LBT, New Financial Year & Real Estate!

The only difference between death and taxes is that death doesn't get worse every time Congress meets...Will Rogers

Well here the congress is in USA & the famous quote about taxation is by actor & social commentator but perfectly applicable here in our country also as each new financial year is getting worse than earlier! Especially when its real estate in Maharashtra then with every new financial year I really wonder what new torture awaits for the industry which is so vital for the present urban scene!

Many reader will frown on my this statement as what a builder has to worry as isn’t real estate like a hen laying golden eggs? So why there should be worry for a builder with ever increasing prices of land & subsequently the end product i.e. a home which can be flat or a row house or even commercial space? Well agreed developers are never recognized for their logical approach or long sight about their industry but even they also can’t be so short sighted as not to understand about the future of this industry the way taxation & all other policies are being laid by our Govt. We are on the verge of ending financial year & the new one will start by next fortnight & if we go through the last year then what outcome we see from the budget or the policies regarding real estate of the city or even state? In last year the industry’s finish product has been burdened by increase in stamp duty as well registration charges. Vat i.e. value added tax has been implemented by state govt & service tax has been applied by the central govt despite the various builders associations oppose to the same. The ready reckoner values ( base prices in various areas decided by Govt on which stamp duty is applied) in of the flats have been kept on increasing & at many places the actual deal price is less than the ready reckoner value yet the buyer end up stamp duty at higher rate than his deal price! Same was about service tax as when we are paying service tax to our contractors & stamp duty on land value how the service tax can be applied on the flat price? I am no tax expert but these were the questions which came to a common man’s mind. And on the top of it the service tax dept is now demanding service tax even on the maintenance deposit which we take from every flat holder & which is utilized to take care the expenses till the society conveyance gets done! And even on the money taken for expenses of getting power connection which the developer has to pay to MSEDCL i.e. power supply company.

Here the most liked argument of people is who cares? Where builders have to pay? All this gets cut from the pocket of the flat buyer so why builder should worry about the taxation. Agreed every indirect tax gets cut from the end user only & real estate is also no exception but then have we thought why Auto Rickshawalas or Taxiwalas go on strike when there is any hike in petrol prices? Why they should go on strike when it’s the traveler by the taxi who is going to shell out the money? Well even they are smart enough to know that every rupee more for the travel is going to keep traveler away from using the taxi & that’s why in end it’s the taxiwala or rickshwala who is going to suffer by petrol price hike & that’s why they goes on strike. Here I will give a simple example about rising costs in real estate,  whenever there is a new movie get released its houseful on a week end & if a family goes to watch it & they found the tickets have sold out then they will opt to buy the ticket in black market. Now if the original price of the ticket is Rs 250 then the guy will buy it on premium say at the most Rs 500 but if it goes beyond  that then he will go back saying that he will watch the movie sometimes later!

Well same thing will happen if we keep on allowing to get the homes costlier & the whole real estate will come to stand still with this rate! Already the prices of homes in Metros are beyond budget of the middle class & it’s this middle class who is the back bone of the real estate. And unfortunately with every new policy about taxation the govt seems to be on mission to drive out this middle class from the market.

For e.g. the latest nail govt has hit on the eve of passing financial year if LBT i.e. local body tax. Agreed, it is for balancing the local body’s income  after squashing out of octroy but how  it can be applied on homes when earlier no such thing was there? When every material which is being used for the construction will be charged with LBT then why LBT of flats is being applied that to upon the agreement cost? ( Though it’s not clear yet but it’s said to be like that) How can be its applied for the land cost as well labor costs involved in costing of the flat? So many questions to be answered & yet the govt is going ahead with applying LBT on homes making them more costlier.

If the news is true about LBT being charged by 1% of agreement cost then the taxes toll itself goes to nearly above 10% in all on the agreement coast. Means for a flat of Rs 30 lacs the buyer will be paying nearly Rs 3 lacs just in form of taxes like stamp duty, registration, vat, service tax & LBT! Leave apart the costing he is already paying for Development Charges, MSEB power supply, NA & so many others which the developer is paying to various govt departments while building the structure.

The million dollar question is after paying so many taxes & premiums does the home which the buyer is getting, provides him the entire so called infrastructure for making his life easier? Unfortunately the answer is big NO! After paying for every single rupee govt is levying on the home yet the scene is poor flat holder rarely gets things like water supply, public transport & power. Leave apart things like education & medical but we are repeatedly failure to provide very basics of life to the common man in spite of charging him for these services.

