Credai Magazine - April_2010

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    Issue

    April

    May

    June 2010

    Private Equity Investments -

    What a Developer should not overlook.

    Private Equity Investments -

    What a Developer should not overlook.

    Meridian City, USA :

    Inspiration for a 21st Century

    "We consider CREDAIour partners"Interview with Honourable Union Minister

    for Housing and Urban Poverty Alleviation

    and Tourism, Kumari Selja.

    "We consider CREDAIour partners"Interview with Honourable Union Minister

    for Housing and Urban Poverty Alleviation

    and Tourism, Kumari Selja.

    World Expoin Shanghai World Expoin Shanghai

    Meridian City, USA :

    Inspiration for a 21st Century

    Cover Story -

    Path-breaking Innovationsin Real Estate

    Cover Story -

    Path-breaking Innovationsin Real Estate

    Quarterly in house magazine of CREDAI NationalQuarterly in house magazine of CREDAI National

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    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 03

    Dear Members,

    The times are upbeat. GDP is likely to touch 8.50% this year. Core sector,

    Manufacturing, IT, Hospitality, Tourism, Entertainment and most other sectors

    have posted robust results. Exports sector has registered a positive growth after

    a long time. Most of the companies are back in their expansion mode. Every company has announced hiring in large numbers

    with the IT Companies leading the pack. Most companies have announced reasonable wage hikes. Fear of job loss has vanished

    from the minds of the employees. Indian Companies are on the prowl again - have started acquisitions abroad. Gujarat and

    Karnataka and a few more states are rolling out several PPP model projects. Karnataka is likely to sign almost Rs. 5 lakh crore

    worth of projects during the Global Investors Meet during June 2010. Union Government is unveiling a mega one trillion rupees

    investments on infrastructure in the next few years.

    Yes, all these signals should have triggered a Real Estate boom by now. Real Estate market not doubt is recovering from the

    dumps of 2008, but the same is not in commensurate with the growth of the economy in general. I was analyzing the reasons for

    the same. One reason I can identify is that since about 5 to 6 months the media has been blaming that the Developers in Mumbai

    and Delhi have jacked up prices by 30% to 40% the moment they saw some movement in the market. And the media kept repeating

    the story all over the country over and over again. I am not sure whether the news about Mumbai & Delhi is right or wrong but

    as far as the cities like Chennai, Pune, Hyderabad, Bangalore etc the rise is hardly upto around 5% and that too is limited to some

    specific locations within cities or to some specific projects. But the media reports about Mumbai and Delhi may be affecting all

    the metro cities. And the situation can become quite alarming. If there is any truth in the news, I am sure that our co-developers

    in Mumbai and Delhi will take cognizance of the situation and take some drastic measures and if I am permitted to suggest, it may

    augur well for the market if prices are reduced to reasonable levels. Unprecedented situations demand unprecedented solutions.

    Probably, we can go a step further and even announce the reduction in the media either individually or collectively. This maytrigger a sudden spurt in demand as I am sure that there still remains a huge pent up demand. We should not allow a second dip

    in the market, at any cost. As newspapers project, it should not be a story of the goose with golden eggs. Market was poised for

    a 'V' shaped recovery since April 2009, but the movement has so far been slow. If drastic action is not taken, we may head

    towards a double dip or a 'W' drop.

    I repeat, I do not know if the media reports are true or not and my thoughts are based on the said reports and the suggestions are

    purely personal. Kindly ignore them if I am wrong.

    Regards,

    A Balakrishna Hegde, Editor

    The Editor is the Managing Director of Chartered Housing, Bangalore and the Immediate Past President of CREDAI- Karnataka

    Why Real Estate markethas not yet recovered fully

    and what is the remedy

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    EDITOR

    A. Balakrishna Hegde

    EDITORIAL BOARD

    Irfan Razack

    Ranjit Naiknavare

    Pradeep Jain

    Niranjan Hiranandani

    Dharmesh Jain

    Harsh Patodia

    Uzma Irfan

    G P Savlani

    Mukta Naik

    CONTENT

    Minerva Research and Media Services Pvt Ltd

    Email : [email protected]

    DESIGN & LAYOUT

    GAAP Communications Pvt. Ltd.

    Email: [email protected]

    PRINTING

    Jwalamukhi Mudranalaya Pvt. Ltd.

    Please send in your feedback,

    contributions and advertising queries to :

    GP Savlani,

    Resident Director,

    Confederation of Real Estate Developers'

    Associations of India

    CREDAI - National Secretariat

    703, Ansal Bhawan,

    16, K.G. Marg,

    New Delhi - 110001

    Ph: 011- 43126262, 43126200

    Fax - 011- 43126211

    Email: [email protected]

    Website : www.credai.org

    Editors Note 3

    Chairman's Message 5

    President's Address 7

    Path-breaking Innovations in Real Estate 8

    CREDAI: In service of our members 13

    Candid Conversation - "We consider CREDAI our partners" 16

    CREDAI - Karnataka Initiative - Bangalore Impact - A Campaign for UIDAI - Aadhar 20

    Best Practices - Meridian City, USA: Inspiration for a 21st century city 23

    Service Tax Issues - Post Budget 24

    Earned Value Management In Construction Projects- An Introduction. 29

    Exploration Of Rain Water Harvesting At Macro Level 30

    Using the sun to sterilize water 31

    India's Real Estate Sector In Quiet Revolution Mode 33

    Book Extract - SPACE FOR SHOPPING, By A.K. JAIN 34

    Have A Glance Over Your Shoulder Please! 40

    Landscape & Me 45

    Architectural Design in Low Income Housing 46

    Worker welfare49

    World Expo in Shanghai - Shanghai stakes a claim to Asia's premier city 52

    MCHI Property 2010 exhibition gets overwhelming response 54

    Event report - Realty Expo 2010 by CREDAI Bengal 56

    MCHI signs Joint Declaration with Maharashtra Govt; 59

    Private Equity Investments - What a Developer should not overlook 60

    A much larger role for CREDAI 62

    CSR Initiative - VGN Homes adds school projects 63

    Event Report - Property 2010 Thane 63

    Recognitions - S.I.S. Safaa Highly Commended at Asia Pacific Property Awards 64

    Recognitions - Secretary - Credai Kochi 64

    CREDAI NCR in dialogue with Banking industry 67

    Credai Preferred Partner Program (CPP) 68

    CREDAI Vizianagram inaugurated 69

    ROFL after client meetings Hilarious experiences of a Landscape Architect 70

    S e r i o u s Humour 72

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    Dear friends,

    We've been debating and dissecting the proposed Real

    Estate Regulatory Bill for months now. After listening to

    several points of view from people at different ends of the

    spectrum, I've evolved a very strong perspective of my own

    and that which CREDAI has been trying to push at various

    levels.

    Real estate is a complex industry and each real estate

    product, be it a home, shop or an office space, is produced

    through a series of processes that form a long supply chain. This chain involves

    stakeholders from varying backgrounds-the poor construction worker, the buyer, the

    contractor, the banker, the development authority, the fire inspector, the sewage engineer

    and many more-and impacts their livelihood. To cut a long story short, it is meaningless

    to regulate only the real estate developer for a process that involves multiple stakeholders.

    I strongly propose that the Real Estate Regulatory Bill be expanded to cover broadly the

    following 4 categories of stakeholders-real estate developers, urban local bodies,

    financing organisations and customers. A more holistic approach to real estate and its

    myriad complexities will be a better bet to rid the industry of its ailments. The currentapproach must be abandoned in favour of a more inclusive one. Everyone must perform

    to rectify the errors in the system and ensure on-time delivery of quality real estate at

    appropriate costs. As the apex organisation of private sector real estate developers,

    CREDAI will certainly ensure support of a bill that looks to improve standards and prevent

    malpractice. We would be happy to work with the government on implementing a well-

    rounded and holistic policy if our suggestions are well taken.

    Warm regards,

    Kumar GeraChairman

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 05

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    Dear friends,

    The report on real estate presented by McKinsey & Co suggests that our sector

    is capable of contributing 1.5% to the GDP. But this will only be possible if the

    Government of India puts in place effective policies for the growth of the real

    estate sector. We all know the bottle necks that keep throttling the growth of our

    sector. Apart from the urgent need to have effective policies and legislations to

    enable us to procure land for development and expeditious clearances of

    development projects. One of the major hurdles is the availability of finance.

