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Navi Mumbai seeing a rise in land and property rates

The growth in Navi Mumbai came about as a result of congestion in Mumbai city. However, realtors in Navi Mumbai believe that now the area is witnessing a steep rise in land prices and properties due to increased demand. In addition, the rates are expected to surpass Mumbai city rates in the coming time given the improved infrastructure and lifestyle.

According to Mohanjeet Singh from New Mumbai Realty, the real estate market in Navi Mumbai is self-sufficient, with a healthy mix of residential and commercial properties. "Many buyers find localities here a viable option due to increased connectivity with the Mumbai suburbs," he added.

Apartments and houses are becoming costlier to own or rent here. Some of the developed areas in Navi Mumbai are Vashi and Nerul, while Kharghar and Panvel are undergoing major infrastructural developments due to their proximity to proposed Navi Mumbai International Airport. Capital value rates in Vashi range from Rs 7,000 to 8,600 per sq ft for residential properties, and Rs 10,000 to 15,000 for commercial spaces. Capital values in Panvel are between Rs 3,000 to 6,000 per sq ft for residential apartments depending on the quality of the project. Meanwhile, commercial property is available at Rs 5,000 to 8,000 per sq ft.

Anil Kumar from Anil Kumar & Co. said that many software companies and large institutions in Maharashtra have set up their branches in Navi Mumbai. Some of the companies are Reliance Group, Wipro, TCS, V2Solutions, ICICI Infotech and Tata Consultancy Services.

Factors that are contributing to a rise in prices here are "Greenfield" airport proposal in Kharghar and Navi Mumbai Special Economic Zone (SEZ). Developments like International Convention Centre, International Exhibition Centre, International Super Malls, hospitals and nursing homes, golf course, sports complex and hotels is pushing infrastructure to different localities.

Besides, adequate water supply and uninterrupted power supply are some of the other factors that are attracting people to own flats here. Singh added that builders like Motwani Builders, Reliable Builders, Shah Group Builders Pvt Ltd in Navi Mumbai have been pivotal in making the area a coveted destination.

Maharashtra to give 150 ha for Navi Mumbai airport

The proposed Navi Mumbai international airport inched one more step closer to realty as the nodal agency for its development crossed yet another hurdle. The Maharastra government has given the City and Industrial Develoment Corporation (Cidco) an "in principle&" approval to hand over 150 hectares of land for the ambitious project.

The government is expected to soon complete the pertinent formalities. Only recently had deputy chief minister Ajit Pawar met CM Prithviraj Chavan in order to expedite the handing over of the land, whose market value is of the order of Rs 500 crore.

The administration's move is crucial, especially when 1,341 hectares of the total 2,054-hectare land is in Cidco's possession. However, the Cidco was striving to acquire the balance 713 hectare. With the government's move to hand over 150 hectare, the Cidco would still have to acquire 563 hectare of land for which the notices have been served under the Land Acquisition Act, 1894 to the residents of Pargaon and Owale. These villagers have been strongly demanding a compensation of Rs 20 crore per acre.

Cidco chairman Pamod Hindurao says the deputy CM has taken an initiative in this regard and the government is son expect to issue a formal order handing over its 150 hectare land for the airport project. "The negotiations with villagers are currently on. I am quite hopeful that a consensus will emerge to pave the way for smooth acquisition of the balance land,&" he told Business Standard. The authorities are to "soon&" take a review of the present status of the development of the proposed airport.

The government's move comes at a time when one year would be complete on November 22 after the ministry of environment and forests gave environment clearance for the project. The Cidco was unable to issue request for qualification in view of acquisition of total land. The state government's decision has given a partial relief, even though it would have to step up efforts to acquire the necessary land.

Hindurao now says all efforts will be made to make the first phase operational in 2014 -- as announced. The airport would handle 10 million passengers per annum in the first phase. The figure will rise to 60 million by its final phase in 2030.

RC Gharat, advisor to the airport's project-affected persons, says there has not been much progress in the negotiations with the committee headed by the Konkan Divisional Commissioner. Reason: villagers are firm on the compensation of Rs 20 crore per acre.

Property prices go down across nine cities in September quarter

The National Housing Bank's Residex, which tracks residential property prices across 15 cities, has shown a sure sign of demand slowing. Property prices in nine cities dropped in the September quarter, while two cities experienced falling prices in the previous quarter.

The number of cities with property rates rising was down to six in the second quarter, against 12 earlier, according to the NHB index.

R V Verma, chairman and managing director, NHB, called it a clear case of demand slowing due to interest rates peaking. He also brought out the difference between investors' and consumers' markets.

Verma told Business Standard, "Metro cities are investors' market, and interest rate hike does not deter them from buying, thereby ensuring a buoyant demand there.&" However, most other cities are consumers' markets, where the end user is deferring his decision to buy.

