City to get 32 four-storeyed parking lots State Revises Builder-Driven FSI Policy

Mumbai: The state government has approved 32 public parking lots under the revised parking floor space index (FSI) policy, creating space for over 30,000 vehicles in the city. 
    Of the 32 approved parking spaces, 20 are located in the island city, nine in the western suburbs and three in the 
eastern suburbs. 
    In all, the BMC received 70 proposals, of which 32 have so far been approved by the state government. Another 11 proposals cleared by the BMC are awaiting the government's approval. 
    To encourage private developers to build public parking lots, the state government in 2008 had announced a policy under the Development Control Regulation (DCR) 33 (24) which would grant the developer up to four FSI in exchange for construction of parking lots. But the original policy had to be revised after experts termed it as builderdriven. 
WHAT IT MEANS 

• According to the revised policy, any developer who builds a public parking lot and hands it over to the BMC for free, will get up to FSI of 4 on a new construction on a plot of over 1,000 sqm in the island city and over 2,000 sqm in the suburbs 

• Developer has to pay 40% premium for additional FSI 

• Developer can build only ground-plus-four levels of parking floors 

• The civic corporation has so far collected over Rs 250 crore as premium

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Interest on Hsg Loans to Stay Out of Tax Net

In an order that will provide relief to those who invest in houses, the Income-Tax Appellate Tribunal (ITAT), Chennai, held that interest on loans taken for buying housing properties will continue to remain out of the tax net, even if the house is sold later.  The ITAT clarified that the interest paid for borrowed loans is certainly an expenditure that should be taken into account while computing the income from house property as well as in computing capital gains arising from sale of the same property. The ruling was made on October 31 by a two-member bench comprising OK Narayanan and SS Godara.  In this case, the taxpayer C Ramabrahmam borrowed money for buying property and claimed deduction for interest paid for the borrowed funds, while computing income from house property.  However, when the house was sold, the taxpayer treated the interest paid on loan as "cost of acquisition" for the purpose of computing capital gains and claimed deduction there too. The assessing officer, however, refused to accept the claim on the ground that interest has been allowed as deduction under section 24 (b) of the Income-Tax Act that deals with income from house property and the deduction cannot be allowed again while computing capital gains arising from the sale of the house.  The first appellate authority, Commissioner (Appeal), allowed the claim of the tax payer but the Income-Tax department moved the Incometax Appellate Tribunal (ITAT), the second appellate authority for deciding tax disputes.  The ITAT dismissed the appeal, holding that deduction under section 24 (b) of the Income-tax Act and computation of capital gains under section 48 of the Income-tax Act are covered under different heads of income. The first section deals with house property and the other section deals with capital gains. The first deduction was claimed when the taxpayer computed income from house property, while the second claim was made when the house was sold and capital gains were computed.  The ITAT held that both these provisions of the Income-tax Act are altogether different, the taxpayer is entitled to claim deduction of interest paid on borrowed loans while computing capital gains too.  Vispi T Patel of Vispi T Patel & Associates told ET: " This is a correct interpretation of the concerned law. This order will be a relief to the taxpayers who are in similar situations".

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FM Asks Banks to Bail Out Builders