    The Reserve Bank of India and the Government should re-look at the importance

    of the sector and accord it the priority that our sector deserves. India, as we all

    know because of its policies of constraint, did not experience the turmoil of the

    global melt down. But, at the same t ime, we all know the growth of our country

    is slow and every Indian dreams of living in India which is even better than thebest in the world.

    As the real estate market matures, we have more options to fund projects than ever before. Besides bank loans, we now have

    the option for debt financing through external commercial borrowings for developing townships. The IPO route is also gaining

    popularity as real estate organizations gain confidence to tap the stock markets. Qualified Institutional Placements (QIPs) are

    emerging as another means of finance. Private equity and foreign direct investment are being explored by several organizations.

    For the large developers, there are many financing options, but new entrants and small players still find no place in accessing

    these funds. For a housing revolution to take place policies of the Government has to be all inclusive and all developers, large

    and small, should be in a position to get finance for their projects.

    There are several challenges. We urge RBI to consider bringing about a radical change in the funding of the real estate projects.Shortage of housing can be met by increasing supply. Curtailment of credit to this sector is counter-productive and the shortage

    of housing continues to increase. Some of the policy initiatives that are urgently required are:

    1. Direct banks and financial institutions to lend to developers aggressively to accelerate supply.

    2. Priority be accorded to fund projects for the common man. Presently Rs 20 lakhs is classified as priority lending this norm

    needs to be revised upwards to at least Rs 50 lakhs.

    3. Reduce home loan rate to within 7%.

    4. Reduce rate of interest on loans to developers to 9%.

    5. Norms to fund real estate projects should be similar to industry. Large and small developers should be entitled to access

    funds.

    6. FDI/ECB norms to be relaxed.7. Treat Real Estate at par with Infrastructure for funding.

    8. The pension funds and insurance funds be permitted to invest in housing and secondary mortgage market papers.

    While we continue to draw the attention of the Government to ease the norms of funding, we, as developers, are duty bound to

    follow and adhere to adopting healthy and transparent policies. We need to lay due emphasis on corporate governance and

    make concerted efforts to improve our image before our customers. We are also duty bound as members of CREDAI to adhere

    to and follow our Code of Conduct, both in words and in spirit.

    Its a two way process. Lets all work together to bring about a revolution in our sector. Lets set an example for others to emulate,

    let us together open the doors for a better tomorrow.

    Sincerely,

    SANTOSH RUNGTA

    President CREDAI

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 07

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    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 08

    Path-breaking Innovations

    MEDITOR'S BOX

    As we use a pen everyday,

    we never think of the men

    and ideas behind this great

    invention. All our real estate

    developments today are born

    out of innovations of the past.

    The Author takes you

    through some.

    in Real EstateMany of us

    w o u l d

    i m a g i n e ,

    though we

    know better, that the retail

    mall, the intelligent

    commercial office building

    and the integrated township

    have been here forever. We

    use technology and formatsand add to them our own innovations, often without a thought to

    those who pioneered them. Here's to taking a look at how some of

    these path-breaking and life-changing real estate formats began.

    The Retail Mall As We Know It

    A Viennese architect who landed in the US during the World War II

    "with an architect's degree, eight dollars, and no English", Victor

    Gruen literally invented the retail shopping mall.

    It all began when Gruen was asked by a friend in 1939 to design a

    leather-goods store in New York. He came up with a revolutionarystorefront, with a mini-arcade in the entranceway filled with glass

    cases, spotlights, and faux marble, and green corrugated glass on

    the ceiling. He called it a "customer trap," designed to lure customers

    into the store regardless of their interest in the products on display.

    Needless to say, this was the seed idea that gave way to the very

    concepts of modern retail.

    His landmark project, the Southdale Mall, was the first enclosed

    mall in the US near Minnesota. It opened in 1956 and Gruen had

    actually envisioned it as the central point of a much larger community.

    Southdale Mall literally turned the concept of hopping on its head.

    Foir the first time, shopping was no longer facing the street or parking.

    Instead, the mall was introverted with blank external walls and all

    the activity focused on the inside. Instead of a spread out shopping

    space, Gruen put the entire development under one single roof and

    introduced air-conditioning. Another new concept was that of multi-

    level shopping. The mall was spread over two flevels conneted by

    escalators and fed by two-tiered parking. A central courtyard with

    visual and entertainment attractions completed the picture. Southdale

    Mall cost twenty million dollars to build. It had seventy-two stores

    and two anchor department-store tenants, Donaldson's and Dayton's.

    Gruen's visionary concept was to change the retail format forever.

    Developers could now make money out of building shopping malls,

    as central to community and urban life was revolutionary for a nation

    and a world where the mindset was still largely rural. Malcolm

    Gladwell, who later authored Gruen's biography wrote in The New

    Yorker that "Victor Gruen may well have been the most influential

    architect of the twentieth century." For Indian cities today, malls

    have certainly become vivid symbols of the consumer culture and

    indeed of urban life. Needless to say, they are the lifeblood of many

    developers today.

    The Modern Amusement Park

    Walt Disney, who gave us our favourite toons like Mickey and Goofy,

    also gave us the modern concept of an amusement park. Disappointed

    in the kids' parks and fairs of his time that "were often dirty, sleazy,

    money-grubbing places", he dreamt of a new kind of amusement

    park that would have a fantasy setting, provide quality amenities and

    represent the idea of family entertainment. The concept was far

    Cover Story -

    Mukta Naik

    is an architect and

    urban planner who runs her own

    content writing and editing firm.

    She has been writing on real estate

    issues for the past ten years.

    Gruen mall detroit, Victor Gruen (Inset)

    whereas previously

    commercial real estate

    had been a highly risky

    proposition. The

    shopper now had a

    whole new expereicne

    to look forward to. The

    developer had a new

    business model.

    Gruen's vision of the

    shopping experience

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    Disneyland, Walt Disney (Inset)

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 09

    beyond that of a carnival with rides, games, and inexpensive food.

    Disneyland was conceived as an extension of the Disney brand, and

    was the first theme park built in the United States. It brought about a

    major shift in amusement park construction and more importantly, it

    fuelled a new kind of real estate development surrounding major

    attractions.

    Interestingly, other Disney stakeholders did not support Walt's dream

    and he got no financing for his project. Most bankers and investorsdeclined to help Walt as he had no real estate development and

    construction experience. They told him that "the outdoor amusement

    business was a cultural anachronism that had already declined into

    senility." Walt was very confident, though. He began to gather funds

    by borrowing on his life insurance and selling vacation property in

    southern California. He assembled a staff of designers, planners,

    and artists and formed WED Enterprises, named after his own initials.

    The WED group reworked Walt's broad ideas through a long process

    of research and creative brainstorming. In July 1953 Walt decided to

    overcome the obstacle of his inexperience and commissioned two

    studies from the Stanford Research Institute, one that would examine

    the economic prospects of developing Disneyland, and the other the

    ideal location for construction. The Stanford group declared that the

    facility could be profitable and recommended a site southeast of Los

    Angeles, a short 27-minute drive from downtown LA. Walt found

    additional financing through selling television programming to ABC

    television with an agreement that they would promote Disneyland in

    return for an ownership stake in the property.

    Construction began. Joe Fowler, an engineer and retired navy admiralwas the construction supervisor and later park manager for ten

    years. Disneyland was formally opened a year later, on July 18, 1955,

    to rave reviews. The instantly recognisable Disney brand and the

    Disney philosophy were obvious and

    the theme of the characters carried

    into everything, the rides, the

    attractions, the lanscape an even the

    food stalls!

    What started as an idea that drew

    scepticism from everyone soon

    became the capstone of Disney's

    empire. In its first six months, one

    million people visited the park; in its

    first full year, three million people

    passed through its gates. The park

    quickly generated capital to finance

    a vast expansion. In the years to come,

    every expansion of the park resulted

    in increased revenues beyond

    expectations.

    Most critically, Disney's plans envisioned that Disneyland becomes

    a destination for vacationers. He planned for hotels and restaurants

    to be built around the park as an integral part. Almost every major

    amusement park around the world now replicates Walt's dream,

    focusing on convenience, a superior guest experience, development

    planning that allows for seamless expansion, and most importantly a

    "theme" that gives a park a sense of identity and uniqueness.