Kolkata is the only city where prices have been declining since the third quarter of 2010-11. Verma noted that Kolkata was not an aggressive market.

"Again, it is an end users' market, and is not of much interest to an investor, which is keeping the demand subdued,&" he said.

Property prices in Pune rose the maximum among all the cities surveyed, at 13 per cent, in the second quarter, compared to the first in 2011-12. Chennai, Mumbai, Delhi, Jaipur, and Bangalore followed, recording increase of nine per cent, seven per cent, five per cent, two per cent and one per cent, respectively.

The Residex, designed to help general consumers and property buyers and borrowers in decision making, displayed a nine per cent decline in prices in Kochi, eight per cent in Hyderabad, and seven per cent each in Bhopal and Surat.

Navi Mumbai is now joke of the 21st century

Navi Mumbai, once touted as a 21st century city, appears to have lost the plot in the very first decade. Planned as a credible alternative to Mumbai, it has turned into a mess that increasingly resembles the degenerating metropolis across the creek.

For all its tall claims of being a slum-free city, more than one lakh slums have proliferated along the satellite city's periphery — right from Digha across the MIDC belt to the Belapur Hills. These slums account for nearly a fifth of the Navi Mumbai Municipal Corporation's corporators, who in turn not only ensure that they are given their share of civic amenities for a lark, but also provide an environment for them to flourish.

The average Navi Mumbaikar now spends more time getting to her swanky railway stations, thanks to the unchecked proliferation of hawkers. On a bad evening, it can take 45 minutes to get from Vashi station to Koparkhairane — a 4km road journey that should ordinarily take no more than 10 minutes.

Once she reaches home, she is greeted with a space that is a uniquely Navi Mumbai preserve — the super-duper built-up area. Developers blatantly increase 60% on the carpet area, when they are not raising entirely illegal buildings. While Cidco is only too happy to milk every square foot of land under its control, the folks at the NMMC are waking up to the joys of raking in the moolah, the city and its people be damned.

Yet, there is still hope. There are the wide roads, the patches of green, the planned layouts, the nucleus of a world-class urban sprawl and, above all, the agility of a young liability-free city. What it needs is political will, a sincere administration, and responsible citizens. Is that asking for too much.

WORK ON NAVI MUMBAI METRO STARTS

The much-awaited Navi Mumbai Metro Rail (NMMR) project is on track and foundation works for the first phase of line between Belapur and Pendhar has commenced, State-run planning agency CIDCO said today.

City and Industrial Development Corporation (CIDCO) has undertaken the work on the metro based on the detailed project report (DPR) prepared by Delhi Metro RailCorporation (DMRC), an official release said here.

A tendering document for the stations, tracks and traction, rolling stocks, signalling and telecommunications and automated fare collection (AFC) was in process and will be finalised by December 2012, it said.

The first phase, spread over 21.45 km, will cover Belapur to Pendhar (11.1 km), Pendhar to MIDC (2.2 km) and MIDC to Khandeshwar (8.15 km). Of this, the civil work on Belapur to Pendhar line has already started, the release said.

The approved project cost of Phase I is Rs 1,694 crore and the foundation stone was laid by Chief Minister Prithviraj Chavan on May 1, 2011.

WHY GOLD PRICES ARE NOW FALLING

"So are you less bullish on gold now?" asked my roommate late on Sunday evening. "The price has taken some beating."

"Why do you ask?”

"Well, for the simple reason that gold has given fabulous returns for each of the last 11 years."

"So? You have a problem with that?"

"What I meant was that there is something known as the reversion to the mean. Gold prices cannot keep going up all the while."

"Yes, they can't. And that's why the prices have been falling lately. The price of gold has fallen from a high of around $1,900 per ounce and is now moving in the range of $1,550-$1,600 per ounce (1 troy ounce equals 31.1 gm)."

"Oops! I have money invested in gold. But I am getting jittery now. I really don't understand the reasons behind why the price of gold is falling."

"So you want me to explain?"

"Yes."

"Okay, first order some bombil fry for me."

"Sure!" she said, and called for a home delivery.

"The world is now getting into a scenario where competitive debasement of currencies is happening and that was holding up the price of gold," I explained. "The markets were also expecting Ben Bernanke, the chairman of the Federal Reserve of United States (the central bank of the US), to announce QE III, and so the price of gold had been rallying."

"Hey, I am not an economist! How do you expect me to understand so much jargon at one go!!" she complained.

"Let me explain. See the thing is, as I have said in the past, the United States has printed nearly $2.3 trillion since the investment bank Lehman Brothers went bust in 2008 in order to revive a moribund US economy. The market was expecting that the US Fed will announce a third round of money printing which is euphemistically referred to as quantitative easing III, or QE III. The earlier two rounds were known as QE I and QE II. As you would know that whenever people see more and more currency being printed they buy gold."

