DLF sells Ackruti City JV stake Assetventures

NEW DELHI: India’s largest real estate developer DLF has sold its stake in a 50:50 joint venture with Mumbai-based Ackruti City for developing a project in Mumbai to a US-based real estate fund for over Rs 200 crore, two senior executives at DLF said, asking not to be named.

The JV firm is developing two office buildings spread over nine million sq ft at Andheri, Mumbai. These two buildings are part of a larger slum rehabilitation project being developed by Ackruti City. DLF had picked up stake in the project over two years ago with the strategy to spread its footprint across the country. DLF exited the project as part of its asset sale programme to raise Rs 5,500 crore by the end of this fiscal.

Centre to bring in law to regulate real estate in Delhi

NEW DELHI: The Central Government on Thursday said that it is considering a model legislation on regulating real estate in

Delhi.
In reply to a written question in the Rajya Sabha, Minister of State for Urban Development Saugata Roy said that 'the Delhi Real Estate Management (Regulation and Control) Bill' can also serve as a reference for other states.

The minister, however, ruled out the constitution of a regulator for real estate sector for the entire country, saying matters pertaining to local governance and land falls in the list of state subject as per the Constitution.

Real estate giant IREO to invest $500 mn in India

NEW DELHI: Global real estate giant IREO will pump in $500 million in various infrastructure projects in India over a period of seven years, the company said Thursday.

IREO, which has invested $1.5 billion in India, is already one of the largest investors in the country's real estate sector.

"Having already invested $1.5 billion, we still have another $500 million available in cash for further investments in our projects," Lalit Goyal, vice-chairman and managing director IREO, told reporters here.

The company currently has 13 projects and is in the process of constructing an IT SEZ (special economic zone) in Pune.

"We have already commenced construction of a five million square feet IT SEZ (Pune) and a three-million-square-feet housing project," Goyal said.

Added Anurag Bhargava, chairman IREO: "The Pune SEZ should be completed by next year."

The company has projects in many states including Haryana, Punjab, Tamil Nadu, Maharashtra and Delhi.

The company said it would develop an eight-million-square-feet housing project in the next 12 months.

RBI issues revised draft norms on commercial real estate exposures

CHENNAI: The Reserve Bank of India (RBI) has come out with revised draft guidelines on commercial real estate (CRE) exposures. The revision comes in the wake of doubts raised in certain quarters on treatment of specified exposures. The new draft is also necessitated by the need to align with the rules with the Basel-II framework.

The Basel-II framework has clearly spelt out the definition of income-producing real estate (IPRE) in para 226 of its framework. According to the Basel-II framework, IPRE “has a strong positive correlation between the prospects for repayment of the exposure and the prospects for recovery in the event of default, with both depending primarily on the cash flows generated by a property.” The apex bank has chosen to align the definition of commercial real estate (CRE) exposure with the Basel II prescription. Going by this, the RBI has clarified in its revised draft guidelines that “if the repayment primarily depends on other factors such as operating profit from business operations, quality of goods and services and tourists arrivals, the exposure would not be counted as commercial real estate.”

Source of cash flow

Any exposure would be classified as IPRE/CRE exposure if the “funding results in the creation/acquisition of real estate (such as office buildings to let, retail space, multi-family residential buildings, industrial or warehouse space and hotels) where the prospects for repayment would depend primarily on the cash flows generated by the asset.”

In any case, the apex bank goes on to clarify, “the prospect of recovery in the event of default would also depend primarily on the cash flows generated from such funded asset, which is taken as security.” For an exposure to be classified as IPRE/CRE exposure, the primary source of cash flow (that is, more than 50 per cent of cash flows) for repayment and recovery would have to be lease or rental payments or sale of assets.

The revised draft has also sought to clarify confusion vis-a-vis exposure arising out of ‘infrastructure lending’ to special economic zones. Certain types of exposures in respect of SEZs would have the characteristics of CRE exposure if the Basel-II approach is followed.

Lending to SEZs

In such cases, the RBI says, they would be simultaneously classified as both ‘CRE exposure’ and ‘infrastructure lending’. In such instances, the applicable risk weight would be that of CRE exposure (even if the borrower is Triple A rated).

The exposure, however, would be eligible for all the regulatory concessions available to `infrastructure lending,” the RBI clarifies.

An investment in the equity of a real estate company or a mutual fund/venture capital fund/private equity fund which invests in the equity of real estate companies would be sensitive to the movement in prices of real estate.

