Advocateselvakumar

sub registrar office bangalore

Saturday, 23 July 2016

Analyse and invest

Anticipating a revival in earnings and demand growth is a dangerous way to plan your equity investments

Investors in the Indian equity markets have been swinging between wild optimism and quiet pessimism since 2012. Many attribute the lacklustre performance of the markets to the lack of fast-paced structural reforms or a deeper cut in interest rates. The real culprit, however, is the lack of earnings growth. Persistent single-digit earnings growth clearly indicates that corporate profits do not back early market optimism. The inordinate delay in cyclical catch-up should concern investors.

The turnaround of a bear market into a bull market is typically led by a fall in interest rates. This provides immediate relief to businesses burdened by borrowings and inventory . Then the operating margins improve, riding on lower input costs and operating leverage, as capacity utilisation increases. Soon, businesses are in a position to post a growth in revenue and expand volume and value of sales, as demand picks up. With sustained demand, businesses become con fident about making further capital investments, and the bull cycle is complete.

The main shocker in the past three years has been the failure of earnings to match up. Estimating earnings is a dangerous game, and in each of the last 12 quarters, analysts have rued that earnings have missed estimates, or the downgrade cycle of earnings has persisted.The single-digit earnings growth that we have seen for Indian equity is unprecedented and unexpected at what seemed to be a turn of the economic cycle.

A chunk of the equity markets is in structural distress. While oil and metals suffer from the downturn in commodity prices, banks are going through the pain of balance sheet restructuring. Infra and capital goods have been hit by lack of investments, and export-led businesses have been impacted by slow global economy . Auto, consumer durable and real estate face lack of demand. The absence of investment is damaging, and the low rate of growth in bank credit implies businesses are not expanding. This structural logjam is holding the markets back.

A very frequently cited explanation about the poor earnings story is that it could be a `one-time extraordinary event'. This term refers to a charge in income that is large and negatively impact, but not expected to persist. Discussions about balance sheets of banks are rife with such comments. Is the stress in the banking system just an accounting and reporting problem, or is there a serious structural limitation to quality of earnings? It is dangerous to show bravado about a turnaround in earnings, when what is touted as `extraordinary' is only the beginning of a long rework.

There is a lot of optimism about demand revival, with the monsoon being the messiah. This time we also have the Seventh Pay Commission. The idea is that if the rainfall is normal, the purchasing power of rural masses will return. Add to this the purchasing power in the hands of government employees, who will use their higher salaries to buy stuff, and we should see a revival in demand for goods and services. Those looking at sectors such as real estate, consumer durables and automobiles are enthused by this revival. Let's consider one real estate to see how this might be an overly optimistic argument.

The real estate market in India boomed due to the runaway optimism of the early 2000s, and struggled to keep up after the global financial crisis. After a period of bravado, the reality of large unsold stocks has become stark. That's why the sector is at the forefront of lobbying for lower interest rates. However, neither a low interest rate nor a pickup in demand would help. What the sector needs is a steep drop in prices, a correction that vested interest of partly completed projects will not allow, leading to a structural logjam.

Another fallacy is that of valuation. Every time an earnings forecast goes wrong, enthusiasts point to how the markets have become cheaper. They declare that at 16 times forecast earnings, the Indian markets are so much more attractive than in the past. Price-earnings ratios have never been about the price-they are about earnings alone, and that the stubborn denominator should justify the wild gyrations of the numerator. Falling PE multiples in a market that screams turnaround should sound alarm bells about earnings not matching up.

The lack of revival in earnings points to serious structural and qualitative problems in corporate and banking balance sheets, and sector-level and company-level differences in performance. The focus for the equity investor should be on the micro-level selection of busi nesses that show relatively better quality, with sturdy models that have stood the test of time; businesses that have been conservative and consistent; and businesses that are not burdened with debt and are therefore able to capture any revival in demand.

Instead of being blindly optimistic about a revival in earnings and domestic consumption demand taking care of everything, it would be wise to acknowledge that these are times for good old-fashioned hard work around stock selection and hard-nosed fundamental analysis.

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Friday, 22 July 2016

5 reasons why your home loan may get rejected

Builder not approved: Not all banks fund loans for properties of all builders. It is critical to understand from the builders which banks have approved them and which have not, as it's possible that when you have decided to buy a property and go back to your banker and check, you realize that the builder is not approved with your banker making it impossible for you to get a home loan on the same from your bank and then you would have to go to a different bank.

