Want to create wealth? Invest in property

Property is invariably the single-most rewarding investment many people make in their lifetime.
Owning a home has always been the great Indian dream. Today, it is not exceptional to come across professionals across sectors owning more than one home.

It pays to stay invested in the real estate market. Property is an interesting investment commodity, which yields both rental income and capital gains.

It is for this reason that an increasing number of people are investing in more than one property, to create wealth.

The low bank interest rates on home loans have made buying property even more affordable. So, whether you want to diversify your investments, or are looking at a rental income, buying a home is a good proposition.

Over the long-term, purchasing a property and turning it into a rental property, will make the investment even more lucrative. If you get the right tenant, your property investment will ensure regular returns, in addition to the increasing value of the property itself.

You must remember that choosing the right or wrong tenant can make or break your property investment. A bad tenant could not only cost you dearly financially, but also prove extremely timeconsuming and stressful.

Location: It is also necessary to look for property in areas where can get you a good rental income . When buying a home, you should view the real estate asset as an income-generating commodity rather than just a home for yourself. This is where the entire purchase process differs.

Location is a key factor. For a good monthly return, the location should be suitable for the prospective tenants. Locate in areas that are coming under the new expansion plans for the city. For example, the metro rail route and the planned Peripheral Ring Road are upcoming projects, so look for proximity to these when going in for a home as an investment.

After evaluating your creditworthiness, you can approach a bank for your home loan. Give your existing property as security.

EMIs can be calculated after assessing the rental returns you are likely to expect in that area. Let your tenants help pay off your loan.

Choosing a tenant: Advertise far and wide to get your type of tenant, in the rental bracket you are looking for.

Word the ad precisely to make sure you capture the reader's attention. Give details of the size and quality of accommodation, and its location. Use the three best attributes of the property in the first sentence of your ad.

In this stage of the tenant hunt, it is important not to rush. However keen you are to ensure that your property does not remain vacant, do not rush in to close the deal. It is essential to have a clear judgment on what you want from your tenant, your rent expectations, security deposit, and terms and conditions in the lease agreement.

Once you have narrowed down your prospective tenants, show them around the property. This is also the opportunity for you to meet the individual, understand his culture, habits and lifestyle. Since he will be living in your home, you need to assess him to ensure future cleanliness of your property.

The first meeting with your prospective tenant will give you leads that can help you make a decision.

Sometimes, the tenant may need the house immediately. If he is satisfied he will write out a cheque. To deal with such situations, keep a copy of the rent agreement ready so that both the parties can sign.

To know more about your tenant, consider references from previous landlords, banks and employers. Ask the tenant for his company photo ID card to make sure he is still employed there.

Lease agreement: You are almost there. Once you and the tenant have agreed on the rent, a security deposit, and the terms, and have settled the details, put these details into a lease agreement.

This lease agreement should be made on a stamp paper and should encompass all the terms and conditions between you and the tenant.

Periodically evaluate the rent and extend the lease on mutual agreement to avoid complications and legal hassles.

Real estate is a good longterm investment avenue. When you crunch the numbers between initial investment in the form of down payment, EMIs and current market valuation of the home you live in, you will discover that this was the most profitable investment you have made.

Tax advantages of investment in real estate

Real estate or property is one of the major asset classes people the world over invest in. Such real estate could be residential house property, whether self-occupied or let out, commercial property, whether used for one's own business or profession or meant for letting out, farm house, agricultural, urban and rural lands, and so on.

Through proper planning it is possible to save a great deal of tax on real estate investments - both on income and on capital gains.

As far as possible, no individual should own more than one selfoccupied residential property. This is because under the provisions of Income Tax Act, only one self-occupied house property is completely exempt from being taxed on its notional rental value.

Thus, if one individual owns more than the residential house property for self-occupation , then only one of them would be exempt from income tax. In respect of the other property or properties, the owner would be taxed as if the property is let out at a reasonable rent.

