Tuesday, August 21, 2012

Taxes, Real Estate & Affordable Home!




The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing...Jean Baptist Colbert

Well looking around the scene in real estate our Govt seems not to have heard this famous quote about taxation as the feathers are not only been plucked out, ignoring the hisses but even wailing of the Goose! Especially when it comes to Real Estate Industry, it’s bleeding by now leave apart shouting while the taxation continues under different headings!

As usual many rather most will say what’s wrong, if you earn then pay! And any ways when it comes to builders they are usually reluctant to pay back even a single rupee for any cause that’s why the Govt has to pull the things away from them! Well may be true in some cases but not always. For instance take the recent news which has stormed Real Estate Industry across the State of Maharashtra ( or soon will storm) is the VAT i.e. Value Addition Tax case in which the High court has decided against the developers. And has allowed the Sales Tax Department to collect the VAT from 2010 but  to charge for the same since 2006 i.e. even on completed projects too. After all its a court decision & the matter will go surely to higher courts but till the time being it’s one more hole in the pocket for the developers & eventually for the flat buyers. As usual many rather most will say what big deal, which developer pays the same from his pocket! Well this time the case is bit different & complex as the retrospective effect for VAT collection is from 2006, many of the projects have been completed & flat holders have been given possession of their respective homes. Though this particular clash was going on since then that whether VAT is applicable on home making, the Sales Tax dept hasn’t been collecting the same till 2010 so whatever tax was due in these five years is the issue of dispute now between the Developers & the Sales Tax Dept. Though by agreement it’s mandatory to pay it by the flat holder as mostly in all flat agreements this idea has been clearly given to the flat buyer, yet now the conflict will be between the customers & the developers over paying this tax even after getting possession of their home! Not many of the flat holders will be even remembering such clause in their flat agreements leave apart paying the liability. And this may cause the developers to take a stand not to make conveyance of the such properties as if the flat holder refuses to pay  Vat then it will be breech of the contract, if there is such clause in flat sale agreement between himself & the developer. One direct impact which is unavoidable is the hike in home prices as the developers will have to recover this unexpected financial burden & if they are unable to do it from the existing flat holders then naturally other only way is get it from the new ones! I am not justifying this action just putting forward the facts what may happen.

Now with the case has been lost by Developers on high Court the Sales Tax Dept has started plucking the feathers i.e. sent notices & the dead line to pay the tax liability from 2006 has been set as 31st August!  By now there must have been many news making headlines as well articles written on the issue by tax experts so no point in going in the details as even the experts seems to be yet confused about the mode of VAT for the retrospective effect years. I am not authority to decide whether its justifiable to charge any tax retrospective as courts are there to decide but as developer by myself &a as a commoner who knows little about taxes all I expect is whatever you charge should be simple to understand. At least what I am going to pay from my pocket should be clear to me so I can arrange my finances accordingly & this is the least any tax payer can ask for! Look at the scene this is going to cause, I have to pay something which I don’t know how much it’s going to be, and whenever such situation is there we all know where it will lead at end? You may not name corruption directly but there will be many cases of trying to run away from the actual figure is a fact. Why can’t before serving the notices the concerned dept itself do a little home work & figure out exact & simple way of calculating the VAT, so there would not have been the confusion about arriving at the figure in itself!

Similar thing have kept happening may it be VAT or Service tax or even the premiums required for the plan sanctioning at governing body's level. Everyone thinks that Real Estate is like the Hen in that story which used to lay Golden eggs. But then we have never known to learn from the folk stories & like the story here in actual too we are hell bend on cutting the Hen than enjoying one egg per day forever! One will wonder with my statement but fact is ever Govt dept concerned with real estate wants their cut from the industry & in the process they are forgetting that to whom they are actually bleeding? A home is very basic need of any citizen of this country especially the urban India & already the prices are way beyond budge for most of the people. On one side the Govt is screaming to make affordable houses & making appeals to the developers for making them & on other side burdening the homes each day with new taxes. Have we thought who is getting burdened under these taxes? The developer isn’t surely going to take any of this load but to pass on the end buyer who is a common man seeking for his own home. Just take a look at the list of the taxes or money being paid to various Govt agencies in process of sanctioning a home to make it ready & then you will realize the quantum of money a common home buyer ends up in paying to the Govt for buying a home!

