Reaction from CREDAI on Union Budget 2010-11
· ‘Status quo’ for real estate sector
· The applicability of service tax to all under construction flats and homes being booked prior to completion will increase the end cost and impact affordability of home buyer
· Indirect taxes on raw materials like steel, cement, etc will further escalate project costs
The period extension of one year for 1% interest subvention on home loans up to Rs 10 lakhs (for projects costing up to Rs. 20 lakhs) would be beneficial to the home buyers to some extent. The time limit for completion of pending projects being extended to 5 years from the existing 4 years time frame would also be beneficial.
However, the Service Tax levied on renting of commercial property and on sale of under construction housing units would prove critical as project costs will get escalated by 4-5% and this additional burden would ultimately be passed on to the home buyers, making the houses costlier for them. Further, indirect taxes on raw materials like steel, cement, etc. will add to the project costs, increasing the prices for the home buyers.
Mr. Kumar Gera, Chairman, CREDAI, commented, “I would say this budget by and large is one in which ‘status-quo’ is being maintained for the real estate sector. I welcome the concern shown by the Finance Minister by providing extension of 1 year in the tax holiday for housing projects under Section 80 IB (10). This has been done as there has been a realization that the slowdown and liquidity crunch have adversely affected the real estate sector in 2008-09 when many projects could not be completed in time due to reasons beyond anybody’s control.
The announcement on extending the interest subvention by one year on housing loans upto Rs. 10 lakhs is a welcome move to benefit the small home buyers.
At the same time, there is one issue in this budget which is detrimental.
The applicability of service tax to all under construction flats and homes being booked prior to completion will increase the end cost and this will significantly impact affordability of the home buyer. The high expectations for a push by way of incentives for slum redevelopment or slum eradication schemes in this budget have not happened.”
Mr. Santosh Rungta, President, CREDAI, said, "Although there has been a few considerations made for the real estate industry like extension of tax holiday for housing projects under Section 80 IB (10), and in terms of the Section 56(2) of the Income Tax Act, the issue of applicability of the service tax levied on renting of commercial property and for under construction units is a major area of concern for the developers. The service tax will be an additional burden and project costs will shoot up by 4-5%. End consumers, thus will be most affected as they have to pay the service tax coupled with the existing stamp duty charges. Moreover, indirect taxes on raw materials for the industry like steel, cement, etc will further escalate project costs."
It is the apex body of the organized real estate developers/builders across