5 things to look out for in your home agreement

Source : money control:2011
Photograph: Vipurva Parekh 

YOU just got news that your home loan has been approved and you are on your way to see an existing model of your future home. Your heart is pounding with excitement, but wait, the tedium of paperwork is not over yet. You need to ensure that your agreement with your builder has no unforeseen loop holes that can plunge you in a legal mess!

Here are five essential steps you need to take to avoid such situations.

Aspect 1: Cost of your dream home

There are various costs attached to the owning your home besides its cost. The cost covers basic utilities like electricity, water, parking space, various taxes and in certain instances the registration charges as well. These may come as part of the deal or may be charged under separate heads. Make sure all these costs are factored into the final price you pay.

Safety points 

Scan the agreement with great care for all these charges

Get the agreement ratified with a real estate lawyer to see if there are any hidden or missed out charges. So, you can have an upfront discussion with the builder and have the document corrected.

If the extra charges are for alterations made to the original plan, ask the builder for the sanction letter provided by government authorities for such alterations.

Aspect 2: Size of the house
Look for the specifications in the agreement that defines the size of the house. This should be clear and specific. Also, look for a clause that says ‘…the plans, designs, and specifications are tentative and the developer reserves the right to make variations and modifications….’ This might mean that you may agree for a certain size, but the builder can give a different size.

Safety points 

Do a thorough check on the builder to determine his track record in project delivery. The way the builder has handled the past projects should serve as a measure to how your project is going to turn out.

Discuss with your lawyer and think about including another clause that provides a definite range to the maximum and minimum size beyond or below which the builder cannot venture. 

Aspect 3: Carpet area

Carpet area is the space where it’s possible to lay the carpet. It does not take into account the area of the walls and balcony. When you include these areas as well to the carpet area you obtain the total built up area of the house or apartment. Additionally, if you include common spaces like lobby, lifts, stairs, garden, swimming pool etc., then its termed as the super built up area. The actual carpet area is bound to be around 20 to 30 per cent lesser than the super built up area. 

Safety points

Always base your purchase decision on the carpet area of the flat.

Double check if this area is specified in the agreement.

Discuss with your builder and the lawyer to make sure it’s possible to include a termination clause if the final construction of the house has a carpet area lesser than what is specified in the agreement.

Aspect 4: Completion of construction and date of possession
During the realty crash that occurred in the recent past, there have been several instances where projects have not been completed on time. Though agreements have a tentative date of possession it is important to for you to check this aspect of the deal. 

Safety points

Monitor the progress of the construction and keep a regular tab on it.

Follow up with the builder if you find the progress painfully slow and request him to step it up. Keep in touch with the builder as the work progresses.

Establishing a society with other buyers in the case of an apartment complex, will ensure that things happen at a decent pace from the builder's side.

Aspect 5: Completion certificate 
When the project is completed and the house is delivered to you ensure that the builder provides you with a completion certificate. This certificate provided by the municipal authorities authenticates that the building complies with the approved plan and obeys all government norms and specifications. This certificate is critical for the registration of the house and to complete other legal formalities. 

Safety points

Make sure the agreement has a clause that indicates the certificate will be handed over to you on completion and hand over of the house/apartment.

Again a society could help move things faster if the builder is laid back about this aspect.

Apart from the above mentioned aspects an overall quality check on the construction, society management etc. are important. Ensure these aspects are also covered in the agreement. Be aware and clued on about what you are getting into before you sign the dotted line.

Pothys buys prime T Nagar property for Rs 60 cr

Source:BS:T E Narasimhan & Gireesh babu :Sep 13,2011:039 IST
The owners of Pothys, a chain of textile showrooms in south India, has acquired a prime property in Chennai for around Rs 60 crore. 
This would be the second biggest property deal in the city in the last three months after India Cements MD's Rs 90 crore deal in posh boat club area.

While the seller, actor K R Vijaya, has confirmed the deal, she refused to share any further details on the transaction. Pothys managing director S Ramesh refused to talk on Monday.


