HC throws out builders’ plea against VAT levy Says Scheme Not Against Constitution

Mumbai: The Bombay high court on Tuesday dismissed a bunch of petitions challenging the state government's decision to charge builders a 5% Value Added Tax on buildings that were under construction from June 20, 2006 to March 31, 2010. The ruling came a day before the October 31 deadline to pay the tax.      "There is no merit in the challenges," said a division bench of Justice Dhananjay Chandrachud and Justice Rajesh Ketkar, while adding, "A wide degree of latitude was enjoyed by the legislature in tax matters." The court held that the composition scheme formulated by the state in two circulars of August and September 2012 were not against the Constitution.      Builders had challenged the state's decision on grounds that it discriminated between buildings built before and after 2010. As per the state's composition scheme, developers of buildings under construction from 2006 to 2010 should pay VAT at 5% of the Works Contract, which includes the cost of construction and excludes the land value, amount paid to subcontractor, service charges, etc. But for buildings under construction from April 2010, builders have to pay VAT of only 1% of the total agreement's value.  NO RESPITE FOR FLAT BUYERS  Flats sold in buildings under construction from June 20, 2006 to March 31, 2010 will attract VAT of 5% of the Works Contract  Flats sold in buildings under construction from April 1, 2010 will attract VAT of 1% of the agreement value  Builders must pay VAT on the 2006-10 flats by today or pay annual 15% penalty  Builders say they will pass on cost to buyers 'Assessing officer can decide on contract type'      Buyers who purchased flats that were under construction from 2006 to 2010 are seeing builders pass on the costs to them. There have been reports of builders demanding that flat buyers deposit the money with them or face a penalty. While the builders are supposed to pay VAT of 5% on just the Works Contract, experts say that flat buyers are being charged 5% on the total agreement of the flat.      The VAT applies only to under construction buildings and not those that were ready with Occupation Certificates when flats were sold.      The builders were led by the Maharashtra Chamber of Housing Industry-Confederation of Real Estate Developers Association of India (MCHI-Credai) and Pune-based Marathi Bandkam. The court said that it was "far-fetched" to assume that the government had applied the April 2010 date inadvertently. The court ruled that the state had the right to frame a scheme and determine the cutoff date for bringing it into effect.      However, the court held out a ray of hope by saying the order would not come in the way of the state taking any decision to hear the pleas of developers who wanted the post-April 2010 scheme made applicable to buildings under construction from 2006 to 2010.      The court also said that, if the builder raised the issue, the assessing officer (sales tax) could decide on whether a particular type of development contract was not a Works Contract. VAT would not be applicable if it was not a Works Contract.

Read more...

HC to give verdict on VAT today

Mumbai: The Bombay high court is scheduled to deliver its verdict on the Maharashtra government's decision to charge value-added tax (VAT) on under-construction buildings between 2006 and 2010 on Tuesday, a day before the deadline for developers to pay the levy ends. 

    "Ultimately, the burden will be on the middle-class tax payers or buyer of flats," said a division bench of Justice D Y Chandrachud and Justice Rajesh Ketkar. The bench will start hearing the case at 9.30am, one-and-a-half hours before the court opens at 11am. 
    The court is hearing a bunch of petitions filed by the Maharashtra Chamber of Housing Industry-Confederation of Real Estate Developers Association of India (MCHICredai), the representative body of builders in the state, along with the Pune-based Marathi Bandkam. An PIL has also been filed by Grahak Hitawardhini, a Pune-based consumer organization. 
    The petitioners have questioned if the sale of flats constitutes a work contract. They have also claimed that the VAT of 5% and 1% for flats purchased from 2006 to 2010 and post-2010 respectively was against the law, as it included the cost of land, which was an immovable property.Mhada flats do not attract VAT: Tax, legal experts 
Mumbai: Buyers who purchased under-construction Mhada flats in the past six years may not have to pay the value added tax (VAT). 
    Legal and tax consultants have told Mhada that its projects do not attract VAT. The reason: Unlike in private transactions, Mhada does not enter into any sale agreement with its buyers. Mhada issues allotment letter to buyers after it has received the entire flat cost in maximum three installments. 
    The law states that builders will have to pay a 5% VAT on sale of properties between 2006 and 2010. The VAT post 2010 will be 1% of the cost of the property. 
    "In private transactions, a developer enters into an agreement to sale with the buyer after receiving a certain amount of the total flat cost of the under-construction flat. A sale deed is registered after the full flat cost is paid," said a Mhada official. 
    Mhada, however, is still playing cautious. "Though we are firm in our view and believe our buyers, majority from the middle class, should not be taxed. The sales tax department has not sent any notice to us for VAT payment," the official added. 
    "We are focusing on private developers. We do, however, believeMhada and Cidco will have to pay VAT," said a tax official. Tanaji Satre, Cidco vice-chairman, said prima facie he believes VAT is not applicable on them, but he has to check.

Read more...

Specify ownership of state govt plots, lessees told

Mumbai: Lessees and occupants of state government land will have to display certificates, declaring that their properties were granted by the government.      "A notice board has to be displayed on the building premises or on compound walls, visible to the public," said an official.      "This will help the government to keep track of its lands, prevent disputes over ownership and encroachment. It will also ensure there are no secret sales," he added.      One of the biggest controversies in recent years has been the land given to Adarsh housing society in Colaba.      According to rules, a lessee must seek the government's approval before selling the land since 50% of the sale price is to be paid to the government as "unearned income". In case, the sale is done without the government's nod, the state will take 75% of the proceeds as unearned income.      Swadhin Kshatriya, additional chief secretary (revenue and forests) said under the Maharashtra Land Revenue Code the government gives land on lease or on occupancy price. "In case of a lease, the lessee has to pay an annual lease rent; while in case of the latter an occupant pays a lump sum. In both cases, the land is let out for 30 years and is not freehold land," he added.     The government has given land for educational, religious, community and residential purposes. There have been cases where "influential persons" have cornered several plots through organizations. The decision is aimed at preventing such misuse, particularly in case of housing. Recently, the revenue and forests department put up a proposal before the government over the change in lease conditions once a lease expires. According to Kshatriya, there were over 1,600 leasehold plots in Mumbai given by the British for periods ranging from 60 to 999 years.      "The leases of around 650 plots have expired. In these cases, the government now proposes to renew the leases for a 30-year period either on a lease or occupancy price basis," he said. "The annual lease rent will be a percentage of the ready reckoner rate. In case of occupancy price, the occupant will pay 20% in case it is residential, 30% for industrial and 40% for commercial," he added.

