BMC GETS 6 WEEKS - `Decide on redevpt of dilapidated mkts'





Expressing concern over the dilapidated old municipal markets, the HC has asked the BMC to take a decision on proposals to develop the civic markets in Andheri and Santa Cruz. A division bench of Justice Anoop Mohta and Justice F M Reis struck down the corporation's orders rejecting the redevelopment proposals on the ground that it was in the process of revising the existing policy . The court said that the corporation could not halt the redevelopment citing proposed change in policy .

"There cannot be any dispute with regard to the pathetic conditions of the markets," said the judges. "If it is the corporation's obligation to redevelop and take control of such dilapidated buildings andor markets, then there is no reason for it not to take action based upon the existing poli cy at the earliest," the court said.

"All are concerned with the development of the markets which is essential part of the society. Most of the markets (see) huge crowds and movement of people of all sorts and age. The requisite facilities and safe buildings are the need of time.The policy decision to develop the markets only after the revised policy is submitted, in our view, is unacceptable submission and specifically when the existing policy nowhere gives this restriction to the corporation. They cannot postpone the development of the city , and specifically of the markets, merely because they have decided to change the policy," said the judges.

The HC has given the BMC six weeks to decide on the redevelopment proposals.





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39 years to get deemed conveyance





HC Relief For Jogeshwari Housing Society Thirty-nine years after they purchased flats in Jogeshwari, the Bombay high court has ordered deemed conveyance to the Farhat cooperative housing society.

"Since the owners having abdicated their obligation under the Maharashtra Ownership of Flats Act (MOFA) of conveying the property to the society, the competent authority has rightly intervened by passing the impugned order (of deemed conveyance)," said Justice R M Savant. The HC, however, struck down the deputy registrar's order that made deemed conveyance conditional on the final orders in a suit between the developers, Malkani Enterprises, and the land owners. The court said the litigation appeared to be a way to stop the society from getting deemed conveyance.

"The facts are very eloquent and therefore unmistakably lead to an inference that the suit has been filed by the owners merely to put obstacles in the society's way from get ting the deemed conveyance.

The suit has been filed without disclosing that a building having two wings, comprising around 60 flats, has already been constructed. The fact that Malkani Enterprises has virtually no rights remaining in the plot has been conspicuously kept away from the small causes court, and an order of injunction has been obtained against it," the judge said, adding, that making the order conditional "virtually made the grant of deemed conveyance ineffective".

The building was constructed in the mid-70s. The developer failed to form a society, which was set up by the flat owners themselves after 15 years. The plot's conveyance too was not granted. In 2006, the society issued notices to the developer for failing to grant conveyance and a criminal case was registered. In 2012, the plot owners issued notices to the developer cancelling the monthly tenancy as arrears were not paid for over 20 years. Subsequently, a suit was filed by the developers against the owners.

The HC said prima facie there was collusion between the developer and land owners to stop the society from getting conveyance. The owners will get six weeks to file an appeal.





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A simple life saving technique in dealing with kitchen oil fire

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For luxurious city flats, even owners shell out `rent