The property is located on Raman street at T Nagar, a prime shopping hub in Chennai. Sources said the property is spread over 10-11 grounds.



This is the second biggest deal in recent months. In July, India Cements' vice-chairman and MD N Srinivasan has acquired a 10 ground (1 ground = 2,400 sft) property along with buildings from Sulochana Reddy at boat club area in Chennai.


Sources close to the deal pegged it at Rs 90 crore based on the price of 9 crore per ground. 


The premises was rented out to Preeti Appliances belonging to T T Varadarajan of TTK group.


A Shankar, local director (strategic consulting -Chennai, Coimbatore, Colombo), Jones Lang LaSalle, said T Nagar was a commercial area and the land price depends on the demand-supply parameters. The price is determined on the potential for the end user for retail development in the property.


The prevailing market price in Chennai is around Rs 3-4 crore a ground, Shankar said. If the price goes up to somewhere near Rs 6 crore a ground, considering the potential for T Nagar as a shopping hub, it is possible. A property in T Nagar can fetch you the price, considering its potential for the retail segment, he added.


According to him, there were no major land deals happening in Chennai for the past two years, and the deals that are coming up now show that the market is moving towards change as the investors are willing to buy and property owners are thinking of selling property at a good price.


However, he said one or two deals do not determine the whole cycle of real estate business. Such deals should be happening in residential real estate sector and the other segments in that case.

NRI's guide to selling purchased property in India

Source :ET :25 AUG, 2011, 01.58AM IST, DEEPA VENKATRAGHVAN,ET BUREAU 

Now  we take a look at what happens when you sell property in India. We will only look at properties purchased by a person either before or after he becomes an NRI. The rules regarding sale of properties acquired as gift or inheritance, will be covered in the next column. 

Can an NRI sell property in India? 

Yes, an NRI can sell residential or commercial property in India. He can sell to: 

- A person resident in India (the definition of resident in this case will be as per FEMA) 

- An NRI 

- A Person of Indian Origin (PIO) 

However, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen. 

In which account must the sales proceeds be credited? 

There are two scenarios that may arise here: 

1. Sale of property purchased as a resident Indian 

The sale proceeds in such cases would have to be credited in the Non Resident Ordinary (NRO) Account. 

2. Sale of property purchased as a non-resident Indian 

If the property was purchased out of rupee resources, that is, income earned in rupees, or the home loan is repaid by a relative who is a resident of India, the amount must be credited in the NRO account. 

In all other cases, there are limits to repatriation that are discussed in the next question. 

What are the rules for repatriation of sale proceeds of property sold in India? 

If the property was purchased while you were a resident of India, then the sale proceeds must be credited to the NRO account. You can repatriate up to USD 1 million per calendar year from your NRO Account (including all other capital transactions), provided you have paid all taxes due. 

Now, if the property was purchased while you were a non-resident, you can repatriate the proceeds outside India provided that you fulfill certain conditions: 

1. You should have purchased the property in accordance with the foreign exchange laws prevalent at the time you bought the property 

2. The amount to be repatriated will follow these limits: -

a. If you purchased by remitting foreign exchange to India through normal banking channels, then the repatriation cannot exceed the amount that you remitted 

b. If you purchased using funds in the Foreign Currency Non Resident (FCNR) Account, then the repatriation cannot exceed the amount paid through this account 

c. If you purchased using funds lying in your Non Resident External (NRE) Account, then the repatriation cannot exceed the foreign exchange equivalent, as on date of purchase, of the amount paid through NRE Account. 

d. If you purchased a property by taking a home loan, then repatriation cannot exceed the amount of loan repayment that has been done using foreign inward remittances or debit to NRE/ FCNR Accounts. 

e. If you purchased the property using balance in your NRO account, then the sale proceeds must be credited to your NRO account and you can repatriate to the extent of USD 1 million (including all other capital account transactions.) 