Here is where the role of developers is important. As when we say we are building societies it doesn’t mean just to build concrete walls , sale them & make money. Try to raise the voice to the authorities for such issues & make life of our client a bit easier is also our responsibility. Instead of so many taxes there should be one plain simple mode of taxation for the homes making them affordable & let various departments of the govt have their share from that central collection. Also the taxation should be rational & keeping in mind the product. We gave all benefits for the Information Industry or Tourism Industry as they generates revenue, then what is real estate doing? This is probably the second largest industry after automobile industry in generating jobs & above all it produces the most essential commodity for the urban India i.e. the Home. It has to be treated with equal or more respect at par with other industries or else as the quote says each new financial year will be worse than death for the middle class home buyer & if he dies that means it will be the death of real estate industry itself, mind it friends!

 Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

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

http://jivnachadrushtikon.blogspot.in/

http://visonoflife.blogspot.in/2013/01/identifying-good-builder.html


Social Side of Sanjeevani ! (Click link below)

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

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

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

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Having a Dialogue!

Change happens by listening and then starting a dialogue with the people who are doing something you don't believe is right...Jane Goodall

These words from the great researcher whose work on chimpanzees is a history in itself are very much important, though they have been said on a different platform & for different people yet when applied to real estate they come very perfect! Recently an incidence took place which reminded me her quote. Since long when the Internet has come in existence I have a habit of replying each inquiry personally also which come to marketing. Though I don't give information or do actual sales part yet I have a letter for every inquirer which I send from my mail id & many a time a dialogue starts with it. In one such conversation the inquirer Mr. Harshal replied to my mail or sharing we can call it, saying he was thrilled to have a mail from me & he is thankful for a personal sharing by a developer to a common flat inquirer which he found extreme rare. He was genuinely excited by a builder personally replying his quarry for finding a home in his budget & actually is in conversation with him & offering assistance for the cause. And let me tell you this wasn't the first case with me. Whenever I have tried to communicate with the people who have inquired with my organization for their home hunt & when have found that I too am party of that communication from my marketing team they have shown surprised reaction.

Though as I have seen reactions of this kind from the clients after my sharing yet this time it ticked up the writer in me as why we are not having a plain simple dialogue with our customers? And when we use the term customer then it’s not only the person inquiring for his home but anyone who expects some service from the organization of a builder. He or she can be supplier, contractor, consultant or even neighbor of any ongoing construction, you ask any of these entities & they will vouch that the builders are never famous for communication. Reason may be any but this is main complaint about the community we call as builders that either they are non-accessible or don't communicate clearly. Here when I mean builder it includes even the staff of the organization, leave apart the person in charge of the organization by himself. Many of the flat holders have never met or seen their builder in the entire process of buying the home. On the other side of the coin, I knew a few fellow builders who boast of not meeting or knowing their single client ever! Well professionally this may be a success as the show is being managed by their team & meeting the builder in person never arise but is it a truth or something to boast? Here many builders think that meeting clients mean more head ache as it makes them feel important unnecessarily as well their expectations increases too much by doing so. Also it’s a myth that being unavailable to the outsiders makes you important or of some status; these all things adds on negative image making in mind of a common man about the profession.

I am surprised as on one hand where the means of dialogues are so many in compare to old days when meting across was the only mean or at most by telephonic conversation were the means of communication. Now we have got Internet, Sms, Whastap, Mobile, Skipe, Face book & the list is on. Writing a letter is a history  as let's ask yourself when you have actually wrote a letter to your any of the customer? Rather never there was so much communication tools available than we have access to the same today & yet what we see is people are getting away from each other & complaints of not having dialogue are increasing day by day & the problems arising because of it! Actually all these tools of communication can be used very effectively to have a dialogue with your customers & it’s this dialogue coming from the developer which is very important for the customer. A home as I have always stated is not just a consumer product but it has lots of sentiments attached to it & what better than to honor these sentiments of customer than to have a regular plain dialogue with him? After all what is a home where there isn't sharing of a dialogue! The dialogue need not have to be promoting your product, you can just write a mail occasionally to your clients as well to your suppliers or even a Sms saying you like to be in touch with them & is everything fine between them & your team? Such simple means of communication can clear a lot of misconceptions about the image of a developer & build trust as well increases attachment towards our organization.