The journey starts right from the sanction process of a home i.e. project by the developer. Presently just in forms of various premiums like for balcony, terraces, stair case areas & development charges one has to pay nearly 150/- to 300/- per sft of FSI. Then there are labor fund charges. You have to pay for slum rehabilitation for use of slum TDR. Then there are various charges to be paid for use of road FSI ( though it’s your own road you are handing over to PMC), water development charges. All such are being collected by local governing body. After that come in revenue dept which chare for NA i.e. giving Non Agricultural permissions after the plans have been sanctioned & then City Survey Dept which charges hefty for measuring your own plot! All these charges are paid by the developer to get the project sanctioned. Then comes the registration charges & stamp duty. That is nearly 6% of agreement cost in city limits i.e. if flat agreement of 4000/- per sft the you end up paying nearly 240/- per sft to stamp dept of Govt. The story doesn’t end her then you have service tax for Central Govt which is nearly 2.5% of the agreement cost & latest entry is VAT which will be 3% approximately ( not sure as final way of charging is yet to arrived) of the agreement cost. If roughly calculated then to my opinion we will be paying nearly 600/- per sq.ft of the flat area in the form of various taxes & charges to the Govt's different Departments in the process of making a home & selling the same. Here I am not counting the time consumed in all this process & cost of the same. Needless to say this amount is being eventually recovered by the customer only! Then there is the power supply i.e. MSEB meter charges which are like icing on cake & charged separately per flat & that varies from project to project. And lastly for those who avails the home loan there is bank processing fees & registration / stamp duty for loan amount!

Here no developer is paying this from his pocket & why blame developer no manufacturer ever pays anything from his pocket is a well known but unsaid truth! Every single Rupee is charged on the end buyer of the product & a home is not exception! This is what I never understand as when the product is like home & one so dear to the heart of millions in this country why can’t there has been a single taxation concept which will make life easier for many. Nobody is against paying taxes  it’s about the way you worked out them. As the developer will know how much he has to pay for making a home so as there can be better transparency in the entire process which is missing presently. Today mostly all flat agreements carries a clause a saying whatever Govt Taxes/ Duties applicable will have to be paid by the purchaser as actual. This clause even puts the purchaser in dilemma as he never knows actually how much he is going to pay till end while buying a home. This does not only disturbs his financial planning but the entire real estate industry comes in doubt as where is the term we call Transparency? Lastly have we thought that by charging so much on every aspect of real estate how we are going to make the home affordable which is the main need of the time. As agreed it’s the taxes we pay which makes a nation able to go on but that has to be done balancing all these aspects & if there are taxes then there should be rewards also for right cause such as making homes available to real needy ones! After all what a common man can expect from the Govt is just a shelter on his head & for that he is going to pay whatever the Govt asks, question is are we going to consider his shouts of pain while doing this or going ahead to pluck the feathers ignoring the same!


Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

Please do visit my blog to know about our philosophy at Sanjeevani ! (Click the link below)

http://visonoflife.blogspot.
com/

Social Side of Sanjeevani !(Click link below)

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65629150@N06/sets/72157628805700569/

For any of your complaints about city, log in at link below

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Wednesday, August 15, 2012

Expanding the City! Part 3






Growth for the sake of growth is the ideology of the cancer cell...Edward Abbey.

Well this quote from the great author perfectly fits for our subject i.e. merging of adjoining new villages in Municipal Corporation. We should remember the basic objective of expanding the city limits or else it will be just on paper & not towards what we want to achieve out of it. What we should be looking for is a monolithic growth covering all features of development of this very city but in actual look what we are doing? More than ten years have been passed by de-merging 8 villages & merging 15 villages in PMC & we are yet unable to approve final Development plan of the city & major issues like TDR these area which are very important for acquiring the lands for various reservations haven’t yet decided up on. Why TDR even we have not taken any firm stand of burning issue of Hill Top Hill Slope under which more than 10% of the newly acquired villages area is coming!

