Real estate in Chennai

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Real estate prices surge in Sriperumbudur, a town 40 km southwest of Chennai, as it makes its mark as a manufacturing hub for global majors.

With several companies announcing their plans to set up manufacturing plants in Sriperumbudur, the town is set to see an investment to the tune of Rs 4,700 crore. It all began with Korean auto giant Hyundai setting up its plant here in 1996. The company has now commissioned its second plant at an investment of Rs 2,000 crore. The latest entrants into the region are Nokia, Flextronics and Foxconn who together account for Rs 1,600 crore of the planned investment. Foxconn has also outlined a joint initiative with Motorola to set up a special economic zone (SEZ) in Sriperumbudur. As a result of these developments, real estate activity has picked up pace in the town. Property prices have gone up by 25 to 35 per cent in recent times and an acre of land now costs Rs 40-50 lakh. As Sriperumbudur lies along the Chennai-Bangalore highway, prices are likely to rise even higher once the national highway to Bangalore is complete.

Due to the increasing commercial activity, demand for housing too is expected to rise, land purchases for which have already begun. Industrialisation is thus set to give Sriperumbudur and its realty a major face-lift.

As per a recent notification by India's Ministry of Commerce, Foreign Direct Investment in the Indian real estate sector is now permitted through the "automatic route", i.e., without requiring the additional approval of the Foreign Investment Promotion Board. This implies that the foreign investor may now by-pass some of the previously required approvals, making the investment process less cumbersome.

Within the real estate sector, foreign investment in India is now permitted in construction and project development related to both residential and commercial development in (i) housing townships; (ii) commercial office space; (iii) hotels and resorts; (iv) hospitals; (v) educational institutions; (vi) recreational facilities; and (vii) city and state level infrastructure.

Certain guidelines exist within the reform measures:

Project Conditions

1.In residential development, the minimum land area must be 10 hectares (approximately 25 acres)

2.In commercial development, the minimum land area must be 50,000 square meters (approximately 540,000 square feet)

3.If the project combines residential and commercial development, either one of the above conditions may be satisfied

4.At least 50% of the project must be completed within five years from the date of obtaining all statutory clearances

5.The project must comply with all local land use guidelines

6.The sale of undeveloped land is not permitted, i.e. the developer may purchase undeveloped land but must develop the land before selling it further

In addition to the above project conditions, the following financial conditions must be satisfied:

Financial Conditions

1.Minimum capitalization requirement of US$10 million for wholly-owned subsidiaries of foreign companies and US$5 million for joint ventures with an Indian partner

2.Capital must be brought into India within six months of incorporation of the subsidiary or joint venture

3.Holding period of three years on repatriation of any of the initial investment unless with the prior approval of the Foreign Investment Promotion Board.

The need for a roof over one's head is as strong today as it was during the Megalithic Age. The difference now is in the kind of shelter we seek -- and the price we pay for it. Buying a house is up there on most people's to-do list.

Banks and lenders have, for some time now, been making it easy to get hold of the money needed for a room of one's own, and falling interest rates make it even easier. Most important, however, are the tax breaks and incentives that are provided to homebuyers.

We take a look at the ways in which the government encourages people to buy residential houses, particularly under Section 54 of the Income Tax Act.

Capital gains: Under Section 54, an individual or HUF taxpayer gets exemption from tax in respect of the long-term capital gains arising from the sale of his residential house, if he invests an amount equivalent to the gains on buying or constructing another residential house within a specified time. If the amount invested is lower than the capital gains income, the exemption is proportionate.

Under Section 54F, a taxpayer can get a similar benefit if he uses the long-term capital gains from the sale of any capital asset (other than a residential house) to buy or build a residential house within a specified time.

While Section 54 grants exemption with respect to reinvestment of the capital gains, Section 54F grants exemption with respect to reinvestment of the net consideration, that is, sales proceeds net of expenses incurred exclusively in connection with the sale, including brokerage, transfer fees, etc.

Reinvestment timeframe: The specified time permitted under both Section 54 and Section 54F for reinvestment is the same. If reinvestment is by way of purchase, it must be done either one year before or two years after the date of sale of the original capital asset. If reinvestment is by way of construction, it should be made within three years from the date of sale of original capital asset.

There is no need for you to reinvest the very same funds that you receive from the sale of assets; the exemption is judged on the basis of reinvestment of equivalent value. But in order to claim exemption under either section, it is compulsory for you to deposit the amount in a Capital Gains Account Scheme with a bank if this amount is not reinvested till the due date of filing return of income.