    New Urbanist Townships

    Disillusioned by the cookie cutter spread of post-industrial cities that

    renounced environmental concern and focused on the automobile,

    and alarmed by the sprawl that modern cities were adopting, several

    urban planners in '80s America began to simultaneously develop

    some first principles for a new kind of urban development. A decisive

    move in 1991 by a Califronia-based non-profit group called the Local

    Government Commission invited architects Peter Calthorpe, Michael

    Corbett, Andrs Duany, Elizabeth Moule, Elizabeth Plater-Zyberk,

    Stefanos Polyzoides, and Daniel Solomon to develop a set of

    community principles for land use planning. These, named the

    Ahwahnee Principles were then sent to one hundred government

    officials at the first Yosemite Conference for Local Elected Officials.

    Calthorpe, Duany, Moule, Plater-Zyberk, Polyzoides, and Solomon

    founded the Chicago-based Congress for the New Urbanism in 1993.

    Today, the CNU has thousands of members, and aggressively promotes

    new urbanist design principles across the world.

    Broadly, new urbanism revives traditional norms of town planning

    and promotes walkable living, connectivity through transit-oriented

    development, mixed use developments as opposed to single use

    zoning that promoted urban sprawl, mixed income housing to promoteequitable and diverse societies, high quality of architecture and

    urban planning with emphasis on public spaces, increased density

    and most critical of all, sustainability and green development.

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    space resort

    Rochester hills New urbanist community

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 010

    Though none of what the new urbanists said was "new", they brought together

    the best design principles under one umbrella. Their vision and research

    has spawned several communities across the USA and inspired developments

    in Europe and South Africa. In India too, cities like Lavasa are based on new

    urbanist principles and are starting a trend of integrated and sensitive planning

    for new townships. Going forward, new urbanism will play a distinct role in

    shaping the many new urban centres that the India growth story will spawn.

    The Intelligent Building

    A comprehensive mix of automated buildings that also adopt green principles,

    intelligent buildings are here to stay, offering developers the benefits of

    long-term cost savings and better building management systems. Technology

    has played a key role in the development of intelligent buildings through the

    efforts of hundreds of imaginative minds the world over.

    The concept of energy management and building automation was fanciful

    till the US faced a serious energy threat in 1973 when OPEC countries placed

    an oil embargo. Suddenly, thought leaders realised that conserving andmanaging energy would be essential for survival going forward. At that time,

    buildings were mostly over-designed, over-ventilated and inefficient. In the

    early '80s, the existing energy management systems transitioned to direct

    digital control (DDC) systems that evolved into the intelligent, sophisticated

    control systems we have today. In the '90s, we started moving toward open

    protocols, and now the use of building automation is an accepted part of

    most projects. As more advanced versions of these systems were deployed,

    energy costs actually started declining.

    Today, we understand that energy efficiency and building automation is an

    integral part of the future of commercial real estate. Developers across the

    world have proved the financial feasibility of this business model. However,

    we have along way to go. Even now, only a handful of iconic projects use the

    availability technology and expertise. Developers in India should seriously

    explore how these can add value to their projects.

    On the anvil: Solar City

    The city of the future, entirely powered through renewable energy sources

    and envisioning the lifestyle of the coming generations, is actually being

    built! The planned city of Babcock Ranch is a 17,000-acre community of

    homes, offices, and factories near Fort Myers, Florida. The largest photovoltaic

    project, a 75 megawatt solar photovoltaic plant that costs $350 million will

    power the city. Developers Kitson & Partners envision a town where "electric

    vehicles, able to plug in for recharge at convenient community-wide

    recharging stations, will glide along avenues beneath the glow of solar-

    powered street lamps. Revolutionary Smart Grid technologies will monitor

    and manage energy use and Smart Home technology will allow residents to

    operate their homes at maximum efficiency, thereby reducing energy costs."

    Kitson & Partners is spending $2 billion to build 19,500 homes spread across

    the affordability spectrum as well as 6 million square feet of retail and

    industrial space. The development also promises the creation of 20,000

    permanent jobs over 20 years.

    Eye on the future: Space Resorts

    If you have about three million euros saved up, you could

    book yourself for a 3-night stay on the world's first space

    resort set to open it doors in 2010. Developed by a company

    called galactic suite ltd., it is actually a bio-inspired orbital

    station designed to be a modular space habitat structure

    with a central-enclosed area where modules will be

    interconnected to a main docking port. Each of the modules

    will include a sliding diaphragm window to allow tourists a

    better view of the earth. A spaceship that can carry four

    passengers at a time will transport tourists from a spaceport

    facility located on a tropical island to the space tourism

    spacecraft after an eight-week astronaut training course.

    On board the spacecraft, the tourist will orbit the earth at an

    average speed of 30, 000 km / h, completing 15 orbital

    rotations per day. You will be carried around the world in 90

    minutes and watch the sunrise and sunset every 45 minutes.

    This is literally an out-of-the-world experience.

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    n these times of great opportunity and challenge, its fitting that we

    pull together and take CREDAI to the next level. The author outlines

    what CREDAI does for its members and how you can help CREDAI on

    its ambitious growth path.

    The Confederation of Real Estate Developers' Associations of India

    (CREDAI) has been in existence for over ten years now. In this time,

    it has grown from a group of select developers to a large umbrella

    organisation that spans nearly the entire country.

    CREDAI's impact

    Our achievements are many in the fields of enabling policy,

    generating awareness on specific issues among our members,

    initiating and sustaining dialogue between developers and other

    stakeholders in the real estate community, like bankers, financers,fund managers, policy makers, customer representatives, etc.

    Specific instances can be recounted from many areas, especially in

    shaping policy. CREDAI gave valuable inputs to the government during

    the formation of the Housing and Habitat Policy as well as for the

    JNNURM program. CREDAI's consistent efforts contributed to the

    abolition of urban land ceiling and stamp duty rationalization. The

    organization contributed to the creation of the SEZ Act. CREDAI was

    a member of working task force that drafted the urban development

    and housing section of the 11th 5 yr plan.

    CREDAI's consistent dialogue with the MoEF regarding Environmental

    Clearance policy for construction projects has brought concessions

    and relief, though this is still an ongoing process. CREDAI has joined

    hands with the NSDC to promote skill development. CREDAI's

    relentless efforts to oppose the levy of service tax on real estate has

    born fruit with amendments made by the tax authorities and more to

    come. Other matters of taxation like Section 56C and 80 I(B) of the IT

    Act have also constantly been on CREDAI's radar. CREDAI played a

    landmark role in urging the Central government to provide a stimulus

    package for real estate during the recession.

    CREDAI has also contributed vital ideas for the nation's development,

    like the Special Residential Zone (SRZ) to reduce the demand-supply

    gap in housing. The organization is working with Indian Banks

    Association to improve financing situation for real estate as well.

    Recently, CREDAI was able to work with the RBI and banking

    association to reclassify real estate to exclude categories like SEZs

    and hospitals. By doing this, the actual amount of bank funding to the

    real estate industry can be monitored (it now shows as Rs 8,000

    crores as opposed to Rs 40,000 crore by the old classification) and

    this makes a strong case for increasing credit flow to our industry.

    Local initiatives by CREDAI members have worked to improve local

    building regulations and their implementation, improving the system

    IEDITOR'S BOX

    Mr. G P Savlani being the Resident

    Director of CREDAI National is the

    silent force behind all the CREDAI

    activities. Here he gives you an

    overview of the past and what's in

    store for the future.

    of approvals and permissions and addressed consumer grievances

    through a special cells set up for grievance redressal.

    Over the years, CREDAI has emerged as a powerful voice for the real

    estate developer community. And since the importance of real estate

    as a growth driver to the Indian economy grows with each passing

    year, naturally CREDAI too has a far greater responsibility as time

    moves on.

    What does CREDAI do for its members?

    At the national level, CREDAI takes up all the issues that impact the

    developer community as a whole. It addresses macro-economic

    policy, national level taxation and other laws through strong relations

    with Central Government and Ministries, which CREDAI has

    developed and nurtured through the years.

    Essentially, CREDAI provides real estate developers with a unified

    voice to

    Represent issues to the government

    Reach out to the consumer

    Seek better solutions through consultation with stakeholders

    Improve the developers' image

    CREDAI facilitates interaction within the real estate community

    through events and seminars and encourages discussion and debate

    on key issues at NATCON, our annual conference. We invite expert

    opinions on issues of concern and disseminate information about

    latest industry developments, policy matters to our members.