Builder approved but property not approved: This is another unexpected reason in home loan rejection, where a builder may figure in the list of approved builders of the bank, but a specific project launched by the builder may not be approved. In addition, there are cases where particular phases of the property( if it's a large project) may not be approved by the banker as well, so it's important to check if the builder, the project and even the phase of the project is approved by the banks to avoid unexpected home loan rejections.

Credit bureau issues: Most customers do not check their credit scores and are mostly oblivious to the same, there can be some old payments missed by the customers or some past challenges the customer may have had, which they have forgotten about. The same can be adversely affected one's scores, and a poor credit score and performance can lead to rejection of home loans. It's very important that customer regularly check credit scores and fix issues if any, around poor credit history immediately.

Valuations related rejections: Imagine a scenario where one is buying a house from the resale market. The buyer and seller mutually decide a price of the property and the buyer decides to go for a home loan to fund the purchase. At the time of sanctioning the home loan, the bank would fund the loan basis the valuation of the property as ascertained by them rather than the price decided by the buyer and the seller. If the valuation amount is higher than the mutually decided price then there is no issue, however, if the value is lower, then the bank may choose to give a lower loan amount than required, or may reject the home loan application as well.

Legal check rejections: The bank does a detailed check on the property before giving a home loan which goes far beyond just ownership related legal checks that most buyers of property focus on. The bank checks on encumbrances, property documents, sanction plans, construction plans, government body checks and clearances and tax paid receipts, among others, along with ownership checks. These are mostly not carried out by buyers in a mutual agreement between the buyer and seller, and can lead to home loans on these properties getting rejected, if the bank does not feel comfortable basis these documents. It's extremely critical for buyers to try to do an elaborate check on the property before applying for a home loan on the same.

Consumers who look for home loans should understand the importance of the product, as most people take this as once in their lifetime and pay the loan for nearly 20 odd years of their life. In such scenario, it is critical to cover all bases from all angles to ensure that the home loan process happens smoothly.

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Thursday, 21 July 2016

Alleged Fake Noc from BWSSB – Complaint against Builder

In Bangalore a complaint has been filed by the residents of Ozone Evergreens apartment complex located at Haralur Road near Sarjapur Road with the Adugodi police. The complaint is against the builders – Ozone Shelters Pvt.Ltd- and alleges that the residents were mislead by the company by furnishing a fake no objection certificate (NOC) number of the Bangalore Water Supply and Sewerage Board (BWSSB) and assuring them of Cauvery water supply.

The Ozone Evergreens is a 18 floor apartment with eight blocks. The residents have alleged that in 2011 the builder collected Rs.one lakh from each of the 900 residents amounting to Rs.Nine crores, to get NoC from the BWSSB for getting Cauvery water supply to the apartment blocks. After a resident filed an RTI application to find out the details of NoC issued by BWSSB, it has come to light that the board has not issued any certificate under the number provided by the builder and the builder has not paid a single rupee to the Water Board in this regard.

The area where the Ozone Evergreens apartment complex is located is newly added to the Bruhat Bangalore Mahanagara Palike limits (BBMP). There in no infrastructure in place to provide either water or sanitation facilities. Also, the residents have alleged that the construction was delayed and the builders had refused to pay them compensation for delaying the construction. The officials of the BWSSB have said that they had no information on issuing of NoC to Ozone Evergreens.

Relief from forum: In the meantime, the district consumer forum has directed the Keystone Constructions and Ozone Shelters Private Limited to pay interest at 10 percent per annum on Rs.24.25 Lakhs for delaying the possession for five months considering it as deficiency in service to a buyer of an apartment from the builder. The compensation was ordered for payment to Raman Singh, a resident of Marathahalli, from September 1, 2011 to January 10,2012. The forum also directed the builder to pay Rs.10,000/- to the complainant as costs. The builder despite collecting money had allegedly could not complete the project within the stipulated time and hand over the apartment to the owner.

New Telengana Govenment – Developers hope for revival of demand

In Hyderabad and surrounding areas the real estate sector is sluggish for several quarters. The buyers are concerned about the formation of Telangana and are putting off decisions as there is no clarity on how the changes will take place. Even though the cost of construction has spiraled around 25 to 30 percent in the past two years, the capital and rental values have remained the same.