Another important consideration should be to use, as far as possible, one's own funds for investing in the self-occupied residential house property, except to the extent of such loans which would result in an interest outgo of a net amount up to a maximum of Rs 1.50 lakh per annum.

Under the provisions of Section 24 of the Income Tax Act, a deduction up to a maximum of Rs 1.50 lakh is allowed in respect of money borrowed after March 31, 1999 for investment in self-occupied residential house property, which is constructed within three years of the borrowing.

This deduction would result in a net loss upto Rs 1.50 lakh from "house property" and would be available for adjustment or set off against any other income such as salary, income from business and income from other sources, etc.

People sometimes invest in a residential house property for earning rental income. If the person investing in such residential property does not have adequate funds for investment , he may borrow the money for meeting the deficit requirement.

As far as possible, the funds may be borrowed from other members of one's own family having lower income. This would enable such family members both to have an income on the one hand and a lower tax incidence on the other.

Thus, if the head of the family were to invest in a residential property and he were to borrow funds from his wife or school / college-going major children, HUF or other family members or personal Trust, etc., then he would be entitled to claim deduction out of the ensuing rental for the interest paid to the different persons in respect of the borrowed funds. Thus, from the gross rental value, deduction would be made for the Municipal taxes, if any.

The balance sum would represent the annual value from which 30% thereof would be allowed as per Section 24 of the Income Tax Act as a statutory deduction in respect of repairs and other expenses. Further, deduction would be allowed on borrowed funds and if after that there is a deficit the same would result in a loss figure from house property

The income tax aspects regarding investment in commercial property which is let out are the same as are applicable in the case of a residential property described above.

In addition investment in commercial property is completely exempt from wealth tax. Thus, one can own any number of commercial properties without either having to pay income tax on 'notional' rent in case of vacant commercial property, nor pay a single rupee as wealth tax.

Farmhouses

Ownership of farmhouses has become a big attraction for the urban rich. Farmhouses, however, attract wealth tax at 1% on the value of the farm house provided it is situated within 25 km from the local limits of the Municipal area of the town concerned. Thus wherever possible, the farmhouse should be situated beyond 25 km of municipal limits.

Where an investor sells a residential house property which is used either for one's own residence or for letting out, then as per Section 54 of the Income Tax Act the net long-term capital gain can be fully protected from income tax if it is invested in another residential house property either within one year in advance of the purchase of the new house property; or within two years in another house property; or within three years in the construction of a house property.

Alternately, any long-term capital gain in relation to any type of capital asset, including property, enjoys full exemption from income tax under Section 54EC of the Income Tax Act, if you invest the capital gain within six months in bonds issued by the Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI) which must be retained for a minimum period of three years. The maximum upper limit for investment in these bonds is Rs 50 lakh.

Critical components in the process of buying a home

Finance, documentation and legal matters are critical components in the process of buying a home. Property investors also need to evaluate returns and repayment of loan.

The first consideration when purchasing property, whether commercial or residential, is location. Depending on the intended use of the plot of land or building, you will be able to ascertain whether it is easily accessible to major roads and public transit, and whether it is close to amenities such as shopping malls, apartment complexes, recreational facilities, schools, and industrial belts. Also, find out if the property has easy access to utilities such as electricity and water.

Another crucial factor is development potential. Before buying a plot of land, you must determine whether it is possible to build upon it. A piece of land may be in a prime location, but you will lose the value of your investment if you discover that you cannot build upon it until after you buy it.

Factors that influence buildability include the quality of the soil and the general topography. Will the soil support the foundation of whatever structure you intend to build on the property? Is there sufficient drainage or is the land susceptible to flooding? Is there easy access to a sewage system? These are all essential questions for which the answers should be obtained before you complete your purchase.

Also, research the plans and policies of the local civic bodies in that area.

Once you have finalised on the property to be purchased, be prepared to look around for best loan options available in order to make the financing efficient.