"Yeah, that you have explained in the past," she said.

"Now, when anything is flooded into the market, it tends to lose value. So the US dollar has been losing value against other currencies. As Harvard economist Martin Feldstein, wrote in a recent research paper titled ‘What's Next for the Dollar’, 'The real trade weighted value of the dollar fell 11 per cent against the Federal Reserve Bank's index of major currencies during the 12 months through May 2011 and 31 percent during the past ten years'."

"So how does that help the Americans?"

"Well, when your currency loses value against other currencies, your exports become more competitive."

"Simple English, please!"

"Let us consider an American exporter, who exports stuff to Switzerland and gets paid in Swiss Francs. Around a year back one Swiss Franc was equal to one US dollar. So if he had got paid 100,000 CHF (the sign for Swiss Francs) for exporting stuff, he could have exchanged it for 100,000 US dollars. Are we clear on that?" I asked.

"Yeah. So far so good."

"But now things are different. One Swiss Franc is 1.10 American dollars. So what does that mean? If he exports goods worth 100,000 CHF, he can exchange it and get 110,000 US dollars (100,000 CHF x 1.10) for it now. This is $10,000 ($110,000 - $100,000) or 10% more than last year."

"Yup. So the US is making more money through exports but how does that make them more competitive?"

"At the current exchange rate the US exporter can offer goods for around 90,900 CHF ($100,000/1.1) and still make $100,000(90,900 x 1.1), unlike a year back where he had to sell for 100,000 CHF in order to earn $100,000. So a US exporter can offer a lower price and thus become more competitive. As Feldstein writes, 'A declining dollar could have a powerful positive effect on the short-run performance of the American economy by raising exports (now more than $1.3 trillion)'."

"Okay, this part I understood, but weren't we talking about gold prices?" she interjected.

"Yeah. So when the US exports more, more money comes into America. As exports become competitive, imports into the US become more expensive, and this may lead to people switching to American goods and services instead of buying foreign stuff. This, in turn, benefits American companies," I explained.

"This is complicated. But I think I have understood everything that you have said till now," she said.

"But that's just one part of the story. When exports for the US get attractive, exports for Switzerland become unattractive. This has been happening for the last one year, as the value of the Swiss Franc has risen against currencies like the US dollar as well as the Euro. This is primarily because the Swiss Franc is seen as a relatively safe currency vis a vis the US dollar as well as the Euro. So with demand for Swiss Francs going up, it has appreciated in value against other currencies. This has made Swiss exports uncompetitive. Now the Swiss Central Bank has decided to fix the value of the Swiss Franc against the Euro. It will ensure that one Euro is worth around 1.20 Swiss Francs so that Swiss exporters do not suffer any further."

"But how will they do that?"

"By not allowing the foreign exchange market to operate on its own. When foreign money comes into Switzerland, the Swiss Central Bank will ensure that there are enough Swiss Francs in the market, so that the demand for the Swiss Franc does not go up and hence ensure that the Swiss Franc does not appreciate against other currencies," I explained.

"But how will they do that?"

"By simply printing as many Swiss Francs as are required."

"Oh!"

"The other currency that has appreciated big time is the Japanese Yen and currently one US dollar is worth around 76-77 JPY (the symbol for Japanese Yen). This is a record for the JPY since the Second World War. Japan is a major export economy and with the JPY gaining value it makes exports unattractive like it has for the Swiss. As Yoshihiko Noda, the current prime minister of Japan, recently said, "I have become more concerned about the worsening of the yen's one-sided movements. I will take bold actions if necessary and won't rule out any possible options." In simple English it means he is ready to print money if the need be."

"So what you mean is that the US is printing money and that, in turn, is leading to other countries around the world printing money, just to ensure that they play catch up."

"Yeah, that is pretty much the case."

"But what's all this got to do with gold?" she asked.

"Well, as more and more paper currency gets printed, and dumped into the financial systems around the world, there is more the danger paper currency will lose its value. So people are queuing up to buy gold. Unlike paper money, gold cannot be created out of thin air."

"So gold prices continued to go up because of all this?" she asked. "Is that what you are suggesting?"

"Yes, that's why the price of gold had been going up. Gold has given positive returns in each of the last 10 years."

"So why is the price of gold falling now?"

"The immediate reason is no announcement of QE III by the US Federal Reserve, which the investors in the gold market had taken as a given and so kept buying gold."

"Yes, that you told me," she remarked.

"Also prices had gone up for so long that a correction was due. As Bill Bonner wrote in a recent column: 'Our faith was never seriously challenged... It's still ahead for the year...Gold is still a winner. Gold investors are still winners. There is no reason to doubt that they will be winners this year...just like they have been every year this century. But that's not how it works. Not usually. The gold market needs to make its admirers feel like losers. It needs to cause them to wonder...and question their own faith and judgment. How so? By letting the price fall to...$1,200...or even $1,000. Then, we will be ready for the third and final stage of this great bull market'."

