New home launches fall by one-third in Delhi NCR: Cushman & Wakefield

New Delhi: Launch of new homes dropped by 12 per cent to over 1.72 lakh units so far during this calendar year in the eight major cities due to cautious approach by developers in view of slowdown in demand, according to global property consultant Cushman & Wakefield.

National capital region (NCR) saw a decline of 33 per cent in new launches this year at 38,411 units compared with 57,098 flats in the year-ago period.

“There has been a drop of 12 per cent in new residential project launches in 2013 as over last year. Total estimated unit launches were recorded at 1,72,500 units across major eight cities of India,” C&W said in a statement.

In 2012, these eight cities — Bengaluru, NCR, Chennai, Mumbai, Kolkata, Ahmedabad, Hyderabad and Pune – witnessed 196,846 units of new launches.

Bengaluru recorded the largest number of units launched this year at 49,279 flats, up by 15 per cent from last year.

Mumbai (6 per cent) and Kolkata (3 per cent) saw a rise in the total units launched in 2013 over last year.

“Chennai on the other hand saw the sharpest decline in launches of new residential units which represented a drop of 39 per cent over last year,” it added.

NCR (-33 per cent), Pune (-20 per cent), Ahmedabad (-5 per cent) and Hyderabad (-3 per cent) recorded a decline.

Commenting on the report, C&W executive managing director South Asia Sanjay Dutt said: “In the current economic scenario both buyers and developers are taking a cautious approach not only towards residential real estate but across all asset classes of real estate.”

He noted that developers have not been able to lower cost due to upward movement in costs incurred on land, construction and debt.

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The land acquisition rehabilitation and resettlement bill, 2012

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We have long heard tales of stupendous conflicts between farmers, developers and government regarding acquisition of land for development purposes. The echoes of these stories are so profound that no one can give them a miss at all. Farmers give land to the developers, developers buy that land and create resources for development, and consequently government intervenes and creates a scope of growth within the defined parameters. But, the situation is totally contrasting than it sounds; also the repercussions of this process are very extensive leading to its impact being manifolds. No one has been able to stream away from the discrepancies in this system.

Uncovering the process

Land acquisition refers to the process by which government forcibly acquires private property for public purpose. The Land Acquisition Act, 1894 (1894 Act) governs all such acquisitions. Additionally, there are 16 Acts with provisions for acquisition of land in specific sectors such as railways, special economic zones, national highways, etc. The 1894 Act does not provide for Rehabilitation and Resettlement (R&R) for those affected by land acquisition. Currently, the R&R process is governed by the National R&R Policy, 2007. In this year, two bills were introduced in the Lok Sabha: one to amend the Land Acquisition Act, 1894, and the other to provide statutory status to the R&R policy. These Bills lapsed with the dissolution of the 14th Lok Sabha in 2009.

In May 2011, the National Advisory Council recommended combining the provisions of land acquisition and R&R within a single Bill. In July, 2011, the draft Land Acquisition, Rehabilitation and Resettlement (LARR) Bill was published by the Ministry of Rural Development for public comments. In September 2011, the government introduced the LARR Bill in the Lok Sabha. This Bill will replace the 1894 Act.

The core sense

LARR Bill, 2011 seeks to repeal and replace India’s Land Acquisition Act, 1894. The Bill seeks to enact a law that will apply when:

  1. Government acquires land for its own use, hold and control.
  2. Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose. The purpose of the Bill includes public-private-partnership projects, but excludes land acquired for state or national highway projects.
  3. Government acquires land for immediate and declared use by private companies for public purpose.

LARR Bill, 2011 aims to establish the law on land acquisition, as well as the R&R of those directly affected by the land acquisition in India. The scope of the Bill includes all land acquisition whether it is done by the Central government of India, or any State government of India, except the state of Jammu & Kashmir.

The unwrapped facts

According to real estate experts, Cushman & Wakefield, acquiring land is a complex procedure and the archaic 1894 Act has been incompetent (for a long time) in addressing the complexities of acquisition and settlement. Recent disputes in Uttar Pradesh, West Bengal, Andhra Pradesh, Orissa and Karnataka exemplify the outcomes of disharmony among various stakeholders. The proposed LARR Bill, 2011 is a major improvement over the previous 1894 Act. Apart from offering better compensation and addressing the concerns of land owners and livelihood losers, the Bill tries to make the whole process of land acquisition easy and transparent. Key features of the bill include higher compensation for land, a comprehensive R&R package, special provisions for SCs/STs, restrictions on acquiring crop land among others. The proposals included in the Bill are likely to impact the residential and commercial property markets, though with a time lag.