Being an engineer by myself as well having a little bit exposure for urban planning I haven’t yet understood why we made two development plans for one city? I.e. for old limits separate DP & for newly acquired villages separate DP! Has such thing been done any where i.e. wit any other city, have we checked it with senior urban planners? Why one city couldn’t have one DP? Will it not be more easier to plan a city in whole than in pieces & then to link them? And why it’s taking so long for us to get our DP sanctioned & come in working? All these things shows our rulers attitude towards the issue of city development. And these things do come to even common man's mind also but seems to get skipped by our rulers!

And on this back ground we are going ahead for expanding our city further by acquiring nearly 10 more villages. Going with the present logic of planning, shall we expect a third DP for these villages? Which sure will be a gunnies book record i.e. making three development plan for one city! And if we are taking ten years for just getting one DP sanctioned of newly merged villages which are with us & even elections being conducted for the same & they have representives from them on PMC, yet no one demands the DP for their area, what all this indicates? Look at the areas which are there now with PMC since ten years, even the most accessible & sought after suburbs like Baner & Balewadi, basic facilities like drainage, water & road network isn’t been there yet to even 50% of the area! And when some proposal is made to get the road net work done there is a shout that it’s for developers benefit! Well, where ever a building is being build & sold there is developers benefit but then where should the citizens of this city will live if not in buildings? The infrastructure in whatever form it comes should be welcomed as every citizen of this city deserves good roads , water supply, drainage & electricity as his basic right. And even a single building has been build in any of the suburb, we have to give them proper infrastructure like other citizen in main city are having as they too are paying property tax like all other people does. And in fact acquiring land for roads is first & foremost important thing in any urban planning as along the roads only other services can be planned as well we can go to the lands which have been reserved for different purposes. Simple thing like proper tree plantation along the roads should be done as early as possible as then only the trees we have planted now will be in position to absorb the polluted gases when the traffic on these roads will increase in future! Actually we should learn from countries like USA where roads are build first & then the buildings follows. Leave apart the cultural infrastructure like play ground & hospitals which are always neglected here in our urban planning which comes last. All this because we have taken the villages in PMC just for the sake of growth & not for development is what one can conclude if going by our actions.

Recently there was a news about a court case by the residents of a complex against the developer for supplying the water for a project which is in PMC limits. The court gave a verdict against the developer saying it’s his responsibility as at the time of plan sanctioning he has submitted an undertaking in PMC that it will be his responsibility to provide the water at his cost to the residents if PMC fails to do so! Well it’s good to save their own skin but when PMC accepts all the money paid in form of various premiums which is supposed for the development of infrastructure & approves the plans then is not their primary responsibility to provide water & drainage like facilities! Taking such undertaking & passing the plans is a sign of sheer monopoly ruling system & just as they are the only governing authority they are making rules on one way & getting benefitted both ways without any responsibility. If the residents are living their & using the water why shall not they only pay for the same, was PMC supposed to supply them water at free of cost? Why PMC has to take undertaking saying developer will bear the expenses of water supply? And as I have already said this is just tip of the iceberg  because there will be many more issues about the road condition, drainage discharge in adjoining natural water bodies , because we have expanded  ourselves but not grown! It’s like a child who simply increase in size with age but totally dependent on the parents for daily basic activities. Unfortunately in our case the parents have refused to take responsibility of the child yet have given birth to it is the fact!

No one denies the need of merging the adjoining villages as the city is growing & will keep on in future to is a writing on the wall. But then we were never known to read the writings on the wall! This merging should have done ten years back only but any ways now also the time has yet run out fullely. And why just ten villages? Like the core area of forest has a buffer zone , whatever is our buffer area lets define it first & then merge that all will be a proper way to do it. As planning of city is not a thing one keeps on doing on yearly basis. Such types of decisions have long lasting impact on the main city & its people so we need to think down the line for at least 50-60 years & then decide our capacity to expand for once on final time only. As it’s a shame that just after ten years even before we have finalized the DP for the same we realize that whatever merging has been done ten years back was inadequate & so put forward proposal for new merging of surrounding villages! The same story should not be repeated every ten years like Jana Ganana is what good planning is.