"That's some statement," she said.

"You see, every bull market has its shares of falls like every bear market has its share of rallies," I said as the doorbell rang.

"Guess that explains it," she said. "But is it the end of the Bull Run on gold?"

"As Bonner puts it, 'besides, gold has had a spectacular 11-year run. It's time for a rest for the metal...and a test for the metal lovers. That's just the way it works. Markets and lovers always test their admirers. Gold should be giving its fans a test...before moving in the final stage of the bull market'," I said. "Hope that makes sense?"

"Yes it does," she said, as the doorbell rang again.

"Good you don't have any more questions," I replied. "Let me open the door, must be the delivery guy. And now that you have had your explanation, I will enjoy my bombil fry!"

How is tax computed on rental income?

Tax is applicable where there is income and essentially there can be only two kinds of incomes related to property — rental income and capital gains when property is sold.

Tax on rental income

The basis of calculating income from house property is the rental value. This is the inherent capacity of the property to earn income. Property income is perhaps the only income that is charged to tax on a notional basis. This charge is not based on the receipt of any income per se, but is on the inherent potential of the house property to generate income.

Sandeep Shanbhag

The first property that one buys is exempt from income tax, but only if it is not let out on rent. A notional rent value based on the market rental value will be adopted as taxable income from second property onwards, even if it’s kept under lock and key.

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To put it differently, even if you earn no income whatsoever from the second property, it will be taxable as if you have put it out on rent. Therefore, it is advisable to rent out the second property since you will be obliged to pay tax on an assumed rental value.

When a property is not let out or is self occupied, only that property is exempted from tax.

Tax deduction

There are two types of tax deductions available on income from property apart from the actual municipal taxes paid. The first is standard deduction of 30%. This means 30% of the rental income can be reduced as a standard deduction for repairs, maintenance etc. irrespective of the actual amount spent, if at all, during the financial year.

The second deduction, which is over and above the 30% standard deduction, is to do with interest on mortgage finance if the property is purchased on mortgage.

In case the property is tax-free, the interest deduction is restricted to Rs1.5 lakh. In other words, irrespective of the amount of interest paid, if you do not pay any tax on the property, the deduction on account of the interest paid has a ceiling of Rs1.5 lakh.

However, for properties that are taxable on either actual rent or notional rent, the entire amount of interest paid without any limit is deductible.

Nowadays, due to high property prices, in almost all cases, the interest amount far exceeds the rentals. Investors generally buy properties for the capital appreciation potential and put it on rent so that the asset does not remain idle and is maintained. However, today rental yields have fallen to around 3-4% pa.

For rented properties, the entire amount of interest payable can be adjusted against the rent and any amount that is left over may be carried forward in the tax return as loss from property to the next year.

This is very important from a tax planning point of view. Such carry forward of the unabsorbed interest can be done for a continuous period of eight years.

Over the years, as the loan gets paid off, the interest component that is getting set-off against the rental income each year will keep on reducing. On the other hand, typically, the rent would tend to increase (increment) each year.

This will go on to lead to a positive differential between the rent received and the interest paid and this difference would be taxable. At this point, the carried forward interest will be extremely useful to reduce tax liability.

If you wish to carry forward loss, it is mandatory to file the tax return by July 31 (for individual taxpayers). Without filing the tax return — and that too by the due date prescribed — carry forward of loss will not be allowed.

Interest deduction on a property can be only after taking possession of it. Often people buy properties under construction where the mortgage payments begin during the construction phase itself. So what happens to the interest paid pre-possession?

Such interest can be claimed for tax deduction in five equal installments starting from the year in which the possession is obtained.

For instance, say someone has bought a property under construction in FY 2008-09 and is paying an annual interest of Rs20 lakh. He gets the possession in FY 2010-11.

Therefore, he has paid a pre-possession interest for 2008-09 and 2009-10 of Rs40 lakh. One fifth of Rs40 lakh, that is Rs8 lakh, can be claimed during 2010-11 over and above the Rs20 lakh that he may pay in 2010-11.

Therefore, the deduction of interest for 2010-11 would be Rs28 lakh (Rs20 + Rs8 lakh) assuming the property is rented or else the deduction is restricted in to Rs1.5 lakh. Next time we shall examine in detail the capital gains that arise from sale of property.

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New transportation systems in Mumbai to

positively impact real estate

Mumbai

Mumbai needs constant up gradation in its infrastructure projects, and there is no doubt that mass rapid transit systems like Metro Rail and Mono Rail will benefit the city once implemented.

While the Metro is further delayed, according to recent reports, and the Monorail is also taking its own time, real estate experts are optimistic about these projects and feel they will bring about a major change in the city.