Read more...

NEED OF THE HOUR The realty sector urgently requires the government to introduce crucial reforms that will boost its growth

Mumbai desperately needs to focus on sustainable development, say realty experts. "The country has hardly 2.8% exposure to the real estate sector of the entire credit whereas the global standards are 25%," says Lalit Kumar Jain, President, CREDAI - National, adding that the real estate and housing sector plays a key role in the country's economy.      MCHI-CREDAI believes that it is imperative to put an end to the cash crunch that is prevalent in the realty sector in India. One of the ways to do this is by raising the credit limit available for projects, points out Paras Gundecha, President, MCHI-CREDAI. "The government should cut the interest rate on housing loans to boost demand for projects and also cut down on the delay in granting approval to projects. This would allow developers to save money and time. The cost savings can then be transferred to home buyers in the form of price reductions in projects," he says. Raising the credit limit will pave the way for improved policies in development of projects. Developers will be able to focus on sustainable projects, which are desperately needed in a congested city like Mumbai.      "The current challenges faced by the sector such as land availability, delays in approvals, expensive and almost prohibitive funding and the ever increasing cost of inputs of cement, steel, sand and labour, if met appropriately, can bring about a significant change in the real estate sector," says Pravin Malkani, MD, Patel Realty India Ltd. Further, he says that there is an urgent need of suitable amendments in the foreign direct investment (FDI) guidelines in the sector.      In order to make Mumbai a sustainable city, reforms such as a single-window policy can ensure easy accessible funding; speedy approvals and a higher and smarter FSI can help in bridging the house gap in a congested city and also bring transparency to the real estate sector. "Single window clearance will help in speedy clearances and increase in FSI will help in optimum use of the scarce land resources," says Lakshman Bhagtani, Chairman & Managing Director, Jaycee Homes Ltd.      The government, meanwhile, seems open to listening to the plight of the realty sector now. Developers  on their part maintain that giving industry status to the realty sector is the need of the hour. "The realty sector has been demanding industry status for quite some time, but unfortunately the government hasn't yet acted on the same. By conferring industry status, the sector will grow manifold as investments will come in and lenders will not hesitate in lending to developers," adds Bhagtani.      Jain says, "As part of the land reforms, according to the global urban sciences, the key to urban development success is by opting for high density vertical development." On their part, an important step that the developers are taking to make Mumbai a sustainable city is by going green. Developing green projects involves high cost, and developers will be able to build green buildings once they consistently have enough credit at their disposal.      Lack of banking reforms also act as barriers in the success of housing sector. "Buyers can't buy because of high rate of interest, taxes and stamp duty excluded from home loans thereby wanting buyers to contribute upto 45% of cost," says Jain.      Finally, the government should work towards easing the commute  time and allow access to vast land parcels outside the city, thus decongesting the primary cities. "The government must also either promote redevelopment of old buildings in the central parts of congested metros or provide good infrastructure to distant suburban locations where the population could reside while continuing to work within the city, " concludes Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India.  QUICK  BYTES  RAISING THE CREDIT LIMIT WILL PAVE THE WAY FOR IMPROVED POLICIES IN DEVELOPMENT OF PROJECTS  BY CONFERRING INDUSTRY STATUS, THE SECTOR WILL GROW MANIFOLD AS INVESTMENTS WILL COME IN AND LENDERS WILL NOT HESITATE IN LENDING TO DEVELOPERS

Read more...

Local bodies can give nod for constructions near airports Will Have To Follow AAI’s Zoning Map

Mumbai: Obtaining a no-objection certificate (NOC) to construct a building around airports has become a tad easy with the civil aviation ministry stating that local bodies will have the power to give the permission according to their own regulations and bylaws, as long as they follow the zoning maps to be prepared by the Airports Authority of India (AAI). 

    According to the ministry's new plan, the AAI will prepare colour-coded zoning maps for each airport, specifying the gradation in the heights of buildings depending on the distance from runways, and hand them over to the local planning bodies such as the municipal corporation in the city. The body will be empowered to sanction constructions based on AAI rules as well as its own regulations. 
    Builders seem to be happy with the news, hoping that the development would facilitate quicker granting of NOCs for which they have to wait for a long time. "The AAI is yet to finalize the zoning maps; we will have to wait and watch if it increases the maximum permissible height to which a building near an airport can be built. Local bodies can grant permission for buildings of those heights only. Nevertheless, it is a good decision and it will significantly reduce the amount of time usually taken by the AAI to grant an NOC for building plans," CMD of Rustomjee Developers Boman Irani said. 
    Till now, to construct a building near an airport, a developer had to approach the AAI for approval. But the airports' authority had no dedicated section to handle such applications, as a result of which NOCs would take a long while to be granted and subsequently, projects worth crores of rupees would stalled indefinitely. 
    Now after giving the nod, the local body concerned will have to submit its copy of permission granted to the designated office of the AAI within a month of sanctioning the building map. The local body will, however, not have any say for building plans that exceed the measurements indicated on the zoning map; for those, the developer will have to approach a designated officer of the AAI who will assess the obstructions to be caused by the proposed structure. After consultation with the local body, if the AAI officer finds that the building plan conforms to the local regulations, it will give the nod. Otherwise, the NOC will not be issued. The applicant has the choice to appeal to the ministry of civil aviation if the AAI officer does not grant sanction for such a structure.

Read more...

Orbit Looks to Sell Stakes in 4 Projects Co aims to raise up to . 500 crore; funds to be used to halve debt-equity ratio

    Mumbai-based listed real estate developer Orbit Corporation is in talks with local developers to sell stakes in four projects, including three redevelopment projects in central and south Mumbai, and a 17-acre slum rehabilitation project in Santacruz suburb, said two people familiar with the development. 

