Real estate of Uttaranchal is fighting for sufficient foreign investments for its development. The real estate in Dehradun is growing at a pace. It has opportunities in industry, tourism, commerce and investment. The state is crowded with lots of real estate builders, who has various township projects for state. Though, commercial and residential properties in major locations like Dehradun look for land in these tourist spots.

With government policy of 100% tax exemption for a decade from central exercise and income tax exemption for next 5 years, housing and building companies are competing to develop virgin lands of Dehradun.

Although the real estate developers are fine with the government’s policies on real estate yet they want government to be more flexible.

With an aim of reversing the slowdown, Urban Development Minister Jaipal Reddy has sought an additional package for the real estate sector.

In a letter to the Prime Minister, Reddy has stated that “more needs to be done to reverse the slowdown facing the sector”.

Suggesting a slew of measures, Reddy has submitted a note containing suggestions of industry.

“Some of these suggestions with appropriate modifications could be favorably looked into,” he said in the letter to the PM.

The real estate sector plays a dominant role in the country’s economic growth and employment generation.

Unfortunately due to the ripple effect of the global meltdown, the sector is facing severe liquidity crunch. Transactions have come down by almost 80% and the sector which was driving the entire economy has virtually come to a halt.

As a result, most of the developers are facing liquidity crunch on account of financing their long term assets with short term loans.

Seeking rationalization of home loan interest rates, the real estate industry has suggested 6.5% interest for a loan up to Rs five lakh and 7.5% on loan above Rs five lakh and up to Rs 30 lakh.

It has also sought the income tax limit exemption on rental income from house to be increased from 30% to 50% among others to revive the sector.

From now on, tax cannot be levied on the money paid by a builder to a housing society or private individual for redevelopment of property, the Income Tax Appellate Tribunal (ITAT) has said in a recent order. The verdict is expected to give a boost to the redevelopment business in Mumbai which has over 35,000 buildings slated for redevelopment.

The income-tax department has been sending notices to housing societies, which are in the process of redevelopment, demanding that tax be paid on the amount paid by the builder to the society.

New Shailaja Co-operative Housing Society, located in Ghatkopar (east) in Mumbai, which received such a notice, moved the ITAT after it failed to get a relief from the Com missioner (Appeal), the first appellate body on tax matters. The ITAT is the second appellate authority on tax issues.

With ITAT decision favouring the society, all property owners including housing societies and individuals embarking on redevelopment are likely to heave a sigh of relief.

“This order will be of immense help to those living in over 35,000 buildings in greater Mumbai, seeking redevelopment. This order gives a clarity on the issue of taxation in such cases,” Property Redevelopers’ Association’s chief spokesperson and general secretary Pujit Aggrawal said.

The tax demand on New Shailaja Co-operative Society was about Rs one crore. The Society’s 3 floor building was converted into a seven story building after the redevelopment.

Accepting the contentions of Tarun Ghia, the counsel appointed by New Shailaja Co-operative Housing Society for arguing its case before the ITAT, the Tribunal observed that Development Control Regulations vest the rights on the society to use TDR rights for additional construction. Even after the transfer of rights to additional FSI, the building and the land continue to belong to the housing society, Mr Ghia argued.

The Tribunal observed that before development agreement was struck, the society was the owner of the land and building and after the development was completed, the society continued to be the owner of the same land and building.

The society had sold the development rights to the developer but since development rights in this case had no “cost of acquisition”, there is no room for determining the capital gain, Mr Ghia argued.

Leading shareholders of Hirco, the AIM-listed real estate fund of the Hiranandani group, are likely to support the group’s move to restructure Hirco, by merging two real estate subsidiaries with it.
According to a person close to the Hiranandani group, “The proposal to restructure has originated from shareholders. About 90% of them are supporting the proposal,” he said, declining to be quoted. “A board meeting is scheduled sometime later this month to take the final call on the plan,” he added.
The move has however run up against stiff opposition from another section of shareholders who are reportedly planning to jointly oppose such a move as they feel, it would give the Hiranandani group, control over Hirco.
Extraordinary general meeting on January 16, in Mumbai, for shareholders to vote on the restructuring proposal. Hirco will begin roadshows for investors early next week.
Niranjan Hiranandani, chairman of the Hiranandani group, didn’t comment as it is the silent period – the period ahead of the company’s results when senior officials don’t make forward looking statements.
Reports in the British media on Wednesday had suggested that certain shareholders were opposing the restructuring plan, which they say, would dilute shareholding interests and effectively cede control to the Hiranandanis.
According to the reports, a section of investors led by Laxey Partners, an activist shareholder with over 10% shareholding in Hirco, have termed the restructuring plan as “shocking and ill-conceived.”
In a letter, Laxey wrote to other shareholders urging them to join it in voting against the plan, which involves injecting a loss-making development vehicle ownded by the Hiranandani family, into Hirco, and handing the family an equity stake of up to 50.6% in Hirco.
As part of the proposal, shareholders will lose their preferential claim on £350.8 million of shares that pay an annual dividend of 12%.
On December 18, the Hirco board had proposed the merger, through which, Hirco would acquire two special purpose vehicles owned by the Hiranandanis. These two companies are carrying out township developments at Panvel, near Mumbai and in Chennai.
There are currently many foreign funds that own large stakes in Hirco, including UK’s Standard Life (13.11%), HSBC Holdings (10.13%), Laxey Partners (10.05%), Halbis Capital (7.84%), Fortress Investment (4.57%) and Lazard AM (4.57%).
The Hiranandani group which is unlisted in India, holds less than 20% of the invested entity. The merger proposal, once implemented would take the Hiranandani group holding to over 50%.
Hirco, which listed on the AIM in 2006, had raised more than £380 million for investing in residential properties in India.