    CREDAI promotes ethics and transparency through the CREDAI Code

    of Conduct, encourages best practices and efficient construction

    methods through events and workshops and implements fair dealing

    through a consumer redressal mechanism. We believe that efforts

    towards corporate governance and transparency are critical to

    improve the image of the developer community and will directly

    increase the ability of the sector to attract funding from a larger

    variety of sources. This is critical to the growth of our industry. Westrive to communicate this to members and encourage each

    developer to join us in the drive towards transparency.

    CREDAI builds relationships between developers, the government,

    financial institutions, media and professionals and builds bridges

    with the government through representations, debates, media

    coverage and legal action. We're working towards building a positive

    image of the developer community.

    CREDAI serves the developer community by being their voice, a

    resource, a good listener and loyal supporter, supports the

    government by bringing the industry point of view to the forefront

    and assists the real estate industry and the larger economy by working

    towards a positive, organized and professional private developer

    G P Savlani

    CREDAI: In service of our members

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 013

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    community

    CREDAI helps members prosper by creating a cohesive unit that can

    reap the industry's true potential. In this way, CREDAI prepares the

    stage for growth and prosperity for the developer community.

    Moreover, by being part of an association that holds such an

    influential position, the progress of the beneficiaries becomes

    sustainable.

    How CREDAI impacts your business closely?

    Today, CREDAI brings together 5000 private sector developers

    belonging to 19 city- and state-level associations under a single

    umbrella. What's more, CREDAI is not a centralized organization. It

    is doubly effective because it comprises of city- and state-level

    associations that understand local issues closely and work towards

    practical solutions at a local level. This is strengthened by a national

    secretariat that takes up issues at the national level and works at

    bringing its member associations together through various means of

    communication and through events and round tables.

    For instance, your city-level developer association, being a member

    of CREDAI, will work to:

    Monitor local development issues

    Keep you informed of local policy changes

    Make strong connections with local government

    Address policy measures that harm developers

    Reach out to consumers with important messages

    Similarly, your state-level developer association will, being a CREDAI

    member:

    Make strong connections with the state government

    Many policy issues are state subjects; the association will track

    these and inform you of critical changes

    Raise common issues with the government in collaboration with

    national association CREDAI

    As an individual developer, you will benefit greatly from being part of

    a city- or state- level association.

    CREDAI is dreaming big

    Clearly CREDAI has the potential and should look at catapulting itselfto the next level. We are already working out plans to offer enhanced

    advantages to our members, in comparison with what NASSCOM

    does for the IT/ITeS industry, for instance.

    A study by Ernst & Young recently submitted to CREDAI encourages

    us to adopt some initiatives from other successful industry

    associations. Some of these are:

    Creating committees that identify and benchmark best practices

    in our field

    Commercialising new concepts

    Encouraging support industries

    Greater emphasis on research and knowledge sharing

    Databases for trade leads

    Tie-ups with incubation centres that support business

    Promote skill development

    Acquire and distribute standardized reference material through

    portal, other avenues

    Encourage standardization

    Encourage innovation

    Global outlook

    Develop new markets

    Introduce consumer-oriented initiatives

    We are aware that there are several initiatives that we can take to

    improve our performance and increase our reach. However, by

    definition, an association is the sum of its members. Therefore, we

    would appeal to you, our members and associates, to pool in your

    resources and help CREDAI grow.

    How can you help CREDAI?

    If you are already part of a CREDAI member association, please

    share your concerns with your CREDAI office. We can discuss

    problems, seek solutions and grow together. If you are not yet a

    member, join now or if there isn't a CREDAI member association in

    your city, start one with our assistance. If your city-level developer

    group is not part of CREDAI, make sure it becomes part of the CREDAI

    family to make a great impact.

    Be the Change

    CREDAI has the chance to play a significant role in the nation building

    process. India is urbanizing rapidly and is in need of large amounts

    of infrastructure. We live in challenging times when decisions and

    policies are made in favour of powerful lobbies backed by research

    and credible organizations and people. CREDAI has the potential to

    be such an impactful organization.

    To achieve our goals, we need your support and teamwork. As the

    famed industrialist and philanthropist Andrew Carnegie, one of the

    most famous leaders of industry of the late 19th and early 20th

    centuries, famously wrote, "Teamwork is the ability to work together

    toward a common vision. The ability to direct individual

    accomplishments toward organizational objectives. It is the fuel that

    allows common people to attain uncommon results."

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    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 016

    on'ble Union Minister for Housing and Urban Poverty Alleviation and

    Tourism, Kumari Selja spoke to Mukta Naik on the role of private

    developers in affordable housing, the progress on the regulatory bill

    for real estate, and her perceptions of CREDAI's role in the industry.

    Housing, especially affordable housing, is clearly the need of the

    hour. Private sector real estate developers, though interested, are

    unable to bring down costs below a point due to cost of land and

    long approval processes. How does your Ministry plan to bring private

    sector developers into the loop so that they are encouraged to build

    and sell affordable homes at reasonable prices?

    The auctioning of land for determining its market price is an old and

    well established economic principle. Prima facie, there can be no

    objection to the auctioning of land acquired by the state governments

    at agricultural prices, if its land use is changed and it is given in

    ownership to private parties who then derive benefit from the capital

    gains or put it to use for purposes that yield higher returns. Such

    auctioning enables the government to be the beneficiary of the

    unearned increase in land value and the conversion of land use

    plugs the gap in demand-supply of urban land.

    H"We consider CREDAI our partners"

    The security of tenure and access to basic civic amenities will

    materialize only if the issues of scarcity of urban land and high urban

    land prices are addressed comprehensively. The aims of the Urban

    Land Policy, 1965, remain valid but its implementations, unfortunately,

    has not yielded desired results. Meanwhile there have been changes

    in the macroeconomic policy and the country has witnessed large-

    scale urbanisation, both, through the expansion of existing cities as

    well as due to the migration from rural to urban areas.

    My ministry has consequently taken an initiative to set up a committee

    to study and give recommendations on how towns should expand

    and grow to meet these challenges. The details are being worked

    out in consultation with the sister Ministry of Urban Development,

    which administers the issues of urban planning and development.

    Will single window clearances, or at least simpler clearance

    procedures for developers ever be a reality in your opinion?

    The state governments and the private sector have to work out awin-win combination to simplify the approval procedure. The private

    sector needs to give a firm commitment to the state governments for

    Candid Conversation

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    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 017

    realising the objective of affordable housing in their projects and the

    state governments need to put a system in place for single window,

    fast track clearances.

    For instance, the Maharashtra Chamber of Housing Industry (MCHI)

    and the Government of Maharashtra (GOM) have signed a Joint

    Declaration on April 28, 2010, for delivering 4 lakh homes in five

    years. I am given to understand that the GOM has assured to take

    measures for the removal of bottlenecks and the implementation of

    projects under the programme and has appointed the Mumbai

    Metropolitan Region Development Authority (MMRDA) as the nodal

    agency for the approval of all projects under the programme and

    granting single window clearance. So a beginning has already

    been made.

    What kind of commitment do you feel is needed from private sector

    developers?

    There is more that can be done in a country of our size. One of the

    areas where we need the private sector to play a bigger role is in

    affordable housing for lower to middle income groups. There is a

    huge demand, especially given the rising middle class and expanding

    tier-II cities. There also need to be holding areas rather than just

    megacities. So the private sector needs to realise that and step in.

    The meaning of 'affordable' also needs to be understood. If you

    make a Rs 80 lakh houses instead of a Rs 1.5 crore house, it is sti ll not

    affordable for, say, young professionals.

    I understand that developers tend to think that housing for the low

    to middle-income groups will not give them large profit margins.

    Obviously there are some systems that have to be put in place to

    make it attractive for the private sector to get into. I feel, however,

    that for the private sector, it is here that the economies of scale

    can work.

    The other issue has been access to technology. Is the government

    planning to provide some schemes that offer low cost housing

    technology to developers so that they can keep cost of production of

    houses low?

    The Building Materials and Technology Promotion Council (BMTPC),

    an autonomous organisation of the ministry is already actively

    involved in the facilitation of cost-effective building technologies.

    There is also in the pipeline a scheme for the promotion of the

    Knowledge Network on Innovative Housing Technologies (KNIHS),

    which, inter alia, envisages the benchmarking of the established

    and approved technologies in the curricula of engineering courses.