Tells bankers to fund residential projects stuck for want of funds

Finance Minister P Chidambaram has asked banks to lend a helping hand to builders, particularly those involved in construction of residential properties, in order to revive faltering economic growth. The minister discussed the problems of the real estate sector with the chiefs of state-run commercial banks at a meeting last week in New Delhi. Bankers who attended the meeting described the broad thrust of Chidambaram's comments, but declined to speak on record. 
"The minister asked banks to fund those residential projects that are stuck for want of funds. This, according to him, will help kickstart the economy," said a bank chief who attended the meeting. In August, after returning to the ministry, the finance minister asked banks to put pressure on builders to lower prices in order to reduce a growing inventory of unsold apartments. 
During the meeting, Chidambaram reviewed a report prepared by Ajai Kumar, CMD of Corporation Bank, on unsold stock in the real estate market and the way ahead. 
The report highlighted the need for builders to arrange their own resource for equity. It also stressed the need for builders to open an escrow account with banks. 
As of now, many builders show advances collected from purchasers of property as their equity contribution. The report, according to people at the meeting who described its contents, said this should end. Credit to Real Estate Sector Slows Down 
This is because the builder does not have any stake in completing the project. In its edition dated November 17, this paper had reported that half of the 3,23,000 apartments due for delivery in 2013 were likely to be delayed on account of problems faced by builders, including lack of financing and delayed clearances. Further, onefourth of apartments due for delivery in 2014 were likely to be delayed, according to the report from real estate research firm Liases Foras. 
Credit from commercial banks to the real estate sector rose only 4% for the year ended September 30, 2012, compared with a double-digit rise in 2010-11, a possible indication of the diminishing attraction of the sector. 
In August, the finance minister had told banks to put pressure on builders to cut prices. "Builders are sitting on huge inventories (unsold apartments) they are neither able to sell at the prevailing prices nor are they allowing others to buy by lowering prices." He further questioned banks as to why they were not putting pressure on builders to lower prices since they had funded both the builder and the retail home loan borrower. 
It's unclear what impact the minister's exhortation will have. 
At least half-a-dozen bankers that ET spoke to after the meeting in August said they did not discuss the subject of reducing prices with builders. "Even as we agree that real estate prices are at elevated levels, builders won't really care for our views," said a bank chief when asked if the bank has sent out any communiqué to builders to lower prices. 
"Back then (in August) the idea was to kickstart the economy and he is attempting it again. This time he has changed the approach," said a bank chief attending both meetings.

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Bharti Eyes Stake in DB Realty Arm’s Delhi Airport SPV

Co in talks to acquire 49% in SPV for . 350 cr The realty arm of telecom major Bharti Group is in talks with DB Realty's hospitality arm to buy a 49% stake in the SPV that is developing a plot at the Delhi International Airport's new hospitality district, for . 350 crore.  DB Hospitality had got the land on a 30-year sublease for . 400 crore through competitive bidding in 2009. It was planning to build three hotels and a convention centre on the 7.7-acre plot, but construction is yet to start because of the overall economic slowdown, and also difficulty in raising funds after an arm of the company got embroiled in the 2G spectrum scam and its promoters Vinod Goenka and Shahid Balwa were attested for their alleged role in the scam. Now, to speed up construction, the company has been looking to sell a significant minority stake to raise funds and has been in talks with a number of funds as well as hospitality and realty firms, said a person close to the development, who did not wish to be named. Vipul Bansal, CEO of DB Realty, confirmed that the company was in the process of selling a 49% stake in the SPV, but did not comment on its talks with Bharti Realty. "At the moment, the stake is open to all interested parties," he said in an email. David Rebello, the CEO of Bharti Realty, declined to comment on the deal. GMR Infrastructurecontrolled DIAL had invited bids for developing hotels in the new hospitality district spread over 43 acres near the Delhi airport. It auctioned 14 hotel plots, with the 7.7-acre plot given to DB Hospitality being the biggest of the lot.  DB Realty has been trying to sell some of its other assets as well, including its 170-room Hilton hotel property near Mumbai airport and a new 314-room Grand Hyatt property in Goa.