Further, they have correlation with the general equity market. Therefore, these would be reckoned both as capital market exposure (for the purpose of compliance with the regulatory ceiling fixed by the RBI) and the internal ceiling for real estate exposure fixed by the bank itself as required by the RBI norms.

Such exposures would attract a risk weight of 125 per cent (as applicable to equity exposures) or 150 per cent (as applicable to exposure to VCFs) as the case may be since these risk weights are higher than that applicable to CRE at 100 per cent.

“The exposure should be reported to the RBI under both the classifications with an appropriate footnote to avoid double counting,” says the revised draft.

Real estate promoters not enthused Assetventures

While the Union Budget revolves around the aam aadmi' the real estate promoters feel that the finance minister has overlooked housing
requirements. None of their expectations have been met, like tax exemptions on housing loans to infrastructure status for integrated townships (Sec 80-1A) and reduction in housing loan interest rates, said the head of aninternational real estate consultancy firm in the state.

But on the positive side, the budget focuses on infrastructure and providing more funding especially for highways and railways. Increase of fund allocation for the JNNURM scheme (Jawaharlal Nehru National Urban Renewal Mission), an excellent scheme, with 87% encouragement respectfully. These outlays will turn outcome if the government implement the infrastructure projects on time,he felt.

Another industrial leader was optimistic that, "The hike in infrastructure spending will be a huge boost for the real estate industry. Any increase in the spending on infrastructure results in an increase in value of real estate development.

No immediate impact on real estate Assetventures

Real estate players in the city are a disappointed lot as they feel the finance minister's proposals for the sector have ignored the
aspirations of the Indian middle class.

The Pune branch of the Confederation of Real Estate Associations of India (Credai) said the industry's expectations to boost affordable housing and higher tax deduction
for interest paid for home purchases were not met. "While the FM talks of a slum-free India in five years, he seems to have completely missed the opportunity to offer relief and incentive to middle-class home buyers," Credai Pune president Satish Magar said in a statement.

"It is well established that housing/construction is an engine that can propel growth in the economy the linkages to hundreds of industries as well as employment to millions of workers seems to have not found any priority in the FM's budget. Overall, the budget doesn't address the needs of the housing industry at all," the statement read.

Anurag Mathur, managing director of real estate research company Cushman & Wakefield India, said, "Though there is no immediate impact on the real estate industry in the Budget, the finance minister has incorporated measures that have a mid- to long-term impact on urbanisation and hence on the real estate industry."

"While the budget is good under the circumstances, what has been left out is a policy level pronouncement for the sector. These announcements could have gone a long way not merely in standardisation, but also in bringing transparency for the real estate sector," he felt.

Anuj Puri, chairman and country head for real estate management company Jones Lang LaSalle Meghraj, said the fact that India Infrastructure Finance Company will be given more flexibility and has been authorised to raise Rs 1,00,000 crore for the development of the infrastructure sector is an indirect boon to the real estate industry.

"Of late, an increasing number of infrastructure projects have a real estate component by virtue of a cross-subsidisation principle. Therefore, boosting infrastructure projects gives an impetus to real estate as well," he said.

The fact that allocation for highway construction has been increased will mean improved and accelerated connectivity, raising the value of existing real estate along these routes and also opening up new areas for development, Puri said. According to him, the allocation increase to the Rajiv Awaas Yojna will help urban slum-dwellers get better houses.

Real estate developers in India pushing up prices

Developers in India have stopped offering discounts on properties and in some cases are even increasing prices as demand rises.

Rising sales are also prompting some developers to return to the luxury end of the real estate market which had stalled in the economic downturn.

'Prices are likely to inch upwards in the coming months in some markets,' said Kumar Gera, chairman of the Confederation of Real Estate Developer's Association of India.

But he added that even an increase in prices will still leave many developments cheaper than they were at the peak of the market a year ago. He estimated that the property crash saw prices fall 25 to 30% but proposed increases in coming months would be around 10 to 15%.

The prices increases vary. Unitech has increased prices marginally, by some 2% in its Gurgaon projects but Mumbai based developer Lodha Group has upped prices by 10 to 15%. A Lodha spokesman confirmed that prices had gone up in luxury projects launched in March. 'We have marginally increased prices every month for these projects since their launch. But the market is in a good spot and the response is still good,' said director Abhisheck Lodha.

Bangalore-based firm Brigade Enterprises cut its prices by 15% in April but has now increased them by 3 to 5% and said that it plans to continue doing so at regular intervals. 'We are hoping that in one year's time, prices will be back to the peak levels of 2007 to 2008,' said chairman and managing director M.R. Jaishanker.