    I must say that some state governments that are forward-looking and

    willing to experiment are bringing in new technologies. For instance,

    some are going in for monolithic construction.

    As Government of India, we have to ensure that any new technology

    that comes in is also cost-effective as well as friendly to the

    environment. The good thing about a free market is that you can get

    in technology from outside more easily, but at our end we have to

    make sure it complies with certain norms.

    In Maharashtra, there has been a recent announcement of public-

    private partnerships (PPP) to develop affordable housing? Are there

    any other successful examples of PPP for affordable housing? In

    your opinion, how can PPP be encouraged?

    The recent announcement of the

    MHRI and GOM collaboration is

    another step in the direction of

    PPP in affordable housing. There

    are other models of PPP in

    housing too, like Bengal Ambuja

    Housing Development, a

    collaboration between M/s

    Gujarat Ambuja Ltd and the West

    Bengal Housing Board; the HIDCOShapoorji Pallonji Alliance for

    delivering affordable home to the

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    residents of Kolkata; the New Township Policy developed by the

    Uttar Pradesh Housing and Urban Planning Department 'Awas

    Bandhu'; Dharavi Slum Rehabilitation in Mumbai; and the concession

    agreement signed between Jaiprakash Industries Ltd (now Jaypee

    Infratech Ltd, the special purpose vehicle created as per the

    concession agreement) and the Yamuna Expressway (erstwhile Taj

    Expressway) Industrial Development Authority.

    Private developers feel they cannot address the problem of housing

    for the poorest sections of society. What are the government schemes

    that are addressing this and how far will they be able to meet the

    needs?

    The Jawaharlal Nehru National Urban Renewal Mission

    (JNNURM), launched by the government in the year 2005, focuses

    on providing housing and basic services to the urban poor in 65

    specified cities through the sub-mission Basic Services to the Urban

    Poor (BSUP) and in other cities through the Integrated Housing and

    Slum Development Programme (IHSDP). By the end of April 2010,

    there have been 475 projects approved under BSUP and 947 projects

    approved under IHSDP all across the country, envisaging the

    construction or upgradation of 1,022,689 and 502,281 dwelling units

    respectively.

    A new scheme, called the Interest Subsidy Scheme for Housing the

    Urban Poor (ISHUP) has been launched to make housing affordable

    and within the repayment capacity of the economically weaker

    sections (EWS) and low-income groups (LIGs). The scheme

    encourages these sections to avail loan facilities through commercial

    banks and housing finance companies for the purposes of the

    construction or acquisition of houses and avail a 5 percent subsidy

    in the interest payment of loans of up to Rs 1 lakh. The scheme is

    demand-driven and so far Rs 41.83 lakh have been released to the

    National Housing Bank (NHB) towards the net present value (NPV) of

    the interest subsidy claimed by the State Bank of India (SBI), Indian

    Bank and the Central Bank of India in respect of the loans sanctioned

    in Andhra Pradesh. The subsidy will benefit 603 households.

    Further, with a view to encourage the allotment of land for EWS

    under the scheme of Affordable Housing in Partnership, the Central

    Government provides assistance on a progressive scale vis--vis

    the built-up area earmarked for EWS and LIGs as a percentage of

    the total constructed area. The assistance is available for the

    provision of civic services such as water supply, including ground

    level and overhead service reservoirs, storm water drainage, solid

    waste management, sewerage, including common sewerage

    treatment facilities, rain water harvesting, approach roads,

    electricity lines and so on.

    Infrastructure, urban services and city management are all challenges

    for Indian cities. Have schemes like the JNNURM truly encouraged

    states/city corporations to improve the service delivery andgovernance models?

    From an urban citizens' perspective, the administration of the urban

    local self-government impacts their lives more than any other tier of

    government. Therefore, reforms in the administration of the institutions

    of urban local bodies (ULBs) potentially have a significant positive

    impact on the quality of governance, service delivery and the overall

    quality of life.

    Under the JNNURM, the states have signed a tripartite agreement,

    along with the ULB and the Central Government, and reforms are apart of the agreement. Funding is conditional to the implementation

    of reforms. Streamlining of the processing for public disclosure,

    administration of property taxes, use of IT under e-governance and

    land-use reforms are some of many reforms that the JNNURM mission

    has pushed through.

    In your view, how has the JNNURM scheme fared till now? What

    kind of butterfly effect will it have on the overall development of

    cities in the country?

    The integrated slum redevelopment approach if JNNURM for the

    provision of shelter, tenurial security and basic services to slum

    dwellers has been widely welcomed as it has the potential to

    make the country slum free. The new programme that we are

    implementing, called the Rajiv Awas Yojana (RAY), envisages giving

    property rights to the poor. This would enhance their stake in

    democracy, law and order and wealth generation. The new

    programmes we are now contemplating envisage a whole city

    approach to tackle not only existing slums but also the factors that

    lead to the creation of slums. This would translate directly into

    finding solutions for massive land and housing shortages that drive

    prices beyond the range of the poor.

    Given that different departments collect data from their perspective

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    of need, is there some streamlined access to data to make planning

    for affordable housing easier and more effective?

    There will be a streamlining of information because the Planning

    Commission is going to conduct a survey of the urban poor. So it will

    all come together there. We are also eagerly looking forward to the

    Unique Identification Number (UID). By itself, the UID is just a number

    that each citizen will have. Its real impact, however, will be that it

    will help the government in more effective delivery of its schemes.

    Even the RAY will be implemented after proper surveys and after

    developing planning models. Already Rs 70 crore has been earmarked

    for the preparatory phase, which will include these surveys to identify

    the correct beneficiaries for it.

    What is the status of the Real Estate Regulatory Bill? When will it get

    implemented and have the concerns of the real estate developer

    fraternity been addressed, in your opinion?

    Unveiled as an item under the 100 Days' Agenda of the Ministry on

    June 30, 2009, a draft of the Model Real Estate (Regulation of

    Development) Act 200_ was prepared and put in the public domain

    by the Ministry in August 2009 to invite comments and suggestions.

    Responses poured in and continue to be received well after the

    November 6, 2009, deadline. More than 350 comments were received

    from real estate associations, real estate developers, consumers

    and state governments.

    These have been discussed with select state governments in March

    2010 as well as in a series of workshops in April 2010. The second

    draft is shortly being placed before a wider group of states, developers

    and experts in another round of consultations before being finalised.

    The point about involving stakeholders like ULBs and financing

    organisations is well taken. We realise that they need clearances in

    a time-bound manner and there are times when some people lose

    out for no fault of theirs and they incur losses, sometimes passing

    them on to the end-customer. We are trying to iron out these problems

    to ensure that the customer does not suffer in the end.

    That is why we are trying to formulate this model act. There is a lot

    of pressure these days on the state governments as well and this act

    will give them the flexibility to take what they need and modify the

    model act to suit their requirements.

    From an overall policy perspective, would it be possible to assure

    our readers that your government is committed to removing the

    roadblocks and ensuring that the housing industry can pursue their

    work in a regulated, but unhindered fashion?

    The draft Model Real Estate (Regulation of Development) Act 200_

    has been conceived by the Ministry to promote planned and healthy

    real estate development of colonies and apartments with a view to

    protect consumer interest on the one hand and facilitate smooth and

    speedy urban construction on the other.

    It is hoped that the legislation will be helpful in the healthy growth of

    the real estate sector and at the same time check the activities of

    unscrupulous people who exploit buyers. Builders and developers

    need to share more information with the public and consumers, so

    that everybody takes a considered decision in the light of available

    information.

    What would be your message to the thousands of real estate

    developers across the country in terms of where they should focus

    their efforts and what are the opportunities they should look at in

    today's context?

    The urban affordable housing segment is the largest chunk of the

    domestic housing market and is distinguished by being a steady and

    growing demand that will not shrink or fluctuate with the share

    markets or the global economy. Private developers need to exploit

    the long-term entrepreneurial and business opportunities that lie

    locked in affordable housing. PPP is an ideal vehicle. In a PPP, the

    strength of the public sector which controls land and its regulatory

    and legal powers are combined with the initiative and resources of

    the private sector and its efficiency. Their strengths thus get

    synergised to far greater effect and productivity. The PPP approach

    will allow the state agencies to overcome resource deficit, improve

    cost recovery and increase the supply of houses on a demand-

    driven basis.

    What have been your experiences with CREDAI over the years and

    what do you think of the organisation?