The compensation plan for the land owners and livelihood losers may be an expensive proposition especially for private and smaller building companies as the Bill appears to be mostly focused on land acquisition for infrastructural projects and large scale commercial projects. Also the Bill has to be aligned to the existing land acquisition norms of various states given the fact that ‘Land’ will continue to remain a ‘State list’ item. The proposed Bill does not talk of any process streamlining, thus setting up of a medium to large scale industry may still be a very tedious process as it requires consent of 80 per cent of the project affected families resulting in active transactional negotiations with large numbers of land owners. There is a scope that unwarranted delays and higher compensations could impact infrastructure projects hindering urban growth and development.

Some of the main issues that the LARR Bill, 2011 has to further address are irregularities in land records, inaccurate land values and multiple land titles. Once the Bill becomes an Act, the states can draft their own policy around the national Bill; therefore, the impact of the new LARR Bill, 2011 will be varied across India. While this is a step in the right direction, there will be many more aspects to formalise before the Bill can come into effect. If the ambiguities are not addressed the bill can be counterproductive.

A significant viewpoint

Confederation of Real Estate Developer’s Association of India (CREDAI) lays down the following points:

  1. Restrictive Land Policy will lead to Unplanned Growth and Slum- Incorporating R&R for all private projects above 50 acres will severely restrict the supply of land for organised housing. Urbanisation is an uncontrollable force. If we do not facilitate it in an organised manner, all the incremental population will be housed in slums with dire consequences for our economy. Housing prices will further become unaffordable. In the long run, even farmers whom this bill seeks to protect, will suffer hugely as development of fringes of urban centre will largely be in the form of unauthorised developments and they will not realise the true economic potential of their lands. Government should do away with the numerous onerous and artificial impediments placed in the way of free commercial transactions. This will be harmful for the economy, the urban middle class, lower middle class and ultimately the farmer.
  2. Alternative Solution: Cashless Transaction– An alternative way of compensating the original landlord/farmer whose land is being acquired for any project which is commercial in nature – toll roads, housing, etc included- is to offer the landowner an opportunity to become a share holder in the new venture. In any case, the valuation of the land including solatium, etc. has to be first determined. Thereafter, the landowner could make his choice for taking his compensation in cash or as share in the project or as part cash and part share. In no case the share holding of the land owner should be more than 49 per cent of the total share capital of the project. This will ensure that the promoter of the project is able to implement the project with his expertise while the landowner could also gain incrementally from the increased value of a completed project. This is a better and sustainable mode of benefitting the landowner rather than stipulate unsustainable and unmonitorable conditions like long term annuity compensation or 20% of the developed land to be given back as further compensation. As such, government has announced compulsory reservation of 20 per cent developed land even in private housing projects for EWS housing construction under Rajiv Awas Yojana. This kind of one-sided, ill- thought out doles may sound very altruistic and pro-poor; but, these are unsustainable and ‘will kill the goose that lays the golden egg’. The Real Estate sector in spite of all hurdles is now contributing more than 11 per cent of GDP and has strong linkage with 250 types of industries plus the finance and insurance sector. It is the second largest employment providing sector. Rapid urbanisation and population increase would need much more affordable space creation in quick time.

The closing questions

Sudhir Kumar, an eminent High Court Lawyer gives in his conclusive perspective- Whenever we consider the usage of 1894 Act the problems of Bhhatta Parsaul and Greater Noida in Uttar Pradesh and Singur and Nandigram in West Bengal prominently persist in the news. However, the real problems of land owners, the government and the private players along with the people are not seriously discussed yet. The present Bill is considerate in analysing many problems but this Bill too is dented with various conditions that it imposes in the form of clause over land owners and land users. To begin, there are two main questions, firstly, whether the Bill is fair enough in answering all the problems that prevail in the present scenario of Indian economy and in the previous 1894 Act. Secondly, with the coming of this Bill will the land owner have the freedom to choose any other option rather than unquantified money on land price developed and distributed by the State government under the 1894 Act?

Even after collecting the compensation from the hands of district officers or land acquisition collectorate; the land owners have to fight another long battle under section 18 of 1894 Act for further enhancement of their compensation from the District Court to High Courts. There are numerous judgments to these effects issued by the Hon’ble Supreme Court and High Courts of various states.

