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If you are planning to buy a flat, you might want to do it before June 1, 2005. After that service tax levy may well be applicable on buildings with more than 12 dwellings and you may end up paying a little 'extra'. While prospective flat buyers are concerned about this development, the builder community is also expectedly unhappy with the new levy. "Personally, I am very disappointed with this levy. There is no way we can absorb this amount what with the prices of cement, steel and fuel escalating," says V P Lobo, Director, Strategy and Policy, Agarwal Group. Adds Abhinandan Lodha, MD, Lodha Group, "This levy will increase property prices. Though some builders may absorb it, in most cases it will be the consumer. After all the money has to come from someone's pocket. It might help if the government formulates a uniform method of recovering this tax."

According to builder Rajiv Sethi, the government should formulate a strategy on how to minimize the impact of the tax. "It goes without saying that the consumer will have to bear the brunt of this amount," says Sethi, who will soon be part of a group that is meeting with income tax experts to sort out the hows and whys on the levy on household services.

Builders are waiting with bated breath for June 1, 2005, when the bill will be passed, after which details of the tax will be revealed. Says J J Augustine, CEO, Evershine Group, "There is still no clarity on the tax levy. There is a lot of confusion about whether this is being paid for construction material or on the construction part. Only after the finance bill has been passed will things be more clear."

In a bid to clear some of the misconceptions, Dilip LAkhani, Chairman, Bombay Chartered Accountants Society explains, "The contractor will charge the builder the tax, which will be about 10% of the construction cost. So far a flat of 1,200 to 1,500 sq ft that costs Rs.1,000 per sq ft to construct, the service tax will be approximately Rs.100 per sq ft. Though it will up the final price that the builder will pay for the construction, when taken in isolation, it is not that much," points out Lakhani, who says that builders whose constructions are not in demand will eventually have to absorb it. "People buying housing in buildings that are in demand will have to absorb this levy but in areas where real estate is not as lucrative, builders may have to absorb the cost," he says.

Translated, it could well mean that builders will find it more difficult to construct in far-flung locations. Subsequently, this may also prove to be a setback for Mumbai's housing solution. "The government keeps talking of affordable housing but nowhere in the budget, have they made any concrete attempts to control prices," says Lobo. "This tax seems to be contrary to what the government is proposing. On the one hand they talk about making housing affordable, while on the other, they impose a service tax, which will deter builders from developing areas on the periphery of Mumabi. People look to these areas for nominally-priced housing. The service tax will negate that," adds Sethi.

According to Lakhani, there is a marginal possibility of builders leasing out flats in buildings of more than 12 dwellings, since leasing or renting flats exempts the builder from paying the service tax. "This may lead to an increase in builders renting out flats or leasing them as opposed to selling them," he says. However, most builders say they will continue in the same vein. "The builders business will be affected if he changes the way he transacts. Those who are selling will continue to do so and those who are leasing will continue to do so too. Its safer for our businesses that way," says Lodha, while Lobo is of the opinion that it won't make business sense for builders to lease flats just to avoid paying tax. But Sethi is keen to find out how the service tax applies to builders who want to do both. "We need to clear our doubts about the details about this tax. We want to know how it will be distributed if we lease some flats and sell some flats," says Sethi.

Its the first step towards radically changing and reorganizing the real estate industry in the country. And as with most of such initiatives it has come as a quiet announcement couched in typical bureaucratic and legal terminology.

Last week, the cabinet committee on economic affairs, cleared a proposal for 100 percent foreign direct investment (FDI) in construction development projects.

These proposals will be no longer have to approach the foreign investment promotion board clearances.

In the residential segment, 100 percent FDI will be allowed in townships with a minimum land area 25 acres. In case of commercial construction projects like building of shopping malls, hotels, a minimum of 50,000 square meters should have to be built under each projects.

At least 50 percent of the project must be developed within three years of the first parcel of land being handed over. The sale of undeveloped areas will not be allowed.

Wholly owned foreign subsidiaries can enter such projects provided they have a minimum capitalization of $10 million. In case of a joint venture with Indian partners, the capitalization would be relaxed to $ 5 million.

The policy stipulates that the funds would have to be brought in within six months of commencement of business. It allows for the original investment to be repatriated after three years. In case the investor wishes to exit early, prior approval would require from the Foreign Investment Promotion board.

Though investments would have to be through RBI's automatic route, the government has also agreed to delegate the power of approving indigenous construction projects with FDI component the local government authorities.

All such projects will have to conform to the norms and standards. There include land use requirements and provisions of community amenities common facilities as laid down in the applicable building control regulations, by-laws, rules and other regulations of the state governments of municipal bodies or local bodies and others concerned.

This announcement is a major correction of the earlier policy, which pegged FDI to a minimum 100 acres of land being developed.

Their unrealistic figure had found major resistance from foreign investors and since its announcement in 2002 the earlier policy had only attracted nine proposals.

Couple this with the recent announcement by a couple of intuitions of setting up of Real Estate Investment Trusts and suddenly you are looking at a whole new Paradigm with Big players, Bigger projects and more transparency in the industry.