The amount so deposited has to be subsequently utilised for reinvestment within the specified time.

To be able to avail the exemptions under these sections, you will also have to fulfil certain other conditions when you reinvest the amount in another residential house within the specified period.

Only residences: Most importantly, the new purchase must be a residential house, no matter of what size and locality. You can avail of the exemption whether you buy a room in a chawl or a flat in a co-operative society or an apartment or a row house or a bungalow, whether in a metro city or at a hill station or in a small town or village. All that matters is that you buy a residential house.

The very fact that the income tax law permits acquisition by way of construction of property would suggest that the land beneath the house would also constitute a part of residential house. In the case of a flat in a co-operative society, the price paid for the land indirectly forms a part of the price paid for the flat.

The modern concept of a residential house is an evolving concept. It is not restricted to four closed walls with doors and windows, but encompasses the amenities, facilities and utilities that can be associated with the house. Structures like garages, servants' quarters, swimming pools, verandahs, lifts, play courts and gardens can be considered as part of a residential house, if they form part of the house or flat.

To avail the exemption, you don't necessarily have to live in the residential house that you buy. You can buy the house and leave it locked for most of the year and use it as a holiday home. Or you can lease it or rent it out to other residential users. But you must ensure that the end use of the house is for residential purposes; you cannot, for instance, buy a house and lease it to a doctor who converts it into a clinic.

Cost components: The quantum of qualifying investment (known as the cost of acquired house) can be determined keeping in view the concept of a house as explained above. Broadly, costs and expenses that are incurred or are necessary to be incurred till the date the property is occupied (by a residential user) can be regarded as qualifying investment in the acquisition of house for capital gains exemption. The qualifying components of cost will include:

1.Purchase cost of land or TDR (transferable development rights) when you construct your own house;
2.Amount paid to a builder or developer for purchasing a newly constructed property (inclusive of the price quoted for amenities and facilities tagged on to a flat);
3.Purchase price paid to an existing member of a co-operative society or apartment for acquiring his right title and interest in the property;
4.Stamp duty, registration charges, associated legal fees for documents and formalities;
5.Brokerage paid to a broker;
6.Transfer fees or premium payable to the society or authorities for perfecting the transfer;
7.Cost of certain renovations of a civil nature under instructions of the purchaser when, typically, a "khokha" of a flat is contracted and further expenditure on flooring, tiling, sanitary fittings, platforms, lofts, first initial painting, etc., is incurred prior to occupation of the flat;
8.Interest incurred up to the stage of occupation of the house.

However, any expenditure on furniture and furnishing, soft furnishings, decoration items, paintings, closing of lofts, etc., cannot be regarded as part of the cost of house. All recurring expenses such as repairing, painting, replacements, etc., will also not qualify as acquisition cost for claiming the exemption. Since the house will need to be owned by the taxpayer, the amount paid as premium for securing tenancy of the house is not likely to qualify as cost of the house.

The tax officer has the right to verify the genuineness of any expenses. So it's best that you maintain a record of all expenses in respect of which exemption is being claimed and preserve all the bills and proof of payments.

The taxpayer also has the option of claiming deduction under Section 80C for payments made in respect of repayment of borrowing or for stamp duty, registration fee and other expenses incurred during the transfer of such a residential house in his name.

Chennai is the fourth largest metropolitan city in India with a total population of 7 million and annual growth rate of 19 per cent. The city is a major trade centre, well linked by road, rail and air to important cities besides being a seaport. Dubbed once as a sleepy and slow-paced city for long, it is today abuzz with activity in business, industry, entertainment and leisure.

A new policy by the state government has a clear focus on state-level second-generation reforms, namely building worldclass infrastructure, including supply of quality energy, changes in labour laws, taxation reforms and business deregulation.

With names like Ford, Hyundai, Hindustan Motors, TVS, Ashok Leyland, MRF, etc., Chennai city is known as Detroit of India. Recently, BMW has opted for the city to set up a car assembly plant at the Mahindra City and Hyundai has decided to put up a second plant near its existing facility on the outskirts of the city. This coupled with Prime Minister's recent announcement that one of the automobile testing centres would be set up near Chennai, the city is all set to become 'Detroit of South Asia'.

Leather, biotechnology, floriculture, horticulture and construction industry are the potential growth areas in the state in future with IT industry. In the context of changing industrial climate, there are a host of industries where the State is strengthening and deepening its presence.

