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That dream home will burn a bigger hole in your pocket

While developers can beat back fears of a hike in stamp duty and leasing fee, a slew of taxes will increase the burden on the sluggish market and thereby, burn a hole in buyers’ pockets.

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Developers from the housing sector have given a mixed response to the state budget 2012-13. While they can beat back fears of a hike in stamp duty and leasing fee, a slew of taxes will increase the burden on the sluggish market and thereby, burn a hole in buyers’ pockets.

What’s bound to hit developers hard is a proposed tax on sand, and the rise in tax from 5% to a whopping 12.50% on the sale of plaster of Paris, which is used in the interior decorations, and from 4% to 5% on works by unregistered labour contractors.

Real estate experts explained, “Unregistered contractors are engaged in the construction industry. So, the labour cost will increase, and the developer will have to pay more, which will be recovered from the buyer.”

Shailesh Puranik, managing director of Puranik Developers, said instead of slapping more taxes, the government should have taken measures to rejuvenate the slackened construction industry. “On the surface, it may look like the taxes have been hiked by just 2-5%, but cumulatively, the burden will be more. The construction costs will go up by almost 10% because of these new taxes.”

But, there’s a silver lining. There was no mention of an increase in stamp duty and leasing fee in the budget. In fact, the procedure of charging stamp duty is expected to be simplified.

“The government has not increased stamp duty because the construction industry is already in a bad condition because of poor sales. If the stamp duty was increased, then it would have sent the housing sector’s sales graph plunging even more,” reasoned experts.

Paras Gundecha, president of the Maharashtra Chambers of Housing Industry, welcomed the decision not to hike stamp duty. But, he wasn’t as pleased with the proposed tax on sand and the rise in one on plaster of Paris. “The tax burden will be ultimately passed on to the buyer. Considering that the market is already in the doldrums, this may turn it into a sick sector.”

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