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3 city areas will appreciate most in 5 yrs: Report

Mumbai: Ulwe in Navi Mumbai, Wadala and Chembur are expected to generate the highest returns for residential real estate investors over the next five years, a report by property firm Knight Frank has revealed. 
    In fact, seven of the top nine spots on the list of 13 areas across the country are occupied by localities in Mumbai and Pune. While rates in Ulwe are expected to rise 145% in five years, in Wadala and Chembur, the hike is likely to be 133% and 125%. 
    The report seeks to identify areas that will develop because of factors such as job creation, infrastructure development and lifestyle change. "We identified 100 cities using banking penetration, hotel room demand, and air passenger traffic as surrogates for business activities. For infrastructure development, the current and proposed investment in infrastructure were taken as proxies," said Samantak Das, director, Knight Frank. REALTY CHECK New projects to boost Ulwe, Chembur 
Mumbai: According to a report by realty firm Knight Frank, seven areas in Mumbai and Pune are likely to give among the best returns to residential realty investors. Taking a number of factors into consideration, the firm identified Mumbai, Delhi, Bangalore, Chennai and Pune as the top five cities to identify investment opportunities. 
    From the five cities, Knight Frank has listed 13 zones which are expected to appreciate by over 90% in the next five years. Of the 13, the top three areas are in Mumbai. They are followed by Noida Extension and Dwarka Expressway in the National Capital Region (NCR), Medavakkam in Chennai and Hinjewadi in Pune. The cheapest areas identified by the study are Noida Extension in NCR and K R Puram in Bangalore, where prices range around Rs 3,200 to Rs 3,245/square foot. At the other end are Wadala and Chembur, where market prices reign in the region of Rs 12,000 to Rs 15,000/sq ft. 
    In terms of infrastructure, Ulwe is expected to gain because of new projects, which include suburban rail connectivity, the trans-harbour creek bridge and the proposed Navi Mumbai airport. Although there has been a spate of titledisputes in Ulwe in the past, lenders say Cidco has become more discerning and there are now projects with clear title where big names such as HDFC are willing to lend. Wadala prices are expected to rise as the area gets re-rated following lifestyle changes that are taking place as very large projects come up. "Link road in Malad has already witnessed a lifestyle shift which has resulted in prices there rising faster. Wadala, too, is undergoing a lifestyle shift," Das said. Chembur is expected to benefit from the completion of the Santa Cruz-Chembur link road, the Eastern Express Freeway and the monorail. 
    According to Das, the Planning Commission's projection of a housing shortage of 26 million units does not reflect the demand for housing but the need. Employment generation will translate that need into demand by increasing affordability, he said, adding, "Our research is targeted at the end-user and not those who are looking at property for self occupation. We have projected the appreciation net of transaction costs but have not taken into account either the rental income or expenses for maintaining the property. In any case, the rental income will only be around 2%."

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Flat buyers’ forum seeks VAT refund

Mumbai: Even as the sales tax department is computing the value-added tax (VAT) paid by 10,600-odd registered dealers or developers, a group of chartered accountants who have set up a forum of aggrieved flat buyers, is now asking them to demand VAT refund from developers.      The forum, which operates through a website called www.flatvat.com, have asked all the 450 buyers who have registered at the website to ask for a debit note or a tax invoice and receipt of the VAT amount collected by the developer. "The invoice and receipt confirms that the developer has paid tax to the government against your flat and will further help you get the refund in the future,'' said Sharad Patel, founder-partner of chartered accountants ASJ who set up the website.      The sales tax department is still computing the total VAT amount – it hopes to collect more than Rs 1,000 crore – paid by the registered developers. Official sources said that while majority of big developers have paid VAT, several small developers have shown nil returns. Dealers have to file sales tax returns every three months. The department is now in the process of verifying the reason as to why some developers have shown nil returns.      Incidentally, even before a buyer asks for a refund, Gundecha Builders, a suburban developer, has decided to refund the balance from the total 5% of the agreement value they have collected from their customers as VAT.      Paras Gundecha, chairman of Gundecha Builders, recently wrote to his 350-odd flat buyers asking them to collect cheques from his office or from the bank for the excess VAT amount. Gundecha, which has computed VAT between 1% and 3.5% of the agreement value, will refund roughly Rs 3 crore to the customers. "Barring very few buyers who have not paid, the majority of my customers paid the VAT amount in the form of escrow and bank guarantees. Now that I have paid that VAT to the government, Isee no reason to hold on to the excess money,'' said Gundecha.      Another leading developer, who has projects mostly in Andheri and Borivli, said he too plans to refund the balance amount to his customers who have paid in bank guarantees and escrow in a few days. "But I am going to tell this customers that though I am refunding the money, they will have to pay in case the sales tax department comes up with another computation. I do not want more headaches," said the developer who refused to be quoted as he is in midst of a legal dispute with 30-odd flat buyers who have refused to pay VAT.  HOMING IN  WHAT THE LAW SAYS  Builders must pay VAT on underconstructed flats sold between June 20, 2006, and March 31, 2010.  If flats had an occupation certificate at the time of sale, then no VAT has to be paid  HOW VAT IS COMPUTED  The sales tax department has given three different methods to compute VAT. In one method, also the preferred option of developers, 5% VAT is computed after the cost of construction and value of land is deducted from the amount mentioned in the agreement. This leads nearly 50% reduction in the amount on which VAT is applicable CONSUMER ACTIVISTS AND ORGANIZATIONS ADVISE      Demand the cost sheet from your developer to see how they have calculated the VAT for your flat Check if the developer has registered the company at the sales tax department, to ensure that the VAT amount is paid appropriately