With the Metro connecting high-density corridors to distant parts of the city, travel time will reduce significantly. This has already triggered an increase in real estate prices especially in corridors through which the Metro will run. As a direct consequence of the Metro rail, areas such as Versova, Andheri, Ghatkopar and Mankhurd have started seeing a rapid increase in real estate prices.

A general interactive survey with brokers along the corridor reflected that the closer a home is to the metro station, the more its value increases. For homes less than two km from a station, the value increased an average of 15 percent, while those that are five to six km away increased just five percent on an average. However, the data varied widely among stations. “Any development activity in a neighborhood makes it more desirable also affecting the prices,” said Sachin Shetty, a resident. “Transit is definitely on people’s minds when they’re thinking about moving into a house.”

A resident of Mathuradas Vasanji Road at Sakinaka says “The metro rail is something we are eagerly waiting for. It is getting increasingly difficult to commute in the Sakinaka – Andheri – Ghatkopar belt. Traffic is beyond control.”

Speaking during the recent Indian Merchants’ Chamber (IMC) conference on ‘Infrastructure Development in the Mumbai Region’, Rahul Asthana, Metropolitan Commissioner, MMRDA, gave details of ongoing and proposed infrastructure projects. He said, “There are various challenges in completing key infrastructure projects however, we are committed to complete them with the best and world class quality. The ambitious Metro line from Colaba to Airport is being planned completely underground. We are also contemplating other metro lines completely underground.”

The Monorail planned in areas like Chembur, Jacob Circle and Wadala will benefit several areas nearby. Developers feel that these infrastructure projects will benefit the locations in the long run.

Mayur Shah, Managing Director, Marathon Group says, “An efficient public transport system is important for Mumbai to become a world-class city. The underground metro and ring road over the periphery is the need of the hour. These projects will create new centers for growth. Earlier, people used to look for homes near the railway station or easily accessible areas.”

Rajesh Shah, Executive Director, Dosti Group says, “These projects will certainly bring distant places within reach. They will increase the marketability of the area. The pressure on other infrastructure in the city will reduce and people can communicate in a better way. The government should take these projects on priority basis and clear the hurdles in the process.”

Manju Yagnik, Vice-Chairperson, Nahar Group, says: “One must not forget that railway is Mumbai’s lifeline where lakhs of people travel distances to reach their destinations every day. And hence the importance of mega projects like Metro and Mono Rail. Ongoing works on these projects have given further impetus to the real estate sector. Both these projects would facilitate easier connectivity between the western and eastern suburbs in the immediate future. Even when the projects were in the planning stage, locations such as Bhayandar, Virar, Dombivli, Ulhasnagar, Panvel and many areas of Navi Mumbai which are part of this rail network had caught the imagination of buyers in residential and commercial segments.”

However, the delay in these projects will not impact the real estate market much. Samantak Das, National Head-Research, Knight Frank India says, “The price rise in property depends upon the phases in infrastructure. Whenever any infrastructure project is announced, the property prices of that area appreciate. When these projects are nearing completion, prices rise. However, the delay in these projects does not impact the rates too much. Implementing an infrastructure project is a big task for the government and it takes time.”

As Mayur Shah points out “People invest in a place looking at its future prospects over the next five to seven years.”

Source: The Times of India, Mumbai

Builder fraternity bleeds as Maharashtra CM sleeps over crucial

realty projects

The liaison team of at least half a dozen top builders in the city have stopped visits to the chief minister’s office — not because work was executed smoothly in Mantralaya, but because no work was done.

“Prithviraj Chavan is too conscious about keeping his honest image intact and as a result, not a single file is moving from the CM’s office,” said a leading South Mumbai developer, adding that his predecessor Ashok Chavan was better. “There were demands to be met, but at least work used to get done during Ashok Chavan’s tenure. Now, the entire business has come to a standstill.”

“If he has any ideas, let him tell us. We are willing to go the extra step. But files should move, otherwise not only will builders bleed out of business, even homebuyers will suffer,” said Paras Gundecha, president of the Maharashtra Chamber of Housing Industry, an association of builders.

The city’s builder lobby claims that the new CM has been so affected by charges of corruption surrounding his predecessors that he is literally running scared from the real estate sector. “He hears us out, but the moment we leave his office, he brushes our proposals under the carpet,” said another developer, whose mega redevelopment project has remained stuck for almost a year.

“Even a routine order that would take a couple of days during the tenure of previous CMs is yet to see the light of the day after months,” the developer said.

If builders complain that the CM hasn’t met them lately, government sources said the real issue was that the builders often visited with no other purpose except for seeking a favor or two for their projects. “Builders are suddenly finding themselves being treated like other citizens. They find that hard to stomach,” according to sources.

