Gurgaon starts acquiring land for 1,349-acre green cover

HUDA has begun work on creating a green buffer as per Gurgaon Master Plan 2031, where 1,349 acres of green cover will be planted on the city’s outskirts to check pollution and improve air quality.

According to HUDA sources, land acquisition for the project has been expedited following directives from the chief administrator’s office. Farmers whose land will be acquired have been served Section 4 and Section 6 notices so far.

Land acquisition officer Satbir Singh said, “We’re speeding up acquisition for 1,349 acres of land near the northern peripheral road (NPR). Local farmers have already been served Section 6 notices. We’ll soon send them Section 9 notices, as per which they will be remunerated for the land acquired.”

He explained that the Section 4 notice is sent out to inform landowners that the government is interested in acquiring their land for government projects. Section 6 notices, sent out last month, informed them the government has initiated the land acquisition process. They will later on be awarded compensation for the land acquired via Section 9 notices, thereby completing the acquisition process.

Singh said the land will be acquired from 13 villages along the NPR. “Villages that fall under the project include Kakraula, Bhangraula, Wazirpur, Dhorka, among others,” said Singh. Land acquisition for residential, commercial and other purposes, as per Gurgaon Master Plan 2031, has taken place long ago. It is only the green cover, to be developed by HUDA, which is lagging behind. “We are now acquiring land for HUDA to speed up the development of a green buffer for the city,” Singh added.

HUDA administrator Anita Yadav said, “Once the acquisition is complete, the 1,349 acres of green cover will be developed to include parks and forest cover.”

Source: CredaiNCR.Org

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Commercial building approvals under radar in Gurgaon

The urban local bodies department has directed the MCG to check its process of approving commercial building plans after a slew of complaints that businesses were being run out of residential properties. According to officials, there are limited number of roads in the MCG area which have been declared as commercial.

“The department has asked us to scrutinize the way we grant approval the building plan for commercial buildings and has asked to prepare a list of all commercial establishments in the MCG area. If we find that a building owner is using his residential property for commercial use we will take action against him,” said an official.

According to the official, a section of councilors have been demanding that the MCG should declare all major roads as commercial so that the MCG can get additional revenue. “However we are not keen on doing so as that will lead to a lot of traffic and parking problems and these roads will not be able to handle the extra load,” he said.

Source: CredaiNCR.Org

Budget 2015 – Plug the Loophole

The government should give more incentives to first-time home-buyers and stop limit-free deduction for second properties.

Keeping Budget 2015 in mind, tax experts are of the opinion that interest deduction for first-time home-buyers should be enhanced and the limit-free deduction on a second home purchase should be stopped to bring in much-needed revenues for infrastructure development and curtail the inflow of black money in multiple properties.

To achieve the government’s target of housing for all by 2022, the focus should be on ensuring that first-time home-buyers should be given maximum incentives to encourage them to invest. Under Section 24B of the Income Tax Act, the maximum deduction allowed is ` 2 lakh. This limit was raised from `1.5 lakh in last year’s Budget. Interestingly, there is no cap on the interest limit for a second property, which encourages people to make a second purchase. Many of them then claim losses on vacant property. This happens more often if the rent they receive for the property is lesser than the interest they claim to pay for such properties.

According to Sonu Iyer, partner and national leader, Human Capital Services, EY (Ernst and Young), a vacant second house is generally deemed as rented out with the rent attracting tax. However, in most cases the interest deduction amount on the property is higher than the notional rent, which the property owner usually shows as loss – which is an undue benefit, say tax experts. “One of the proposals that the government should consider in Budget 2015 is not to tax a property on a deemed basis. This will not only prevent claim for loss on vacant property, it will also bring in additional revenues,” says Iyer.

Also, in case of pre-construction interest, a person is allowed to avail of the interest deduction benefit only after possession and that too on amortized basis over five years subject to overall cap of `2 lakh, which includes interest payable for the relevant tax year. For instance, if pre-construction interest is `10 lakh, which means amortized interest of `2 lakh over five years and interest payable in first year after possession is `1 lakh, you can claim deduction only for `2 lakh and not for `3 lakh

This is unfair as in most cases property possession is delayed. “Taxation laws should treat pre-construction loan interest as a separate item of amortised deduction outside the cap of ` 2 lakh. Don’t cheat the customer of his right to deduction. In most cases, projects are delayed, and the customer is not able to avail of entire pre-construction interest deduction,” she adds.

In many cases people buy two properties, both for self-use. One is at the place where they work and the other is in their home towns as they want to stay connected to their roots. At present, one can only claim one property as self-occupied, eligible for nil rental value. The government can propose that the two properties be treated as self-occupied, says Iyer.