The company is aiming to raise . 450-500 crore by selling stakes in projects with an objective to halve debt-equity ratio to 0.4 times by the end of this financial year. The company's total debt stood at . 887 crore at the end of June. 
Besides the slum rehabilitation project in Santacruz suburb, the redevelopment projects that are being negotiated for stake sale are at Lalbaug, Worli and Tardeo in south and central Mumbai. 
Orbit declined comment for the story citing silent period ahead of its quarterly earnings to be detailed next week. "The talks have been initiated with two realty developers for Santacruz project. The company is contemplating now if the project can be exited entirely as one of the developers has shown interest to that effect," said one of the people quoted earlier. 
Orbit's Santacruz project involves rehabilitation of 2,200 slums spread over 17 acres near Khira Nagar on SV Road. The project, with total estimated saleable area of 8 lakh sq ft, has already received consent and slum rehabilitation authority's approval with some free sale component buildings already being constructed. 
Most of the funds the company is looking to raise are likely to come through transactions for Santacruz and Lalbaug projects, said the person quoted above. 
The redevelopment project at Lalbaug in central Mumbai involves 20 buildings, for which the company has already bought out the landlords. It has also received the tenants' consent for eight buildings so far. Thecompany is looking to offload its interest in some of these buildings on standalone basis. It is also ready to work towards a tie up with strategic investors. 
Apart from these two projects, the company has put two more redevelopment projects in Worli and Tardeo on the block. 
These projects are estimated to have total development potential of nearly 60,000 sq ft. Of these, the company is already in advanced talks with a local developer for Tardeo project that has 25,000 sq ft development potential. Shares of Orbit gained 4.7% to close at . 57.75 on the Bombay Stock Exchange on Tuesday. 
kailash.babar@timesgroup.com 

Read more...

Chavan steers clear of giving out flats to poor

Will Await Report On Alleged Graft Thane: Concerned by allegations of corruption in the implementation of the centrally aided Basic Services for Urban Poor (BSUP) scheme in Kalyan-Dombivli, chief minister Prithviraj Chavan on Tuesday declined to personally hand over the keys of over 300 tenements to select beneficiaries. Instead, he called upon Kalyan-Dombivli mayor Vayjanti Gujar and municipal chief Ramnath Sonawane to do the allotments. Chavan also announced that he is waiting for a police report on the alleged scam.      Chavan attended a function organized by the Kalyan-Dombivli Municipal Corporation and visited Ambedkar Nagar where he inspected a few of the 308 tenements that are ready. But he politely distanced himself from the ceremony to allot the tenements to Dombivli slumdwellers. The CM attended the two-hour-long function, but asked Gujar and Sonawane to do the allotments.      TOI has reported on the alleged corruption in the implementation of the Rs 654-crore BSUP project that promises to provide 13,469 tenements to slumdwellers across nine pockets of Kalyan-Dombivli. A police complaint filed by RTI activist Kaustubh Gokhale, who has compiled a dossier on the project, alleges a scam to siphon off crores of rupees. The allegations include the inclusion of fictitious names in the beneficiaries' list, appointment of a private consultant to survey slums without inviting bids, and misuse of public money by civic officials and contractors. Chavan, when asked about the alleged corruption, said, "I have ordered an inquiry into the entire implementation and after the report is ready action will be initiated against the guilty." When asked whether his presence at the ceremony could lend some legitimacy to the alleged corruption, the CM said, "I didn't come here to hand over keys to the beneficiaries. I wanted to see the project and tenements for myself. The keys were handed over by the mayor and commissioner."      Police reports suggested that the CM could participate in the programme but should not hand over the keys.      Gokhale complained to the Thane police that a multi-crore racket was on and demanded that an offence be registered against civic officials and corporators. The Thane police, meanwhile, could wash their hands of the affair as they have sought permission to transfer the case to the CBI.      "I submitted evidence running into hundreds of pages on specific corrupt practices," Gokhale said. "But, they chose to sit on it. Finally, I urged them to register an offence against me for filing frivolous complaints or register a complaint against the officials. But they were unwilling to do either."      Gokhale filed a criminal writ petition in the Bombay HC asking the court to direct the police to register an offence. Additional police commissioner Milind Bharambe said, "There are no clear instructions from the government to file an FIR as yet. However,our probe is on and we will take a decision shortly."  STEALING FROM THE POOR?  COST Estimated at 654 cr The project | Build 13,469 units, ranging from 270 to 307 sq ft, for slumdwellers in 9  pockets of Kalyan-Dombivli under Basic Services for Urban Poor schemeFunding | About 50% from Centre, 20% from state, 20% from urban local body, and 10% from beneficiaries FUNDS RELEASED  CENTRAL FUNDS ASSURED  294.9 cr Released: 139.5 cr  STATE FUNDS  ASSURED  173.2 cr  Released: 81.6 cr  KDMC FUNDS  ASSURED  150.1 cr  Released: 28.3 cr      WHAT NEXT  All eyes are on the report the police will deliver to the state governmentSOME ALLEGATIONS      4 contractors were given advance funds of Rs 21.3 cr. This is Rs 16.8 cr more than they should have received      A bank guarantee collectively obtained from 3 contractors was for Rs 8.6 crore, which is lower than the advance they got      A pvt consultant was appointed without inviting bids      Projects are on private lands though no process of law was followed for acquisition. KDMC officials say this speeded up work Times View: Breaking the nexus T ime and again schemes have been created to help the poor and underprivileged, but the money doesn't reach them. The Basic Services for the Urban Poor scheme seems to be another example. Despite layers of checks —appointment of a nodal agency, technical appraisal committee, project evaluation committee and an Independent Review and Monitoring Authority—the politician-bureaucrat-contractor nexus is once again accused of graft. The time has come to take strict action against corruption at the local level and do a rethink on contractor-driven schemes. If money is disbursed directly to the intended recipient, it could help stymie the corrupt.

Read more...

MMRDA decisions to benefit RIL

Mumbai: Mukesh Ambani's Reliance Industries Limited (RIL) might turn out to be the biggest beneficiary of certain decisions taken by the chief minister Prithviraj Chavan-led Mumbai Metropolitan Region Development Authority (MMRDA) on Monday. 