The sources said the CM was also cautious about meeting some legislators and politicians who were known to plead for the builders. They pointed out that where it matters, the CM has not shied away from taking decisions, including difficult ones.

The best example has been clearance for the redevelopment of the Bendy Bazaar cluster project in south Mumbai. “Where decisions concerning the good of Mumbai or Maharashtra are concerned, the CM will certainly hear out the parties and decide,” sources said. “The problem is the builders don’t speak for Mumbai but for themselves.”

But an industry observer said: “Even in Bendy Bazaar, just two buildings have been surveyed to date. At this rate, it will take ten years for the project to even get started.”

No prepayment penalty on floating home, auto loans

Prepayment penalty, a nightmare suffered often by individual borrowers of home or car loans, is set to end. In a meeting with the Reserve Bank of India held on Monday, banks agreed to waive prepayment charges on floating rate loans, the central bank said today.

The move is aimed at bringing fairness in bank charges. Prepayment penalty in some banks can range between one and five per cent on the loan due, depending on the nature of the loan.

The removal of prepayment penalty will make it easier for customers to shift loans to other banks if they get a better interest rate. Also, it will increase competition among banks.

Banks have also been asked to revive fixed rate home loan products, which have become almost a thing of the past, as they are increasingly focusing on floating rate schemes to protect themselves from interest rate fluctuations.

The central bank is of the view customers should not be exposed to rate volatility and banks should be able to hedge their risk through appropriate instruments.

"Banks may also offer long-term fixed rate housing loans to customers and address their asset-liability mismatch issues by recourse to the Interest Rate Swaps market. Floating rate loans pass on the interest rate risk from banks that are better placed to manage it to borrowers and, thus, banks only substitute interest rate risk with potential credit risk,&" the RBI said.

However, the RBI has allowed banks to charge appropriate prepayment penalties in the case of fixed rate loans.

Regarding failed ATM transactions, the onus will now be on banks to prove the customer's negligence or mistake. The customer must be compensated for losses from unauthorized transactions.

Banks have been asked to initiate the process to provide a "one view of all bank accounts of a customer like deposits and loans and the process needs to be completed in one year&".

These decisions were taken at the annual conference of banking ombudsman in Mumbai. The conference, inaugurated by RBI governor D Subbarao and chaired by RBI deputy governor K C Chakrabarty, was also attended by Pratip Chaudhuri, chairman of the State Bank of India and M D Mallya, chairman of the Indian Banks' Association, among others.

The Indian Banks' Association (IBA) has been given the mandate to standardize the most important terms and conditions (MITC) for at least 10 important banking transactions and circulate among banks for adoption.

It was also decided that issues pertaining to monetary compensation for mental harassment suffered by bank customers would be examined by banks and the regulator.

The regulator is also mulling the idea of providing insurance of some reason-able amount on customers' credit and debit card transactions

A reality check on home buying agreements

The penalty of Rs 630 crore on the country's largest property developer, DLF, by the Competition Commission of India (CCI) has brought focus on the builder-buyer relationship. The buy/sale agreement between the two parties is back in focus.

CCI's observations against DLF are symptomatic of a wider malaise. "Smaller developers draft their buyer agreements based on what bigger industry players offer their customers, &" says Sanjay Sharma, managing director of Delhi-based Qubrex, a real estate consultancy. CCI's order was based in part on the report presented by Qubrex on DLF's market share and its influence on the Gurgaon real estate market.

A little research would reveal the dice is heavily loaded in favor of builders and buyers are generally hapless.

Reality check: Though builders are supposed to specify the date of possession in the agreement, they delay signing it, even by a year, despite taking the booking money from the buyer. This way, even if the project is delayed, the buyer can do little.

For the buyer, delays mean added costs, even if payments are construction-linked. He pays 10 per cent of the property value while booking the flat. And, another 20-25 per cent even before actual construction has begun, plus 10-15 per cent on signing the agreement. This is beside any rental or interest outgo on home loans that an individual may be servicing.

Penalties favor builders: "Both builders and buyers are entitled to charge a penalty in case of project delays by builders or payment defaults by customers," says Vinod Sampat, president, Cooperative Societies Residents Users and Welfare Association.

The model agreement under the Maharashtra Ownership Flats Act (Mofa) mentions a uniform nine per cent interest penalty payment. In practice, while builders charge an interest up to 21 per cent for payment delays by the buyer, the builder may pay as little as one per cent of the amount collected from the buyer towards the cost of the apartment if they delay giving possession of the apartment.

"Almost four out of five agreements state that the builder would offer Rs 5 per sq ft as a penalty in case of project delays," adds Sharma. At that rate, if a builder has to pay a penalty for a 2,000 sq ft apartment, costing Rs 2 crore, he will end up paying Rs 10,000 a month or Rs 1.2 lakh as penalty for every year of delay. The customer, especially if he has borrowed from a housing finance institution, would be paying an Rs 2 lakh equated monthly installment. In effect, the buyer is borrowing from the bank at 10-12 per cent yearly interest to pay to the builder, while the builder is only compensating for the delay at the rate of around one per cent a year.