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Unlike Your Pizzas, Home Deliveries to be Delayed

DREAMS CRASH A new survey shows nearly half of the 323,000 homes to be delivered in 2013 will be delayed     Here's a shocking piece of news for those waiting to take possession of their homes next year. A new survey has found that nearly half of the 323,000 homes to be delivered in 2013 are lagging behind construction schedule, with a third not ready for a housewarming before 2014. In addition, nearly three of every four homes promised for delivery in 2014 are also likely to be delayed, real estate research firm Liases Foras has found in a nationwide survey conducted recently. "There have always been delays, but it is a bigger concern today as the quantum of homes being built is much larger now," says Deepak Parekh, chairman of India's biggest mortgage lender HDFC Ltd. "Everyone's money is stuck. It is not only bad for homebuyers, but also for the economy," adds DK Mittal, secretary, department of financial services. The problem that began in 2010, when the economy started to weaken, has aggravated in the last one year due to paucity of funds as well as delays in securing approvals. Home sales have slowed down, private equity has dried up, the primary market is subdued, and banks have been reluctant to lend to builders. A combination of consumer activism, agitation by farmers, bureaucratic delays, labour shortage and legal wrangles has also contributed to the holding up of projects. The delays leave lakhs of homebuyers to grapple with another problem in the midst of rising prices and a slowing economy. "Individual homebuyers have the option of taking recourse to the law, but almost no one does so as it is a cumbersome process and may lead to further delays if the builder digs in his heels," says Vaibhav Gaggar, partner at law firm Gaggar & Associates, which helps clients in real estate disputes, among others. "If they choose, buyers could invoke a clause that is part of most standard contracts, to terminate the contract and get back their money with interest. If the person chooses to retain the property, he could file for compensation and damages by proving that he has been injured financially," added Gaggar. At present, contracts between buyers and builders provide for a per sq ft compensation in case of delays. "But the amount is minuscule," he said. Builders in the Delhi-National Capital Region have been the biggest culprit, with a 74% late delivery rate, followed by Mumbai and Chennai at 61%, Bangalore at 59% and Kolkata at 57%. "Data indicates that there would be more delays going forward because of the stress on cashflows of developers," says Pankaj Kapoor, managing director at Liases Foras, the firm that carried out the survey. Supply, Demand Both a Concern  This non-brokerage real estate research and rating firm services banks like HDFC, Axis Bank, Deutsche Bank and Standard Chartered as well as big real estate companies and private equity (PE) funds.  Experts say there are liquidity concerns both on the supply and demand side. Many developers are faced with a liquidity crunch and cashflow issues due to slowdown in home sales, and this is turn is impacting their ability to finance construction of new properties.  "Home sales are down nearly 40% because of the very high cost of homes. This is becoming a vicious cycle," says Anckur Srivasttava, who heads GenReal Property Advisers, a property consultancy. Adds Anshuman Magazine, managing director of CB Richard Ellis: "There is a liquidity concern on both the supply and demand side due to high interest rates and high prices. The impact of the slowing economy is reflecting on the ground now, in demand slowing down and execution of projects being hit." According to a recent report by real estate consulting firm PropEquity, the number of unsold properties in India's top seven cities at the end of December this year is expected to be around 32,000 units and valued at over . 21,000 crore. Developers argue that liquidity issues are just one of the reasons for the delays. More pressing is the issue of getting approvals on time to get on with construction. "After the first approval, subsequent no-objection certificates and approvals like water, electricity connections, completion certificate and others get delayed," says Lalit Kumar Jain, president of the Confederation of Real Estate Developers Associations of India (Credai), the national association of builders. The regulator will, however, have the right to give an extension to the builder on a case-to-case basis.  ravi.sharma@timesgroup.com