    On the basis of RIL's request, the authority agreed to grant the firm an additional two years to complete the construction of a multi-level underground car park on a 37,252 sq m recreation ground in G block at the Bandra-Kurla Complex (BKC). 
    Under lease conditions, construction work on the plot, allotted to RIL in 2007, was to be completed by July 17, 2011. The MMRDA had collected from RIL a Rs 50-crore bank guarantee, which was to be encashed for breach of the four-year norm. 
    RIL would be required to furnish a fresh guarantee to continue work in that event. 
    On July 15, 2011, RIL requested the MMRDA to extend the bank guarantee and give it time till July, 2014 to finish work. It said a court matter relating to an adjoining 75,000 sq m plot, also leased to it for a convention centre and exhibition centre and commercial complex (CEC), impacted work on both the plots. On Monday, the MMRDA granted RIL's request. A decision to relax norms for the level and the size of underground car parks could also benefit RIL, sources said. On the basis of demand from the BKC property owners' association, the MMRDA decided to do away with the restriction that a car park could extend to a maximum of two levels and that premium (5% lease rent) is to be paid for construction beyond two times the plinth area. Asthana said this would encourage creation of more car parks. 
    Meanwhile, RIL, along with 12 to 13 other lease holders, may not require to pay the penalty in the form of additional premium for delayed CEC construction with the MMRDA relaxing the norm for completion of construction work from four to six years. 
    RIL is yet to acquire a commencement certificate (CC) for the work and is into its third year. As per the existing condition, it would have had to pay a penalty of 120 crore for each delayed year. 
    "The FSI in BKC was increased which led to increase in size of construction. Delays in environmental and high rise clearance also hit work for a number of plots," Asthana said. The new norm will be applicable for all existing leases where the four-year period is yet to be completed and for new leases. "Penalty will be collected in cases where the fouryear period has elapsed," Asthana said. The authority also decided to initiate the process for allotment of surplus 54,000 sq m area in the "E" block to existing lease holders.

Read more...

How earnest money impacts your tax

You don't have to pay income tax on earnest money received from a failed deal, but there are other tax implications you should be familiar with, says M K Agarwal     When you buy or sell a tangible asset, there is usually some earnest money given by the buyer before he arranges for the full payment. This can range from 5,000-10,000 for a used car to a couple of lakhs of rupees for a real estate transaction. The payment is meant to seal the deal and the rules of arrangement are simple. If the buyer backs out, the earnest money given to the seller is forfeited. If the seller changes his mind, he gives back double the amount to the buyer. To ensure that both the parties play fair, there is typically an intermediary who is known to both.      In normal circumstances, any amount received as advance for the purchase of an asset is a revenue receipt and is taxed in the year that it is received. What happens if the deal falls through? Will the forfeited amount become the income of the seller and will he have to pay tax on it? Under which income head will the amount have to be declared in the tax return form?      As per Section 51 of the Income Tax Act, 1961, if the owner of an asset has received money by forfeiting any advance money for the asset, this amount will be deducted from the purchase price of the asset. This is the cost for which the asset was acquired or its fair market value (if the property was purchased before 1 April 1981). Suppose you bought a property for 10 lakh about 15 years ago, and two years ago, you decided to sell it for 40 lakh. The deal was struck and the buyer gave you earnest money of 2 lakh, but later backed out. The 2 lakh will be treated as capital receipt and you will not be taxed in that year, but the amount will be deducted from the purchase price of your property when you sell it in the future. In this case, the purchase price will be taken as 8 lakh.      In some cases, deduction of earnest money from the cost price of the asset pushes up the capital gains tax of the owner substantially. In the example (How much tax...), the owner would not have had to pay any tax had he not forfeited the earnest money. The indexed cost of acquisition without deducting 50,000 from the cost price would have been 8.3 lakh. One would be better off including the earnest money in one's income from other sources and paying tax on it. Is this possible? The law is silent on this because the earnest money is a capital receipt, not income.      Also, the seller must know that this is a one-way street. If you backed out of the deal and paid the buyer 2 lakh compensation, it would be treated as a capital loss and not added to the purchase price of the property. You can claim tax benefit on this only if you were in the business of sale and purchase of the property. In such a case, the loss due to forfeiture would be treated as a rev enue loss.      Earnest money is usually a very small percentage of the to tal value of the transaction, but sometimes it can be higher than the cost price of the asset. Under Section 48 (read with Section 51) if the amount forfeited is greater than or equal to the cost of ac quisition, the cost of the asset will be taken as nil. In one such case involving Sunita N Shah (2005) 94 ITD 492 (Mumbai), the forfeited amount was higher than the cost of acquisition. In such cases, the excess amount is considered cap ital receipt and is not chargeable to tax.  Tax impact on buyer  In case the buyer defaults and the earnest money is forfeited, he will not be allowed to show it as a cap ital loss. This was the verdict in the case of CIT vs Sterling Invest ment Corporation Ltd (1980) 123 ITR 441. However, if the seller fails to honour the deal and pays the buyer double the compensation this will be treated as capital gain because it amounts to relinquishment of a right by the buyer. In the case of CIT vs Vijay Flexible Container (1990) 186 ITR 693, it was held that giving up the right to -obtain conveyance of immovable property amounts to transfer of a capital asset.      What happens if the advance money was for the purchase of a commercial property? Can the loss be treated as business expenditure incurred by the purchaser? The amount cannot be claimed as -revenue expenditure. In CIT vs Jaipur Mineral Develop Syndicate (1995) 216 ITR 469 (Raj), it was held that if the payment is made for the purpose of acquiring a capital asset, the amount lost upon forfeiture will not be considered as revenue loss though the amount may not have the same consequence or character in the hands of the recipient or beneficiary.  —The author is a chartered accountant and senior partner at Mahesh K Agarwal & Co and can be reached at mkcacs@gmail.com  How much tax does a seller pay?  Mr X bought land in January 1987 for 2 lakh. He agreed to sell it to Mr Y in January 1998 and received 50,000 as earnest money. However, Mr Y backed out and his 50,000 was forfeited. Mr X sold the land on 1 January 2009 for 8 lakh to Mr Z. Here's how his gains will be taxed:  Purchase price: 2 lakh  Earnest money received: 50,000  Deemed purchase price: 1.5 lakh  Indexed cost (in 2008-9): 6.23 lakh  Selling price: 8 lakh  Capital gain: 1.77 lakh  Tax payable: 35,400 (20%)

Read more...