Some factors to keep in mind while looking for a loan:

Interest rate: Look for the lending institution offering the lowest interest rate.

Prepayment option: Check what will be the penalty if you repay the loan before the stipulated time. The lesser the penalty the better it is for you.

* Form 16 for the last three consecutive years
* IT returns of the last three years
* Salary slip
* Bank statement for the last financial year
* PAN, identity proof
* Complete set of house documents
* If the property is an apartment you will have to furnish the MoU between the builder and you. The MoU should state that the property will become yours and will be registered in your name once the payment is made
* You will also have to fill in forms at the bank
* A letter from the builder stating how much he has received from you as advance
* NOC from the builder of the apartment
* Sale deed from the builder showing the worth of the property

The loan amount sanctioned to borrowers is based on age, salary, educational qualifications, credit history and previous employment track record. You can club the income of your spouse, in order to increase your loan eligibility. Typically, banks only lend the amount where your monthly EMI outflow is 30 to 40 per cent of your salary. Any amount greater than this would make repayments towards the loan a burden and one may default.

* Understand the market you will be buying in
* Consider adding other furniture, fixtures and equipment into your loan
* Consider buying/building more square footage than you need right now - you can always grow into it, and this will also allow you to get some rental income until that time
* Make feasibility studies
* More and more businesses in foreign countries want to open offices here, so focus on standardising your construction to suit their requirements

A little power house

This hi-tech home creates more energy than it uses. But what’s it like to live in – and how does that touchscreen work, asks Cathy Strongman


Imagine a house so advanced and eco-friendly that within 40 years it will have fed more energy back into the national grid than was used to build it, wiping out its carbon debt to the planet.

For the past seven months, Sverre and Sophie Simonsen and their three children have been living in the world’s first Active House – a sleek, angular building outside Aarhus in
Denmark.

It’s one of seven being built across Europe by different architects – it will be joined in the autumn by an equally green semi in Northamptonshire. For 12 months, a family will occupy each home while the building’s performance and the family’s experience are monitored.

Sverre had been itching to move from their 1970s home. “It’s a typical suburban Danish house with small dark rooms,” he says. “I’d always wondered what it would be like to live in a contemporary, open-plan building.” Their old home is only 400m away.
Light fantastic Glass features heavily in the £500,000 design, by Aart Architects for VKR Holding. “The natural light has definitely made a difference to our mood,” Sophie says. It has twice as many windows as an average house, all triple-glazed with super-insulated frames. This is in contrast to most eco homes, where large windows on all but the southern facades are frowned on due to the material’s poor insulation.
In winter, solar radiation streaming through the windows provides 50 per cent of the heating, while in summer it is restricted by an automated system that controls sunscreens and opens windows. With the family’s feedback, the pre-set programmes have been tweaked.

“It got very hot last summer, and it was so bright you needed sunglasses in the kitchen,” Sophie says. Privacy also proved a problem, because the perforated screens offered little respite from passersby. “They could see what we were having for dinner,” she says. They would occasionally open in the middle of the night, too; they are now manually operated.

Technical hiccups
Getting to grips with the lights that automatically turn off when sensors detect no activity was equally interesting. “If you’ve been sitting on the toilet a little too long, you’re suddenly plunged into darkness,” Sverre says. “And we had to install bedside lamps for the children as their lights kept turning off during bedtime stories.”

Trial and error
The computerised control
panel, which displays how much energy and hot water the house is producing and consuming, looks fiendishly complicated.
“The blinds and windows are numbered differently, with no diagram, so at the start it
was trial and error,” Sophie says. “But once you’ve figured it out, you don’t have to understand the technology – you just turn
it on and type.”

Solar power
The southern facade of the roof is pitched at 35 degrees to maximise solar gain, and coated with solar cells and collectors. The cells generate electricity for the lighting, appliances and the control system. They should produce 5,500kW a year – nearly double the amount required by the family – so for eight months excess energy is fed back to the grid. This means that, in winter, extra energy is provided from the grid for free. The solar collectors provide more than 50 per cent of the hot water and, combined with a solar heat pump, power the underfloor heating. There’s also a ventilation system, which takes heat from stale air being extracted and uses it to warm fresh, filtered air entering the home.

