Ensure structural safety of the building

How safe is your building? Only a structural engineer can give an answer. For that, he or she should have been in the team that constructed the building, monitoring every stage of the work.

But there is no rule that such a professional should be in the team. There are only guidelines. In western countries, structural certification is mandatory. Here, builders can decide whether to engage a structural engineer or not.

Usually, the buildings are designed on the Indian Standards Code, says S. Suresh, member of the Association of Structural and Geotechnical Consultants. A buyer may be under the impression that his building will stand for 100 years. An earthquake or cyclone may strike once in 50 years.

Even the builder cannot guarantee safety. A structural engineer can ascertain safety only if stringent monitoring has been done at all stages of construction. Hence, he or she should be involved in the construction right from the planning stage, Mr. Suresh says. Usually, the builders who give priority to safety have an inbuilt system to check the structural strength. For this, technical inputs are necessary, he says. Sometimes, a structural engineer is called only at the start of the construction, as his or her role is considered only advisory.

The structural drawing is important as the grid lines will be shown in that. It needs to be decided at the planning stage how many pillars are needed and where they should be erected. Problems such as wrong inclination of buildings or deeper setting in into the earth can be because of errors at various levels. There can be errors in soil investigation, design, construction or extra load.

Though structural safety is important with more and more multi-storey apartment complexes coming up to meet housing needs, the building rules in the country are yet to specify these norms.

Builders look for tax concessions

The Kerala Builders’ Association has suggested exempting flats with areas less than 100 sq.m (about 1,000 sq.ft) in rural areas from within the purview of the value-added tax regime.

The association has also suggested tax holidays for a limited period for the building and real estate sector in view of the hard times it faces. The concession will help it come out better from the calmness.

According to the president of the association M.D. Jairaj, giving incentives to builders in rural areas can help them offer affordable houses in rural areas to the common man. Also, this can help people in search of affordable homes when move from urban to rural areas.

The association, representing nearly 150 builder members in the State, sees signs of a revival in the housing market in Kerala.

However, Dr. Jairaj says that the government is looking at builders as enemies and is acting in a way that will render futile their efforts to survive these times of economic recession.

According to him, there is a widespread allegation that tax collection from the sector is low. This has led the government and the taxes department to treat them from this perspective. The association demands that the government and the department have to do something to protect the sector, which provides lakhs of jobs in the organized sector.

The sector is ranged with taxes. It pays around 33 per cent, including tax on inputs, he added.

The sector has been the worst hit in the economic recession. Added to this is a fear psychosis over the recession that scared away potential investors.

The government has admitted to a dip in revenue from registrations in the recent past. All the same, the association feels that the actual revenue fall may have been more than what is claimed. But the situation may have been helped by the ongoing drive opened by the Registration Department to settle cases related to undervaluation of property.

The association's general secretary T. Padmajan says that they have been demanding remedial measures for several problems facing the sector. These demands and appeals have fallen on deaf ears.

One of the demands they suggested is reduction in stamp duty. The stamp duty in Kerala is one of the highest in the country and scares away buyers. A reduction in this can create a more robust property market.

Taking the present financial crisis faced by the builders into consideration, the government should consider allowing them to defer the payment of labour welfare cess.

Another demand put forward by the association is the individual structural plans for each panchayat. According to them, each panchayat should have land-use rules to make planning easier.

Simplification and unification of the Kerala State Electricity Board rules is yet another demand. According to the association, the present set of rules on securing new electricity connections causes considerable delays.

Good news !!! Home loan subsidy

The Union Government has announced good news for those planning to take home loans by revising the interest rates. For home loans up to Rs. 10 lakh, the subsidy rate will be 1 percent. The interest subsidy will be available for those who opt for a property priced up to Rs. 20 lakh and a loan of Rs. 10 lakh or less.

Taking into consideration of cost of the property, it is not clear that the incidental costs such as registration costs and deposits paid for electricity and water connections are included. The new subsidy rate will be provided by the government for borrowers from banks and recognized home finance companies.

It is likely that the subsidy will be routed through banks and these companies after a year of repayment.

For example, consider a State government employee with an income of Rs. 20,000 a month, has bought a new house for Rs. 15 lakh. He has invested Rs. 5 lakh from his savings and has borrowed Rs. 10 lakh from a bank. The loan is repayable in 240 months (20 years), with the EMI being Rs. 8,998 each, at an interest rate of 9 percent. In this case, he will be eligible for the interest subsidy of one percent for the first year of repayment, which amounts to Rs. 7,596. So during the first year, he saves Rs. 633 a month.

The chart shows interest subsidy available for Rs.5 lakh and Rs.10 lakh loans for repayments tenures of five, 10, 15 and 20 years.

Subsidy for home loans @ 9% per annum

Longer tenures best

To make use of the maximum subsidy, it is better to opt for a longer repayment tenure, that is up to 20 years. In this, EMIs will be smaller and you will have the option of making part prepayments (normally banks and finance companies will not charge any penalty) later on.

Tax benefits

Furthermore, the interest paid after deducting the subsidy is eligible as deduction from the gross income under Section 24 of the Income Tax Act and also the principal repaid during the year qualifies for deduction under Section 80C, along with other specified instruments such as insurance premium and contribution to Provident Fund.

On a loan of Rs. 10 lakh for 20 years tenure at 9 percent interest, the interest paid during the first year after deducting the subsidy figures out to Rs. 79,236 and principal Rs. 21,144.