Sometimes, if the State government fails to develop the said acquired land for a long term of time, which generally do happens, then there is another tedious battle of cancelling the notification of lands acquired under the 1894 Act. But, are the land owners actually practicing farming on their land or do they sell the land quickly to other private individuals in order to get more amount than what the government prescribes after making their assessments, such questions are still not answered in the present Bill. Moreover, what is the benefit factor for new land users if the notification of land is cancelled and each new user has invested their money? Another thing which could be mentioned here is the rising heterogeneity among the original land users and the new land users, as the compensation policy in the matters of land acquisition is still not acceptable by both the people involved in case. The analysis has to be made along with some amendments; that whether the Bill is able to answer the problems of farmers, land owners, land users, industries, agricultural productivity and the social brigade at all. In the stage of analysis, what could be the broader line for answering various issues raised in various litigations before the courts or among the land owners and land users? The analysis could never bring a solution however the probable solution can be made. But, it’s very important to clarify the role of government, their intention and their officer’s role who are involved in such process. At present, there are many more issues that could be raised in time manner and the debate on the sanctity of new Bill shall always be maintained.

Land Acquisition Bill may push up property prices by 30%

NEW DELHI: Real estate developers say the passage of the Land Acquisition Bill could push up property prices by as much as 30% in projects where land is yet to be acquired.

The Bill, passed by the Lok Sabha on Thursday, aims to provide higher compensation of four times the market value for land sold in rural areas and twice the market value for land in urban areas, among other benefits to land owners.

While developers agree that the Bill will increase transparency in land deals, they say the higher compensation to land owners could make several real estate projects unviable. While large projects of over 50 acres will become difficult to execute, even prices of smaller parcels of land that do not come under the purview of the Bill could double, they add.

“The process of acquiring land for projects will become tedious, especially in the case of large land parcels,” said Lalit Kumar Jain, chairman of Confederation of Real Estate Developers Association of India.

Developers say the worst hit could be lowcost and budget housing projects. “The idea of low cost housing was to get cheap land. If land prices shoot up, so will the prices of the finished product,” said Niranjan Hiranandani, chairman of Mumbaibased Hiranandani Group.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012, will replace the Land Acquisition Act of 1894. It needs clearance from the Rajya Sabha and the President to become law. Besides ensuring fair compensation, the Bill says that land acquisition for public private partnership (PPP) projects will require the consent of 70% of the landowners while private projects will need the consent of 80% of the owners, conditions that will leave little room for forcible acquisition of land. The Bill also says that if the land is sold to a third party, 40% of the profits will have to be shared with the original owners.

According to the Bill, affected “families” would include farm labourers, tenants and workers who have been in the area for up to three years before the land acquisition. Such persons will have to given a job or compensation of .Rs 5 lakh, an allowance of.Rs 3,000 a month for a year, besides other allowances as part of the rehabilitation and resettlement (R&R) package.

This means that a private company acquiring land will have to first seek the consent of 80% of the land owners before approaching the government to acquire it. Once cleared, it will have to offer an R&R package, too.

One of the amendments to the Bill allows a buyer to leas land, instead of buying, as suggested by BJP leader Sushma Swaraj. “For the real estate industry, the addition of R&R component will be a big financial burden,” said Sanjay Dutt, executive managing director of South Asia at Cushman & Wakefield.

The Bill has drawn protests from developers, who maintain they always ensure full consent of the seller in any land deal. “A willing buyer and a willing seller should be exempted from the Act, as in such cases there is always 100% consent and the best market price for the land is paid,” said Rajeev Talwar, group executive director at DLF

“Going through the government compulsorily will only add to the cost and time taken and will put unnecessary burden on the buyer. The government should rather make it easier for the private sector to operate.” To insulate against any increase in land price, several developers have adopted the joint development model, where landowners and developers share profits as well as risks.

For developers, the cost of land is expected to increase significantly, impacting project cost and margin.