Builders are hopeful that on the formation of new government the real estate sector will see uptrend. Prominent players in the field and representatives of real estate bodies are all hoping that a 100 day development agenda will play a role in improving the sentiments of the buyers and the developers.

Mr.Sekhar Reddy, president of CREDAI – has said that the scenario in the State and especially Hyderabad is passing through a difficult phase where the prices have remained stagnant and are about half the prices of Chennai. He has further said that the reasons for this situation were uncertainity on the statehood and the agitations. The sentiment in the market will turn positive if the new government sets up a 100-day agenda and address the issues faced by the sector.

The president of AP Real Estate Developers Association, has said the sector was stagnant in the past four years because of the agitation for the new state which is now over. Further, the new government will bring in a positive sentiment and encourage people to buy properties in the region. He has further said, the prices may go up by about 15 per cent as they have remained same for too long in spite of increase in input costs.

Managing Director of PEBL has said that the people have accepted the formation of Telangana which is a reality, and during the past few months non-local, non- Telugus were looking for properties. He has said the locals will also get back to the buying mode after the formation of the new government.

The realty sector players say that this is the right time to buy the properties as it is still a buyers’market. They feel the situation may not last long as the property prices in Seemandhra region are seeing an increase in property prices. The players are seeing an upswing as there will be lot of construction activities as new infrastructure is to be created for the new State capital. Reports show that the property prices in Vijayawada – Guntur, are beginning to firm up where the capital of Seemandhra is expected to come up, are beginning to firm up.

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Wednesday, 20 July 2016

Confirmation Deed

Indeed there is every need that great care has to be taken by the Purchaser of a Property to ensure that the Sale Deed executed in his/her favour is correct in all respects; and that there is no mistake or error whatsoever in the said document which conveys the right, title and all privileges in absolute terms.

In order to ensure that the Sale Deed executed and got registered in his/her or their favour, the Purchaser of the property should get the document vetted thoroughly and take every step to get the error/s or mistake/s, if any, crept in, are rectified and confirm the Purchaser's title over the said property.

Normally, it is observed that many a time some sort of document supplementing the main absolute sale deed, or mortgage deed etc., is required to be executed in order to remove the defect occurred while executing and/or registering the main document or to correct mistake crept in. In such event, the necessity of CONFIRMATION DEED arises.

The strict meaning of the term “Confirmation ” is the approbation of or assent to an estate already created by which the confirmer strengthens and gives validity to such estate so far as it is in his power. Confirmation can take place by three ways: (1) by a Deed; (2) by acquiescence or (3) by limitation. The latter two are confirmation in law and the first one is confirmation by a deed.

There are two types of Confirmation Deeds. One is a Deed of Confirmation whereby a person confirms or gives his assent to a document of transfer executed by another person, where the former has not been made a confirming party to the main document of transfer either through oversight or for some other reasons. The second type of Confirmation deed document is executed when a party to a document has made some mistake in signing the main document or has failed to admit execution before the Sub Registrar within the prescribed time and the Sub Registrar has refused to register the document so far as the defaulting party is concerned or in some other respect.

Usually, the need for execution of second type of confirmation deed will frequently occur. It is very common that for one reason or the other a party executes a deed and when it is later on lodged for registration, fails to appear before the Sub Registrar in time and as a result whereof the Sub Registrar refuses to register the deed so far as he is concerned. In such a case to remove the defect, a Confirmation Deed is executed by such a party whereby he confirms the execution of the main deed and confirms the main deed as valid and binding upon him and if he is the transfer-or or one of the transfers he also confirms that he claims no right, title and interest in the property and the same would belong to the transference. Copy of the main deed is to be attached with the Confirmation Deed and it is desirable to have the copy signed by him. How far such a document cures the defect is not very clear but this is the way the mistake can be rectified as it would not be possible to execute a fresh deed and pay fresh stamp duty and registration charges. In any event it appears that such a document would act as a promissory estoppel against the party.

Section 66 of the (English) Law of Property act, 1925 provides that “ a deed containing a declaration by the estate owner that his estate shall go and devolve in such a manner as may be requisite for confirming any interests intended to affect his estate and capable under this Act, of subsisting as legal estates which, at some prior date were expressed to have been transferred or created, and any dealings therewith which would have been legal, if those interests had been legally and validly transferred or created, shall, to the extent of the estate of the estate owner, but without prejudice to the restrictions imposed by this Act in the case of mortgages, operate to give legal effect to the interests so expressed to have been transferred or created and to the subsequent dealings aforesaid. Even though there is no such specific provision in any of the Statute in our Country, yet such a document will have legal effect by way of estoppel or admission.

