Non-resident Indians keep falling prey to fake land deals

Source :Thepeninsulaqatar:Friday, 29 April 2011 03:49

by Moiz Mannan

Slogans like ‘India Shining’, ‘Incredible India’ and ‘Jago India’ sound very nice, says a website dedicated to legal matters of non-resident Indians, but it is high time the government provided succor to its diaspora in matters that really hurt.

Real estate is one of them. 

Every few days one now one is hearing heart-rending stories of hapless NRIs being defrauded or robbed of their property back home by unscrupulous elements, even relatives.

 Sitting thousands of miles away, there is very little the overseas Indian can do.

Very recently, the Punjab Newsline reported the case of Kulwant Kaur, an NRI from Canada, who was shocked to know that some people grabbed her land in the name of religion.

When she went to complain regarding this in the local police station, she was stunned to discover that a false case instead had been registered against her by those persons. On verification, the entire land and property was found to carry her name as the owner and the case was shut.

The woman, along with her son, has alleged non-cooperation by senior police officials. This case has been pending from last 19 months and no action has yet been taken by the police. The miscreants continue to threaten the owners and the owners continue to make rounds and rounds of the police stations in hope of some justice.

In another case, a local consumer forum in Chandigarh has directed a real estate giant to pay a compensation of`100,000 to an NRI couple for causing mental harassment and delay in handing over possession of a flat purchased by them.

The agreement was executed in November 2006 for a 4 bedroom apartment and possession was to be handed over within 30 months from the date of construction. However, no offer of possession was received until 2009.

 According to complainants, despite the commitments and the fact that sale consideration was paid by January 2007, the company failed to deliver possession.

Earlier this month, a US-based NRI was defrauded by a trio of real estate agents in Navi Mumbai. The tricksters duped him with forged ownership papers and even fake keys to his ‘dream home’ in Vashi. 

According to police the NRI, Kumar, approached a real estate agent in Navi Mumbai in December with the intention of buying five flats in the satellite city. The agent introduced him to the three fraudsters.

The trio showed Kumar a 1,200-sqft flat which he liked and the deal was finalised at `2.8m. They showed Kumar all the documents related to the flat and asked for `1.6m as token payment. When he paid, the documents and a set of keys for the flat were handed over to him with the promise that he would get possession in March.

Kumar smelt something fishy, however, when he did not hear from them again.

He went to the registrar’s office in the area and was told that the documents were forged. Investigation has revealed that the trio are part of a gang of nearly 40 members, which has a noted real estate agent as the kingpin.

The group not only forged ownership documents but also did franking by themselves and even forged pan cards, ration cards, electricity bills and receipts to obtain bank loans.

Plot your investments to land rich gains

Source :BS:Dipta Joshi / Mumbai April 20, 2011, 0:07 IST
While investing in a plot may not offer tax benefits, capital appreciation is the key.


In 2007, Navin Tiwari purchased 2,000 square feet of land at Alibaug — the weekend getaway destination for Mumbaikars — at Rs 300 per sq ft. Last year, he sold the same at Rs 750 per sq ft, more than double the price.


Even if Tiwari had kept the plot and built himself a second home, he would have benefitted from the appreciation in land prices.




Construction on non-agricultural (NA) land is legal and works as an investment strategy. Land prices appreciate and more so when the location is closer to already thriving cities.

 

FOR USE OR WEALTH CREATION?
	For self use	For investment only
Costs	Depends on location and connectivity. Higher price for better facilities	Available for  government approved schemes. If approved, plots offered by private builders or
Loans	Composite loans for land and construction	Stand-alone  purchases may require higher collateral
Tax benefits	Interest of up to Rs 1.50 lakh paid is exempt Principal amount up to Rs 1 lakh under Section 80 C	Interest payable on loan is deductible only if shown as business income. Principal amount not eligible for tax benefit
Liquidity	Depends on location. Second homes destinations are considered a luxury and not a necessity	Depends on location. Longer exit period for far away areas with low connectivity

“Most cities amalgamate the surrounding areas within the city limits while expanding. Plots in these locations are sought after as suitable second home destinations,” says, Pranay Vakil, chairman, Knight Frank.


Any expected infrastructure development in and around the area will also see a rise in prices. For instance, land prices in and around Navi Mumbai have risen by 40-50 times in the past three years, ever since the plans for an airport were announced. Areas near the Bangalore and Hyderabad airports also witnessed a similar rise.


However, one is advised against borrowing money to invest in such plots as there is always an uncertainty regarding projects taking off on time. If your interest meter is ticking, it can take a heavy toll on your finances.


According to Pinkesh Teckwani, head, land & industrial services (west India), Jones Lang LaSalle India, “If one has an investible surplus, one could look at investing even moderate sums of Rs 8-10 lakh in a good location for 7-10 years.”


LOANS
In any case, it is difficult to avail loans for plots unless they are for self use. Even as banks and housing finance companies finance land sold by government bodies, they may not always agree to fund those sold by private developers. 


Lenders like HDFC restrict the loan to 70 per cent of the cost or value of the land if it is located outside the city limits. For those within city limits, the same is restricted to 80 per cent In some cases, lenders who fund individual land deals may ask for extra collateral in the form of property, besides the one being bought, say realty watchers.


Interest rates for financing plots are higher than the regular home loan by around one per cent. Banks also restrict the tenure of such loans to a maximum of 7-10 years.


If you already have the bank’s approval, you could opt for a composite loan that funds both the acquisition of land as well as the construction. Treating it as a housing loan, the lender will disburse the amount in accordance with the proportion of construction completed.


Some buyers opt for plots with a basic concrete housing structure to ensure they can get a home loan instead of one for the plot. It also proves economical as home loans, apart from being cheaper, are for a longer tenure.


TAXES
There are no tax benefits on the principal amount of loans for land. However, the interest on the loan is tax deductible if the land is rented out and generates income. The rent would be treated as business income.


When the land is used for residential purposes, one can avail of the usual tax benefits associated with a home loan, that is, a deduction of Rs 1.5 lakh on the interest paid on the loan and repayment of up to Rs 1 lakh towards the principal amount. However, one could claim these deductions only when the construction is complete and the property possessed. When retained for more than 36 months, one can avail of the long term capital gain (LTCG) benefits.


EXITING PLOTS
Land is not always easy to sell as it is not a very liquid asset. “One should have a time frame of at least six months if one wants to exit such investments. More so, if one has invested in places with low connectivity,” says Balwant Jain, CFO, apnapaisa.com.


It could get worse in case of encroachments on the land or changes in the zoning law. “It is easier to sell if one has bought a clearly demarcated residential NA plot,” adds Teckwani.


Even in case of plots with constructions, the fact that these investments are mainly for holiday homes restricts buyers’ interest in them.