In all these cases, the balance sale proceeds can be credited to the NRO account and you will be able to repatriate up to USD 1 million per calendar year (including all other capital account transactions). 

Vikas Vasal, Executive Director of KPMG India explains, "This limit of USD 1 million is the limit upto which you can repatriate without any permission from RBI. If you have a genuine need to repatriate above this limit, you can make a specific application to RBI for increasing the repatriation limit." 

In all cases, repatriation is restricted to sale of two residential properties.


What is the capital gains tax applicable on sale of properties in India? 

Before we move on to this explanation, it is important to understand that for all income tax purposes, the definition of NRI would be the one prescribed in the Income Tax Act. For all repatriation purposes, the definition of NRI would be one under FEMA. While in most cases, a person who qualifies under one would qualify under the other, it is better to review both definitions. 

If you sell the property after 3 years from the date of purchase, you will be liable for long term capital gains tax of 20 per cent. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing by the cost of purchase adjusted to inflation. 






Cost Inflation Index Notiified by the GOV:


Financial year :2008-09  -582
                             2009-10  -632
                             2010-11  -711     



As an NRI, you will be subject to a TDS of 20 per cent on the capital gains. 

If you sell the property within 3 years of purchase, you will be liable for short term capital gains tax at your respective tax slab. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available). You will be subject to a TDS of 30 per cent irrespective of your tax slab. 

Now, the question arises as to who will deduct the tax at source. If the property is sold to an individual, does the individual need to deduct tax at source and deposit the same with the Government? Will the individual then issue a TDS certificate to the NRI? 

Sandeep Shanbhag, Director of Wonderland Investments explains, "Yes, the payer of the sale proceeds, even if he is an individual will be responsible for deducting tax at source and paying it to the Government. He must get a Tax Deduction Account number (TAN) and issue a TDS certificate for the same." 

What if the individual does not go through this process and fails to deduct tax? "The onus of deducting tax is on the payer. So in case the individual does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible," Shanbhag says. 

Can an NRI avail of any capital gain tax exemptions? 

Section 54 

According to section 54 of the Income Tax Act, if you sell a residential property (after 3 years from date of purchase) and reinvest the proceeds into another residential property (within 2 years from date of sale), your gains will be exempt to the extent of the cost of new property. Suppose your capital gains is Rs 30 lakh and the new property is for Rs 20 lakh, then Rs 5 lakh will be treated as long term capital gains. 

The residential property that you sell may either be a self-occupied property or one that was given on rent. Further, the new property must be held for at least 3 years. 

Now an important question that NRIs have: Can you invest the proceeds in a foreign property and still avail the benefit of section 54? Vikas Vasal, Executive Director of KPMG India says, "Section 54 does not specify that the property must necessarily in India. So yes, a beneficial view can be taken." 

Section 54EC 

According to section 54EC of the Income Tax Act, if you sell a long term asset, in this case, the residential property (after 3 years from date of purchase) and invest the amount of capital gains in bonds of NHAI and REC, within six months of date of sale, you will be exempt from paying capital gains tax. Your bonds will remain locked in for a period of 3 years.

NRI's guide to renting out property in India

source:ET :10 SEP, 2011, 01.16AM IST, DEEPA VENKATRAGHVAN, 

Property is a favourite Indian asset class and one of the main reasons for this is its ability to generate regular cashflows through rent. 

Now we will look at the various aspects involved when an NRI rents out a property in India.

 The definition of NRI for the purposes of repatriation will be that of the FEMA and for the purposes of income tax will be that prescribed in the Income Tax Act. 

Can NRIs earn rental income? 

An NRI can rent out property that he owns in India. The rent proceeds can be credited to the NRE or NRO account. Rent proceeds received in these accounts can be freely repatriated. If you do not have an NRE or NRO account, the proceeds can also be directly remitted abroad but you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid. 

Is rental income taxed in India? 