    We look upon CREDAI as a partner. I am of the opinion that unless

    the private sector and the government work together, we won't get

    anywhere. We can't work at cross-purposes. I share a good

    relationship with CREDAI. It has called me to speak at several

    occasions and I have met most of the office-bearers and other

    members. I found them all to be very enthusiastic about affordable

    housing. I have met developers who are very sincere about wanting

    to develop affordable housing. And over the years we have come totrust each other immensely, so when they say they are serious about

    something, I am sure that they really are.

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    he effort and the concept of Unique Identity for residents

    of the country impressed the members of CREDAI

    Karnataka. For the Industry plagued with myriad

    problems this concept of recognizable identity will enable

    address most of them, if not fully. Since the Industry is the second

    largest employer

    and still

    unorganized, the

    effort in creating

    identity to 50

    million odd

    c o n s t r u c t i o n

    work force is a

    herculean task. Sensing the prospects of CREDAI involvement in the

    exercise, Past President Ramani Sastri entrusted the task of creating

    a platform to address the issue to me. Under the chairmanship of

    Mr.Balakrishna Hegde I was given the task of organizing an interactive

    session with the concerned associations. The proximity to connected

    associations enabled me easy identification of target audience in

    our effort. We invited all the Center Chairmen of Builders Association

    of India (Southern Cities) along with all the CREDAI center Chairmen

    of 4 Southern States.

    The campaign was organised on 19-4-2010 at Hotel Lalit Ashok,

    Bangalore

    The presentation was made by the Honorable Chairman Shri

    Nanadan Nilekani himself. We at CREDAI Karnataka set the stage

    for the campaign and hosted the event in Bangalore.

    The Mission

    The role that the Authority envisions is to issue a unique identification

    number (UID) that can be verified and authenticated in an online,

    cost-effective manner, and that is robust enough to eliminate duplicate

    and fake identities

    Purpose of the Campaign: (Bangalore Impact)

    To work in liaison with UIDAI in propagating the scheme to

    target residents of the country- the construction work force.

    To educate through member association and members the need

    to register the target residents

    To act as catalyst in coordinating the effort for registering the

    target residents.

    To involve Association and members in the actual registrationprocess

    Way forward:

    Enlist complete support to the effort from the various Associations.

    Organize seminars at

    all association centers

    of CREDAI and BAI

    with specific pre-

    prepared agenda and

    event.

    Discuss and finalize in

    consultation with

    UIDAI the simplified

    recruitment form for

    group registration

    through their

    respective employers/

    Associations.

    Create networking mechanisms with BAI and other similar

    associations for implementation of the programme.

    Fix target date for completion.

    Regular review between various associations.

    CREDAI will lead the campaign and will be the link between

    UIDAI and other involved Associations.

    Form core group to monitor the implementation.

    CREDAI HQ to keep update of progress and report at regular

    intervals.

    PR Exercise by CREDAI through various means.

    The arrangements and the concept presentation by us were greatly

    appreciated by Sri. Nandan Nilekeni. He had assured necessary

    support in our effort and all the delegates assured full support to the

    effort. Similar effort for the other three zones is planned at the

    appropriate time involving all the Construction fraternity for proper

    implementation. The 50 odd participants who are chapter heads of

    BAI and CREDAI of Southern States appreciated the effort and have

    assured full support to CREDAI's efforts. The campaign by CREDAI

    Karntaka had its real impact and the media fully reported the event

    with positive mileage to the Association.

    (IN ASSOCIATION WITH BUILDERS ASSOCIATION OF INDIA AND OTHER CONNECTED ASSOCIATIONS)

    CREDAI - Karnataka InitiativeBangalore Impact - A Campaign for UIDAI - Aadhar

    T

    S.Suresh Hari

    Secretary - CREDAI Karnataka

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    eridian is nw

    the third

    largest city in

    Idaho, USA.

    T h e

    population grew a huge 81.5%

    from 2000 and the head count

    now crosses 73,000. The growth

    comes from the city's vision, to

    offer a premier place to live,

    work and raise a family. And it

    is with this foresight that we see

    a diversifying local economy, a

    workforce under training and

    other moves to develop a

    connected community. At the helm of affairs is Mayor Tammy de

    Weerd.

    Blueprint for transformation

    Setting up an urban work environment to encourage economic

    stimulation, with the expansion of downtown Meridian, while

    connecting to a greater business community across the state was

    one of the targets. The Meridian Development Corporation (MDC)

    with its independent role as an urban renewal agency,was set up

    with a Board of Commissioners. The assignment: to establish the

    most technology and business minded city in the region.

    The Smart Business Ecosystem (SBE) was developed in association

    with Vengaworks to come up with office space in high-performance

    buildings. New jobs created in businesses working to make the

    building more energy efficient are also leveraged.

    Meridian City, USA: Inspirationfor a 21st century city

    MEDITOR'S BOX

    This new series will look

    at examples from across

    the world that can inspire

    developers in India. In this

    case, the transformation of

    Meridian from a sleepy

    rural town to a bustling hi-

    tech city can easily beachieved in India by a

    smart integrated township

    development.

    Strengthening the heart

    As development spread on the outer fringes of the city, MDC had

    taken on a new challenge by bringing the people back home to the

    inner city. The new City Hall was among the first to be built and

    trigger development. Many of the city's services were consolidated

    here. Downtown began to mean a vibrant, walk able place to be in.

    New projects just added to the convenience and pleasure.

    The Ground Floor: Powered by Vengaworks

    Attracting Idaho entrepreneurs and business professionals to

    Meridian's business city centre is the 3000 sq ft Smart Work Center.

    The project is financed by MDC. The area offers enterprise class

    infrastructure, private and collaborative work spaces, meeting rooms

    with high-definition video systems, digital-media-equipped training

    and seminar space. Members, residents and workers can use the

    space for a monthly fee.

    By location and the facilities it offers the project bridges the gap

    between the home office and a central office. Users get access to

    tools and services they require for improved productivity; and all this

    is at a downtown location that is a convenient commute.

    Innovation corridor

    Furthering plans of their long-term growth strategies for economic

    development, environmental measures and community initiatives

    will be the 'corridor development' downtown for the Health Sciences

    and Technology Corridor (known as "The Core"). This 1,800-acre

    project would include a new 60,000 sq ft acute care hospital and

    Idaho State University's Meridian campus. Several other corridors

    are being researched for business viability.

    Best Practices

    C R E D A I I s s u e - A p r i l - M a y - J u n e 2 0 1 023

    meridian-city-hall Meridian-idaho-welcome-sign

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    By S Sivakumar, Director, S3

    Solutions Pvt Ltd, Bangalore

    SERVICE TAX ISSUES -

    POST BUDGETN

    EDITOR'S BOX

    Despite never ending confusions,

    the author who is well known for

    his ability to simplify the most

    complex issues, brings in as much

    clarity as possible.

    ow that the

    Pr e s id e n t

    has already

    given her

    assent to the Finance

    Act 2010 on May 8, 2010,

    the amendments to the

    existing service tax provisions have already come into effect from

    that date, including those related to Construction of Complex services,

    Commercial or Industrial Construction services and Renting of

    Immovable Property services. The purpose of this piece is to look at

    the possible controversies and issues that might arise, post Budget,

    concerning the Realty Sector.

    1. Changes in the Abatement Scheme on service tax - land value

    cannot be included

    The President has given her assent on May 8, 2010 to the Finance Act

    proposals, passed earlier by both the Houses of Parliament. The

    Finance Minister had announced on the floor of the House on April29, 2010 that the Abatement Scheme the Abatement Scheme for the

    construction industry is being amended to provide that service tax is

    now payable only on 25% of the amount received and that too only in

    cases where the gross value includes the value of land constructed

    upon. The exact wordings used by the FM, in his Budget speech, are

    reproduced below:

    "The construction sector has requested for a review of the changes

    in the service tax law proposed in this year's Budget. Several

    suggestions have been made by the trade associations. Considering

    all the inputs, I propose to provide tax relief to this sector by enhancing

    their rate of abatement from 67% to 75% of the gross value where

    such value includes the value of the land constructed upon. Certain

    procedural bottlenecks relating to the completion certificate

    prescribed in the law would also be simplified." Of course, we would

    need to wait for the Notification from the Government, on this increase

    in the abatement value, which can only apply prospectively.