Most of the time the customers, contractors or the suppliers of a builder rarely have direct access to the main figure of the organization. In such case periodical meeting in form of casual get-together with all these segments does make healthy relations. And again it need not have to be a time consuming event like a dinner or lunch, a casual over the cup of tea type conversation is enough. All the outcome which we want is a bond gets strengthened & it’s this bond which makes them trust in you. And at such times you can casually ask them about any difficulty they are finding in dealing with your team or suggestions about any improvement in your system from their side. Trust me people get thrilled with such get-togethers & many a times you get out of the world ideas which are beneficial for entire organization. Now a day’s many big real estate houses have a concept of arranging a get-together of their existing customers yearly basis & organizing some cultural even followed by dinner at such occasion. Nothing wrong but what I feel is more than that if you keep it casual &create opportunity for your clients to express themselves about their experience with your organization then it will be much fruitful. Similarly small group get-togethers with your suppliers or contractors can be arranged. It also helps in making them feel as one team & it’s this team which produces miracles at work. In present times people are realizing that money isn't everything to deliver the results & your dialogue can be something which is far more than just money which you will be paying for the services of the people.

At our organization we have a system of conducting on site get-togethers of existing customers & explaining them the construction work & introducing them to the people who are making their home. It's not the specifications people are interested but it’s to have a across dialogue with their developer is what interests them more is what I have experienced. And this process should not be just one time event but a routine practice as then it will help in achieving its purpose. Finally as the wise old men have said "There is no more effective solution for any problem in communication than plain simple words which have come from your heart"!  Only need is open up yourself a bit & this is applicable to both sides, may you be a developer or a common flat holder, you can always start a dialogue from your side. As Jane Goodal has said even if you don't have any wrong thing to point out yet you can do something better with that dialogue!



Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

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

http://jivnachadrushtikon.blogspot.in/

http://visonoflife.blogspot.in/2013/01/identifying-good-builder.html


Social Side of Sanjeevani ! (Click link below)

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

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

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

Think Green, Think Life

www.sanjeevanideve.com

Life of Building!

There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible...Henry Ford

Well when applied to our real estate many will say the above quote is a mockery of the industry as whenever the term quality product is referred, builders certainly are not up in the line. This again many of my colleagues won’t like but that is the general feeling of common man I am sharing. There was a letter in "Sakal Vastu" by Mr. Sandeep Khardekar about the quality of the present construction as well responsibilities for the faults in the same. After reading that letter, the builder as well engineer in me can’t keep mum & that’s the subject of this sharing.

Mr. Khardekar has compared our today’s construction with British time structures & then there were issues about what is the life of the present buildings considered while building them & what about the faults like leakages as well cracks to the plaster etc. He also has raised the point about certifying the ongoing construction & punishment to the concerned for faulty work or making. All the points are very much valid though the answers may not be as simple as it looks because most will say what’s big deal no doubt the builder is responsible & punish him for any such fault. Well, may be true in some extent but before concluding we need to look at the issues in holistic angle as its not whose fault it is but how we are going to pin up the responsibilities & what are the reasons behind the faults is much more important to know. As speaking about Credai or MBVA i.e. both are the builder's organizations, no member will wish that his buildings should have faults & neither will he love to face complaints from the customer. Rather no builder who wants to be in business for longer time will like to have such things in his buildings.

Then why there are such cases of bad quality construction & conflicts over the maintenance between customer & the builder? Let’s understand the building construction process for that. Still in our country to a majority extent building construction or any civil activity is being done by manual labor & the material used is whatever locally available. In a way unlike any factory made product where most of the work processes are being done by machines here it’s done by manual methods & that does creates quality related issues. Also no standardization of the construction practices is here. There is an IS building code for construction practices but at many places it’s vague & not pertaining to the specific local conditions which are limitations too, for the builder. For example getting sand or metal of proper size & grade for the construction work. For this the builder is totally dependent on the local market material only. Most important there is no controlling authority control for building construction. The local authorities like Municipal Corporations are interested in just sanctioning process which is FSI or zoning related & they are not ready to take responsibility of quality. Though they do ask for structural stability type’s certification from the licensed structural designer, that’s it! And it’s assumed that the architect is supposed to look after the quality part of the building construction, but his role too is limited for checking dimensions as well plot margins type things & all the actual construction work is left to the developer & his contractors. Here again there isn’t any system to confirm technical qualifications of the builder or his contractor neither to check whether there is any technically qualified staff is available at site for quality checking. These are the basic lacunas which lead to future faults in construction.

The construction of a building is twofold process i.e. manufacturing as well assembling as the frame, means column, beams & slabs along with walls is being actually constructed at site & then tiles, doors, windows which are made in factory are fitted in this frame. So it’s a mix product of manufacturing & assembling. Obliviously the faults also will have to be categorized accordingly. Then there are local conditions like quality of sand & weather in city like Pune which does induce thermal stresses in the frame as in one day the temperature difference can be as high as 25 degrees! Also the sand available in Pune & surrounding is river sand which does have high clay content & becomes main reasons for surface cracks in the plaster. Again the cracks can be of two types, first type which are surface cracks are in plaster & they do look ugly but not harmful structurally. The other types are structural cracks & are outcome of poor quality concreting or faulty structural design. Also because of less curing to the concrete after casting. The second category cracks are sheer negligence of the developers & he is solely responsible for it & they are non repairable too. When I say non repairable that means it will cost huge amount to repair such fault & not possible for many occupants. 