Yes, since this income is earned in India, tax will be payable by the NRI in India. In fact, tax will be deducted at source by the payer of the rent. The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent from the rent amount. He must also provide a TDS certificate to the NRI. 

"The onus of deducting tax is on the payer. So in case the payer does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible," explains Sandeep Shanbhag, Director, Wonderland Investments. 

Having said that, if the tenant does not deduct tax at source, it is prudent to file your tax returns and pay the taxes thereof. 

Is rental income taxed in the country of residence? 

When you are an NRI, you are obviously a resident of another country for tax purposes. And in most cases, countries levy tax on residents on their global income. So it may happen that as per provisions of the Indian Income Tax laws, tax will be deducted at source on income earned in India, as is in the case of rent. But at the same time, that income will be subject to tax in your country of residence. In such cases, we need to refer to the Double Taxation Avoidance Agreements that India has entered into with various countries. 

The India-US DTAA for instance provides that rent from immovable property will be taxed in the country in which the property is situated. So NRIs who are residents of US would have to pay tax on rental income in India. While they would still have to declare that income while filing their tax returns in the US, they would get a credit for taxes paid in India. 

It is prudent to check the tax laws of the country that you are resident of or consult an expert in that country. 

What is deemed rental income? 

According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof. 

Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. Vikas Vasal, Executive Director of KPMG India explains, "At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of 'more than one property' will apply to global properties." 

What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on the 'deemed rental income' in India. 

However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act. 

Remember that even if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income. 


Is deemed income from house property taxed in foreign country? 

You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. However, Ganga Mukkavilli, a New York City basedCPA whose firm, CPAs, Taxes & Associates PC, specialises in international accounting, taxes and small businesses says that you would still have to show the property if it is an investment property in your tax return in the US (even though you do not have any rental income ). 


"If you do not show this investment property, the problem will arise at the time of sale of property. Suppose you sell a property on which you had no rental income for US tax purposes but had deemed income as per India Tax code, then the amount spent on the maintenance, repairs and renovations and depreciation on this property which may be eligible for deduction or addition to your cost basis while calculating capital gains would become difficult to establish.


 However, if you have not declared the property in your tax returns, the US tax code may challenge the cost basis (purchase + improvements + suspended losses)to claim a tax deduction at the time of sale," he explains. 

"Of course, any investment properties with rental income and related expenses must be reported on Form Schedule E in the US tax returns and rental activities by nature are always treated as 'passive' investments with restrictions on deductibility of the net rental losses. Always consult a tax expert as passive activity rules are quite cumbersome," he adds. 

Income tax exemption, possible? 

If your total income in India, including rental income is below the basic exemption limit of Rs 1.6 lakh, you can get a TDS exemption. But the process can be complicated. You would need to apply to the tax authorities for a tax exemption certificate and submit the certificate to the tenant. The issue of the certificate is at the discretion of the tax officer and he needs to be convinced about your case. 

Alternately, an easier way would be to file your returns and claim refund of the TDS paid. 

In such cases however, the rental income may be taxed fully in the country of your residence (based on the tax laws in that country.) 


So if you are a resident of the US, even though your income is below the basic exemption limit in India and you pay no taxes in India, this income will be added to your income in the US and taxed according to US laws.

PE investment in real estate down 20% in April-Aug

Source:BS:PTI: Newdelhi:Sep 13,2011:15;50 hrs
Private equity investment in India's real estate sector declined by around 20.2% to about Rs 3,740 crore ($831 million) in the first five months this fiscal due to sluggish demand.


Factors like the tight availability of funds with PE players and delays in project execution prompted fund houses to adopt a cautious approach toward the real estate sector, according to data compiled by research firm Venture Intelligence.



PE players had pumped around Rs 4,685 crore ($1,041 million) into the realty sector during the April-August period of the previous fiscal, as per the data.

"Funding through the PE route is lower compared to the previous year, as fund houses are cautious about investing into realty due to a dip in general demand and uncertainty over timely completion of the projects by developers," said the Chief Executive Officer of Fire Capital, Om Chaudhry, while commenting on the data.