And the journey has just started by making a resolution that to by just one of the ruling party. It has to be yet tabled in front of General Body i.e. main house of all elected members then the comprehensive plan has to be made for the exact area to be acquired. Again the said villages Gram Panchayts has to accept this merging & then proposal will be send to State Govt's Urban Development Dept & suggestion objects will be called up on then green signal will be shown to the proposal. We can imagine when just DP passing of existing acquired area can take ten years then how much time will be required to complete the whole journey of new acquisition & planning for the same! Unfortunate is the city won’t stop growing in all these years which will be wasted in just deciding whether to acquire the villages or not & if yes how? We are neglecting this fact & not prepared to deal with it. There is provision of applying rules  for the areas within ten kilometer radius from the existing PMC boundary, which are for class A municipal corporation but the current governing bodies for this area has got no man power or system  to keep proper check on the implementation of these rules. The plans of the new developments in these to be acquired villages may get passed by applying the rules but there is no assurance that it will be followed in actual at site. And what about acquisition of reservation lands & their safety, who will be taking that responsibility, just few more undertakings! Nobody is taking in to consideration what has happened all around us; for e.g. Parvati Hills slum! What guarantee is there that when all the procedure for acquiring villages get completes these reservation lands will be vacant & in proper form to get developed the same for the purpose they have been kept? And another issue is what about the infrastructure to the residents of these areas till all this process gets completed? Till then are these people supposed to survive on undertakings taken by the developers! Are we interested in just collecting revenues & let the city grow in whatever way its growing or are we interested in giving good life to its citizens? Some day someone is going to ask these questions of which we don’t have any answers.

We are forgetting that first duty of any governing urban body is to provide a proper shelter to its citizens & that won’t happen automatically. One has to plan & see that the plan gets in existence by the actions. Here not only the PMC or Urban Development Dept but even the role of Developers & Media is equally important. As common man isn’t aware of any of these things so we need to make them realize the truth about the city they are living in. In any planning time is the essence as even if we don’t acquire the villages they will be & are going to be part of the city is a fact, issue is whether we are going learn from the mistakes in past or continuing the same story from the last page! That is what going to decide the faith of our beloved city & real estate in it. After all what is a Real Estate Industry? It’s one of the basic need fulfilling aspect of the society
& this has to be understand by all those who are related to it. As then only we can make the life of common man in this city a bit easier & what better can he ask for?

--
Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

Please do visit my blog to know about our philosophy at Sanjeevani ! (Click the link below)

http://visonoflife.blogspot.com/

Social Side of Sanjeevani !(Click link below)

http://www.flickr.com/photos/65629150@N06/sets/72157628805700569/

For any of your complaints about city, log in at link below

http://www.punecorporation.org/GRS/Complaint/LaunchComplaintCitizen.aspx

Think Green, Think Life

www.sanjeevanideve.com

Saturday, August 4, 2012

Expanding the City!



“In great cities, spaces as well as places are designed and built: walking, witnessing, being in public, are as much part of the design and purpose as is being inside to eat, sleep, make shoes or love or music. The word citizen has to do with cities, and the ideal city is organized around citizenship -- around participation in public life.” ...Rebecca Solnit.

Coming to the core part of our subject of merging the adjoining villages in to Municipal Corporations, the quote by the great planner certainly makes me think about the scene around. It’s not the question of merging but question is where are we heading for? I remember a story from my earlier days of starting my field work;  In a big industry there was a canteen for the people working at the industry & where a board has been displayed saying  " Our workers eat the same food which our Managers eat!" One day someone changed the board saying " Our Managers eat the same food which our Workers eat!" Leave apart the joke or sarcastisum in the story but same logic is applicable here is what many will say. Like the villagers will get the same infrastructure which citizen in the corporation gets or will it be citizen in our corporation will get the same infrastructure which the villagers have! Truth remains that however we accept the fact that villages i.e. Gram Panchayts are surely not structured for giving proper infrastructure to the increasing demands from urbanization; but are the Municipal Corporations  really capable of giving that assurance to the citizens? Sadly the facts here also says no. See the current water or traffic problems & you will know what I meant. Though these are just tip of iceberg when it comes to problems of city life! And the scene is same all around the country except few examples like Ahmadabad or Chandigarh where the not just the Civic Administration but even the State bosses also joined the hand to plan a better life offering city & then to execute what they have planned.