Most impressive of all, this energy balance is achieved
without the family living a monastic life: the house has two flatscreen TVs, a kitchen crammed with Siemens and Gaggenau appliances, and a double shower. “You
don’t feel you’re making sacrifices,” Sophie says. “We use less energy without thinking about it.”

The future
In five months, when the house goes up for sale and the squad of technicians dissipates, the Simonsens will move back to their 70s home. They aren’t putting in an offer, not because they don’t enjoy the life, but because with cutting-edge technology the cost and hassle of finding someone to fix it is too high.

Pioneering houses such as these demonstrate how green we can be. But only once the technology becomes mainstream and the workforce is trained to install and repair it, will homes such as this become a fixture on our streets.


The Guardian

Step daintily into your garden

Decorative stepping-stones are wonderful landscaping aids when tastefully placed around water ponds, a gazebo or a porch.


Fragrant flowers. Flowing vines. Artistically placed ornaments. A lovely garden indeed. But, do frequently-used paths with trampled-down grass or shrubs mar the magic? Certainly, kids prancing around or curious guests wearing the lawn down are factors defying control. So, what’s the solution? Simple. Stepping-stones!

Stepping-stones beautify your garden while leading the way to a sundial, a cluster of potted plants, a fountain or a swing. Decorative stepping-stones are wonderful landscaping aids when tastefully placed around water ponds, a gazebo or a porch.

Functional elements too
Besides their aesthetic value, stepping-stones are functional too. They avoid mud being carried across your emerald lawn or the sparkling floor indoors. Plus, pets or kids using the same path everyday contribute to moth-eaten garden spaces. Trying to green an area, heavily trod upon is self-defeating. Cleverly concealing the scraggly vegetation with stepping-stones is the best solution.

Choose from an assortment of materials — sandstone, limestone, slate, ceramic, quartzite and granite. The West loves ready-made flower-shaped stones (sunflowers, dahlias, daisies...) and stones with celtic square, gothic square or rose patterns.
Moss-covered stones make for interesting ornamentation. But, moss takes too long to develop. Pressing ordinary stone slabs into the soil is easy but drab. Log-slices are unique but not enduring. Coloured stone chips lend themselves to any pattern you desire.

So, want a creative display? Try making stepping-stones yourself out of concrete with pre-readied moulds/casts or objects like saucers of plastic planters, old cake, bread pans or plastic trays that are about 2 inches thick and 16-18 inches wide.

Remember to coat them liberally with petroleum jelly. Mix water to the concrete till the consistency is neither runny like soup nor crumbling like sand chunks.
Inserting a chicken-wire mesh in the middle of your mould-mix bolsters durability.
Allow the stones to set for 2-3 days. Turn the moulds upside down and tap them lightly till the stone pops out.
Fix the stones into the soil only after another week.
Use iron oxide powders in brick-red / ochre/brown/black/green shades for dyeing concrete.
Blend it in when the mix is as yet wet. You can also embed the mould with decorative items like beads, broken bits of tiles/marble, playing marbles, shells, pebbles, stones, etc. before it completely hardens.
Fixing concrete stones into bare soil is easy. Even if they shift with time, re-setting them isn’t arduous. Pressing them into a lawn area, however, demands more effort.
You can have either a straight or a winding path of stepping-stones in your garden. For a straight path, mark the route by planting stakes into the ground, connecting them with a cord.

Use an old garden hose for the purpose if your path’s a meandering one. Space out the stones adequately to accommodate the average human stride. A distance of 24 inches between the centres of two adjacent stones is optimal. If the path’s meant particularly for kids, a smaller spacing would be appropriate. Place a few on the earth with the spacing determined and try walking on them. If you’re comfortable, begin fixing them.
At the chosen spots, dig two-inch-deep depressions. Line them with a half-inch layer of sand for drainage and to facilitate height-adjustments. Now, press the stones into them. They will stick their heads half an inch above the ground. This will make them visible enough to guide movement but not too high, tripping users.