Source: HT Estates, Mar 3, 2015, Page 01

EMERGING HUB – Another Gurgaon in the making

Dharuhera, home to many prestigious companies like Maruti, Honda, Amtek Auto, Sony, Samsung, Gillette, Orient Textiles, etc, is witnessing huge demand for social, entertainment, residential and commercial real estate due to some mega infrastructure projects in the vicinity.

Dharuhera is second to none in the NCR as far as connectivity and infrastructure are concerned. The town lies on NH-8. Also, KMP Expressway that connects NH-1, NH-10, NH-8, and NH-2 bypassing Delhi is nearing completion and is in close proximity to the town.

Some of the forthcoming mega infrastructural projects that are responsible for the development of the town include Delhi-Mumbai Industrial Corridor (DMIC), Manesar Bawal Investment Region (MBIR), Rapid Rail Transit System (RRTS) connecting Delhi-Gurgaon-Manesar-Dharuhera-Rewari-Bawal-Neemrana, and India’s first defence university-Indian National Defence University (INDU).

DMIC is now attracting the attention of investors across the world because it is a unique model for industrializing a country. Experts say that DMIC has the potential to attract more than $100 billion in new investments while value of land along the corridor would multiply manifold. When complete, DMIC will be the biggest industrial zone spanning the length of the western flank of India, encompassing six states, with “smart cities“ dotted along the length and breadth of this industrial corridor. This will naturally lift the prospects of Dharuhera and make it a strong competitor to Gurgaon in industrial growth and real estate development.

The Haryana government has earmarked four Influence Zones of DMIC in the state. In the first phase, MBIR has been taken up for development. MBIR spans across 800 sq km, out of which 402 sq km is being developed initially. Some of the mega projects under MBIR are an exhibitioncum-convention centre on 400 acres, an integrated multi-model logistics hub on 1,000 acres, among others.

RRTS (Rapid Rail Transit System) between Gurgaon, Manesar, Dharuhera, Rewari, and Bawal-130km in route length has been planned with an investment of Rs 63,000 crore. Land acquisition has begun here with a notification in 13 villages of Rewari district in Haryana.

KMP (Kundli-Manesar-Palwal Expressway), under construction, will connect NH-1, NH-10, and NH-2 with a route length of 135.65km. These developments have spurred the efforts of developers here.

Source: Times Property, Feb 28, 2015

Realty sector seeks removal of multiple tax levels on REITs

The real estate industry is keenly waiting for clarity on the tax structure applicable to real estate investment trusts, or REITs, from the upcoming Budget. In July, finance minister Arun Jaitley in his Budget speech gave a so-called pass through status to REITs. However, the explanatory statement accompanying the 2014-15 Budget revealed that the tax incentive given to REITs comes in with riders.

The pass through treatment is essentially accorded when REITs are acting as a debt-raising instrument. For instance, if a sponsor, or SPV, has formed a REIT to raise funds either in a foreign or domestic market through bonds or loans, the trust will deduct a witholding tax, before repatriating the interest income to investors. So, while the tax is paid by the trust, the tax liability is that of the investor, and not the SPV or the REIT.

“The special tax regime says that no tax is levied on interest income received from the SPV in the hands of the trust and no withholding tax is levied at the level of SPV. Withholding tax is levied on payments of this interest income to unit holders at 5% for non-resident unit holders and at 10% for resident unit holders,” Pranay Bhatia, partner at BDO India, explained.

However, if an SPV is distributing dividend on equity to the trust (which in turn will repatriate to the investor), it will be subject to dividend distribution tax at the SPV level, but exempt in the hands of the trust and the unit holders.

Also, REIT units, when traded on the stock exchanges, would attract a similar tax treatment as equities, and will be liable for securities transaction tax. While REITs will be exempt long-term capital gains tax, they will attract short-term capital gains tax of 15%.

REITs will also attract minimum alternate tax. So, while swap of shares for units in REIT are not taxable in case of promoter, according to accounting practices, the difference between the fair value of REITs and the cost of shares will be credited to the profit and loss account, leading to a MAT levy of 20% under the I-T Act.

However, the REIT itself will only be taxed in case the assets it holds are transferred to another REIT. Capital gains at the time of sale of assets by the business trust will be taxable in the hands of the trust at the applicable rate. If such capital gains are distributed, the component of distributed income attributable to the capital gains would be exempt in the hands of the unit holder.

The realty sector is expecting that the Budget will exclude both DDT and MAT levies on the REIT structure and exempt it from multiple tax levels, bringing in a level-playing field for more investors.

Source: CredaiNCR.Org