Another manufacturing fault is leakage of water proofing of terraces or toilets. This again causes due to bad supervision or faulty processes of doing the water proofing. In any case the fault lies with the builder only provided no damage has been done to the water proofing after possession by the flat holders.

Other types of faults are in assembling, for e.g. tiles get loose in a year or plumbing fitting leaks or cladding fails down or doors get bend & things like that. All these can be avoided by using good workmanship as well choosing good quality material of standard companies. Again this is builders responsibility though in some cases like shade difference in floor tiles is beyond control of the developer as even you but good branded tiles such type of faults have been observed & the reason is a tile is made of natural material like clay. And every batch differs in properties of basic material so some shade difference is possible but it should not be more that 10-15% is accepted. As to these faults even the builder can’t do anything. Also Chrome plated fittings get rusted due to use of bore well or hard water; such faults are beyond control of the developer.

Apart from this there is responsibility of the occupants also to use the building with proper care which many a times not followed by the occupants. Breaking of the wall of plaster after finishing should be strictly avoided as plaster to the main frame of the building is like skin to our body, you cut it at one place & unlike our body it can’t get healed with medicine but the damage can be anywhere in the frame & leads to leakage. But what I have seen is many a times for things like fixing Air Conditioning unit to changing the tiles or kitchen otta direction the plaster is being broken & then we say cracks have developed in the flat’s walls. Even if it’s being done in your flat the cracks may occur in adjoining flat. Faults like toilet leakages occur due to breaking of toilet tiles after possession as per interior design’s requirement & the sufferer may be the flat below your home. Here definitely the developer isn’t responsible but the occupants are. Then there are things like periodical painting exterior as well internal which many societies don’t do for cutting expenses. Actually it’s very essential for tropical areas like ours where we receive rains nearly 30 inches per year. After 5-6 years the buildings needs to be painted from outside & now days we do get good quality paints which takes care of seepages to great extent. Also regular checking of pluming lines & facilities like Garbage Chute or else we have read accident like the one in recent news can happen. If a society isn’t getting such periodical maintenance done of the buildings then the developer can’t be blamed for the faults occurred due to it. Important things like maintenance contract of fire fighting systems or lifts are often not renewed in time or given to sub standard agency just to save the costs incurred & which leads to major faults is also I have observed. But at the same time the developer should make the occupants aware about all these things while giving possession is also equally true.

The builders who are aware about quality they does take such precautions of appointing proper contractor as well trained technical staff at site as most of these things can be avoided with proper supervision. And that’s why it’s very important to visit the site regularly after you have booked your flat & see that the construction is being supervised by trained staff. Also here is where pedigree of the builder counts a lot as a good builder who has past experience under his belt will see that the workmanship is good he will try to avoid any future maintenance by taking care at right time during construction. Also he will make the occupants aware about the proper maintenance of the building he has built. And even if some maintenance occurs then he will take the responsibility & instead avoiding customers will speak with them & do the needful about the fault. So it’s extremely important to visit the past projects of any builder before finalizing your home with him & see by your own eyes the quality as well service he provides to his customers.

Unfortunately to my knowledge there isn’t any system other than Consumer Court & then go to the judicially for any of the fault which occurs after possession & which builder is not agreeing responsibility for the same. At Credai there is a Grievance Cell which does try to give justice to such flat holder provided the builder is their member. We do need a system where such disputes can be taken care & fast. And this can be formed at local governing bosdy only as they can check the site situation, pin point the responsibility of the fault & act accordingly. As in all such cases most important is the time as well repair costs incurred. The aim is faults should be cured & fast.

The life of RCC i.e. Reinforced Cement Concrete structures is considered as 70 years to my knowledge. Means nearly two generations are going to stay in such building & its responsibility of the builder to build the structure accordingly which will serve them in best way. Also it’s the responsibility of the occupants too, to see that whatever has been given to them as a home they should maintain it properly. As ultimately it’s the home where our sentiments also are involved, we are talking about & not just any consumer product.

--
Sanjay Deshpande

Sanjeevani Dev.

Envo-Power Committee, Credai, Pune

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

http://jivnachadrushtikon.blogspot.in/

http://visonoflife.blogspot.in/2013/01/identifying-good-builder.html


Social Side of Sanjeevani ! (Click link below)

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

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

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

Think Green, Think Life

www.sanjeevanideve.com