Flying golf balls ‘putt’ Chembur housing society residents in a fix

Mumbai: When residents bought flats at Navjivan housing society in Chembur, they were thrilled that their windows accorded them a view of the lush green fields of the 100-year-old Bombay Presidency Golf Club. Little did they imagine then that they'd be ducking for cover from golf balls flying out of the very same fields.      In the last two months alone, residents have collected 50-70 balls that landed into their homes after shattering windowpanes. The society, which shares a boundary wall with the club, comprises 55 buildings and 600 flats. Seven of the buildings are the most affected, said residents.      Murali Iyer, a resident of Navjivan housing society, said his seven-year-old son was injured last month because of a golf ball. "The ball smashed the windowpane and landed in the bedroom. My son was sleeping in the room and was injured by glass shards that flew as the ball broke the glass," said Iyer. "Thankfully, my son's injuries were not major but I shudder to think of what could have happened."      Residents claim golf balls rain down on their society almost daily. Rajesh Nagpal, who resides in one of the buildings on the third floor, said the balls had smashed the glass on his French windows. "The attitude of the club's managing committee isn't good. They call us trespassers when we complain. I fear for my kids. Highend nets have been put in seven pockets except around the compound wall of our society. It's a global practice to have these nets to prevent the golf balls from entering homes," he said.      Simran Shivdasani, another resident, said senior citizens have stopped stepping out of their homes for walks for the fear of being hit by a ball. "Windscreens of cars have been damaged many times. The club must put up safety nets,"she said.      Ravi Raghavan, secretary of the Bombay Presidency Golf Club, said, "This club is 100 years old and was in existence even before the buildings came up. While buying the flats, residents knew their homes would overlook the golf course. I shall take up this issue with the general committee. I cannot comment now on the kind of barricades that can be erected. We paid for the damaged windows. It's good nobody was injured."  SCRAMBLING  FOR COVER  IN A FIX | Residents of Navjivan housing society in Chembur have been battling a barrage of golf balls from the nearby Bombay Presidency Golf Club. The society comprises 55 buildings and 600 flats  SAFETY HAZARD | The balls have been damaging windows and cars. A resident claims her seven-yearold boy was injured last month by glass shards which fell after a golf ball smashed the windowpane. Residents said senior citizens have stopped going out for walks for the fear of being hit In the last two months alone, residents of Navjivan housing society have collected 50-70 golf balls

Read more...

KDMC told to file report on 654cr hsg ‘scam’

Thane: The district administration wants a status report from the Kalyan-Dombivli Municipal Corporation (KDMC) on the Basic Services to Urban Poor (BSUP) scheme.      The Rs 654-crore housing programme, funded by the Centre, has been plagued with allegations of corruption, misappropriation of funds and fudging of the beneficiary list.  On Wednesday, TOI reported financial irregularities in the scheme to provide 13,469 tenements in high-rises for slumdwellers in Kalyan and Dombivli. "The Thane collectorate has directed us to submit an extensive report about the BSUP scheme's implementation from its inception," a senior civic officialtold TOI.      "We have acknowledged that there was delay in the project's execution largely due to interruptions caused by antisocial elements and legal issues involved. We have sought sanction from the state government to allow KDMC to secure a loan of Rs 174 crore from HUDCO for the project," he added.      The Thane police, which are investigating charges of graft in the welfare plan, have recommended a CBI probe. Chief minister Prithviraj Chavan has been reportedly advised against associating himself with the programme. Sources say Chavan is scheduled to preside over a function on October 23 to hand over keys to beneficiaries of the scheme.      KDMC special officer Subhash Bhujbal conducted an inquiry into the programme's implementation. The probe revealed that a private agency, which was authorized to conduct a survey, added fictitious names in the beneficiary list.      The firm was mandated to conduct a survey of the slum pockets using a biometric system for identifying each beneficiary after scrutiny of their proof of residence.      Under the scheme, a slumdewller has to pay 10% of the construction cost of a tenement, while the Centre, state government and local civic body foot the rest. TOI report on October 18

Read more...

Panel to pave way for rail corridor

Mumbai: The state government has formed a five-member panel to finalize a draft agreement related to its role in the Churchgate-Virar elevated railway corridor project. 
    The panel, which is likely to be appointed in a day or two, has been asked to complete the task within a fortnight. 
    The Western Railway, which is executing the Rs 20,700-crore project, has sought the state's support for issues involving relief and rehabilitation of the project affected, allotment of FSI for commercial exploitation, acquisition of land and temporary diversion of roads, among other issues. 
    It has submitted a draft support agreement to the state government. The urban development (UD) department has proposed appointment of a five-member panel, comprising heads of the UD, law and judiciary department, finance department, MMRDA chief and civic chief, to study the draft and finalize the agreement document. 
    The signing of the state support agreement would facilitate floating of bids for the project. Sources said the committee was formed at the instance of chief minister Prithviraj Chavan, who reviewed the proposal on Monday. 
    While the state is satisfied with the corridor's technical feasibility, it has insisted on submission of its financial feasibility. It has also insisted on a holistic rehabilitation policy to ensure the project does not run into litigations.

Read more...