If you are in the group of 10 percent income tax (annual income between Rs. 1.6 lakh and Rs. 3 lakh), your saving may be up to Rs. 10,000 and may be along with other deductions, your tax liability becomes nil.

Realty sector begins to look up

The commercial property market, which had seen one of the biggest falls in October-November, is slowly reviving as higher government incomes and an improving economy are prompting customers to invest in asset classes.

"In the last few months the real estate market has undergone major changes. The slowdown that migrated from the US has got corrected in India now. The prices have got corrected. And whatever pent up demand was there in the market has started getting converted into business," said Santosh Rungta, president Confederation of Real Estate Developer's Associations of India (CREDAI).

CREDAI with 4000 members, is the apex body of the organised real estate developers and builders across India, representing pan-India associations of real estate and housing developers.

People were virtually not buying during the slowdown as the real estate price was high and insecurity gripped buyers.Developers, who had slashed prices of their commercial projects by 40-50 % due to slow demand, say there are now more enquiries from retail investors, while institutional buyers have closed some deals.

"The government made an appeal to us that the prices should be brought down and we (CREDAI) made an appeal to our fellow developers that they should try and bring down prices, and they acted accordingly," Rungta said.

The pan-India price reduction was to the tune of 15-35 percent depending on various categories and geographies, he said.

"Today flats are being sold, but the pace could be better. Generally things have reversed. In Mumbai also, rightly priced projects have been sold. The major contributor to this is the government policy to generate demand. It brought in stimulus packages, ensured availability of liquidity to the home buyers, interest rates softened," he said.

Another real estate player Indrajit De, chairman of Eden, also said a cut in housing loan lending rates may attract a few more buyers into the market."If the lending rate falls further by 50 basis points, the sales figure will climb up," he said, adding, "Certainly the market is looking up now. Sales have also improved."We are selling around 25-30 units (flats) per month. But it was much higher in the range of 55-60 units per month before the recession actually hit India."

Harshavardhan Neotia, chairman, Ambuja Realty Group, told : "Sales have picked up in the last two-three months. There is more offtake now than what it was six months back. But now the buyers are genuine users and not just investors. These are the people who really need housing. They are lot more quality conscious and they look for the right products." He said there was a drop of 10-15 percent in the price during the recession period. In the last two-three months the company has sold around 200 flats, he said.

Reacting to the recent announcement by union Finance Minister Pranab Mukherjee on interest subsidy on new home loans and extension of deadline in tax holidays on projects approved by March 2008 if they are completed by March 2012, Rungta said: "One must understand that extending the tax holiday under 80 I B (10) for a mere one year to projects approved by March 2008 will fail to create a significant positive impact on the real estate market. It will only benefit a few micro markets with a handful of projects."

CREDAI has suggested the centre consider extending the dateline to March 2012 for providing tax holidays to projects irrespective of the date of approval. "This will be of greater benefit to the sector and encourage developers to take up new projects and expedite ongoing projects as well."

Rungta further said: "Even the proposed interest subsidy of one percent to home loan borrowers for loan taken for houses costing up to Rs.20 lakh is also not justified."

CREDAI has suggetsed that the centre increase the subsidy to home loan interest rates by another one percent to two percent and extend the scheme for houses costing upto Rs.30 lakh from the currently proposed valuation of Rs.20 lakh.

Uncertain future of Housing Board

A memorandum was submitted to the State Government by the Kerala State Housing Board Employee Association three years ago, but no steps were taken in this regard. It is the responsibility of the Government to provide housing to hundreds of thousands of people below the poverty line. The employees appealed to the Government to help the board to tide over the problem.

According to the union leader, staff strength has come down from more than 1,000 to 500. During the State Budget for the year 2009-2010, Rs. 2,000 crore was allowed to start projects immediately by associating with private companies.

It was in June the Government ordered for the assets to be evaluated and allow the participation of the private companies to develop the properties. According to the employees, this government institution can become one of the major catalyst in the housing market if its potential is tapped and it assets are leveraged. It is known that the board has around 50 hectares of prime land across Kerala with assets around Rs. 3,000 crore and liabilities of Rs.1,000 crore.

K. Devarajan, Vice-President of the Housing Board Employee Federation, says that the Government should find a way to help the board and find the capital for projects. As the board is in the severe liquidity crisis, the only way to solve the problem could be done through the State.

According to the leaders, the board can enlist help from the Union Government if the Government opens up avenues for viable and profitable ventures.

For the settlement of dues to the Housing and Urban Development Corporation (Hudco), the Government will be releasing Rs.255 crore. The budget was proposed to write of Rs. 117 crore due to the board from 40,500 beneficiaries housing schemes before 1996.

The board will have a much better balance sheet by writing off the dues from the schemes mentioned above, and this will make it easier for them to take loans for projects. In order to woo international competitive bidding, the Government should seek transparent policy to develop the Marine Drive property of the board in Kochi. A special purpose scheme should be formed and used to return the Hudco dues.

According to the trade union leader, one time settlement is required for the board to survive with Hudco. Also, the amount (Rs. 255 crore) that has been sought by the Government should match what it owes the board for subsidies and one-time settlement. They also added that there was no compensation from the Government to the board for write off, one-time settlements, and instant subsidies given to borrowers.

In the last two State Budgets, the board is facing uncertain future by abandoning two major projects such as Marine Drive township at Kochi and Akkulam satellite township at Trivandrum. If the problem remains uncertain, poorest sections of the society will be affected more. Still, there is a chance for the Government to re-establish its pre-eminence to help the poor people in Kerala.