The benefits of the announcement, according to experts will trickle down to all sections of the industry from builders to the buyers. Rajesh Khushlani, senior manager-advisory services, Knight Frank India, points out capital inflow at cheaper rates will help to improve developer’s margins and part of it may be passed on toe end consumers. One could expect an improved quality of end products as global best practices and techniques will be introduced.

"Indian consumers are likely to benefit in the medium to long term due to increased competition," he says, adding that in the short to medium term land prices likely to shoot up in the metro cities, as supply is scare and the market buoyant.

According to Anuj Puri, MD, Cherterton Meghraj, the earlier stipulations of developing 100 acres of area and restricting FDI only to integrated township were shifting foreign investment in the sector.

"In China, FDI in real estate contributes 3.2% to the GDP (about 52 Billion USD). In India the proportion has been negligible. Hopefully the new policy will change that," he says.

Rajiv Sethi, director, Omega Investments and Properties Ltd., has been talking to foreign Investors, who he says have shown a keen interest. "They are, however, wary of making any deals as they are unclear about the finer details. The current policy appears to only permit foreigners to build, they won’t come here as contractors. They have to be assured that they will be get good returns for the investment too,” he says.

Some industry players like Mukesh Patel, knowledge workers, Neelkanth Group, however, feel that though the government's initiative is a step the right direction, what is also needed is similar focus on infrastructure.

"With proper infrastructure, even the foreign players would have a better smoother platform to work on and the development pace would have been a lot faster," he says.

However, the bottom line, as most property market analysts concur, is the entry of international firms coupled with a steady, reliable flow of funds should ensure better technology, in, proved construction quality, bigger amenities and many more integrated townships over the next few years.

The impetus has been provided, now it’s a question of just how fast the sector accelerates.

While high street phoenix at lower Parel has had its a share of the action for sometime, now there is a enought activity on the other side of the tracks as well, Parel, the country cousin, has decked up and is waiting to party.

The soon to open ITC Grand Central Sheraton Hotel and towers designed by Hafeez Contractor, has brought in the first winds of change to this predominant mill land. “While Parel has always been synonymous with mill land, today there are newer lifestyle options available. With the increase in development of mill lands, commercial complex, "say Anil Malik, General Manager, ITC Grand Central, Sheraton and towers.

Says Neha Batra, from international Property consultants, Chesterton and Meghraaj, "the area is going to become a destination point with a five star, and the pace of development will get a boost."

If reports are to be believed the Piramal's are constructing a residential complex right next to Grand central, this is stated for completions in 2006. Says Rajeev Piramal, vice president corporate and strategic planning, Piramal Holding Ltd.

"We saw Parel as an emerging area, that’s why we decided to construct a residential complex here.

Parel, which is traditionally known as an industrial area, will soon develop into a residential and commercial area because of its central location.

Also plans are on by the Wadias to convert the spring mills of Bombay dyeing into a residential complex the 10 lakhs square feet residential complex will also house a shopping mall.

The Hind Mata theatre in Parel will also make place for a new shopping mall, which will only further change the face of the area. Another 23-floor tower Kala-Patru habitat, by the Kala-Patru builder’s will be ready for possession by mid-January. And work has started on Ashok Towers at SS Rao Road. The complex will have four buildings- three of 35 floors each and another of 50 floors.

Also, real estate prices in Parel currently at Rs. 4000-6000 per Square feet are fast catching up with Colaba - Cuffe Parade which stand at approximate Rs. 8000-12000. Says Keya Shah, a resident of Parel, "Parel, otherwise known as mill area, is all set to get a premium feel."

Also if Malad has its BPO Boom, Parel has ad agencies like Leo Burnette, Grey Worldwide and media offices of MTV, Star TV and others. "Earlier if corporate at nearby offices wanted to have a drink, they had no place to go. Now they will have an option, "says Mallik. Adds Sandip Roy, associate media director, Grey Worldwide, "I enjoy working the area. Now, I am looking forward to a time when I can have coffee at nearby five star at 3 am."

And if it is offices and homes, Parel has geared up to cater to them. Gone are the days when Bata was only major showroom in the area. Today, the area has outlets of the country’s major brands. Says Mandar Chawalkar of the near by Nike Showroom," Out goods are mostly bought by High end consumers and that's what Parel is attracting."

So far, while the flyovers make accessibility to Parel easier, SD Nalawde, inspector of police, Bhoiwada traffic division adds,” The development boom in the area has not caused traffic problems so far. Also a fair amount of road widening has taken place. Now we will know if there are any traffic issues only once the hotel is fully operational."

From Predominantly mill land to an upwardly mobile township, Parel has made the shift. Well, high street, you have another phoenix rising now.

The central business district (CBD) in any city is its traditional commercial hub. But times are changing. Prime office space in Mumbai's Nariman Point used to command a price as high as Rs. 30,000 per sq ft just eight years ago - today it's Rs 8,000-10,000 per sq. ft.

"The prices are not moving to realistic levels," says Rajiv Sethi, Director, Omega Investment & Properties Ltd. According to Professor VR Iyer, Secretary, Bombay Productivity Council. "Most companies have moved to the suburbs." The council's office near the Bombay Stock Exchange has been on the block for the past several months. But the bids are too low." we would like to shift to Andheri and have located a property with a conference center and auditorium.