Chennai has traditionally been the hub of economic, geographic and political activities of south India. Its economy is well balanced with the info-tech , entertainment, industrial and other service establishments playing equal role in city's growth. Unlike other metros, there was no significant steep rise and fall of the real estate market in the post liberalization era in Chennai. This was due to the fact, that not many multinational companies had chosen Chennai to start their operations. It can be attributed to the large floating stock available in the market during this period.

In high street retailing, Chennai has major retail chains like Shopper's Stop, Lifestyles, West side, Pantaloons, Landmark, Globus etc. Retailing corporates like Food World, Vivek & Co., Subiksha, are headquartered in Chennai. Though Chennai faces a shortage in terms of good quality retail space with good signage, it continues to be the favourite location for highpowered national retailers due to the relatively low cost of real estate as compared to other metros.

Organised Retail - Shopping Malls and Complexes

Chennai has been the city where the concept of organised retailing had its origin. It was this city, which saw the rise of Indian retail chains like Food World, Nilgiris, Saravana Bhavan etc. It was Spencer Plaza that has changed the concept of retailing in Chennai and brought in the first organised mega format for retailing. The Mall, located on Anna Salai road, was developed by Mangal Tirth Estate Limited and has become an important retail cum office destination in the city over the years.

The mall, which started with a super built up area of 300,000 sft, has now become the mega mall of city with a total of 1.05 million sqft. The pricing has gone up tremendously as in the year 1991 the mall started leasing retail space at Rs18 - Rs 22 per sqft per month on super area, which is currently hovering at Rs 60 - 100 per sqft per month.

Promoted by the ETA group, Chennai City Centre was recently inaugurated on Dr Radha Krishnan Salai. The mall has an area of 3,00,000 sqft and out of which 2,00,000 sqft is for shopping and multiplex theatre. The remaining 1,00,000sft is for office space.
The Ampa Mall on Nelson Manickam Road, with 4,00,000 sft BUA is coming up on a 3 acre property on Nelson Manickam road and Poonamallee High Road.

Keeping in view the fast pace of development of commercial and residential developments in the city, the number of malls coming up in the city are very few. There are speculations of development of malls towards the southern part of the city by many private developers as well as malls as part of township projects.

Two upcoming malls will add approx 8 lakh sft of retail space in the city. Chennai has a huge demand for organised malls due to increase in the number of IT companies entering the city.

Chi (pronounced chee) is the fundamental principle without which Feng Shui (nor anyone, for that matter) cannot exist. Chi, a Chinese word that has no direct translation in English, holds several meanings at once: cosmic energy, life force, breath, and vapor. Chi is the invisible energy that animates all living things. Chi flows continuously: through pathways (or meridians) in your body (the practices of acupuncture and Asian medicine are based on these flows); through your home, through the Earth, the heavens, the atmosphere, and the cosmos. Chi is the flow of life itself, and if the chi stopped flowing through you for even one second, you would cease to live.

The chi of homes can vary widely, depending on the energies of the residents and the general and specific details of the structure and the lot. The interaction between the chi of a living environment and the chi of the humans within this space is Feng Shui; the house itself and the people living in it synergistically create the house chi, which in turn continuously affects and conditions the residents' energy, actions, and to some degree, their destinies. Amazingly, the way your home is situated can mean the difference between experiencing long-term happiness and good fortune versus enduring missed opportunities and a more-difficult life path. Deciding between these two options and taking concrete actions to bring about the one you desire is the purpose of Feng Shui.

The energy of the Earth is divided into many categories; Feng Shui masters have delineated hundreds of specific distinctions about the types of chi of different pieces of land. The most important distinction in Feng Shui is whether the energy (chi) of a parcel of land is healthy and supportive of the humans who live in the area. At the extreme ends of the spectrum, the chi of the earth can be two forms:

Lively, vibrant, and nourishing: This type of chi is abundant in locations like Hawaii, in old-growth redwood forests, or by healthy, moving streams. Such an environment generates a great deal of negative ions (which are actually positive for your health), contains high levels of oxygen, and helps create a positive mental attitude.

Arid, barren, and hostile: The chi in these conditions is unsupportive of human life and can actually drain life from the people who stay in the area for long periods of time. These locations may feature negative magnetic fields, unbearable temperatures (hot or cold), and a lack of life forms. Examples include the Arctic and Antarctica, the Gobi Desert, Death Valley, and the Dead Sea (the names of these last two are certainly no coincidence!).

The flow of chi in your environment affects every area of your life, influencing your health, your outlook, your decision-making, and even your sex life. The flow of chi in turn is influenced by the interior and exterior elements of the physical environment. Colors, shapes, orientation, lighting, objects and their positions and arrangements, the use of space, and the degree of cleanliness or clutter all impact and collectively determine your home's energy flow. And this flow (or lack of flow) affects you continually, conditions your experience in your home and workplace, and significantly influences your future for good or for ill.