The lower availability of funds with PE players was another reason behind the dip in investment figures, he said.

Chaudhry also said repayment of funds raised during 2006-07 was likely to have reduced the corpus available with the fund houses.

"A lot of funds, which were raised during 2006, are due for return to investors in this year," he said.

The real estate sector is also suffering on account of declining flows from commercial banks and tightening of provisioning norms by the Reserve Bank.

Global Logistic Properties planning 100 Billion Yen in Japan

Source :IIFL:Sep 12,2011

The report stated that the company plans raise at least 100 billion yen.

Global Logistic Properties, which is partly owned by Government of Singapore Investment Corp., is planning to list its Japanese assets through a real estate investment trust in an initial public offering in Japan, according to a report. The report stated that the company plans  raise at least 100 billion yen. GLP, which listed on the Singapore Exchange late last year, has hired Citigroup, Goldman Sachs and Nomura Holdings as the main underwriters for the IPO, says report.

சொத்துக்களை மதிப்பிடுவதில் உள்ள பிரச்னைகள், சவால்கள் மற்றும் வாய்ப்புகள்'

தகவல்:தினமலர்:செப்டம்பர் 12,2011,

கோவை : கோவையில் இந்திய மதிப்பீட்டாளர் சங்கத்தின் சார்பில், "சொத்துக்களை மதிப்பிடுவதில் உள்ள பிரச்னைகள், சவால்கள் மற்றும் வாய்ப்புகள்' என்னும் தலைப்பில், இரு நாள் கருத்தரங்கு நடைபெற்றது.  இதில், இந்திய மதிப்பீட்டாளர் சங்கத் தலைவர் தியாகராஜன் பேசியதாவது: அரசின் கொள்கை முடிவுகள், புதிய சட்டங்கள், அறிவு, ஆற்றல், துறைசார் மாற்றங்களை உள்வாங்குதல் என, பல்வேறு தளங்களிலும் சொத்து முதலீட்டாளர்கள் தங்களை மேம்படுத்திக் கொள்ள வேண்டும்.  பொருளாதார வளர்ச்சி மற்றும் அரசின் கொள்கை முடிவுகள் காரணமாக, சொத்துக்களின் மதிப்பு அபரிமிதமாக உயர்ந்து வருகிறது. மக்கள் தங்கள் தேவைகள் மற்றும் எதிர்காலப் பாதுகாப்பை கருத்தில் கொண்டு வீட்டுமனைகள், கட்டடங்கள் போன்றவற்றில் முதலீடு செய்கின்றனர்.  இதன் காரணமாக இன்றைக்கு வீட்டு வசதித் துறை, அதீத வளர்ச்சியை எட்டியுள்ளது. உலகமயமாதல், தொழில்மயமாதல் உள்ளிட்டக் காரணிகளால், புதிய தொழில்நுட்பங்கள் வளர்ந்து வருகின்றன. இதனால், ஒவ்வொரு நாளும் புதுப்புது இயந்திரங்கள் உற்பத்தியாவதால், இயந்திரங்களின் மதிப்பும் மாறிக் கொண்டே உள்ளது. நிலம், கட்டடங்கள், இயந்திரங்கள், தங்கம் என, அனைத்துப் பொருட்களின் மதிப்பிலும், தொடர் மாற்றங்கள் நிகழ்வதால் இன்றைக்கு, சொத்துக்களின் மதிப்பைப் பற்றிய புரிதல், அனைவருக்கும் அவசியமாகிறது.  நாடு முழுவதும் தற்போது, 22 ஆயிரத்துக்கும் மேற்பட்ட சொத்து மதிப்பீட்டாளர்கள் உள்ளனர்.  சொத்துக்களை வாங்குவோர், விற்போர் மற்றும் வங்கிகள் என, பலரும் நம்மை முழுமையாக நம்பி முதலீடு செய்ய துணிவதால், நமக்கான சமூக பொறுப்பு கூடியுள்ளது.  எனவே, சொத்துக்களை துல்லியமாக மதிப்பிட்டு, சிறப்பான சேவையை சமூகத்துக்கு தர வேண்டியது நமது கடமை. நேர்மையும், துல்லியமாக மதிப்பிடும் திறமையும் நம்மிடம் இருக்க வேண்டும். இதற்கு அனைத்துத் துறைகளையும் ஆழமாக அறிந்து கொள்வது அவசியம்.  இவ்வாறு, தியாகராஜன் பேசினார்.