If the stone is wobbly, add or scrape out sand as required, till it settles into the depression snugly. Fill in some dirt around the edges such that it slopes down slightly from the top down to the ground.

Stepping-stones needn’t be used merely for creating paths. They can also be strewn about the garden randomly to heighten the charm. Get started.

A Dyuti

A reflection of you

‘Har Ghar Kuch Kehta Hai’ (every home says something) goes a popular commercial. True. Homes today are more than just four walls. They are an extension of the personality of people who dwell in it.


A new home is an exciting prospect and doing it up adds to the all the fun surrounding it. As for the revamping process, the market is full of myriad options and choices that suit all budgets. Even if you hire the services of an architect, make sure it is your voice that is being heard.

“I feel homes are evolving spaces and need to connect with your own sense of self, comfort and living. Do it bit by bit and avoid rushing into ‘want to do it all at one go’ situation. Look at the various elements that compose a home — walls, floor, lighting, furniture, objects, art and functionality, together in order to create a single theme rather than only looking at individual pieces,” says Mukul Goyal, Creative Director, Designwise.
You can use simple ideas like having a different colour theme for each room and then work on ancillary aspects. Likewise, choosing similar furniture as a common theme for the house would make the task much simpler. Again, a plethora of designs, colours, shapes and sizes are available to suit your need. The idea is to know what you want and need.

Trends
The latest trend in home décor is very much influenced by current economic and social trends.

In the post-recession economy, focus on green living, simplicity and hope for the future, all comprise the trends for 2010. “Fresh lively colours, which indicate optimism in life are back in vogue. As the spring season reflects renewed life, various hues like vibrant violet, warm tangerine, sunny yellow and grass green in fabrics, paints and accessories are in. Also, colours like blue and green are hot favourites, but with variations.

Floral designs and patterns (inclusive of floral colours) will continue to rule in areas such as products and themes. As far as furniture is concerned, wooden furniture has always been a big draw. Ethnic decorations with a royal-touch are in focus again. Traditional, Victorian looking tables, lamps tea sets are back,” says Vandana Khosla, Creative Director, ELVY.

“I only believe that the eclectic trend is getting stronger. People are far more aware of what they like and this is combined with so many materials and options available for all home domains! It could send your head in a tizzy,” says Goyal. He suggests never to follow any trends just for the sake of it. Instead the process needs to be according to your personal tastes and preferences.

Budget makeovers

Often giving homes a makeover involves working within a budget. The constraints of having to work under financial challenges make the task itself more interesting. “Budgets are beautiful as they challenge you and your creativity. One only needs to do more research on options available and get creative to make it aesthetically satisfying,” opines Goyal. Several experts feel that there is absolutely no need to spend large amounts on changing home decor.

A few simple steps can give your home a whole new fresh feel.
“Repaint using existing colours, just to freshen up the rooms, or choose a whole new colour palette. Painting is an inexpensive decorating option. Judge your furniture. Replace any old, broken or tarnished pieces. Rearrange the rest in a comfortable and attractive way. Also cane, bamboo, blocks boards can be used, which are not all that expensive.
Change your curtains. Shop for the best deals. It will automatically add a new look to your house.

Add more pillows to beds, sofas and chairs. You can either buy them or make your own.
Update framed family photos around the house and place a few new inexpensive décor products too,” explains Khosla. Finally, keep it clean because simplicity is elegant. This transition and change needs to be a well thought out process. It’s important because once you have changes around your home, you have to live with them.

Remember, the cardinal rule is that quality never goes out of fashion and a little investment can do wonders to provide a makeover to your personal space.
Do up your home the way you want to. After all, home is where the heart is!

DH