Section 17(1) of the Registration Act also recognizes the Confirmation Deed as it provides that any document confirming any interest in an immoveable property requires registration. Such a document will only attract stamp duty as on agreement under article 5 (h) of the Stamp Act and should be registered, irrespective of whether the main document is registered or is to be registered.

The Confirmation Deed is executed on various circumstances such as :

• Confirmation Deed by the Vendor, whenever the Vendor has failed to appear before the Sub Registrar to admit the execution by him of the said Deed within the prescribed period.

• Confirmation deed of Sale by Trustees, whenever the Trustees, before the beneficiaries of the trust attaining the age of 21 years sell the land and premises to some others and execute a sale deed, without having any authority to do so under the said Deed of Trust and without obtaining leave of a Competent Court to do so.

• Confirmation Deed by Lessor of assignment, whenever the Lessor of Assignment without taking the prior consent of the Lessor of the Lease Deed assigns the demised premises comprised in the said Lease Deed in favour of the Assignee and when the Lessor of the Lease Deed has become entitled to terminate the said Lease deed.

• Confirmation deed by a trustee of Lease granted by other Trustees, whenever the Deed of settlement is executed by the Settlor in favour of the Trustees and when both the parties referred to in the said Deed of Settlement are the Trustees of the other part, thereby the said Deed of lease executed by the later part of the Deed of settlement under mistaken advice and when the Lessee demands the execution of confirmation deed by the remaining trustee in order to confirm the said lease deed.

• Confirmation Deed of a Sale deed with a wrong schedule.

• Confirmation Deed and transferer by a benamidar in favour of the Real owner.

• Confirmation Deed by owner of conveyance by Attorney.

• Confirmation Deed by HUF members.

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Tuesday, 19 July 2016

Post-retirement investment options

If you have just retired and are looking to deploy the retirement money, the simplest option may seem like bank fixed deposits.

However, you may miss out on other superior options available to build a diversified retirement income portfolio that also returns well.

Here is a low down on your options and the suitability of each such option, based on your tax slab.

At 8.6% per annum (from April 1, 2016, but subject to reset every quarter), this is the best rate that a 60-plus investor can get in the present scenario.

This rate will be fixed for five years - that is until maturity - even as new rates (linked to government security yields in the market) will be announced every quarter. This is an ideal option for multiple reasons:

One, the post office interest rate will likely remain higher than bank interest rates.

Two, the quarterly interest payout gives you the needed income flow.

Three, it is eligible for deduction under Section 80C of the Income Tax Act, in case you fall under tax bracket and want to avail deduction. In fact, in the year of your retirement, when you still remain in the high tax bracket, this can be an ideal 80C investment option.

Four, in later years, although the interest is fully taxable, given that you will fall under lower tax brackets, than in your earning years, the post-tax returns won't be terrible.

Five and very importantly, it is sovereign guaranteed. Remember, even bank deposits (and your savings account together) carry insurance and only up to Rs 1 lakh. The only drawback is that there is limit of Rs 15 lakh that you can invest (across all accounts, individually or jointly) at any point. Besides, TDS will be deducted for all interest payouts exceeding Rs 10,000 a year (similar to bank). Hence, make sure Form 15H is submitted if you are below the taxable limit for senior citizens.

Suitability:

It is suitable for all retired investors across tax brackets. It remains an ideal investment option in the year of retirement, especially to avail Section 80C tax benefit.

Bank fixed deposits (FDs)

If not for anything else, the relationship that you have with your bank and the services that you will avail there, especially as a senior citizen, will entail that you park some money in bank deposits. While you will enjoy special rates for senior Citizens, this is certainly not the best time to lock a majority of your funds in banks. The interest is taxable at your slab rate. Here again, submit your Form 15H to avoid TDS if you are not within the taxable limit.

Suitability:

Bank FDs are a good option to diversify. They are better if you are not a tax payer. If you are one, ensure you keep your exposure to this avenue limited in a low interest rate scenario such as the present one.