On such scenario many will say then what’s the need of acquiring or merging the new or adjoining villages when we can’t serve properly the existing citizen of the city? Well saying this is one thing & accepting this logic will be making ourselves  the infamous " Shaikhchilly" who cut down the very branch of the tree on which he was sitting! Looking around at what we call  our city & its planning then  the new DP i.e. development plan of the old city is in making & will be soon tabled before the city fathers. That itself has crossed the time limit but any ways at least now it’s been drafted. We have heard from many of the city prominent figures saying we should plan for minimum 100 years for the city! Well, saying is easy as words don’t cost but a city is never stand still & is ever growing; so are the problems generated by its growth. In such conditions to plan something which will be freeze for 100 years is simply illogical on the aspect of development. Instead take opinion of real great urban planning minds which are abundantly available in our country, a factor which we never took in account & what they will suggest is freeze the concepts of planning for 100 years & plan the DP around these principals for shorter spans i.e. 20 years & move ahead. This will ensure the basic principles of planning & road to access the  growth problems will remain same & a direction of the journey will be fixed. Then all what is left will be ensuring its execution on smaller spans which also needs to be monitored regularly even yearly.

We have things like Environment Report which seems to be being published now yearly & we do read the news about the same when its published, that’s all! What is more important is implementation of the same & making it more transparent by virtue of which we can actually assess the impact on common man's life with whatever policies we are making for the better environment of the city. I haven't read the Environment Report but I am curious whether it has interviews of people from all segments from the city & their views about the kind of life this city is offering to them! I am sure that will make the Environment Report more interesting as well realistic as a City don’t get read by the reports but by the people living in it & their day to day experiences with the City! We have  green belts which are being utilized for all sorts of things but greening! We have rivers & streams but they are worst than nallahs! We have hills which are turning gray with the slums & illegal constructions than being a green cover for the city! So many things needs to look in while fixing the policies & the main is why in last 30 years we could not implement the Development Plan of the city at its fullest? Statistics says we have not acquired even 40% of the reservations from the last development plan which was made in 87 & we don’t have exact figures how many reservations of acquired have been developed for the purpose they have been acquired! Classic example is we raise hell about the traffic problems & its solutions on one side & on other side we have the HCMTR i.e. High Capacity Mass Transport Route which has been planned since last 25 or more years but only on plan! Not a single inch of it has been built in all these years! So many such examples we have from the existing city planning which can be an eye opener while planning our any next move towards the future of this city! This column is not to blame Govt or ruling parties but to analyze the facts around us & may once we have got the problem then only we can have the solution, is the way I look at it. On all above back ground we need to seriously ask a question to our own self that are we ready to expand really? Or instead while making  a Greater City are we going to end up as a Greater Village!

One will again ask, what’s all this to real estate industry? It is any way growing so why to worry? Well, ignorance is bliss but not for long! When we say real estate is growing it’s not just the prices we should be looking for its the availability of a good home to all segments of the society is what we should be aiming for. And where we stand on this scale? Frankly even a small kid can tell how poorly we are doing  on this front. Series of illegal constructions, ever expanding slums & encroachments on reservation lands, shrinking of natural water channels & continuously expanding city limits in itself tell the story that we are far behind on providing good affordable homes to the citizen of this very city within the so called city! Just more & more people are coming here & willing to live in this city, that doesn’t mean all is well. It’s out of compulsion this may be happening, the day they will get better alternative they will choose that option over this city, let’s not forget this fact! We need to conserve our strengths & explore them than ruining our resources. Role of Developers also is equally important on this front as we need to plan the homes keeping in mind that Real Estate is not only money making thing but a service to the society also! Call it Municipal limit or Grampanchayat, the target should be giving a good accommodation to the common man which may not have a fancy living amenities but a basic infrastructure where they can live at peace & what more a good city can offer to its residents! For that need of the time is will power to do so; which seem to be missing & this responsibility is not of just the Govt or the Town Planning Officers or some department of administration but of every citizen. Unless we press our demands strongly we are not going to get them is a truth. And for that we need to table them & put forward on every platform then only some where some hope is alive. As to deserve an ideal city we need to be an ideal citizen first & that is in our own hands only!


--
Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

Please do visit my blog to know about our philosophy at Sanjeevani ! (Click the link below)


Social Side of Sanjeevani !(Click link below)


For any of your complaints about city, log in at link below


Think Green, Think Life