LTT to replace Dadar as outstation hub

Mumbai: Dadar will cease to be a station for long-distance trains in five or six years, by when Lokmanya Tilak Terminus (LTT) will be upgraded from five to 12 platforms to bear Dadar's load. At present, Dadar serves eight long-distance trains. "Platform lengths at Dadar cannot be increased because of space constraints, preventing us from running longer trains," said a Central Railway (CR) official.      The Railway Board has accepted a proposal by CR to upgrade LTT, which "will bring facilities there on a par with that at the airport, though on a smaller scale", the official said. "It will have seamless connectivity with other modes of transport. There will be a mall, multi-storey parking, escalators, restaurants, food courts, better signage and indicators, budget hotels and an aesthetically pleasing exterior and interior."      The project will be implemented on public-private partnership (PPP) at an estimated cost of Rs 5,000-6,000 crore. It will be executed by the Railway Land Development Authority by using 20 acres of land that CR possesses around LTT. LTT project to exploit 20 acres railway land  Mumbai: Central Railway general manager Subodh Jain has said a call for expression of interest for the Lokmanya Tilak Terminus (LTT) project is likely to be issued within six months. Construction work is likely to begin in 18 months, by when the tendering process is expected to be over. Income for the project will be generated by FSI sale and lease rent from  the bid winner. The railways aim to time the bidding process with the opening of the Santacruz-Chembur Link Road (SCLR), which will improve east-west connectivity, providing quick access to LTT. "We are confident of receiving premium quotes in bids. After all, LTT is located in the heart of Mumbai," a CR official said.  LTT PROJECT  Implementation mode |  Public-private partnership  Estimated cost |  5,000-6,000 crore  Authority | Railway Land Development Authority, which was established by the railway ministry for generating nontariff revenue through commercial exploitation of railway land  Land | 20 acres, owned by Central Railway around LTT

Read more...

BMC cracks down on redevelopment project delays

Warns Of Fines, Even Proposal Cancellation

Mumbai: Continuing its crackdown on sloppy work, the BMC has outlined a policy limiting the maximum redevelopment project time for its properties to four years and slapping penalties on developers unable to meet deadlines. 
    In a circular on Monday, the estates department listed out seven steps to be taken against developers if they slip up, including cancellation of proposals for delays in the planning stage and fines if construction is not completed on time. 
    Last week, the BMC, in an unprecedented action, had slapped penalties over Rs 90 lakh on sub-engineers of its road department for not filling up potholes promptly this monsoon. 
    Among the steps listed on Monday (see box), the BMC has revised its charges for a developer from Rs 1,000 to Rs 5 lakh every year for revalidation of the letter of intent (LOI) if he fails to get a commencement certificate (CC) within a year. For further delay, a showcause notice will be issued for cancellation of the project. It will be implemented with retrospective effect from 2010. 
    The BMC has taken a lenient view on delays resulting from litigation, but ordered a stiff 18% interest levy on the remaining capitalized value (the amount the developer has to pay for the sale component in a redevelopment project) and an additional Rs 1 lakh per month for any extension a builder might seek in a smoothly progressing project. 
    The new policy also links a project's deadline to the plot area. Redevelopment on a plot up to 4,000 sq m has to be completed within three years and those that must in four years. 
    "The delay in completion of projects embarrasses the BMC as rehabilitation of tenants cannot be done on time. Moreover, as time passes, the value of the flats in the sale component of the project increases for the builder, but leads to delay in paying up the capitalized value that he owes to the BMC. This policy will ensure that the capitalized value is paid on time and as per schedule," said acivic official. 
THE ACTION PLAN 1 If a builder/society submits a redevelopment plan without the principal tenants' consent, 45 days will be given to do so 
    Failure will mean closure of proposal 2 After the BMC lists eligibility oftenants, the developer/society must give details of the plot area and developer's financial status within 
15 days 
    Assistant commissioner (estates) will close proposal in case of failure 3Once the letter of intent (LOI) is issued, the society/ developer has to obtain intimation of disapproval (IOD) and commencement certificate (CC) within a year 
    Inability will mean the redevelopers have to cough up Rs 5 lakh for revalidation every year 
    If CC is still not taken within a year, a showcause notice will be issued for cancellation of the project 4 If a project is not completed within deadline, a showcause notice will be issued to the developer/society for recovery of the capitalized value (the value of the project's sale component) 
    For two-three year projects, 10% of the value has to be paid before LOI and 90% before occupancy 5 If a project goes without litigation and yet the developer seeks extension, an 18% interest on the capitalized value will be charged with an additional Rs 1 lakh per month for the extended period 6 To ensure handover of the rehabilitation component on time, the BMC proposes to take a bank security deposit and forfeit it in case of delay 7 Any developer who has abandoned 3 projects in the past will be blacklisted BMC PROPERTIES IN ISLAND CITY 
The BMC owns 4,176 
leased plots spread over 551 hectares. It has more than 5,000 structures with over 40,000 tenants 
REDEVPT PROJECTS 
110 municipal tenanted properties 
are in various stages 
of redevelopment in 
the island city STATUS OF SOME PROJECTS 
Work on Lalbaugcha Raja Cooperative Housing Society, Bavlawadi near Ambedkar hospital in Byculla and BIT chawl on Princess Street began in 2004. After 8 years, they are nearing 
completion 
Construction at BIT chawl, Agripada, BIT chawl, Matunga, Vakil chawl in Parel, two projects near Nair hospital, Janta Nagar and Kranti Nagar projects near Grant Road station took off in 2007. Nowhere near completion after 5 years 
REASONS FOR DELAY 
    Litigation/ non-cooperation by tenants 
    Demolition of existing structures on site 
    Materialization of pending transfer cases 
    Split-up tenancies 
    Developer's inability to process proposals for IOD or CC on time after receiving LOI

Redevelopment work on at the BIT chawl in Agripada

Read more...

Cap likely on Mhada rehab house size

Mumbai: The state government may modify norms to increase the size of tenements for people residing in old and dilapidated Maharashtra Housing and Area Development Authority (Mhada) buildings which go in for redevelopment. 

    To get rid of excessive bargaining and unfair practices used by developers to lure societies, Mhada is toying with the idea of introducing a cap for the maximum size of rehabilitation tenements for such projects. 
    The move will influence redevelopment plansof close to5,000societieswhichhouse over 1 lakh people. 
    The governmentoffers an FSI of 2.5 for redevelopment of such societies under section 33(5) of the development control regulation. 
    The government has plans to consider 484 sq ft as the maximum flatsizein case of low-income group (LIG) projects. This could grow to 600 sq ft in the case of middleincome group projects. 
    With no maximum eligibility cap at present, societies have often fallen into the trap of dubious builders who promise unreasonably high tenement size for rehabilitation flats. Unable to meet the demand later, a number of them have abandoned projects leaving residents high and dry. 
    Chief Minister Prithviraj Chavan said last week about 30% of 530 such projects where permission for redevelopment was granted were yet to see any work done. The restriction on the tenement size will also provide a level playing field, sources said. 
    Builders have no reason to complain as the move will resultin an increasein theincentive FSI offered to them. According toexisting norms, a builder gets an incentive FSI of 300 sq ft for each rehabilitation tenement in the case of LIG projects. The incentive FSI is used for the sale component of the project.If thecapof 484sq ftisintroduced, even the incentive offered will rise proportionately, a source said. 
    The government is likely to retain the condition which requires a builder to share the surplus built-up area (that remaining after accounting for the rehab and incentive component) with Mhada in a 33:67 ratio. A proposalof paying thedeveloper construction cost for the built-up tenements surrendered to Mhada and letting him pay premium at ready reckoner rates for his share is under consideration.