  Maintenance, Taxes Run Into LakhsMonth Fancy apartments in new luxury buildings not only cost a king's ransom, but also need a fortune to be kept in possession. Maintenance charges and municipal taxes can run into several lakhs a year because of amenities like swimming pools, club houses, elaborate security arrangements and property tax assessments at the highest rates. "It's like renting your own home," said a property market insider. Depending on size, a flat in buildings like Imperial Heights in Tardeo, Orbit Arya and Villa Orb on Nepean Sea Road, Raheja Vivarea in Agripada, and One Altamont Road can cost a home owner Rs 60,000 to Rs 2 lakh a month, as the monthly maintenance cost and property tax works out to as high as Rs 30 a sq ft. "It's a lifelong liability.They have to set aside a few lakhs every year, whether the value of their property appreciates or depreciates," said a real estate consultant. Imperial Heights, a twintower 60-storey complex, came up as part of a slum rehabilitation project and houses corporate honchos, bankers, top lawyers and expats. A resident said he pays Rs 70,000 a month in maintenance charges for his 3,450 sq ft flat. The amount will increase to Rs 1 lakh a month once the municipal property tax kicks in. For a first-time visitor to Imperial Heights in Tardeo, the twin towers' "unparalleled" security arrangements almost give the feeling of a defence establishment. Domestic helps are randomly frisked for tobacco, alcohol and more sinister objects, and CCTV cameras in the lifts, lobbies and corridors keep a hawk eye on mundane movements for fear that they may turn malevolent. More pleasant aspects include a climate-control swimming pool, a gym, a restaurant, a cigar room, a convenience store and a banquet hall. Not to mention guest houses serviced by the Taj. "We have not paid property tax for over a year as the society has challenged the BMC's levy. Once the matter is resolved, the monthly outgoing on a flat will increase substantially," said a resident. The complex also has 10,000 sq ft flats, whose outgoings are more than Rs 2 lakh a month. The other buildings follow closely. One Altamont Road, constructed jointly by developers Suresh Raheja and Govani, has 8,000 sq ft flats, where monthly outgoings are over Rs 1.2 lakh, not counting municipal taxes. Villa Orb on Nepean Sea Road, where Union minister Piyush Goyal (BJP), owns a flat, is another tower where monthly expens es are believed to be astronomical. Sources said the outgoings, without civic taxes, are Rs 18 a sq ft a month for flats of 5,500-7,770 sq ft area. Agripada's three Vivera towers command Rs 12 a sq ft, without taxes. A resident said the builder, Raheja Corp, has already collected a corpus from each flat owner: Rs 35 lakh for a 4BHK flat and Rs 22 lakh for a 3BHK one. Besides a club house, a swimming pool and a banquet hall, the amenities include billiards, badminton, squash and tennis courts, a health club, a recreation ground for children, a yoga centre, and air-conditioning for the entire building. Outgoings in smaller buildings with fewer flats are higher than in larger buildings with more flats as the maintenance costs get divided among more owners, said developer Abhisheck Lodha. Another developer said occupants of new buildings built with limited floor space index (FSI) because of coastal zone regulations pay more. "Flat owners in buildings with higher FSI incur lower maintenance charges because of more apartments." Property experts said municipal taxes on new apartments will increase by as much as 40% every five years. This is a factor why some prefer to buy flats in landmark buildings constructed four or five decades ago. Owners of large flats in old, plush buildings on Malabar Hill and Carmichael Road pay much lower amounts. In Pedder Road's Woodlands, a premium residential tower built in the 1960s, an owner of a 1,200 sq ft flat pays only around Rs 12,000 a month. Residents of Carmichael Road's Rushila, where flats measure 3,000 sq ft, pay a similar amount.The building came up in the mid-1950s. A resident of the 1960s-constructed Meher Apartments, Altamont Road, said outgoings are between Rs 7,00012,000 a month. The luckiest are flat owners in Jolly Maker Apartments 1, Cuffe Parade, a complex comprising two 25-storey towers with about 180 flats and 10 bungalows. Here, residents do not pay a paise. Touted as the country's richest housing society , Jolly Maker's flat owners get annual dividends of Rs 5-10 lakh from their housing society , which also pays civic taxes and maintenance charges. The reason for the society's huge cash pile is because it owns six floors in Nariman Bhavan at Nariman Point, which are leased out to companies. In the mid-1970s, the builder offered the Nariman Bhavan property as a package to buyers who paid 40% more for their flats.  

Deal Keeper

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Poll frenzy: CM clears realty projects worth `4,000 crore

160 individual schemes among those okayed in 15 days n Heritage tag off most of Chembur