In Chennai, it’s the same story. There is an exodus of companies from the expensive Mount Road in the heart of town to Mahabalipuram Road and Tidel Park street is losing its importance as most new developments are in the salt lake area. in Hyderabad too, the highly crowded Begumpet and Banjara Hills are losing out to Madhapur and the Cybercity. According to Colliers International Report, about 9 percent of the CBD in Bangalore is lying vacant property prices in the prime business areas of Pune too have taken a hit. Prices have declined by about 15-20 percent at Koregaon Park, Boat Club, Prabhat Road, M G Road and Law College Road.

BRIS lifts the veil on the realty rates ruling in Sewri and suggests a suitable plan of action for realty end-users

You seem to be worrying only about Sewri's social infrastructure now. It is time you shed such worries. There is our lady Fatima school in Sewri. If you are looking out for better schools, closer home you can find a few excellent schools such as St. Joseph's Don Bosco, just 15 minutes away in Wadala. Byculla too is a mere 15 minutes drive away and houses some of the best schools of Mumbai.

Not just KEM Hospital is located somewhere between Sewri and Parel. At a short distance is the Wadia Hospital. You can also find a veterinary school and hospital here. Of course, the famous Haffkine's Institute too is close by.

Above all Sewri is extremely well connected, both by rail and by road, the closest railway station is Sewri on teh Harbor Line and even Parel railway station on the central railway is not far either. Both Lalbaug and Parel is a mere 10 minutes walk from Sewri and are center points for many buses plying between South Mumbai and Suburbs.

Began to Harden

Sewri is contiguous to Parl, Lalbaug and Kala Chowki, all mill districts. You know well Parel Is home to some hot realty projects. Kalpararu Heights has been already partially commissioned some 1.5 kilometers from Sewri and the asking rate here is Rs 5,750 per square foot.

Is there a scope for appreciation in Sewri projects in the short run? Just look at the way rates have moved over a year in this location. For instance, look at the Piramals developed Ashok Towers coming up opposite Kalpaturu Heights, Pieces of property here was quoting at around Rs 5,500 per sq ft. Just imagine, construction of the Planned four towers is still to commence.

Then for value add on you have the ITC's luxury 7 star Grand Maratha Hotel in Parel, which has been commissioned partly, Move over to Parel tank road, you can spot several beautiful buildings such as Tata housing's Glen Eagle and Sethi Builders Kingston Towers. for Landmark, you have the decade old Vikas finlays Towers and the sprawling residential colony for Zoroastrains called Wadia Baug on this Parel Tank Road. who said Sewri is secluded and downmarket?

The last word

Sure the Nhava Sheva sea-link will make Sewri the focal pint of transport between Mumbai the rest of Maharastra. So, do not underrate the importance of this link. Sewri has all tha South Mumbai can offer and yet it is away from maddening crowds. Sewri not sjust offers natural beauty and urban amenities, it’s sure to turn into a golden investment soon for the discerning investor end user or otherwise. Why Sewri have all the strengths to develop sometime like a lower Parel. That is the upper side of an emerging idea.

Ironic as it may seem, but while the slum redevelopment Association is seriously working towards rehabilitating slums in the city, the government appears to be doing the opposite. Adding to this in its discriminatory policy, the government has already cleared nine projects, while the remaining are yet to be cleared.

The association comprises around 80 builders all of whom have been involved with the working towards rehabilitating the slums. According to Mr. Rajiv Sethi, of the association, 55 % in the city live in slums and if the government does not act soon enough, very soon the number would increase. "One of the major obstacles is the Coastal Regulatory zone (CRZ) where construction upto 500 meters will not be permitted. In a city like Mumbai, the distance should be restricted only upto the first authorized structure having a proper drainage arrangement and not 500 meters or 100 meters as the case may be. We have, infact asked the government to reduce it to a further 50 meters, “he said. Where in the world do they have restrictions in costal areas, he wanted to know. “Not in New York, or Hong Kong, or Singapore. In any big city, there are constructions along the seacoast. So, why in Mumbai should there be a problem. The United States has an FSI of 29 which is the maximum and they have no CRZ problems, “he added. When asked about the environment groups who have from time to time objected to constructions near the coastline, Mr. Sethi said, "what about the environment of people living in the slums. Isn’t that their concern and its not that the mangroves along the coast are flourishing. The positive aspect is that we not only provide them housing free of cost, but we also take care of the environment around. So, what is the problem then?"

Another Problem is that earlier the government in a 100,000 Sq. foot area promised the builder a built-up area of 250,000 Sq. ft. Now that has been reduced to a mere 125,000 build up which the builder gets. And since the construction revolves around slum dwellers, there's not actually much profit or in some instances, no profit at all." The association has been asking the government to increase it to 250,000 sq. feet. Not just for profit sake but for the task to be carried out without difficulty," said Mr. Sethi.

Meanwhile, while several developers have taken up various projects and submitted proposals to the slum rehabilitation authority, they can do little except wait high FSI being granted for slum projects, but now it seems that instead of progress being made, there is nothing but regression.