Read more...

AURANGABAD PLOT Mega project gets CM’s FSI push

Mumbai: In what is perhaps the highest FSI granted so far beyond city limits, chief minister Prithviraj Chavan has agreed to provide 1.5 FSI on a 50-acre plot to be developed for an exhibition-cum-convention (ECC) centre at Shendra in Aurangabad. 
    The ECC has been proposed as part of the ambitious Delhi Mumbai Industrial Corridor (DMIC) project, which is being pushed by the Centre as its own mega investment project. 
    According to the decision taken by the CM on Wednesday, the 1.5FSI would be global in nature, meaning it would apply to the entire plot. This means that construction up to 1.5 times the total plot area will be possible. 
    The Maharashtra Industrial Development Corporation (MIDC), which owns the land, is the nodal agency for DMIC's implementation in the 
state. It had sought an FSI of 2 for the plot's developable portion for ECC, which will be taken up on built-operate-and-transfer basis, sources said. 
    Chavan held a meeting with DMIC CEO Amitabh Kant on Wednesday. Senior officials were present at the meeting. Following Chavan's agreement, the MIDC, in consultation with DMIC, will issue tenders for the ECC, sources said. A proposal for amendment in town planning norms will be moved too. 
    At the meeting, Chavan asked officials to ensure that the state support agreement (SSA) is signed with DMIC for the project work within the next week. MIDC and the government asserted that the state's equity in the project must be 51%. The DMIC is pushing for a shareholder agreement with a 50-50 equity ratio. A special purpose vehicle for the project will soon be formed.

Read more...

NEW DCR BRINGS BONANZA BMC mops up 300cr from bldrs for extra area

Mumbai: The amended Development Control Rules (DCR), which offers developers 35% extra area for residential projects on payment of a hefty premium, has earned the BMC Rs 300 crore in the past few months. The new rules came into force last January. Since then, the civic body has cleared 753 building projects. The BMC hopes to collect another Rs 500 crore by April 2013. 

    The new policy, formulated by then civic chief Subodh Kumar, charges a premium from developers who want to build more that the permissible Floor Space Index (FSI) —total built-up area vis-a-vis the plot size. After including spaces like the lift, staircases etc, which were earlier free of FSI, compensatory FSI up to 35% for residential projects and up to 20% for commercial projects was decided to be offered. 
    Civic officials say that if a developer wants to avail of this extra, FSI then he has to pay a premium on the basis of the ready reckoner rates of the area. The civic body had estimated a revenue collection of Rs 1,000 crore after allowing additional FSI as premium for the current financial year. 
    "The new system has made it very simple for us to scrutiny the proposals. It has also helped boost revenue," said a senior civic official from the development plan department. 
    While Kumar had proposed levying 100% premium for such areas that were earlier free of FSI, the state—while approving the policy-—reduced it to 60% for residential and 100% for commercial. 
    The change in DCR was brought to make the system more transparent. As earlier these areas like flower duct, lift and refuge area were not counted in the FSI, many builders who manipulated the system were able to virtually double these free-of-FSI areas and sell them at market rate to flat buyers.

Read more...

Redevpt of Mhada colony in Thane caught in red tape

Thane: A spacious flat, a fat corpus fund to manage the maintenance of their swank 22-storey highrise and a better lifestyle lured Pramod More's family to agree to redevelopment of their 35-year-old Mhada building at Vartak Nagar. However, two years on, their dreams seem to be crumbing as the redevelopment projects on the 63-acre Mhada colony is stuck in a policy paralysis. 
    Over 3,500 tenants are now living in rented accommodations after their old buildings were hurriedly demolished. 
    "Delay in decision-making has held up the project. Merely sanctioning higher FSI of 2.5 is not the solution. Environment nods and lack of clarity on part of Mhada regarding the ready housing stock to be provided to it has become the bone of contention," said Hanumant Jagdale, a NCP leader and a prominent developer in the area. 
    "Most of the buildings in the colony stand on small plots of around 600 sq m, so the developer has no option but to go vertical. Initially, two of the three building redevelopment projects took off successfully after Mhada increased the FSI to 2.5 from 1. However, for the past four to five months, the work has stopped after the Thane Municipal Corporation (TMC) insisted on an environment department no-objection certificate for structures exceeding 20,000 sq m. Owner of the land, in this case Mhada, should get the requisite NOC but the agency has failed to do so," said Jagdale. 
    In the absence of the NOC, the TMC has refused to give a go-ahead, he added. 
    Locals have held the nexus between developers and policy planners in Mantralaya, Mhada and the TMC responsible for this. But now, others who are still residing in the age-old dilapidated buildings and row houses are unwilling to take the redevelopment plunge. 
    Of the 73 Low Income Group (LIG) Mhada buildings in the colony, over 40 are in a dilapidated state and have been served notices by the authorities. These houses are largely occupied by industrial workers employed in manufacturing units in and around Thane.

Read more...

CM cracks whip on errant developers

Mumbai: Thestatehasdecidedtotake action against developers involved in over 100 redevelopment projects in the city. CM Prithviraj Chavan on Thursday said strict action would be initiated against developers who failed to undertake redevelopment projects within stipulatedtimeon Mhada land. 

