporation. All residential, institutional, commercial building permissions below 18 metres height (non multi-storied building) and issue of No Objection Certificate to the Commissioners of Sangareddy and Bhongiri Municipality while grant of residential building up to G+2 on plot area up to 1,000 sq. mts to the Panchayat Secretary/Executive Officers of Village Panchayats in HMDA.

The HMDA Board decided to adopt the concept of Green Channel for speedy approval of Building Permissions and Layouts.

As per this, non-MSB cases would be cleared in six working days and applications coming through this channel would be liable for charging special fee.
Incentives

The meeting reviewed the progress of work in preparation of Master Plan for HMDA extended area and observed Transportation Plan, Environmental Development Plan should be given importance along with land use zoning plan. The need for additional Railway passenger terminals and freight terminals was also highlighted and the Chairman also directed to provide duct along the roads for utilities. He also instructed to check the feasibility of providing gas pipeline in the duct. The HMDA also directed Metropolitan Commissioner that suitable incentives are worked out to encourage builders in taking up buildings as per the Green Building Code.

While sanctioning Rs.100 crore for the new HMDA building at Hitech City, the Board also approved four zonal offices and eight service centres.

While the zonal offices are to be located at Shankarpally, Medchal, Ghatkesar and Shamshabad, the HMDA service centres would be at Chevella, Sangareddy, Narsapur, Shamirpet, Bhongir, Pochampalli, Ibrahimpatnam and Maheshwaram.