Real estate prices likely to go up

Source:DFC:Jharna Mazumdar Sep 08 2011 , Mumbai




Property prices are likely to escalate due to the Land Acquisition, Rehabilitation and Resettlement Bill introduced in the Parliament on Wednesday.

Lalit Kumar Jain, chirman of CREDAI said, “Due to the recent land acquisition bill property prices will further escalate as acquisition of land will become costlier. For private land acquisition it is based on negotiation and introduction of rehabilitation clause wa not needed as it will creat more hassle. Also the lan stock will be reduced.“

Niranjan Hiranandan of Hiranandani Developer said, “One way the land ac quisition bill is very good a agitation related to land ac quisition across the coun try will be put to rest. Bu the clause of rehabilitation even in the case of privat land acquisition will lead t misuse and corruption. W are negotiating and payin as per market prices then why should the question o rehabilitation and resettlement arise.“

Hiranandani said another clause introduced that if a land is acquired for some purpose and not fully utilized by the developer then the government will take 80 per cent of the land is not correct as there may be several reasons for not utilising it. He added that increase in property prices is inevitable as land acquisition is likely to become costlier.

Indian realty sector to face tough time in next 12 months

Source :By PTI :Aug 28 2011, New Delhi

With the US and European debt crisis affecting sentiments across the world, the Indian
real estate sector is likely to see a gloomy phase in the next 12 months and developers would face liquidity crunch, low sales and pressure on margins, consultant Jones Lang LaSalle said.

The country's leading realty consultant pointed out that the projects would be delayed, unsold housing stock will rise and developers might have to offer new projects at 10-15 per cent discount, all because of a slowdown in property demand.

"The US and European debt worries have added to the uncertainty... With the escalating global liquidity issues, these are challenging times. Over the next 12 months, we definitely expect these sentiments to reflect in the financial profile of the Indian real estate sector," Jones Lang LaSalle India Managing Director (West India) Ramesh Nair said.

He said the banks would further tighten lending to realty sector and disbursal rate of home loans is bound to reduce.

"Developers will be under pressure to reduce their debt-to-equity ratios. Fund raising through the QIP route will reduce, and we are going to see a decrease in real estate IPOs," Nair said.

In order to generate funds, the consultant said many developers will sell their non-core land and divest their stakes in non-core businesses such as hospitality and retail.

Major firms like DLF is selling its non-core assets to cut its huge debt that stands at over Rs 20,000 crore. Unitech at present has debt of about Rs 4,000 crore.

"This is an unsettling time for the market, and obviously for real estate investors as well. Are we looking at 2008 all over again?" Nair said, referring to the global economic slowdown in 2008 that had hit Indian realty sector badly.

The consultant observed that high interest rates, increase in vacancy and demand slowdown will impact the earnings of developers leading to a slowdown of construction activity and delay in project delivery.

The margins of realtors would also be affected due to increased construction costs, Nair said.

"We are likely to see pre-launch projects coming with at 10 per cent to 15 per cent discount, over the pricing of other projects in the same areas," he added.

Besides, the distressed projects of smaller developers will be acquired by medium-to-large players at prices significantly lower than their original valuations.

"The only constant is change. This has been an axiomatic truth for the Indian real estate market over the last 24 months, with volatility having become a byword to describe it. There has been little or no respite from this state of flux," Nair said.