    There seems to be some confusion here in terms of the value of the

    land, in as much as, the Abatement Scheme covered by Notification

    No. 1/2006-ST dated 1-3-2006 never included the value of land, in thefirst place. In fact, it would be unconstitutional for the value of land

    to be included for the levy of service tax by the Government. One

    does not quite understand then, the import of the FM's statement, in

    the absence of a clear Notification/Circular from the CBEC, which

    has not been issued, as aforesaid. Moreover, we must remember

    that, when service tax was first levied on 'Construction of Complex'

    services effective from June 16, 2005, the Board had clarified vide

    Letter No. F.No.B1/6/2005-TRU dated 27-7-2005 that, service tax would

    be payable only on the gross amount charged by the service provider

    for the construction service provided and it would not include the

    cost of land and stamp duty paid for registration of land'. Hence, in

    my view, there is absolutely no way that the land cost could be

    brought into the service tax net.

    Very interestingly, no changes have been announced for the Works

    Contract Scheme. Hence, the Occupancy Certificate related logic

    does not apply to the construction contracts, which have been

    classified under the Composition Scheme applicable to Works

    Contractors.

    2. Developers/Builders can opt for any of the three schemesAs things stand now, post Budget, Developers and Builders have

    three options or schemes, under the service tax law. They can opt to

    pay service tax under 'Construction of Complex Services', which is

    in the statute book since June 16, 2005. In terms of the Abatement

    Scheme applicable to these players, service tax is to be paid on 25%

    of the gross value received, in terms of the FM's Budget speech,

    from a date to be notified. Alternatively, they can opt to pay service

    tax under Notification No. 12/2003-ST dated 20-06-2003, as per which,

    the service provider is exempted from paying service tax on the

    value of goods sold/transferred. The benefit of this Notification isvery much available to Developers/Builders/Works Contractors.

    Alternatively, the Realty players can opt to pay service tax under the

    Composition Scheme, applicable to works contractors.

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    The major disadvantage associated with the Abatement Scheme is

    that, cenvat credit is denied in respect of service tax paid on input

    services and excise/CVD paid on capital goods, unlike the other twoschemes. Though the Department has been taking a view that the

    benefit of Notification 12/2003-ST dated 20-06-2003 cannot be extended

    to Developers and Builders, the Bangalore CESTAT, in the case of

    Sobha Developers Ltd v. CCE & ST [2010] 24 STT 425 (BANG. - CESTAT),

    has categorically held that the Developer is entitled to the benefit of

    Notification No. 12/2003.

    Developers who have contracted out the construction activity would be

    better off, going under Notification No. 12/2003 or the Composition

    Scheme for Works Contractors, given the significant benefit arising

    out of cenvat credit. Developers and Builders would be well advised

    that they are entitled to follow any of the above referred schemes in

    respect of each of their contracts. There is a wide spread incurred

    belief that the composition scheme has to be opted for, in respect of

    each project. This is not quite true, in as much as, every contract for

    construction of a flat is a works contract and consequently, there are

    as many works contracts as there are flats, in a housing project. There

    is a stipulation that a Developer cannot changeover to the works contract

    scheme, in respect of a contract for which service tax has already

    been paid under 'Construction of Complex' services as of June 1, 2007.

    No such conditions exist, in respect of Notification No. 12/2003 and

    consequently, the Developer can always shift to Notification No. 12/

    2003 from the Abatement Scheme at any point of time.

    3. Impact of Budget amendment on 'Construction of Complex' services

    on ongoing and new projects

    As we know, the President has already given her accent to theinsertion of the Explanation to Sections 65(105)(zzzh) and Section of

    the , due to which, the scope of 'Construction of Complex' services

    and Commercial or Industrial Construction Services is now expanded

    to provide that, unless the entire payment for the property is received

    post the completion of the construction of the flat/commercial

    property, as evidenced by the Occupation Certificate, all contracts,

    irrespective of whether they are agreements of sale or agreements

    of construction, would be treated as taxable services. The FM has

    assured to look at alternatives to the Occupancy /Completion

    Certificate. The text of the Explanation, as passed by the Parliamentis as follows:

    "Explanation.-For the purposes of this sub-clause, the construction

    of a new building which is intended for sale, wholly or partly, by a

    builder or any person authorised by the builder before, during or

    after construction (except in cases for which no sum is received

    from or on behalf of the prospective buyer by the builder or the

    person authorised by the builder before grant of completion certificate

    by the authority competent to issue such certificate under any law

    for the time being in force) shall be deemed to be service provided

    by the builder to the buyer;"

    The important question that arises here, is, whether this explanation

    is prospective or retrospective? The Department is very likely to take

    I've tried to summarize the merits and demerits of each of these Schemes, in the table given below:

    Issue Abatement Scheme-Notn. 1/2006 Notification Works Contract-

    No. 12/2003 Composition Scheme

    Does gross amount include No, despite FM's No No

    value of land value statement in Parliament

    Value of gross amount 25%, from date of notification 30% Not Applicable

    on which ST leviable

    Effective rate of service tax 2.575%, from date of notification 3.09% 4.12%

    Is cenvat credit available No, with effect from 1-3-2006 Yes Yes

    on service tax paid on input service?

    Is cenvat credit available on No, with effect from 1-3-2006 Yes Yes

    excise/CVD paid on capital goods?

    Is service tax leviable on the free Doubtful, in the light of decisions of No Yes, in respect of

    supply of materials by Developers? Madras and Delhi High Courts. contracts the execution of

    Department however is issuing Notices which has already started

    on orafter 1-7-2009

    Is the Developer/Builder required No No Yes

    to exercise his option and

    inform the Department

    Can the Developer/Builder change to Not Applicable and Not Applicable and No

    another scheme, once he Developer/Builder Developer/ Builder can

    has exercised the option? can change any time change any time

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    the view that, this explanation will have retrospective effect, and

    would cover all existing contracts also. In my view, such a stand

    would be untenable, in the light of the Apex Court's judgment in the

    Martin Lottery Agencies Ltd case [2009 (14) S.T.R. 593 (SC)], wherein

    it had been held that, an explanation having the effect of casting or

    widening the liability on a person can only be prospective in nature.

    Hence, this amendment will not affect projects already completed

    prior to the date of the coming into force, of this explanation. But, the

    position could be a bit tricky in the case of existing or running housing

    projects. It would be very difficult to take the view that the Explanation

    cannot be applied to existing or running housing projects. While

    discussing the impact of this explanation, we should bear in mind

    the fact that, this amendment, which is prospectively applicable

    from the date of the passing of the Finance Act, 2010, would effectively

    nullify the impact of Circular No. 108/02/2009-ST dated January 29,

    2009. Irrespective of whether agreements of construction or

    agreements of sale are entered into, Builders and Developers would

    now be liable for service tax, so long as, the entire amount from their

    customers are not received after the date of the Occupation

    Certificate("OC") and so long as they are rendering services under

    'Construction of Complex' services. All agreements classif ied under

    'Construction of Complex' services, whether for construction or for

    sale of flats, etc. would now be covered under service tax levy, so

    long as monies are received before the date of the OC. In fact, on the

    face of it, even agreements for sale of readymade flats, entered into

    prior to the OC date, would be covered under service tax. This view

    gets strengthened when one goes thro' the TRU circular D.O.F. No.

    334/1/2010-TRU dated 26th February, 2010, wherein, the amendment

    has been listed under 'Alteration or Expansion in the scope of taxable

    services' and not under 'New Services included in the list of taxable

    services'. Hence, in my view, while the amendment related to the

    levy of service tax linked to the Completion/Occupancy certificate is

    prospective, the levy of service tax under 'Construction of Complex'

    services continues to be applicable even prior to this amendment,

    notwithstanding the Circular No. 108/02/2009.

    4. Confusion continues vis-a-vis Works Contract services

    As we have seen above, the Budget has not touched the scheme oflevy of service tax, for Works Contract services. Even the infamous

    Circular No. 108/02/2009-ST dated January 29, 2009 was issued to

    clarify the scope of service under 'Construction of Complex' services.

    Hence, the scheme of levy of service tax under 'Works Contract'

    services has more or less remained, except for the amendment

    introduced in respect of inclusion of the free supply of materials by

    the Developer in respect of contracts in respect of which, the

    execution has already commenced on or before July 1, 2009. The

    definition of a works contract, under the service tax law, is based on

    the definition given in the state VAT law. Whether an agreement to

    sell a flat could be considered as a works contract and consequently

    be levied sales tax/VAT, is already before the Hon'ble Supreme Court,

    in the L & T case 2008-TIOL-186-SC-CT.. In this case, it has been has

    been submitted that an agreement to sell a flat should be differentiated

    from a works contract and that, the law laid down by the Supreme

    Court in the K Raheja Development Corporation case 2006 (3) S.T.R.