However, discounts through brokers have not yet disappeared from the market. Developers have increased the commission offered to brokers from 3% maximum to 5 to 6%. Brokers in turn are offering a discount of 1.5 to 2% on the price of property to buyers.

'These are the same measures developers and brokers adopted to create a price bubble during the boom years. Demand has not risen to an extent that it can fuel a price increase,' said S.G. Maheshwari, a Mumbai-based property consultant.

Aditi Vijayakar, residential executive director at property consultants Cushman and Wakefield is not convinced the market will carry the price increases. 'Right now it is a fairly confused market. Rates have more or less bottomed out but there needs to be substantial amount of sales before buyers are convinced price increases are justified. I think the real estate market will be flat for some time,' she said.

Union budget ignores real estate development: CREDAI

Reacting to the union budget 2009 -10, Kumar Gera, chairman, Confederation of Real Estate Developers Association of India `s (CREDAI) said, ``CREDAI having more than 4,000 members involved in Real Estate Development across India is utterly disappointed particularly because the Budget has completely ignored the substantial contribution of housing and real estate sector to GDP and Employment of 10 million workers which is second only to the agriculture industry. ``

We are also upset on the fact that the industry which has an impact of over 200 services and industries with forward and backward linkages has been let down.

Since the Government has set a target of achieving 9% growth, we were expecting Housing and Real Estate sector to substantially contribute towards achieving the target, he added.

He mentioned that budget has failed to provide any incentive even to the purchasers of affordable homes. It was widely expected that the exemption of interest on self occupied residential house property presently restricted to Rs 1.50 lakhs per annum would be increased to Rs. 3 lakhs, but nothing has been done in this respect too.

He added that as far as increase of allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme by 87% to Rs 128.87 billion in the current budget and enhancement of allocation for housing and provision of basic amenities to urban poor to 37.93 billion is concerned, it would provide some relief through government authorities only without much participation by the private sector.

Rajiv Awas Yojana to aim at slum-free India Assetventures

The Rajiv Awas Yojana, announced in the budget, aims at promoting a slum-free India in five years and would focus on according property rights to slum dwellers, Union Minister for Housing and Poverty Alleviation, Kumari Selja, said here today.


"The government has announced a new scheme Rajiv Awas Yojana for the slum dwellers and the urban poor in an effort to promote a slum-free India in five years," Selja said in her inaugural address at the Habitat Business Forum meet on urban challenges and solutions.

Twelve countries are taking part in the conclave which is co-sponsored by UN Habitat and China Real Estate Chamber of Commerce.

The union minister said the scheme will focus on according property rights to slum dwellers and the urban poor by the states and union territories.

"It would provide basic amenities such as water supply, sewerage, drainage, internal and approach roads, street lighting and social infrastructure facilities in slums and low income settlements adopting a 'whole city' approach," she said, adding, it would also provide subsidized credit.

Describing urbanisation as "a great historical opportunity", Selja said the energy of urban growth can be harnessed as a "positive force for human development to create sustainable, equitable, and peaceful cities".

India property sales up Assetventures

India property sales levels have risen by as much as 25-30% since April, following 10-15% growth in Q1 2009, in light of lower interest rates and residential property prices, as well as the construction sector’s greater focus of affordable housing.

This information was obtained by the Economic Times, who spoke to a number of banks, property developers and real estate consultancies.

Much of India’s property sector has struggled for the past year or so due to the global financial crisis, which left several house builders struggling to adapt to deteriorating market conditions.

Residential developers were left with high-end apartments which had no buyers. Consequently, they have been forced to slash prices by up to 45% since the peak of 2007.

The fall in property prices has increased affordability levels across much of India, which has led to increased demand for property in India.

Jones Lang LaSalle Meghraj says that sales across the mid-to-high income segments have conservatively risen by around 25%.

Delhi-based Omaxe reports that sales levels are up by 30% since 2009.

India's largest property developer DLF says it has sold almost 1,500 flats in various cities since April.

Rival Unitech has sold over 4,000 residential units in the last two and a half months.

Hiranandani Developers report that they have sold around 7,000 apartments across the industry, mainly in Mumbai suburbs, over the last two months.

Real estate sector sees focus on affordable housing

Real Estate sector sees focus on affordable housing. The new scheme that the President announced was the Rajiv Awaaz Yojna. Sources said, this will be very big scheme, will require a corpus of over Rs 50,000 crore as the minimum. CNBC-TV18’s Nayantara Rai reports.