Mumbai: Chief minister Prithviraj Chavan has cleared 160 individual development project files and taken major housing policy decisions, worth over Rs 4,000 crore, in the last 15 days. Not just that, the state government did so by glossing over a mandatory rule that calls for the provision of tenements to the economically weaker, if redevelopment is taking place on a plot of 4,000 sq m or above. Chavan also cleared a file that made almost all of Chembur heritage-free, leaving out only the St Anthony's Church, the Jain temple, Leprosy home in Trombay and some bungalows in Deulwadi. The speed at which Chavan has cleared the files contradicts his earlier stand of keeping builders at bay. The clearing of files at record speed, predictably, failed to impress the BJP. It alleged that most of the transaction amount is likely to be used as party funds for Congress candidates during the upcoming assembly elections on October 15. The BJP said it will relook the files, if voted to power. Chavan was unavailable for comment. What are the files that have been cleared? Among the major files to be cleared were the ones relating to cluster development, slum rehabilitation policy for Thane and floor space index (FSI) of 2.5 for Navi Mumbai. Is the decision loaded in favour of developers? The rules mandate that if redevelopment is taking place on a plot of 4,000 sq m or above, tenements will have to be provided for the economically weaker section. However, while clearing the 160 files, this clause was not considered. According to real-estate experts, "the (mandatory) decision would have created sufficient affordable housing stocks for Mhada but developers' profit margins would have been slashed. Now, developers will be benefited a lot. " What is the BJP's argument? Vinod Tawade, senior BJP leader, told dna: "By clearing files hurriedly before the election code of conduct sets in, Chavan has raised the required party fund. We will reopen all these decisions if we come to power." What are builders saying? Obviously they are happy. Sunil Mantri, president of the apex developers' body, NAREDCO, told dna: "I expect elections every three months, so that no files get stuck. Most files have been pending for several months. Thanks to the elections, they were cleared." What if the BJP reopens files as they say? A prominent developer from South Mumbai told dna that chief minister Chavan might have raised funds for his party, but it also benefited developers. "We are worried that the BJP is saying it will reopen files, if voted to power. If that happens, we will lose our money and our projects will be delayed. To get the files cleared again, we have to pay again." What's the Chembur issue? The heritage tag has finally gone off almost the entire Chembur. Only the St Anthony's Church, Jain temple, leprosy home in Trombay and some bungalows in Deulwadi have been left out. Even the Gaothan area has been cleared of the heritage tag. A government regulation will soon be issued. It would have faced a delay of over two months, had Chavan not cleared the file before the poll code of conduct became operational on Friday. Chembur MLA Chandrakant Handore confirmed the move. "The CM cleared the file yesterday. Chembur is purely a residential area, so there was no need to give a heritage tag to it. However, we are happy that the tag has been removed," he said. When did residents start protesting? When they first came to know that the area will be included in the heritage precinct list, an association called Chembur Citizens Forum filed a writ petition with the Bombay high court. The high court, on March 27 this year, ordered that, in two months, a review committee should be formed to present a report. What happened then? A review committee headed by former chief secretary Dinesh Afzalpurkar took suggestion/objections of the residents and compiled a report to strike off more than 500 buildings off the heritage list in Chembur. The report was then sent to municipal commissioner Sitaram Kunte. Kunte recently forwarded the report to the urban development department. The department then sent the file to Town Planning department for their remarks. The CM finally cleared the file on Thursday.

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How to invest in property with Rs 2 lakh





You no longer need deep pockets to invest in property. Find out how Reits will help you participate in the real estate market

If you have Rs 2 lakh to invest, your bank may roll out a red carpet, your stock broker may inundate you with hot tips and the neighbourhood jeweller may even offer a discount on making charges. However, you will probably get laughed out of the estate agent's office.Not anymore. With Sebi issuing final guidelines for real estate investment trusts (REITs), you will soon be able to get a piece of the action in the property market with as little as Rs 2 lakh.

REITs are just like mutual funds, but instead of using the money collected from investors to buy stocks and bonds, they invest in property .Last month, the Union Budget removed an important hurdle by giving pass-through taxation status to REITs. Last fortnight, Sebi issued the guidelines, settling several of the concerns raised by the real estate industry . The launch of REITs will increase the flow of funds to the cashstarved real estate industry . "Even if half of the currently available Grade A office space gets converted to REIT and is listed in the next 2-3 years, it can mean an inflow of Rs 60,000-72,000 crore," says Anuj Puri, chairman and country head, JLL India.High entry barrier Whether you invest in a residential property or commercial space in a metro or tier I city, the minimum investment is normally upwards of `30-40 lakh. Sebi's guidelines for REITs have pegged the minimum investment at Rs 2 lakh, which will allow retail investors to participate in the real estate market. In the secondary market, the minimum holding could be even lower at Rs 1 lakh. "REITs will allow even middle income individuals to invest in real estate. Without this, they can't participate because of the huge entry barrier," says Keki Mistry, vice-chairman and CEO, HDFC. The low ticket size means that investors can diversify their portfolios by including real estate without investing huge amounts in the asset class. The high entry barrier is not the only problem with investments in real estate.With no real estate regulator in place, individual investors are at the mercy of politically connected builders in India. If, however, they invest in a REIT, they will be able to join hands and get bargaining power against the developers.

The other benefit is diversification. When one invests in a real estate project, the returns are dependent on how well that project is received in the market and the rental income it is able to command. On the other hand, REITs invest in several projects and, therefore, provide the benefit of diversification to the investor. With a low entry barrier of Rs 1 lakh in the secondary market when units are listed, an investor can spread his investment across 3-4 REITs launched by different asset managers. The liquidity offered by REITs is another positive feature of this mode. While selling a property can take weeks, even months, REITs will inject liquidity into the investment by listing the units on the stock exchanges. The day is not far when one will be able to buy and sell property at the click of the mouse.How attractive is the investment?
While Sebi has given the go-ahead to REITs, right now they can invest only in commercial real estate. This narrows the scope considerably because most of the action in the sector is in residential real estate. Even in commercial projects, 80% of the investment must be in rent-earning projects. The balance 20% can be in other assets, including projects under construction (restricted to 10% of the total REIT assets), listed or unlisted debt of real estate companies, equity shares of real estate companies having 75% income from realty activities, government securities and money market instruments.