    337 (S.C.) should be distinguished. The simple logic is, what cannot

    be a works contract under the VAT law, cannot be a works contract

    under the service tax law, as well. Should the Apex Court hold that

    an agreement to sell a flat is not a works contract attracting VAT, the

    levy of service tax under 'Works Contract' services, in the case of an

    agreement to sell a flat, would fall 'flat'. If an agreement to sell is not

    a works contract under the VAT law as well as under the service tax

    law, it cannot be subjected to service tax under 'Construction of

    Complex' services, as well. What is exempted under a specific head,

    cannot be subjected to tax under a different head. The Supreme

    Court's decision in the L & T case would therefore assume a lot of

    importance and will have wide ramifications on the levy of service

    tax on the Realty sector.

    5. Can the Department recover interest and penalty from Landlords/

    Lessors

    As we know, many Landlords and Lessors had stopped paying service

    tax, on the basis of the Delhi High Court's ruling in Home Retail

    Solutions v. Union of India 2009(14) S.T.R. 433 (Del.). With the Finance

    Act 2010 having been passed, the retrospective levy on renting

    services has already come into effect. One major concern arising

    out of the passing of the Budget is the introduction of the validating

    provisions, as per which, the Department is entitled to recover interest

    and penalty, in respect of Landlords/Lessors who have not paid theservice tax on the rents received by them. Of course, in cases where

    no Show Cause Notices have been issued, the Landlords/Lessors

    would be well advised to discharge their service tax liability along

    with interest, taking the advantage provided by the amended Section

    73(3) of the Finance Act, 1994. In cases where Show Cause Notices

    have already been issued, the Landlords/Lessors would need to fight

    these out, in respect of penalty.

    Before concluding.....

    Very unfortunately, the Budget does not seem to have brought about

    any clarity, in respect of the service tax provisions concerning the

    Realty sector. On the other hand, a host of new issues and

    controversies have been created, including the reference to the

    value of land under the Abatement scheme, in the FM's speech.

    From the perspective of the Developers and Builders, it would be too

    dangerous not to collect service tax on their housing projects, even

    for the period prior to May 8, 2010. Developers and Builders, not

    paying service tax, would now run the risk of being levied penalties,

    in addition to the mandatory interest for the delayed period.

    Of course, the Developers and Builders can make an intelligent useof the three schemes that are available to them and optimize their

    service tax payments.

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    o n s t r u c t i o n

    Industry, not only in

    India but all over

    the world

    traditionally has had a bad

    reputation for time and cost over

    runs. Project management

    professionals have always been

    looking for better ways of

    managing these aspects of the construction industry. It is often felt that

    other industries have better ways of managing these dimensions and

    great amount of effort is spent in to identify a tool that meets this

    requirement without realizing that great difference in culture that exists

    between the other industries as compared to the construction industry.

    Earned value analysis was formalized as a cost control tool in the

    US defence as early as 1960s. The use of EVA (Earned Value Analysis)

    for cost control and management gained popularity with theapplication of PC for processing of data.

    Earned Value Management (EVM) has been used widely in many

    industries such as defence, IT, phrama, oil and gas to name a few,

    the construction industry is just now starting to pick up on this

    technique.

    EVM is a three dimensional tool. It compares the work planned with

    the amount achieved and finally compares this with the 'cost' of that

    achievement. Cost management on construction projects includes

    the planning of the budgeted costs and their control. This is related to all the knowledge areas of the project. The actual costs are

    related to the work performed, but, the work performed is not often

    related to the work scheduled.

    The purpose of this article is not to teach how EVA calculations are

    done but to highlight the importance of using EVM as a tool to

    monitor construction projects in a better and more realistic manner.

    To quote 'Practice standard for Earned Value Management' of PMI

    (Project Management Institute) EVM has been called " management

    with the lights on" because it can help clearly and objectively

    illuminate where a project is and where it is going - as compared to

    where it was supposed to be and where it is supposed to be going.

    EVM can play a very important role in answering some of the

    C

    EARNED VALUE MANAGEMENTIN CONSTRUCTION PROJECTS-

    AN INTRODUCTION.EDITOR'S BOX

    One of the most respected

    Project Management

    Consultants details a

    more efficient Project

    Management system.

    frequently asked

    questions to assess the

    success of a project

    namely:

    Time parameters:

    Is the project

    ahead or behindschedule?

    Likely completion

    date of the project.

    Is the time being

    used efficiently.

    Cost Parameters:

    As of now is it

    under budget or

    over budget?

    What is the cost of the pending activities?

    What is the final project cost likely to be?

    Will be over the budget or under the budget?

    On application of EVM, if the project manager finds that the project

    is running behind schedule or over the budgeted cost, the project

    manager can use the same methodology to identify problem areas

    and identify critical areas and what should one do to put the project

    back on track.

    As it has always been the case in the construction industry, adaptation

    to use of any new tool or process for the betterment of project

    performance monitoring has been an uphill task. Professional in the

    industry must make an effort use these tools which would certainly

    help in managing the uncertainties in a construction project.

    It is needless to say the success of the application of EVM is dependent

    on the accuracy of the information on which the analysis has to be

    based upon. It is imperative that project schedule should be logic

    linked and have the critical path and the milestones identified. All

    the activities have to be identified in detail and also cost of each

    activity specified.

    Those who are interested to know more about the application and

    use of Earned Value Management may refer to "Practice standard

    for Earned Value Management" by the Project Management Institute.

    Mr. A N Prakash, Managing Director,

    AN Prakash Construction Project

    Managements Consultants,

    Bangalore

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    Exploration Of Rain WaterHarvesting At Macro Levelhe sinking ground

    water table in cities

    and urban areas is

    certainly a matter of

    great concern. The tremendous

    increase in population (especially

    in the suburbs and extended

    suburbs) has put great strain on

    services especially on water

    supply for the city as a whole.

    While the awareness for rain water harvesting has increased of

    late, we must also think of having ways and means of exploring this

    at macro level to avoid the impending crisis. With more and more

    buildings coming up and almost every plot / property being built

    upon the open areas in all these developments are paved and

    rainwater which was being absorbed in the ground during earlier

    times is now being discharged in storm water drains ultimately

    finding its way in the sea. This is the single most important cause of

    lowering of underground water table mainly in the suburban areas.

    The excessive discharge of rain water entering these storm water

    drains and resultant overflow of these drains has also created

    problems of water logging especially during days of heavy rainfall in

    the monsoon in several areas in the suburbs.

    T

    It would be worthwhile seriously exploring the possibility of having

    openings at certain fixed intervals in the storm water drains with pits

    underneath these opening of suitable depth (atleast 2 mtrs. in depth)

    below these openings (see illustration) which would allow percolation

    of the rain water flowing in these drains in the ground. Provision

    will have to be made for providing an inspection chamber above

    these pits so that before the onset of monsoon, the tress leaves,

    debris or mud etc. that may have accumulated on these pits can be

    cleared. Such openings and pits could also be provided in the

    internal storm water drains of large housing colonies and industrial

    and commercial complexes. Apart from tremendous help in raising

    the ground water table throughout the city, it will also help a great

    deal in controlling the

    flooding during the

    heavy rainfall by

    relieving the excessive

    strain on the overloaded

    storm water drains.

    Over a period of time the

    flooding during heavy

    rainfall has now

    become a recurring

    phenomenon in most of

    the suburban areas of

    the city. In areas nearer

    the sea, the spacing of

    EDITOR'S BOX

    Simplest and most

    practical solution for

    recharging the ground

    water which can also

    prevent flooding in

    urban areas is discussed

    in this article.

    Jashwant B. Mehta

    A Consulting Engineer who has

    authored many books on varied topics.

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    Using the sun to sterilize water(BASED ON BBC NEWS DTD. 22ND MARCH, 2006)

    ven after 60 years of independence, a large majority

    of our rural population is deprived of clean drinking

    water. A very simple and effective way to solve the

    problem could be to use solar radiation which means

    a combination of ultra-violet rays and heat. This would

    destroy the bacteria which cause