Cabinet Approves tabling of Benami Transactions (Prohibition) Bill, 2011in Parliament

New Delhi: The cabinet on Thursday approved a proposal to enact a new law to strictly deal with benami transactions or property purchased in someone else's name.

The cabinet, at a meeting chaired by Prime Minister Manmohan Singh approved the tabling in Parliament of the Benami Transactions (Prohibition) Bill, 2011 to replace the Benami Transactions (Prohibition) Act of 1988.

"The Bill contains elaborate provisions dealing with the definition of benami transaction and benami property, prohibited benami transactions, consequences of entering into a prohibited benami transaction and the procedure for implementing the benami law," a statement released after the meeting said.

Properties held by a coparcener in a Hindu undivided family and property held by a person in fiduciary capacity are excluded from the definition of benami transaction.

A coparcener is an individual who holds property inherited from an ancestor, while a fiduciary is an individual who holds property in trust.

Further, properties acquired by an individual in the name of spouse, brother or sister or any lineal ascendant or descendant are benami transactions which are not prohibited. Consequently, they are not subject to penal provisions.

Broadly speaking, if the real beneficiary of a property is not the person in whose name it is bought, such transactions are termed as benami, a Persian word meaning without name.

Benami transactions are the major source of black money. The government is under intense pressure to deal strictly with such transactions.

According to the proposed Bill, if "any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into such benami transaction, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to two years and shall also be liable to a fine".

"A benami property shall also be liable for confiscation by the Adjudicating Authority after the person concerned has been given due opportunity of being heard," the statement said, reports IANS.

Domestic PE Funds Emerging as Preferred Investment Option for HNI’s

Domestic private equity funds in the real estate space are emerging as a preferred investment option for high net-worth individuals and family offices in the country. Over the last few years, money from institutional investors that was part of such funds has dried up. Banks have been directed by the central bank to reduce their exposure to real estate. “In such a scenario, HNIs are investing with fund houses as these offer better yield to the investors,” says Sandeep Kotak , executive vice president and business head for commercial real estate at Kotak Mahindra Bank . As a portfolio, capital market offers an 8% return while HNIs can get a return of 18-22% from domestic funds investing in real estate. In the last one-year a number of players including Ask Investment Advisors, Kotak Realty Fund, Milestone Capital Advisors and Aditya Birla Real Estate Fund have raised domestic private equity funds from HNIs. ICICI Venture and Indiareit have announced that they will raise money from HNIs.

For HNI’s investing in a fund is an opportunity to diversify both location and developer risk and participate in real estate across the country. “This has emerged as an alternative investment class,” says Sutapa Banerjee , chief executive officer, private wealth at Ambit Capital . For an HNI , investing in a fund means he is investing in a basket of properties, he does not have to do a due diligence on the physical property and is free of all hassles of registration and stamp duty, she adds. The only due diligence that is required is which fund to invest in-one that invests for capital appreciation, for rental yield, where one gets a steady return or one that invests in part completed projects where the payback period is shorter. “Investing in real estate in India still requires thorough due diligence which an institutional fund manager can do better,” says Sanjeev Dasgupta , president, real estate at ICICI Venture, which is raising a Rs 1,000 crore domestic fund. Apart from the due diligence, a fund manager would also offer tax efficient deal structuring.

“A fund does not invest in a property for the price increase. It will access the development margins at today’s price,” says Sunil Rohokale , executive director, Ask Investment Advisors, which has raised two domestic realty funds (Rs 520 crore and Rs 480 crore) in the last few months from HNIs. HNIs of course need to be careful about which fund they are getting into and their past track record. Not many of the funds in the country have shown returns yet. “We offer this product to clients who understand that there is relatively higher risk in real estate and it is a long term play,” says Sonalee Panda , head, wealth management, liability and marketing at ING Vysya Bank . A typical investment in a real estate fund would be for 5-7 years. Dasgupta of ICICI Venture though points out that the kind of investments that funds are making these days, they can start repaying the HNIs after the first year. A number of funds today are investing in projects that are 50-60% complete. Here, investments should get an exit in 2-3 years.

Oberoi Realty’s Centaur Hotel Deal Terminated

Oberoi Realty, through a wholly owned arm, had a 50:50 JV with co-promoters of DB Realty to acquire the Mumbai hotel.

Oberoi Realty Ltd has said that an agreement signed by Siddhivinayak Realties Pvt Ltd (SRPL) with V Hotels Ltd to purchase the Centaur Hotel property in Mumbai has been terminated by the order of an arbitrator.

SRPL is a 50:50 joint venture between Oberoi Constructions (an Oberoi Realty arm) and Vinod Goenka & Shahid Balwa (co-promoters of DB Realty), who are currently in jail for alleged involvement in the 2G telecom scam.