Here is a verbatim transcript of Nayantara Rai’s comments on CNBC-TV18. Also watch the accompanying video.

Let’s not forget in the Presidential address the UPA government did promise a slum free India in five years that’s a very ambitious target. Therefore we are expecting that in this budget affordable housing will be given a big focus.

The new scheme that the President announced was the Rajiv Awaaz Yojna . We are hearing from sources that this will be very big scheme, will require a corpus of over Rs 50,000 crore as the minimum. But in this budget we could see an allocation of anything between Rs 5,000-10,000 crore. This allocation will be for implementation of the project as well as interest subsidy.

What we need to understand how this model will work and it is for illegal colonies as well as for slum areas in urban areas. The state should transfer land to woman beneficiary, so women will be given priority and part of the vacated slum as well as illegal colony can be used for commercial developments. So that will help cross subsidising the entire scheme and this also means that we could see public-private partnership. But lets not forget that real estate is a state subject, so it will be up to every state on how it will want to take this up.

We also need to understand that this scheme will cause between Rs 5-7 lakh and the minimum carpet area will be 250 sq. ft. So a lot of these principals are already there in the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). We need to understand from our sources in the Urban Development Ministry that the Ministry has asked for a second phase of JNNURM again over a period of seven years, so that could be the second phase of JNNURM that we might see. The real estate developers have of course asked for an industry status, so we will have to wait and see. The other one is tax breaks under section 80 IB that real estate developers were expecting to be expanded when Mr. Chidambaram presented his last budget and this did not happen, so they will of course be watching for that one.

Scenarios: What to look for in Budget Assetventures

The new government will present the 2009/10 federal budget on July 6 and is expected to expand both the budget deficit and its market borrowing requirement to support growth.

Following are some scenarios on what Finance Minister Pranab Mukherjee may announce and its impact on financial markets. The current fiscal year of 2009/10 runs until the end of next March.

Budget Deficit

The government is almost certain to expand the 2009/10 budget deficit beyond the 5.5 per cent set in an interim and pre-election budget in February.

Bonds have priced in expectations that the deficit will swell to between 6.25 per cent and 6.5 per cent of GDP. So it is unlikely to be rattled so long as the deficit is around these levels.

But any sign that the government is bowing to pressure for populist spending measures to make good on promises made in the April and May general election would spark a bond sell off.
If it also fails to present a plan to bring the deficit back under control in subsequent years, the country’s credit rating could come under pressure.

Government borrowing target

The government will raise its borrowing target for 2009/10 to help pay for its increased budget deficit.

A Reuters poll suggests it will rise to 3.95 trillion rupees, a level already factored into bond prices, from 3.62 trillion rupees set in the interim budget in February.

Bond yields have jumped to factor in a massive increase in government borrowing. Ten-year bond yields, for example, are up 170 basis points since the start of the year.

The forecast borrowing would be 29 per cent above 2008/09 borrowing of 3.06 trillion rupees.

Asset sales

Mukherjee is likely to announce plans to sell shares in some state run firms to help fund rural and social programmes, a central part of the government’s election platform.

Asset sales would relieve pressure on the bond market and help keep the budget deficit in check.

Analysts say the stock market could absorb 100 billion rupees ($2.1 billion) in share sales. A higher amount would be difficult to swallow and would weigh on market sentiment.

Analysts suggest Coal India Ltd and hydro-power generator NHPC would be among the easiest IPOs to complete.

Shares in railways consulting firm RITES, power equipment maker Bharat Heavy Electricals Ltd, Rural Electrification Corp and power transmission firm Power Grid Corp could also be sold off smoothly, they say.

However, potential sales of telecoms firm Bharat Sanchar Nigam Ltd and Air India may be problematic. Unions have opposed IPOs of the telecoms firm and loss-making Air India would need to be restructured to make it attractive to investors.

Infrastructure

Mukherjee is expected to announce more plans to repair India’s shoddy infrastructure, considered by many foreign investors as the Achilles’ heel of the economy that prevents the sort of double-digit growth seen in China.

Infrastructure investment is currently around 6 per cent of GDP, so that figure could rise, although the budget deficit limits spending for now.

Measure would cover both urban and rural projects and include improving the rural roads network and building more low-cost homes to deal with massive demand. It will also announce plans to revamp public transport across the country including building metro rail networks in other cities.

These moves will be positive for infrastructure firms and could benefit India’s largest infrastructure firm Larsen & Toubro and others such as GMR, GVK and HCC among others.