How to transfer your property

    When it comes to transferring property, a sales deed may not always fit the bill, especially if you want to pass it on to relatives. In such cases, instruments like a gift deed or relinquishment deed can come to your rescue. However, blindly choosing either can lead to problems. “You must understand the purpose of each document before getting it drafted. Know the benefits as well as drawbacks of each,” says Vaibhav Sankla, director, H&R Block. “These documents are designed to play a specific role in the transfer of property and, hence, it is important to consult a lawyer,” he adds. 
GIFT DEED 
This document allows you to gift your assets or transfer ownership without any exchange of money. To gift immovable property, you just have to draft the document on a stamp paper, have it attested by two witnesses and register it. Registering a gift deed with the sub-registrar of assurances is mandatory as per Section 17 of the Registration Act, 1908, failing which the transfer will be invalid. Besides, such a transfer is irrevocable. Once the property is gifted, it belongs to the beneficiary and you cannot reverse the transfer or even ask for monetary compensation. 
    However, if you want to gift movable property like jewellery, registration is not compulsory. At the same time, a mere entry in an account book is not sufficient to establish a transfer. Apart from physically handing over the property, you need to back it with a gift deed. The process is slightly different if you are gifting company shares. You will have to fill out the share transfer form and submit it to the company or registrar, and the transfer agent of the firm. Once again, get a gift deed drawn and executed to complete the transfer, but the document need not be registered. 
Advantages 
The biggest benefit is that there is no tax implication if you are gifting property to certain relatives (see box). However, you still have to pay stamp duty, which can vary from 1-8% for immovable property, depending on the state in which the transfer takes place. If you are gifting property to a non-relative, the stamp duty would be higher at 5-11%. You have to pay this duty even in the case of movable property. Expect to shell out 2-8% in case of relatives, and 3-8% for non-relatives. For physical shares, the stamp duty is 0.25%, but if these are in the demat form, you don’t have to pay. 
Limitations 
Though a gift deed cannot be revoked, it can be challenged in court, coercion and fraud being the most common grounds. So, if you have been tricked into gifting property, you can take the matter to court and have the transfer reversed. It can also be challenged on the grounds that the donor was not of sound mind or a minor. “You can never have a challenge-free gift deed, but consult a lawyer while drafting it so that the chances of it being challenged are minimum,” says Aakanksha Joshi, senior associate, Economic Laws Practice. Also, you cannot gift a property that’s held jointly. 
RELINQUISHMENT DEED 
This document is quite different from a gift deed, though the legal implications are the same. You can use this instrument if you want to transfer your rights in a particular property to another co-owner. Such a transfer is also irrevocable even if it is without any exchange of money. As with all documents related to the transfer of immovable property, a relinquishment deed needs to be signed by both parties and registered. The stamp duty is similar to that for a gift deed. However, there is no discount for relatives, nor are there any tax benefits. Also, both stamp duty and tax will be applicable only on the portion of the property that you relinquish, not on its total value. You can also use this deed to transfer movable property without registration, but it is typically used for immovable property. 
Advantages 
It allows seamless transfer of your share in a jointly-held property. “This document is most commonly used when a person dies without leaving behind a will and all siblings end up inheriting the property,” explains Joshi. Unlike a gift deed, you can draw the relinquishment deed for monetary consideration. 
Limitations 
There are no tax benefits, for as per the tax laws, the term ‘transfer’ includes relinquishment, not gift. Hence, when you are relinquishing property for monetary consideration, it will result in capital gains for the transferor. “If the consideration is less than the stamp duty value of the property, the difference between the stamp duty and the consideration will be taxed in the hands of the buyer,” says Sankla. If you relinquish it without any consideration, the stamp duty value of the property will be its sales price.Image

Lease deeds, Power of Attorney to be compulsory under new bill

A bill to amend the century old Registration Act to help check the loss of revenue to the state seeks to make registration of lease deeds of immovable properties and Power of Attorney compulsory irrespective of their term.

The Bill also makes it mandatory for every person presenting the document at the registration office to affix his passport size photograph and get photographed by a digital camera on the document.

The Registration (Amendment) Bill, 2013, to further amend the Registration Bill, 1908, introduced in the Rajya Sabha today by Rural Development Minister Jairam Ramesh, also seeks to make provisions for the recovery of deficit registration fee and refund of excess fee.

It also provides that Wills or authority to adopt a Will and any document notified by the state government may be registered at the option of the parties.

The Bill also provides that immovable property can be registered only in the state in which it is actually located, but the Central or State government can allow a particular document to be registered in any registration office.

The Bill also includes a new section which prohibits the registration of certain documents relating to transaction which is prohibited by any central or state act, besides prohibiting registration of any document which is likely to affect the accrued interest in immovable properties of central or state government, local bodies and other properties as may be notified by state government.