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Drains, Mithi to be widened in another 3 yrs: Civic body

Mumbai: The civic body has said that Mumbai's storm water drains will be widened and deepened by 2015, as will be the city's most abused river, Mithi. The cost of the venture, in the end, will come to about Rs 3,900 crore. 

    Municipal commissioner Sitaram Kunte said that, through the BRIMSTOWAD project, the BMC is quadrupling the holding capacity of storm water drains and supporting that with pumping stations to prevent a repeat of the 2005 floods. "We have planned for a rainfall of 50mm/hour and runoff coefficient of 1, as recommended by the Madhav Chitale factfinding committee. But there may be days when it rains more; no system can be calibrated to take care of all eventualities," Kunte added. 
    The civic chief said pumping stations are being constructed in two phases. "The Irla and Haji Ali pumping stations are complete, while work on Love Grove and Cleveland stations at Worli is underway. Tenders have been invited for the Britannia outfall pumping station. In case of three other stations (Gazder, Mahul and Mogra), there are land and environment issues that need to be resolved." 
    But, according to hydraulics expert Madhav Chitale, the implementation of BRIMSTOWAD is the least required to protect Mumbai, which is now a risk-prone zone from "hydrological point of view". "Mumbai needs a three-way approach. It has to be probabilistic and not deterministic. BRIMSTOWAD is a deterministic approach," he said. 
    Chitale pointed out that his report had recommended categorisation of floodprone areas on the basis of the possibility of their flooding "once in 10 years, 25 years, 100 years and above 100 years"—also known as the river valley approach. In the first category, he said, residents must be asked to take compulsory insurance. Another desperately-needed measure is the preparation of a climatic model to determine rising sea levels. "Orissa has done such a study. Mumbai must also study the impact of sea rise. There are 40 points where water from the city flows into the sea. Protection bunds need to be redesigned at these points." 
    According to storm water drain department officials, of the 55 floodingprone spots, inundation has been stopped in nine and reduced in six others, thanks to pumping stations. The Love Grove and Cleveland pumping stations will ensure there is no flooding in another nine spots, while Britannia, Gazder, Mahul and Mogra will stop flooding in yet another 24 places. 
    Activists argue that it is not enough to merely widen and deepen nullahs and rivers. The city's open spaces must be saved as well since these act as holding ponds in case of floods. 
    Rising concretisation of open spaces in housing and commercial complexes has increased the runoff, preventing water from percolating into the ground. Similarly, saltpan lands and mangroves along the coast must be protected, activists say.

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Bldgs can have only 2 cellphone towers: BMC

Mumbai: The BMC will not allow more than two cellphone towers to be installed on rooftops. 