Open for all: While Mofa always restricted sale of both open and stilt parking lots and terrace areas, such sales do take place and many builders may not make it part of their agreement. Others have now started selling these and also issue receipts, say property brokers. "Hopefully, a Supreme Court order restricting the sale of open spaces will have an impact," says R R Singh, director of the Delhi-based National Real Estate Development Council.

Forfeiture clause: Unfortunately, there isn't much a customer can do if he does not agree to the terms of the agreement. The forfeiture clause included in the agreement would work against him. In most cases, even before he is asked to sign the agreement, he has paid 10 - 35 per cent of the property's cost to the builder. Opting out at this stage could see him losing either the entire amount paid till then or at least 10 per cent of the earnest money.

Banks Commitments to Customers

The banking regulator, Reserve Bank of India, has put in place a series of measures to ensure that banks are held accountable for service deficiency. Banks, too, have agreed to adhere to a BCSBI (Banking Codes and Standards Board of India) code of commitment to customers, which is available on banks websites. Here are some commitments you should be aware of:

REPORTING COMPROMISE SETTLEMENTS:

Many borrowers, who have repaid their dues under a compromise settlement with their bank, feel cheated when their see adverse reports in their credit history, since it can mean rejection of future loan applications. If a loan is repaid after a part of the amount is waived off, many banks report the loan as written-off while submitting data to credit information companies. However, the code states that if the account of a borrower is regularized after having been in default, the information will be passed on to the credit information company in the subsequent monthly report.

DELAY IN AFFORDING CREDITS:

The code also details the penal interest payable by the bank in the event of delay in executing transactions through the electronic payment platforms. The central bank, too, has specified penalties payable by banks in case of such delays. If the delay pertains to NECS, ECS-Credit or NEFT transactions, the bank has to pay penal interest at the prevailing RBI LAF Repo Rate plus 2%, starting from the due date of credit till the date of actual credit. This apart, every bank has formulated a cheque collection policy, which can be accessed on their websites. A key provision relates to the penalty payable by the bank in the event of delay in collecting outstation cheques. You need to study it carefully to be prepared to take action if your bank puts its toe out of the line.

BEHAVIOUR OF RECOVERY AGENTS:

Many customers complain about the high-handedness of recovery agents. The code of commitment states the bank will not initiate recovery proceedings without informing the borrower in writing. The agents can contact you at a place of your choice and have to communicate in a civil manner. They can make calls or visits only between 7 am and 7 pm. If the recovery agent does not adhere to these norms, you can report the matter to the banks nodal officer. Being acquainted with the BCSBI code of commitment to customers will help you become aware of your rights.

Exhibition to tell you all about redevelopment

The state government and Brihan Mumbai Municipal Corporation should take the holistic approach while approving redevelopment plan of dilapidated buildings.

Most of the redevelopment projects have been stalled because there is no clear guidance, and policy. More than 16,000 old and dilapidated buildings are waiting for redevelopment.

“Families and its members have increased, still they are staying in that small rooms,” said Paras Gundecha, president of Maharashtra Chamber of Housing Industry (MCHI).

“They are desperately looking for separate and big houses. But because of lack of knowledge and unavailability of healthy policy, the redevelopment is not taking place in city. BMC recently declared that they will charge 100 % premium on use of additional FSI. It will stop the city development,” he said.

He said that in redevelopment, a developer raises the corpus fund, gives additional area to existing residents, buys transfer of development right (TDR), pays them rent and constructs additional area for themselves.

“It is a tough task. We requested the government and the BMC, not to make major changes in policy that will make them difficult to undertake the redevelopment projects. MPs and MLAs are pressing for the same demand. We hope something positive will come out,” Gundecha added.

However, to simplify the redevelopment procedure, DNA has organized redevelopment conference-cum-exhibition at Nehru Centre in Worli on August 27 and 28.

The state government and Brihanmumbai Municipal Corporation should take the holistic approach while approving redevelopment plan of dilapidated buildings.

Most of the redevelopment projects have been stalled because there is no clear guidance, and policy. More than 16,000 old and dilapidated buildings are waiting for redevelopment.

“Families and its members have increased, still they are staying in that small rooms,” said Paras Gundecha, president of Maharashtra Chamber of Housing Industry (MCHI).

However, to simplify the redevelopment procedure, DNA has organized redevelopment conference-cum-exhibition at Nehru Centre in Worli on August 27 and 28.