Corporate fixed deposits

Do not scout for high returns in this space. Go for two to three well-known NBFCs, which are also governed by RBI to ensure you park your money in safe avenues. As the interest rate is likely to be higher than bank FDs, this is a must have for diversification purposes. While interest rates have fallen in this segment as well, they still remain higher than bank deposit rates.

Suitability:

Good diversification option for investors who are not in the tax ambit and are in the low tax bracket. For those in the high tax bracket, the post tax returns will not keep pace with cost of living, especially medical expenses.

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Monday, 18 July 2016

If you are a tax defaulter, a tougher I-T dept awaits you

Even before football fans recovered from the news that Lionel Messi will no longer play for Argentina, they were in for another shock. The Spanish tax department sentenced Messi and his father Jorge Horacio to 21 months in prison apart from fining them a few million Euros for tax fraud.

It appears that both avoided Spanish income tax on his image rights by using shell companies in various countries. However, both may not have to spend time in prison since, as per Spanish law, prison sentences below two years are suspended - meaning they can be served anywhere including on a football field. It is apparent that the sentence was given for 21 months only to ensure that this benefit is availed.

Sports stars being penalised by the tax office is not a new phenomenon - Maria Sharapova and her father had their share of tiff with the tax department. Tax jurisdictions abroad may not arrest popular stars but they will not stop shy of naming and shaming them. This leads one to think aloud as to what would the tax office in India do with tax defaulters?

Sports stars in India may have the money but not the intention to defraud the tax office. Recently, there were reports of some arrests by the tax department but they were quickly denied. As with many things in India, the truth will never be known.

A strategy paper prepared by the department has some news in store for tax defaulters. In order to cripple and check (strong words these!) the activities of tax defaulters, the Income Tax Department has decided to block the Permanent Account Number (PAN) of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans. The taxman will block PAN in such a way that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets.

With the objective of disincentivising the defaulters, it would recommend that the LPG subsidy which is directly credited to the bank accounts of the said defaulters be annulled. The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties with a request not to allow any registration of immovable properties where such PANs are involved. Such defaulters' information has also been recommended to be circulated across tax offices so that their activities, loans or government subsidy can be plugged countrywide.

The department has also decided to subscribe to the Credit Information Bureau Limited (Cibil) data to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets. The department, beginning last year, also started to "name and shame" large tax defaulters by publishing their names and other credentials in leading national dailies and on its official web portal.

Beginning this financial year, it has decided to publicly name all categories of taxpayers who have a default of Rs 1 crore and above. While all these strategies are bound to draw attention, whether the tax department can curb the fundamental rights of a taxpayer to seek loans/LPG subsidy is a basic question that is bound to land up in the courts.

Amidst all this, an Income Declaration Scheme (IDS) is operational with effect from June 1, 2016. The government has been going on a marketing blitz in an attempt to get people to embrace the scheme. Sets of Frequently Asked Questions (FAQs) have been issued and IDS also found a mention during the prime minister's "Mann ki Baat" airing. The scheme will run for four months.

Undisclosed sum

The declared income and related assets will be taxed at an effective rate of 45%. The undisclosed sum can be held either in the form of assets or in any other form. If the taxpayer is holding undisclosed income in the form of an asset, the market value of the asset as on June 1 shall be used to compute the sum of undisclosed income.

It has also promised that those declaring undisclosed income or assets would not be subject to further enquiry or scrutiny. If our friendly neighborhood tax office discovers any undisclosed income or assets after the scheme closes, the offender can be assured of a tough time.

The IDS scheme may, at best, meet with a lukewarm response because of the high rate of tax at 45% and also the need to pay tax on assets at market value as on June 1. One of the examples given in the FAQs illustrates that tax will have to be paid on cash remaining on hand out of the undisclosed income - a concept unheard of by the Indian tax payer and which will certainly make him wary of going for the scheme.

At best, the tax office should get some limited comfort that those who declare any income/assets under this scheme will not be able to short-change them again. It is possible that the scheme may be extended beyond October but the response would increase only if a few sweeteners (such as a tax rate that gives comfort) are thrown in.

Over the years, the Indian taxpayer in general and the defaulting one in particular, has become a war veteran in fighting his battles with the department. Unless there is something in the deal for the taxpayer by way of an incentive, he is not going break into a sweat over the moves being proposed by the department or the income declaration scheme. It should not come as a surprise if a person with five undisclosed properties discloses only three under the IDS scheme and keeps the remaining two in stock for the next scheme to be announced in a couple of years.

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