Indeed, the real estate sub-index on the Bombay stocks market has more than doubled in the past three months, compared with a 50 per cent rise in the main index.

Reforms

The government is unlikely to unveil any significant economic reform plans in the budget even though its decisive election victory has put pressure on it to deliver new initiatives.

Parliament is already chewing over plans to raise the foreign investment ceiling in insurers to 49 per cent from 26 per cent and reforms in the pension fund management sector -- a process likely to take 6-8 months before approval is reached.

Govt plans real estate model bill to be firmed up by Aug-Sept

Govt plans real estate model bill to be firmed up by Aug-Sept
The minister for housing and urban poverty alleviation, Kumari Selja has announced a model bill for regulating the real estate sector by August-September timeframe. Talking about the 100 day agenda for her ministry, Selja said that the Model Bill would propose a regulator and aim to address the concerns of consumers as well as the real estate industry. The finer details of the Model Bill could not be ascertained.

She said, “We have initiated a dialogue with all key stakeholders including private sector, NGOs, and various States to prepare the model Bill for regulating the real estate sector.”

Ozonegroup to develop a township in Chennai
Bangalore-based realtor Ozonegroup has announced the launch of its maiden township project — ‘The Metrozone’ — in Chennai.

The project will be a joint venture between Ozonegroup, HDFC India Real Estate Fund and Urban Infrastructure Opportunities Fund and would involve an overall investment of Rs 2,500 crore and is likely to be completed in about 52 months. Spread over an area of 42.5 acres, the township offers apartments, penthouses and commercial space for hospitality, retail and offices.

Sudarshan KS, COO of Ozonegroup said that the first phase of the township is scheduled to be delivered by November 2010.

Lords Inn to open 10 new hotels
Hospitality player Lords Inn has planned to invest over Rs 100 crore over the next three years to expand its business. The company, which operates in three and four star categories, is also looking at joint ventures and acquisitions. PR Bansal, chairman and managing director of Lords Inn, announced, “We will invest over Rs 100 crore in hospitality across India to open 10 new hotels in three years. Currently, we are eyeing on cities like Bangalore, Jaipur and Delhi.”

The group provides management services to hotels in three and four star categories in tier II and III cities.

Kumar Builders earmarks Rs 450 crore to develop residential tower
Pune-based Kumar Builders has earmarked Rs 450 crore to launch a 30-storey project, 45 Nirvana Hills, spread over 79 acres, in Pune.

According to Lalit Kumar Jain, chairman and managing director, Kumar Builders, construction for the first building of the project has already begun. There would be five to six residential projects that will also be 30 storeyed.

The entire project is estimated to cost Rs 450 crore. It is a self-funded project, finances for which are being raised through internal accruals.

For decades, Pune’s buildings were limited to a maximum of 36 metres. It was only last year that construction of residential projects up to 100 metres high was permitted.

Infrastructure, real estate sectors expect a big boost Assetventures

NEW DELHI: The infrastructure sector and the recession-hit real estate sector are looking forward to the Union budget with great expectations. Both the sectors, which require huge investments, are expecting a big boost to revive growth and put them on the path of recovery.

The President’s address to Parliament has sought to give a big boost to the infrastructure sector, plagued by bottlenecks with slow movement in the development of ports, roads and airports. However, it is expected that apart from granting industry status to infrastructure, the budget will give impetus to investments in the sector.

Global consultant Goldman Sachs expects a leap in infrastructure spending, particularly on roads and ports. It is estimated that India will require $500 billion over the next five years in the sector to sustain the growth momentum. The budget is expected to give a big push to Public-Private Partnership (PPP) projects. Greater flexibility could be given to the India Infrastructure Finance Company Limited (IIFCL), which has been set up as a refinancing facility for infrastructure projects, to deploy funds.

Double the capacity

According to the Planning Commission, India may need to nearly double its capacity of ports, roads, power, telecom and airports to keep pace with its growth. Companies engaged in infrastructure development are expecting some relief for lenders to enable them to achieve financial closure of much delayed projects.

There is an expectation that the proposal to restore tax exemption under Section 10 (23G) could be introduced in the budget to be presented by Finance Minister Pranab Mukherjee on July 6. This Section allows tax exemption for investments in infrastructure, both via equity and debt.

The real estate sector is looking forward to relief for the housing sector, which has been reeling under the recessionary trend for the last few months. Real estate developers want interest rates lowered to make cheap loans available, which will give a boost to the housing sector and generate demand.