A lot can be done in our Garden areas to enhance the CHI of the house or apartment. Placement of flowering plants, designing the landscape and drawing in the energy into the house is an ancient Chinese technique.

Beautiful gardens are like wonderful rooms. They have elements that include texture color, height, sight, smell and sound--elements that carry or evoke an emotion, a memory or a message. That's the power of a special room or a garden--the power of feng shui. By simply placing a flower or a sculpture in a particular place, a mood is planted.

The key to feng shui is chi, or energy. Feng means wind, shui means water, which implies movement. Feng shui practioners believe that good feng shui develops when your designs reflect nature. This can be achieved by planting flowers in clusters or by scattering them randomly through the garden. Plants growing in lines move energy through the garden too quickly.

And color plays an important role, too. Select colors that make you feel good. Each color has some meaning. For example, fame and reputation are represented by red, so a feng shui garden might concentrate red plants and objects in an area for better fame and reputation. Yellow is the color for health and healing. Purple represents money, wealth and prosperity. Pink is associated with relationships and marriage, and if this interests you, plant some peonies: In the Chinese system, peonies represent longevity in a relationship.

Besides choosing certain colors and plants, there's another way to add good energy to your garden, and that's with sculpture. Adding items that are special to you, that come from a special place, or that you've received as gifts creates a personal commitment to the space. When you walk by, you are reminded of a special person or place.

For More details about fengshui visit http://www.fengshuiserver.com

Indian construction industry is all set to become $180 billion sector by 2020 from its present size of 50 billion dollar, said an PHDCCI study. This projection was made on the assumption of 6-7 per cent annual growth for the domestic construction industry. With recent emphasis by policy makers in developing adequate infrastructure in the country, the study said time was ideal for the sector to propel national economy on a higher growth trajectory, by maximising performance and operational efficiency. The study also pointed out that India needed an investment of 35 billion dollar for road development in the next eight years, which already had received a boost due to job-generating Golden Quadrilateral projects, 55 billion dollars to install new telecom networks in the next 12 years and eight billion dollars to modernise ports. At the same time, new opportunities were arising for the construction industry in the aviation sector as air passenger traffic was expected to double by 2006 and an investment of three billion will be made in the next decade.

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The home loans segment has been growing at a robust rate over the past few years. Obviously, most of the growth has come from borrowers residing in India. However, non resident Indians also account for a portion of the home loans business. This article takes a look at home loans for NRIs and how they differ from home loans for resident Indians.

The home loan offering for both resident Indians as well as NRIs is fundamentally the same. The basic difference lies in the eligibility criteria. Given below are 3 such parameters across which home loans for NRIs differ as compared to those for resident Indians.

1.The NRI loan seeker has to be a graduate. The same is not necessarily the case for resident Indians- they can still qualify for a home loan subject to fulfilment of certain criteria. He also needs to have a minimum monthly income of $ 2,000 (this criterion may differ across HFCs). The NRI also has to route his EMI (equated monthly instalments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.

2.Another difference lies in the home loan tenure. Loans to Indian residents are available for a 20-year tenure. In fact, some housing finance companies (HFCs) even offer home loans on a 30-year tenure, if the applicant fulfils certain criteria. NRIs however can avail of a home loan only for a maximum of 15 years (depending on the HFC).

3.NRIs are also required to submit additional documents than is normally required for a resident Indian. For example, certain documents like a copy of the passport and a copy of the works contract (also sometimes referred to as the contract card/labour card) are required only for NRI loans.

Another important document required while processing an NRI home loan is the power of attorney. The POA is required because the borrower is not based in India and in such a scenario, the HFC would need a 'representative' 'in lieu of' the NRI to deal with. Although not mandatory, the POA is usually drawn on the NRI's parents/wife/children.

The rate of interest is another area that separates the NRI from the resident Indian. Home loans to NRIs are costlier. The difference is to the extent of 0.25 per cent-0.50 per cent. As is the case with loans for resident Indians, some HFCs also have an internally earmarked 'negative criterion' for NRI home loans. For example, certain locations are marked as being 'negative' in the books of HFCs. An NRI who hails from a negative location may find it difficult to get a home loan.

Finally, NRIs should take due care while selecting their HFC. Considering the geographical distances involved, it is pertinent that loan seekers associate with a proactive and responsive HFC.