Following the termination of the contract, V Hotels is liable to repay Rs 73 crore within 90 days. It was the initial amount paid by SRPL for the deal.

SRPL had entered into an agreement with the firm controlled by Ajit Kerkar (former Tata Group executive who had an acrimonious exit from Indian Hotels more than a decade ago) in March, 2005, to purchase the Centaur Hotel property for around Rs 300 crore.

The case has been pending for a long time between the two parties. While the arbitrator has terminated the deal, SRPL has also filed an application at the Bombay High Court, seeking an injunction against V Hotels.

Although unrelated, this comes soon after another project related to DB Realty was scrapped last week.

Slump Delays Projects of Several Developers in NCR including DLF, Unitech

Most of the projects launched in the National Capital Region (NCR) between 2005 and 2007 are yet to be completed. These include DLF’s Magnolias and Belaire in Gurgaon, Parsvnath’s Exotica in Gurgaon and Palacia and Privilege at Greater Noida. Unitech has also seen construction delays in two of its projects — Escape and The Close — in Gurgaon. “We are trying to complete the two by the end of this year,” a DLF spokesperson said on the company’s delayed projects.

A Parsvnath official said the company is targeting completion of its two Greater Noida projects by end-2012. “In case of Exotica project in Gurgaon, even though there were delays, we have completed possessions in the first two phases. We are currently offering possession in the third phase. And in six months, we will start providing possessions in the fourth phase,” he told DNA. A Unitech spokesperson said the company has already offered The Close (North) for possession. “Of the total 16 Towers, 14 towers have been offered. Also, more than 500 families have occupied their apartments and many others, who have taken possession, will move in soon. The remaining towers will be offered for possession in the next few months. Similarly, for The Escape as well, possession has already started and is happening in a phased manner.”

Developers blame the delay on the 2008-09 slowdown, among other factors. “During the slowdown, all the projects were impacted. Other factors such as lack of construction workers due to Commonwealth Games last year and the National Rural Employment Guarantee Scheme have also contributed to the delays,” said the DLF spokesperson. The Parsvnath official dittoed: “Almost two years were lost to the recession. Customers defaulted and even the banks that had committed us funds also took a backseat. We were pitted against odds.” The lessons seem to have been learnt well.

DLF has put in place a system of pre-launch checks and balances. “As a policy, we have decided that launches will be done only after all the required approvals from the concerned agency have been taken,” the spokesperson said. Parsvnath has started taking dedicated loans for projects. Unitech, on its part, has jacked up manpower for speedy implementation. “Unitech has ramped up the construction activity significantly during the last 24 months. Workforce deployed at sites increased nearly six-fold from 3,500 to about 20,000-plus,” its spokesperson said. But just as the going appeared to be getting better comes the likelihood of another slowdown, what with interest rates and input costs shooting through the roof.

Property Prices to Increase Sharply in Greater Noida: GNIDA

Greater Noida Industrial Development Authority (GNIDA) on Friday said consumers will have to pay much more for properties in the region in future after the Supreme Court disallowed acquisition of 176 hectares of land from farmers. The authority also said it will return the land to the affected farmers as per the apex court ruling and will strictly follow the new land acquisition policy of Uttar Pradesh in acquiring land for future projects.

“After this court order, we will acquire all future land keeping in mind the market price and hence will have to pay higher land prices. Automatically, sale prices will increase and hence end consumers will be impacted severely,” GNIDA Chief Executive Officer Rama Raman said. The authority will follow the court orders in “letter and spirit” and will return the land to farmers, he added. “Initially, we will return the land as per the orders. We will see later how we can proceed in this respect after going through the detail judgement,” Raman said. He, however, did not specify what GNIDA will do to compensate the developers, but said it will acquire land at regular intervals “as and when necessary”.

On Wednesday, the Supreme Court had upheld a verdict of the Allahabad High Court that quashed acquisition of 176 hectares of land from farmers in Greater Noida saying the authorities were “sub-serving” private builders in the name of public interest. Raman, however, said real estate development in the area is unlikely to get affected due to the judgement. “I don’t think it will affect much, but due to procedural steps, we may only witness some delays,” he added. Meanwhile, real estate analysts said the Supreme Court decision is unlikely to affect much in the future, but rather it will help all stakeholders to approach cautiously.

“Demand will not be impacted much in the region as developers are taking various proactive measures to address customers’ concerns. “From now onwards, all future transactions will see double verifications from all parties like consumers, developers and the government. It is a good thing for the sector to avoid any controversy,” Jones Lang LaSalle Chief Executive Officer (Operations) Santhosh Kumar said. He said developers may feel some impact in the near future as they are either refunding the money or giving alternate locations to consumers, who had booked their properties in the disputed area. Expressing similar sentiments, Cushman & Wakefield India Director (Residential Services) Shveta Jain said there will not be any significant impact to the existing customers as developers are relocating them to other projects in the area.