The Rural Development Ministry’s Bill has been brought in after incorporating the recommendations of a Committee headed by Secretary, Department of Land Resources to suggest amendments to the Registration Act, 1908.

As the century-old Act had many lacunae whereby many exploited its provisions by not getting their lease deeds below one year for their immovable property registered, thus causing revenue loss to the state. 

Lease deeds, Power of Attorney to be compulsory under new bill

A bill to amend the century old Registration Act to help check the loss of revenue to the state seeks to make registration of lease deeds of immovable properties and Power of Attorney compulsory irrespective of their term.

The Bill also makes it mandatory for every person presenting the document at the registration office to affix his passport size photograph and get photographed by a digital camera on the document.

The Registration (Amendment) Bill, 2013, to further amend the Registration Bill, 1908, introduced in the Rajya Sabha today by Rural Development Minister Jairam Ramesh, also seeks to make provisions for the recovery of deficit registration fee and refund of excess fee.

It also provides that Wills or authority to adopt a Will and any document notified by the state government may be registered at the option of the parties.

The Bill also provides that immovable property can be registered only in the state in which it is actually located, but the Central or State government can allow a particular document to be registered in any registration office.

The Bill also includes a new section which prohibits the registration of certain documents relating to transaction which is prohibited by any central or state act, besides prohibiting registration of any document which is likely to affect the accrued interest in immovable properties of central or state government, local bodies and other properties as may be notified by state government.

The Rural Development Ministry’s Bill has been brought in after incorporating the recommendations of a Committee headed by Secretary, Department of Land Resources to suggest amendments to the Registration Act, 1908.

As the century-old Act had many lacunae whereby many exploited its provisions by not getting their lease deeds below one year for their immovable property registered, thus causing revenue loss to the state. 

Real estate sector to remain unaffected by inclusion in NCR: Experts

Three new inclusions to NCR viz Mahendragarh and Bhiwani in Haryana and Bharatpur in Rajasthan would not impact real estate sector negatively said the industry experts. This was in response to a query whether the step would bring down prices of the properties in Gurgaon. This brings the tally to 11 districts of Haryana in the NCR region out of twenty.

“People still have to throng past Manesar in Gurgaon. Residential market or even commercial real estate market response is very far sighted,” said Sunil Chutani, managing director Terra Realcon.

Chairman and managing director of Trehan Home Developers, Harsha Trehan echoed similar sentiments. “Lot of vacant land is still available in other parts of the NCR such as Noida, Greater Noida, Faridabad, Gurgaon, Manesar, Bhiwadi, Kundli, etc. The point is when end-user is not going to these far off places, why would he go to newer areas recently added to the NCR map.”

Trehan further clarified, “As of now people still have to move into these places. A lot of investors have invested in various areas of these regions but actual buyers have not come in. For example some of the newer areas in Gurgaon have a lot of investors and because of high price end user are not coming.”

Chutani said though people have this in their knowledge, it would still take some time for these areas to register in people’s mind. “This is evident from response to other areas closer to Delhi.”

Sunil Chutani however cautioned the buyers about certain developers’ intentions. “Some developers might try to lure the buyers/investors by highlighting the far off future prospects.”

Many experts believe that instead of making buyers confused about the prospects of new regions, the government should try to make the market of existing places more lucrative through various means.

Sumit Berry, managing director of BDI Group did not endorse the idea of addition of new districts. “I believe the government should first concentrate on present NCR areas. A lot of infrastructural development is needed in places such as Bhiwadi and Manesar. So I would have been happy if NCR Planning Board would have announced some development plans for the present regions.”

Sanjay Rastogi of Saviour Builders also emphasized on giving more importance to existing areas first and thereafter adding newer areas. “Existing area should get government support when it comes to job creation and infrastructural development to meet the intention then add new regions.”

Also, there are suggestions that Noida and Greater Noida market will witness a northward movement. “The areas in these two places are likely to witness hike between Rs 1000 and Rs 2500 per square feet. Amidst such circumstances, Yamuna Expressway area is the right place to invest as of now rates are cheaper, despite the fact that Yamuna Expressway is the future,” informed Amit Gupta director of Orris Group.

Gupta rubbished any thought of correction in prices happening in immediate future in Gurgaon Noida or any other NCR region. He also sees this as a move to ease out some pressure from the Delhi-NCR region