    Currently, the civic body is finalizing a new policy after the Union department of telecommunication (DoT) issued guidelines on installation of the towers. While formulating the policy, the public concern over thehealth hazards will also be kept in mind. 
    Mumbai's cellphone usage is high and various service providers are vying to grab a major share in the market and want to instal towers on buildings to provide better connectivity. 
    The civic body also plans to have a special counsel to fight the case in the high court and to vacate the stay on taking any action on the illegal towers. 
    "Although we don't have our own machinery to check radiation levels, a new policy will soon be drafted to check the number of towers in Mumbai. We will not allow more than two towers on the top of a building." 
    The issue was raised by BJP corporator Vinod Shelar who said Mumbaikars were facing grave danger due to rising cellphone tower radiation astheBMChad not prepared any guidelines. 
    "At certain places, five to six towers have been set up on terraces," Shelar said. 
    "An increase in cellphone towers has seen rise in diseases like cancer, brain tumour, high blood pressure and heart ailments. The proportion of birds has also reduced considerably in Mumbai," he added. 
    Several mobile companies are violating the proposed transmission levels of 600 microwatt proposed by the International Commission of Non-Iodised Radiation, claimed Shelar. 
    According to BMC officials, the onus is on the DoT's term cell to scrutinize the radiation levels. "In some cases wherethe radiation levels are high, BMC officials can register cases on the DoT helpline," Gupta added 
HEADING FOR TROUBLE 
    According to the BMC, there are 3,489 cellphone towers in Mumbai. Of these 1,628 (47%) are illegal 
    Over 500 towers have been installed without the civic body's nod in Bandra, Santa Cruz , Vile Parle, Andheri and Jogeshwari. K-East ward (eastern side of Vile Parle, Andheri and Jogeshwari) has 261 illegal towers 
    D ward (Malabar Hill, Nana Chowk) has 138 unauthorized ones 
    Mumbai's cellphone usage is high and various service providers are vying to grab a major share in the market and want to instal towers on buildings to provide better connectivity 
    Mobile companies violated the proposed transmission levels of 600 microwatt proposed by the International Commission of Non-Iodised Radiation, claimed a corporator

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Pressure mounts on CM to lower VAT, decision soon

Mumbai: A day after a cabinet meeting discussed the contentious issue of value-added tax (VAT) for flats, pressure is mounting on chief minister Prithviraj Chavan to reduce it from 5% to 1%. 

    It has been brought to his notice that it is wrong to charge 5% VAT, particularly for flats sold after 2010 as the relevant charge is 1%. It is incorrect to recover the amount with retrospective effect, the CM has been told. 
    Industries minister Narayan Rane said even if VAT has to be paid by the developer, it will eventually be recovered from the buyer. "Even if the builder pays VAT, he will recover it from the buyer later. Under such circumstances, if the government is keen to protect the interests of the buyer, it should reduce the amount from 5% to 1%," he said. 
    A senior bureaucrat said while no decision has been taken on extending the deadline or reducing VAT yet, Chavan is in favour of lowering the amount to protect the interests of flat buyers. "We expect him to take a decision within a week after consulting senior cabinet members," the bureaucrat said. 
    On the issue of a sudden hike in the prices of Mhada's Malwaniflats, a minister said when the agency issued an advertisement, it said the apartment would cost Rs 34 lakh each. But now, it has asked for an additional Rs 15 lakh without assigning any reasons. "The matter was brought to the notice of the chief minister, who admitted that it was a mistake on the part ofMhada officials," the minister added. 
    Mhada MD Satish Gavai said it was an error and a high-level probe had been ordered. Mhada was in the process of fixing responsibility, he added. "When Mhada issued the advertisement, it quoted a price of Rs 34 lakh. Later, we observed that it was an incorrect price and the actual cost was Rs 49-50 lakh. We are considering giving the buyers more time," Gavai said.10,600 get registered 
    As many as 10,600 developers have registered themselves under the e-return scheme initiated to collect VAT. Sales tax officials said a majority of developers filed nil returns. TNN

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