Restructuring

According to Rohtas Goel, CMD, Omaxe Limited, developers are facing acute liquidity crunch and facing difficulties in servicing debts. Restructuring allowed up to June 2009 has provided immense relief. As the recovery is likely to take more time, further restructuring should be allowed, wherever required.

Group housing and integrated township development should be brought within the definition of infrastructure and incorporated in the explanation under sub-section 4.

“The housing sector should be granted the status of industry for all concessions, rebates and easy finances,” Mr. Goel said.

Saviour Builders director Sanjay Rastogi says the budget should lower interest rates and recognise real estate as an industry. He feels strict norms should be introduced to control the prices of steel and cement to stabilise the industry.

Concessions

The Royal Institution of Chartered Surveyors (RICS) said the government should increase the housing loan interest deduction limit to Rs. 2.5 lakh or Rs. 3 lakh per annum and lower interest rates to 7.5 per cent for loans in the range of Rs. 5 lakh to Rs. 30 lakh.

The RICS expected re-introduction of concessions under Section 80IB (10) of the Income Tax Act, encouraging construction of small units at affordable prices.

It expected waiver or reduction in stamp duty, value-added taxes and other government taxes for economically weaker sections and lower income group housing; restoration of tax holidays for low-cost housing projects; further relaxation of the external commercial borrowing and Foreign Direct Investment norms; and rationalisation of stamp duty and registration charges.

Will Budget unveil a window of hope for retail? Assetventures

Chennai: Though the past year brought economic hardship with significant implications for the retail sector, there seems to be a silver lining for India. In the Annual AT Kearney Global Retail Development Index (GRDI), which ranks 30 emerging countries on a 100-point scale (where the higher the ranking, the greater are the opportunities offered by the country), India reclaims the top spot, which was last held in 2007, informs Amarpal S. Chadha, a senior tax professional with Ernst & Young.

Given the above potential provided by the Indian economy, the industry is all geared to look at what the Finance Minister has to offer to the different industry segments in this year’s Budget, he adds, during a recent email interaction with Business Line.

“Before chalking down any demands for the retail sector, it is important to have a look at the areas where retail is benefiting the economy. There are some big business houses that have ventured into organised retailing, and have the potential to generate large-scale employment in India.”

Organised retail accounts for approximately 5 per cent of the total retail business in India, Chadha reminds. “Thus, there is a tremendous scope for the retail sector to contribute to the Government in terms of taxes and serving the economy by generating employment opportunities, improving supply chain management, reducing wastage, and offering goods to consumers at discounted prices.”

At some point or the other, most of the sectors have been provided some tax benefits or concessions, be it the hotel industry, shipping, banking or manufacturing, he notes. “All these sectors have reaped the benefits of tax concessions and have also witnessed growth in terms of the number of players, giving a boost to the overall economy. If the Government can look at extending some tax benefits to the retail sector, it will go a long way in providing the necessary boost to the industry. The Government should acknowledge the growth potential, which this sector has, and give it an industry status.”

Excerpts from the interview.

On FBT.

It is of common knowledge that retail works on paper-thin margins. If the Government can cut down the corporate tax rates and give some concessions in the fringe benefit tax (FBT) rates, it will help retail in improving its cash flows and funding its operations.

Sales promotion forms a major chunk of expenses for retail. Though the legislation exempts several means of advertisement from the scope of sales promotion, it would be beneficial if the Government provides an exemption of sales promotion expenses from the FBT levy.

On consolidation.

Benefits of Section 72A of the I-T Act, which deals with carry forward and set off of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation or demerger, should be extended to consolidations in the retail sector.

On FDI.

Foreign Direct Investment (FDI) in retail has been the most-talked about area in the last few months. FDI in multi-brand retail is disallowed. However, the Government recently came up with Press Notes 2, 3 and 4 of 2009, which prima facie gave an indication that foreign investment in multi-brand retail is allowable, if multi-brand retail is carried out by a subsidiary of an investing company, which is owned and controlled in India.

As the prima facie reading of the above Press Notes seems to create misgivings in the industry, it is of utmost importance for the Government to clear its viewpoint in relation to FDI in multi-brand retail by issuing a specific clarification.

On service tax.

The economic downturn has reduced the price of real estate, and this has benefited the retail sector. However, the cost which is causing inefficiency in retail is the levy of service tax on the renting of immovable property, which should be abolished as there is no service element involved when an immovable property is let out.

Recently, the Delhi High Court ruled that service tax is not intended to be levied on the renting of immovable property. However, the Revenue has filed a Special Leave Petition before the Supreme Court against this ruling. Accordingly, the aforesaid issue remains open till the constitutional validity of such a levy is finally decided upon by the Supreme Court.

