Steeper service tax and the inclusion of a 1% TDS on all realty transactions is expected to push up prices of flats in Mumbai and in the metropolitan region.
According to the Union budget proposals, the government is to introduce a 1% TDS on any realty transaction over Rs50 lakh. Mumbai, of course, sees most transactions over this limit.
Service tax has been raised to 3.7% against the earlier 3.09% if the house is worth more than Rs1 crore or if the area is over 2,000 sqft. Simultaneously, excise duty on marble has been increased from Rs30 per sqft to Rs60 per sqft.
Paras Gundecha — president of the Maharashtra Chamber of Housing Industry (MCHI), an umbrella organisation of developers — said: “Not one of our demands has been fulfilled. Instead, several taxes have been introduced. It will further burden buyers as well as developers.”
Though real estate is such an important sector, the government has ignored it once again, Gundecha said. “Central housing minister Ajay Maken had promised to give the real estate sector an infrastructure status... But it has not happened.”
The government has, however, given a Rs1 lakh deduction for interest payment on first-time housing loans of up to Rs25 lakh. Pankaj Kapoor, MD of Liases Foras, said it would help buyers in tier II and tier III cities.
“Nationalised bank records say at least 50-60% people go for home loans in the Rs15-Rs25 lakh bracket,” he said. “The poor funding in real estate will not help to boost affordabel housing in metro cities.”
Ramesh Prabhu, chairman of the Maharashtra Society and Welfare Association (MSWA), said the budget is not encouraging for the housing sector. “Currently, there is a shortage of 18 million houses and that requires a fund of Rs8 lakh crore. But the government is giving a mere Rs2,000 crore for urban and Rs6,000 crore for rural housing,” he said. “How will it bridge the gap? This budget is nothing but an eyewash.”
Niranjan Hiranandani, managing director of the Hiranandani Group, termed the budget “well-balanced”. “Though there are positive initiatives for women and youth, there is nothing for the real estate sector,” he said. “They have just added up the taxes. It will increase the cost of the house instead of making it affordable. A buyer has to pay almost 31% in taxes, including stamp duty, development charges, registration, service tax, education tax, and value added tax.”
If so many taxes are imposed by every government body — the BMC, the state government and the Centre — it will be very difficult to make affordable houses.”