The property market in India was always seen as unorganised and fragmented. However, the past three years have seen a big shift in the fundamentals that drive the growth. This has attracted private equity players and other real estate funds from abroad. In addition, existing and new players in the development business are eyeing viable and profitable projects.

The market continues to grow in all major markets of the country. Mumbai, Delhi, Bangalore, Chennai and Hyderabad have attracted interest from IT and ITES companies, who are either setting up their bases or looking for expansion. The suburban localities in these cities are experiencing high level of activity due to easier availability of land, construction of large floor plates; offer of built-to-suit facilities and at lower rental.

The real estate sector is riding high on a strong economy and the commercial real estate is being driven like never before by the booming IT/BPO/Call Centre sectors. To make most of the opportunity, developers have geared up to provide more efficient and high-class developments. These offerings are of global standards, matching the requirements of corporates. Not just that, developers are using new age techniques to act delivery times.

This is clearly evident from the large number of transactions across various metros resulting in high volume of absorption. Bangalore recorded 1.6 million sq. ft. of office space in 2004 Q3 while Hyderabad recorded 3 lakh sq. ft. of office space. As much as 8 lakh sq. ft. of office space was absorbed in NCR in Q3 2004. In Chennai, 9 lakh sq. ft. of office space was absorbed in Q2. The high absorptions have resulted in low vacancy rates. In Mumbai Central Business District (CBD), it's 10-12 per cent. In Delhi CBD, the vacancy rate is 14 per cent, while in suburban Gurgaon it is 15 per cent. In Pune, which has emerged as hot corporate destination, the vacancy rate is just 15 per cent.

Hot and happening

According to data provided by Chesterton Meghraj, property consultants, five of the 12 cases where property prices doubled were from Chennai. For instance, Velachery, Tambaram, Nilankarai, Tiruvanmiyur, Valmiki Nagar and Mogappair doubled property values in the past five years after Chennai started attracting IT talent. Old Mahabalipuram Road is a great example of heightened IT/BPO activity which has set residential property prices soaring. On an average, Chennai realty prices rose 72 per cent during the five-year period. It needs to be mentioned here that Chennai realty prices have been lower than other metros and hence for a given price rise, it would naturally show higher appreciation in percentage terms than others.

The new trend of campus facilities is also contributing significantly to steady increase in corporate occupancy as more and more corporates ardemanding greener and low-rise office surroundings. With Chennai being the flavour of the season among IT companies, the likes of Infosys, Tata Consultancy Services, Wipro and multinationals like Cognizant, Covansys, Ford Information Technology, Xansa, and Verizon have invested in land and are building their own campuses on the old Mahabalipuram road. Says Anuj Puri, MD, Chesterton Meghraj Pvt Ltd: "Chennai is on the threshold of an IT/ITES revolution, thanks to a large skilled work force, low operating costs, good infrastructure and proactive government policies. While Delhi, Mumbai and Bangalore have hogged the limelight till now, the next hub will be Chennai, on the back of the underlying compelling offer."

The city is getting increasingly cosmopolitan; it has the requisite manpower pool; the cost of living is 35-45 per cent lower than Delhi, and has cheaper real estate options. Several MNCs are therefore evaluating Chennai for their second phase of growth in India and developers have already started creating IT-focussed developments in peripheral locations.

Many developers are already planning malls in the suburbs. There are two malls coming up within city limits, one on Nelson Manickam Road and the other on Radhakrishnan Salai.
A new study by Jones Lang LaSalle, a global real estate firm with operations in 100 countries, found that locations like Sao Paulo, Brazil and Buenos Aires, Argentina may "compare favourably with current offshoring favourites such as Delhi and Shanghai when companies expand their locational criteria beyond labour cost reductions."

The Index contains data for 45 variables that affect the choice of cities for various offshoring activities. The real estate researchers grouped these variables into six sets of drivers:
1. Cost: labour, business, real estate, telecommunications and utilities
2. Human capital: labour supply and quality
3. Business environment: innovation and competitiveness
4. Market: growth and population
5. Infrastructure: physical and telecommunications
6. Real estate: structure and availability

Not surprisingly, Delhi topped the list, followed by Manila, Chennai, and Bangalore. The residential development is mainly in Velachery, East Coast Road, Old Mahabalipuram Road and Vadapalani, as these areas have moved up the value chain and offer good qualityresidential clusters. The development in these areas is largely a spin off from the IT and ITES businesses on the OMR and Ambattur belt. Providing a more stable and favourable IT environment, amidst the inherent potential of a vast and varied knowledge pool, robust infrastructure and cost-effectiveness, Chennai has emerged as a southern star on the property scene.