On refund.

The process of refund of Special Additional Duty (SAD) of customs allowed to importers on goods meant for resale in India poses a lot of administrative difficulty for the taxpayers. The Government should either totally exempt SAD or simplify the procedure associated with the refund of claim. This would help taxpayers reap the benefit as envisaged by the Government.

On related measures.

Reduction in the individual personal tax rates will help in increasing the purchasing power of consumers, boost consumption, and thereby help the retail sector in improving its profitability. It will also have an indirect impact on improving the manufacturing sector.

Sea link hits Worli property prices Assetventures

With the Bandra-Worli Sea Link now open to the public, real-estate prices in the once tony residential area of Worli Sea Face are set to change.

According to real-estate experts, increasing traffic and the consequent noise and air pollution are bound to have a negative impact on property prices along the promenade.

"Individuals who may have wanted to shift to Worli Sea Face will be put off," said Anuj Puri, managing director, Jones Lang LaSalle Meghraj, a real-estate consultancy firm. "There are many issues like pollution, easy access to buildings, and security of children due to the increase in vehicular traffic."

Residents are already complaining that noise levels and air pollution have gone up. Moreover, the exit of the sea link has created a bottleneck, ruining the peace of the locality. The press of the National School for the Blind is on this road which, interestingly, is designated a silence zone.

While Puri did not think that prices would crash, he said they would stabilise, "they won't appreciate. The impact will be such that if anyone wishes to sell their property, they won't get a good price."

Even the hitherto quiet hillock of Pochkhanwala Road will now suffer heavy vehicular traffic. In fact, some residents anticipated this problem some months ago and moved into the western suburbs, selling off their properties when prices were still good.

"A CEO of a top information technology firm sold his property a few months ago as he anticipated noise and traffic problems," said Pranay Vakil, chairman of Knight Frank India. "The fact is that the value of properties along the Sea Face has now gone down."

On the other hand, experts say the sea link has brightened real-estate prospects in the western suburbs. "The key word is infrastructure," said Vakil. "It increases connectivity and with better spread comes better prices."

N Raghunathan, a former chief secretary of Maharashtra and resident of Priya building on Worli Sea Face, is now spearheading a campaign against the exit of the sea link. Raghunathan and other residents have written to the state government and even the prime minister about the problems.

Their claims are not unfounded. Town-planning expert Chandrashekhar Prabhu said he had read the note prepared by Raghunathan and agreed that the area, once an open space, is now a hub of pollution.

"They are cent per cent correct in the assessment of the aftermath of the sea link," Prabhu said. "Worli Sea Face is surely becoming the most polluted area for no fault of the residents."

BSES can collect arrears from present property owners: HC

BSES can collect arrears from present property owners: HC
In an important ruling, the Delhi High Court has said that power distribution companies in the capital can collect electricity dues of the previous owner of a property from its present owner or occupant.

In its judgment, the high court allowed BSES Rajdhani Power Ltd to collect from the present owner of a plot the arrears against its previous owner.

The court clarified that on the ground of non-payment of the arrears, the BSES can stop supply of electricity to the present owner.

"If there are electricity dues against the previous owner or occupant, the present owner applying for fresh electricity connection can be compelled by the distribution company to pay the electricity dues of the previous owner," said a bench comprising Chief Justice A P Shah and Justices S N Aggarwal and S Muralidhar.

The court order came while allowing a petition filed by the BSES challenging the single judge's order that rejected the plea of the power discom saying that it (BSES) has no right to collect from the new occupant the dues of previous owner.

Slowdown-hit real estate bets big on Budget

Having been hit the hardest by the economic downturn, embattled realty majors are betting big on the forthcoming Budget, to be presented on July 6, in a bid to revive the sector’s fortunes. Experts say the sector needs government support as well as further stimulus to get out of the current slump.

While the government with a clear mandate has provided the requisite stability to the economy, it now needs to focus on retrieving the sluggish real estate which is now facing a severe financial crunch. This is important in view of the fact that real estate in India is the second largest employer next only to agriculture, and growth in the sector has a direct impact on ancillary industries such as steel and cement.

“In the backdrop of its importance to the growth of the Indian economy, it is vital for the government to nudge growth in the sector, through fiscal stimulus, to newer heights which would also help make affordable housing a reality and within the reach of the proverbial ‘aam aadmi’,” says Nandita Tripathi, associate director, KPMG.