If 2008 was the year that witnessed an unprecedented crisis of confidence, 2009 could be one of re-building confidence among market participants.

With inflation coming down, leading to lower interest rates, several blue chips are at multi-year lows and insurance companies are showing a marked shift from unit linked plans, the year is sure to throw up interesting long term investment opportunities for investors.

And gold, the asset class that truly transcends geo-political boundaries, could be the one to bet on heavily. Along with the southward movement of interest rates, debt has emerged as one of the top investment opportunities.

For retail investors, investing through debt mutual funds early in the year could turn profitable. “People in the higher tax bracket should invest through bond and income funds, and for at least 2-3 years,” said Gaurav Mashruwala, an independent financial planner. However, for those in the lower tax bracket, bank fixed deposits are usually the preferred investment option.

But, bank FD rates are also headed south and are expected to keep falling as long as banks keep reducing their lending interest rates. With the development of a robust corporate debt market on track, individual investors could expect to start participating in the debt market directly.

The linkages between the debt, spot and derivatives market for foreign currencies, and a market for interest rate derivatives are very strong. This should provide some liquidity to the corporate debt market, which might create opportunities for retail investors who do not want to go through the mutual fund route.

In 2008, investors lost money in shares. But 2009 could be the year of long-term investors with some large cap stocks now available at over 90% discount to their 2008 highs. These stocks have moved from the exclusive large-cap area, past the mid-cap range, are now resting in the small-cap segment.

Yet, market veterans expect stock prices to decline further from the current levels once corporate results start coming in from January second week. So the right time to invest for the long haul could well be after that.

“The good bets are those frontline companies from each sector that are India-centric,” said Arun Kejriwal, director, KRIS, an investment advisory company. Among those expected to give better returns are PSU, auto, FMCG, pharma, power and telecom companies.

“Once the cycle starts turning, banks will be off the block first. Capital goods and power companies would follow,” said Anup Bagchi, executive director with ICICI Securities. “And, with the government stimulus packages in place, infrastructure companies are expected to do well,” Bagchi added.

The life insurance segment is sure to witness a sea change during the new year. During the bull phase, insurance companies sold and buyers mostly bought ULIPs where returns are fully linked to the market.

But,in an uncertain market, these products are turning out to be patently bad ideas. Insurance buyers, having burnt their fingers in ULIPs, are now looking for capital protection and assured returns.

Realty firm Akruti Developers is wooing home-buyers to invest in its serviced studio-apartments project by offering a rent guarantee scheme to potential buyers. The proposed project — Afallon — will come up in the Whitefield technology hub, in close proximity to the International Tech Park, said Akruti Developers managing director Nikhil Jadhav.

With apartments priced under Rs 30 lakh, Bangalore-based Akruti says the project is targeted at young professionals who would benefit from investing in an asset and earn a regular income from it.

“The studio apartments, ranging from about 700-800 square feet are priced between Rs 22-30 lakh and will be fully-furnished. We think it can be turned into a source of parallel income when the owner rents-it-out to guests on a regular basis. Over the years, the owner also benefits from the appreciation of the property’s value,” Mr Jadhav said. Housekeeping and maintenance will be outsourced to a professional firm.

Owners who sign a rental agreement with the developer will be paid a fixed rent for three years. These owners will not be charged a maintenance fee. But those who wish to fix their rent and look for tenants themselves will have to pay a monthly maintenance fee. “Rental guarantee schemes are extremely popular abroad and developers continue to add new incentives to attract buyers, especially since sales have slumped,” Mr Jadhav said.

Afallon comprises 120 studio apartments and are being sold by invitation only. The project will include facilities like a business centre, car hire, daily housekeeping, gym, cook-on-request and a doctor on call. Akruti plans to sell only sixty units and retain the rest.

“This will help generate investor confidence; that we are committed to creating a quality product,” Mr Jadhav said. Construction will commence in February and the apartments will be ready for handover in two years. The company has eight completed projects in Bangalore and two in Goa.