    While Chavan said that the nature of the action wasbeing decided,senior officialssaid it could be in the form of revocation of redevelopment permissions. Referring to a decision on granting additional FSI for the redevelopment of old Mhada buildings by levying a premium, Chavan said it was not in linewiththebasic principlebehindsanctioning the additionalFSI. 
    In 2008, the state urban development (UDD) department approved a proposal to grant an FSIof 2.5for such projects.The additional FSI could be availed either by paying a premium for the increased portion of the FSI or by sharing the built-up portion of the surplus FSI (FSI remaining after deducting the rehab portion and the developer's incentive for rehab) in a 2:1 ratio between Mhada and thedeveloper. 
    Understandably, the premium option got maximum hits. In fact, out of 530 projects approved, 511 were under the premium option. "The main idea behindtheFSIhikewastoimprove quality of housing for tenants and generate affordable housing stock from the surplus FSI. This was lost by offering the premium option," Chavan said.He addedthat the move was either taken without any ideologicalbasisor wasdriven by vestedinterests. 
    Sources said that an exercise to find out who was responsible for the introduction of the option was ongoing. While the UDD claims that the original Mhada resolution for the FSI grant contained the premium option, housing department sources claim it was introduced at the UDD level. Chavan said work was yet to begin in about 30% of the 511 projects approvedunder the premium option and said action would be initiated in such cases. The government discontinued the premium option in September 2010. 
    On Thursday, Chavan held a meeting of elected representatives to discuss the Mhada redevelopment issue. Following the meeting, sources said the state could alter the redevelopment model. While continuing to insist on built-up share, it is considering the option of either linking it with the market value of the area or reduceitsshare.Ithas planstospecify a cap on the rehabilitation area to weed out the practicewheredevelopersluretenantsby promising unjustified areas. Chavan said a decision in this regardwas "long overdue".

Read more...

Know These Loan Facts Before Going for an Under-construction Property

Vidyalaxmi explains the risks involved in these projects and tells what home buyers can do to reduce their loan burden     With the festive season just around the corner, prospective house buyers are coming back to the market. Builders too are ready to indulge in some gimmicks to catch these prospective buyers' attention.  With property prices remaining sky-high and the interest rates yet to ease significantly, many prospective buyers would be tempted to check out under-construction properties for their cheaper price tags. Typically, these under-construction properties quote at least 20% lower than the prevailing rates in a locality. Of course, you can check the properties under construction, but do it with open eyes, because apart from the obvious risk of delay (it could even be indefinite in some cases) in construction, you may also get some other financial hiccups if there are long delays.  "The last few years have not been kind to real estate developers. Even some reputed builders are forced to divert money from pre-launch projects to the projects nearing completion," says Shweta Jain, director (residential services) at Cushman & Wakefield. The delayed possession of the house could exert severe financial pressure on the buyer if he has to pay the EMI as well as the rent at the same time. Moreover, if the project gets stuck or even defaults, the homebuyer is still liable to pay the interest and the principal component of the disbursed amount to the bank. If you are taking a housing loan to buy an underconstruction property, here are some points you should always remember. EMI PAYMENTS ON SANCTIONED LOAN AMOUNT  In an under-construction property, a bank disburses the loan amount in tranches to the builder. However, you may be expected to pay the EMI on the sanctioned loan amount and not the disbursed loan amount. For instance, if you have taken a loan of . 70 lakh and the bank has disbursed only . 20 lakh to the builder, you may have to pay an EMI for the entire . 70 lakh, which is . 67,552 at 10%. "There is a construction risk involved both for the bank as well as the homebuyer. Earlier, banks were promoting pre-EMIs and part-repayment of loans. Now with the increase in risk factors and elongated period of loans, such as 25 years, banks ask for repayment on the whole loan amount," says Harsh Roongta, CEO, Apnapaisa.com.  It makes financial sense to pay the EMI on the sanctioned loan amount, as the principal component of the home loan will be much higher, which will reduce the tenure of the loan.  "In the above example, the interest component of the EMI is calculated on the disbursed amount. If the borrower starts paying the full EMI from  the first month, the loan will be repaid in 197 month as against 240 months," adds Roongta.  However, borrowers often invest in an underconstruction project with the intention to stagger the loan repayment. This huge EMI outgo from the first month can also be a strain on the pocket, especially if the borrower is doling out a monthly rent over and above the home loan EMI. The borrower would have been better off buying a ready-to-move-in house.  HIGHER LIABILITY ON YOU IN CASE OF  PROJECT DELAY OR DEFAULT  If the project delays or defaults, the liability is on the borrower to pay off the dues. The loan will be settled only after the borrower has paid off the interest and the principal component of the loan amount disbursed to the builder. Hence you should consider the "track record and reputation" of the developer while buying an underconstruction property.  "The risk comes down if the developer is a prominent and trusted one with many timely completed projects and is financially sound to be able to complete and deliver the project without having to rely too much on cash flows generated purely from sales of units in the project," says Shweta Jain of Cushman & Wakefield.  This has been a growing concern especially since 2008. Even some reputed builders are forced to divert money from pre-launch projects to their projects nearing completion. Hence, if you are borrowing up to 70% of the property value, it is better you opt for a project which is close to completion or a ready-to-movein house. Also, do check if it is already mortgaged with a lender. If the property is already mortgaged with a lender, do insist on a no-objection certificate from the lender before entering into a purchase agreement with the builder. This NOC can act as a good recourse for the home buyer if the developer defaults on his loan.  NO TAX BENEFITS IN UNDER-CONSTRUCTION PHASE  A home loan borrower can claim tax exemption on interest payments up to . 1.5 lakh and another . 1 lakh under Section 80 C towards the principal repayment. However, you cannot seek these tax benefits in the pre-construction phase, even if you have started repaying the housing loan. "The Section 24 of the Income Tax Act states that if a property is still to be constructed, there will not be any deduction on the interest payment all of those years. The interest for the pre-construction period can be availed for deduction in five equal installments from the year the construction is complete," says Vaibhav Sankla, director, H&R Block India. You can avail the tax benefit at the time of filing your income tax returns.  The Section 80C allows tax benefit for the amount paid towards the stamp duty and the registration process. "However, the tax rebate on principal repayment may not be allowed when the property is under construction," he adds. If there is a delay in the possession of the property, the tax benefits also get delayed to that extent.  vidyalaxmi.v@timesgroup.com

Read more...