As a first step, the government should accord ‘infrastructure status’ to the housing sector and appoint a regulator to act as a single window for overseeing and monitoring the affordable housing agenda. “After being hit by the global financial meltdown, real estate developers have now recognized the growing demand for affordable housing. To provide further impetus to this direction of development, the government should consider reinstatement of the tax holiday benefits under Section 80IB-(10) for affordable housing projects,” says Tripathi.

Brotin Banerjee, MD & CEO, Tata Housing, is also of the same view. “We seriously believe that the housing sector should be delinked from real estate and be accorded infrastructure status. This will enable easier access to low-cost institutional funds as also allow the sector to tap long-term funds,” he says.

Further, for affordable and low-cost housing, “we at TATA Housing believe that loans for such projects should be made available at lower rates and also qualify for stamp duty and fee waiver. Development and approval charges should similarly be done away with or at least subsidized,” says Banerjee.

Moreover, increase in the limit of interest on housing loan from the existing Rs 1.5 lakh to Rs 3 lakh and a corresponding increase in the tax deduction limit for the principal loan amount would also go a long way to enhance the common man’s appetite for home loans by lowering their tax outflows and, hence, making their dream home a reality. Besides, “tax benefit should be given from the year the loan is taken from banks, rather than after taking the possession of the house. This will help in providing stimulus to new launches,” suggests Neeraj Bansal, associate director - advisory services, KPMG.

In the current economic slowdown, real estate mutual funds (REMFs) could provide the necessary financial support to the cash-starved housing sector. However, since their introduction a year back, REMFs have not found any takers due to unclear regulations and absence of guidelines for their tax treatment. “Recognizing the need for REMFs as an important capital contributor for the sector, the government should consider aligning the regulations to global best practices, including providing a tax pass through status for registered REMFs,” says Tripathi.

'Property brokers expect prices to increase assetventures'

'Property brokers expect prices to increase'

Residential property builders have something to cheer if the result of a poll of property brokers conducted by Edelweiss Capital is any indication. The pan-India poll shows that property brokers expect prices of residential property, especially i n the Mumbai and NCR region, to increase around the Budget, Edelweiss said in a press release issued here.

"Throughout India, property brokers have turned positive on the Indian residential realty market, in the last three months," the poll said. There has already been an increase in the number of transactions in the past one month against nil in the preceding five months, it said.

The poll was conducted amongst 100 odd property brokers in the first-half of June in the four cities of Mumbai, NCR, Bengaluru and Chennai and 20 micro-markets. A significant change in sentiment post-elections and preceded by strong stimulus measures have contributed to a strong recovery in volumes and prices, the release said.

According to the poll, nearly 87 per cent of the brokers surveyed endorsed that transactions had indeed increased in the last one month.

Huge rush to avail property tax rebate

NEW DELHI: With the deadline for filing property tax returns (PTR) only a day away, property owners eager to avail the early payment rebate of

15% queued up from 9am at various MCD tax collection centres in the city. Despite the option of filing returns online, many still opted to submit the PTR forms manually. Some said they found the online procedure slow.

At the Lajpat Nagar centre, the queue was particularly long. Said Kavita Sharma, a resident of Sarita Vihar, " I don't have much faith on online transactions. We get a receipt immediately this way.''

Another taxpayer, K P Singh, added,"The online servers are not working properly and filing online is more expensive since we have to pay an additional Rs 50. I'm paying my taxes now because I did not find the time earlier.'' Some also said that despite filing their returns last year, the payment hadn't been updated online and still showed as arrears."I filed my returns by going to the centre. But this year, when I tried to pay it online, it showed as arrears. Why should I pay the tax twice?'' asked a tax payer who did not want to be named.

However, MCD officials said arrears were showing only in those cases where the cheques had not been realised before the due date or there had been a refund. The officials admitted that the online system may have been slow over the last three days because of the massive rush of people who waited till the last day to file returns.

"For the last three days the online system is slow because it's being hit 3500 times per minute, peak time being 10am to 4pm,'' said a senior official.

Meanwhile, MCD made provisions for property tax collection at all its 12 zonal offices and the headquarter in Lajpat Nagar. The centres will be open from 9am to 9pm on Tuesday to help tax payers get their 15% rebate on the last day. And taxpayers can pay online till midnight for the same rebate.

MCD's director press information, Deep Mathur said, "In order to facilitate property owners and tax payers we have kept all our property tax collection centres open from from 9am to 9pm on Tuesday so that they can avail the 15% rebate even on the last day.''