Though some may see this as an unnecessary restriction, the straitjacket of rental yielding projects is actually a blessing in disguise. First, there is major difference between rental yield from commercial and residential properties in India now. "While rental yield on commercial property is slightly lower than the interest rate, the one on residential property is very low. So REITs will not work in the residential market now," says Mistry . If rental yield from commercial projects is less than the prevailing interest rate, why should one consider investing in REITs? "The rental yield is not very attractive now, but is expected to rise in the future," says Ujwala Rao, national director, capital markets, JLL.Besides, there is always the possibility of capital appreciation that will push up the NAV .Bottom of the cycle Still, there are several factors that investors need to keep in mind. As of now, the commercial real estate market is in doldrums. "In several pockets, the price of commercial real estate is around 30% cheaper compared to residential real estate," says Kapoor. Though there is an escalation clause in most commercial real estate projects, it is a users' market and, therefore, they are able to renegotiate the rents downwards. This also means that commercial real estate is reasonably priced right now. There is a greater scope for appreciation. As the economy picks up momentum and commercial activity increases, things are likely to improve. "This is the time to get into commercial real estate because it is at the bottom of the cycle," says Kapoor. Other experts join the chorus of optimism. "For REIT to work, you need a buoyant real estate market. Nothing much had been happening in the past 3-4 years, but things have started picking up now," says Mistry . "Commercial real estate is linked to economic recovery . Rentals may remain under pressure for the next 12-18 months given the oversupply , but with the speed of supply moderating in the coming years, the situation should improve," says Mittal.Taxation of REIT income This was the biggest bone of contention for REITs. The recent budget offered some relief when the finance minister announced that REITs will be a pass-through vehicle. In the earlier structure, both the trust as well as the investors had to pay tax. Now, the trust will not pay tax on income. Only the investor will be taxed when he gets the income or sells the units. However, experts warn that this pass-through benefit is not applicable to all types of incomes from the REIT (see table) "The pass-through benefit is only for interest income earned by the REIT from its special purpose vehicle (SPV). As of now, there is no pass-through for rent or other income received by the REIT from property directly held by it," says Sriram Govind, core member of the international tax team, Nishith Desai Associates. He says the REIT has to pay corporate tax on such income earned by the SPV . Similarly, the REIT will also have to pay capital gains tax on sale of shares of the SPV . There is also no relaxation on the dividend distribution tax on payouts by the SPV to the REIT," says Govind.Though the dividend received from SPVs is taxfree for REIT as well as investors, the SPV would have already paid corporate tax and dividend distribution tax on such income. Factor this tax into the calculation of returns from REITs.

Though the dividend distribution tax is a prickly problem, what more than makes up for it is the treatment of capital gains from the REIT.Since there is a securities transaction tax (STT) on the listed REITs, the long-term capital gains will be tax-free while short-term capital gains will be taxed at a concessional rate of 15%.

However, you need to hold the REIT units for at least three years to qualify for long-term capital gains. In addition, the investor has to pay tax on part of the income received during the period. "The listed pass-through vehicles are at a tax disadvantage," says Feroze Azeez, director, Investment Products, Anand Rathi Private Wealth Management.

Since some of the income from the REIT will be tax-free and some other will be taxable, the big question is, how will investors know the difference? "There will be some reporting mechanism and the break-up will come at the time of income distribution from the REIT," says Rao of JLL.

Interestingly , REITs offer a better deal to NRIs on the tax front. The withholding tax for them is only 5% compared to 10% for resident Indians.And the amount received may be tax-free for them, at least in most countries, while the Indian investors have to pay tax based on their slab rates. If the NRI has to pay tax on the income in the country of residence, he can claim this 5% as a rebate.What are the risks?
The biggest risk can come in the form of developers keeping their prime rent-earning properties and dumping their not-so-good assets on REITs. Though there will be professional valuers, the real estate market is notorious for its opacity . It is still a builder's market and the investors don't have any access to the valuation process. Though the introduction of REITs is expected to improve the situation, the lack of transparency and the black money component in the real estate deals is another possible risk.Finally , there may be stable regular income, but the capital appreciation or depreciation depends on the market price of commercial real estate and, therefore, will be volatile.

Sebi's guidelines for REITs is only the first step. There are bound to be teething problems when the market starts functioning. However, this has paved the way for a more vibrant market for real estate. If you want to invest in real estate but don't have deep pockets, you can consider REITs as the vehicle that can take you there.

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