Goregaon in Mumbai develops as

residential destination

Mumbai

Goregaon, a suburb situated in North Mumbai has developed into a full-blown residential destination. Filmistan and Film City, the two famous studios are located here. During the 80′s, there was a surge of real estate and population and since then it has been on the rise. The lush environs of the Aarey colony, give this suburb a rich blanket of greenery.

According to Subhankar Mitra, Local Director – Strategic Consulting, Jones Lang Lasalle India, “In Mumbai’s prevailing residential real estate market scenario, the 1 and 2BHK configuration is in considerable demand. The rates in Goregaon East currently range from Rs 8000-12000 per sq.ft which make it relatively attractive for middle to higher-middle income buyers.

“It is a good location with residential projects by reputed developers. Advantages for home-owners in this area are the closeness of the Oberoi Mall and major workplace hubs that lie in close proximity.”

Some top quality projects are coming up in Goregaon. According to Dr. Samantak Das, National Head – Research, Knight Frank India, “There are many premium builders in Goregaon like Oberoi Realty, Sheth Builders and Mahindra Lifespaces. These projects are of a very high class and rates range from Rs 9,500- 11,000 per sq.ft. Cheaper flats are also available at Rs 7, 500 per sq.ft. Property prices have increased and are expected to remain stagnant for some time.

“Goregaon’s strength’s are its connectivity and social as well as retail infrastructure. The city is well connected through the Link Road and the Western Express Highway. Due to its nearness to retail outlets, offices and schools as well, there has been a good amount of absorption.”

Shamit Banerjee, a resident of Goregaon says, “There are two reasons why Goregaon is such a perfect place to live in. First, it is a place inclined towards nature and second, the cool climate all the year round. “In the western part of Goregaon the property rates are affordable for middle class people compared to places like Malad and Kandivali.”

Similarly, Pankaj Mithel finds the area extremely resident friendly. He says, “In Goregaon, the western area has come up quite a bit. It is closer to the station, about a 10-15 minutes’ walk.

“There are a lot of schools, colleges and offices in the vicinity leading to an increase in the number of residents. It is one of the most happening areas in Mumbai.

“All the land is being redeveloped and it is a very cosmopolitan place. It will soon be second to Bandra-Kurla Complex.”

Royal Palms have a few of their projects in the area. Talking about Goregaon, Mr. Dilawar Nensey, Jt Managing Director, Royal Palms India, says, “The location was chosen on the basis of it being within municipal limits of Mumbai and the natural beauty in and around it. Initially when Royal Palms came into existence we had plans of building IT projects in the 240-acre complex but later we came up with a proper township, which is now a self sustained mini-city with 2000 flats and 2000 offices.”

Discussing reasons for Goregaon being the perfect all-rounder suburb Mr. Percy Chowdhry, Director, Rustomjee Group says, “The state-of-the-art infrastructure, availability of plush residential properties and social infrastructure in Goregaon has made it extremely popular.”

The Rustomjee Group has a few of their projects in this area. Rustomjee Elanza, a high-end residential project is located on the Goregaon-Malad Link Road. It is developed thoughtfully and has three elegant towers each with 36 floors offering buyers the convenience of choosing between 2 and 2.5 BHK apartments ranging from 1100 sq.ft – 1305 sq.ft. Another of their projects called Rustomjee Ozone houses around 450 families.

Ravi Ahuja, Executive Director, Development Services India, Cushman and Wakefield says, “With the advent of large-scale office complexes such as Mind Space in Malad, Nirlon Complex in Goregaon the demand for residential options in the north has taken a great leap. This has also led many developers to keenly look at developing mid ranged to high end residential projects in this location.

“The residential values in the location have seen a corresponding rise through the years. The values for mid-ranged properties range from Rs 7,000 – 8,500 per sq.ft while high-end apartments are Rs 11,000 – 16,000 per sq.ft. The values of late have remained stable.”

Stating the reasons for Goregaon developing towards a brighter future, Manoj John, Vice President – Corporate Planning and Strategy, RNA Corp. says, “Well planned residential housing, rail and road infrastructure development, and corporate migration to new formed secondary business district of Goregaon are the reasons for appreciation in property values. Considering the recent and proposed developments in Goregaon, the suburb certainly has a bright future amongst Mumbai’s real estate micro-markets.

“We have introduced ‘RNA Exotica’, a premium 48-storey residential tower strategically located in vicinity to commercial and entertainment hubs at Malad, SV Road, Goregaon (W) and along the Western Express Highway in Goregaon (E).

The project comprises four wings with 36 residential floors each, two basements, 11 level car parking and an e-deck. It consists of 2 and 3 BHK luxurious apartments.”

Although there has been an escalation of residential property and residents, Goregaon still maintains its green side. Small pockets of the city have tall trees lining the roads, which are very well maintained.

NEW MUMBAI REALTY

New transportation systems in Mumbai to

positively impact real estate

A reality check on home buying agreements

Banks Commitments to Customers