Published & Updated as on - 2010-03-02
Home sales may go up, but no incentive for
developers.
Though the
Budget has given sops to home buyers in the form of tax savings and interest
rate subvention, it has quitely brought back the much-dreaded service tax on
lease rents in the Finance Bill.
While
home sales are likely to go up, the buyers may have to shell out more for their
dream homes as developers plan to pass the service tax on to the buyers.
The Budget has announced a
maxium tax savings of Rs 20,000 for those earning up to Rs 5 lakh annually and
a maximum of Rs 50,000 for those earning up to Rs 8 lakh. This additional
income is likely to find its way towards buying homes.
Says Aashiesh Agarwaal, research analyst at
Edelweiss Capital: “For people getting an annual income of Rs 8 lakh, there
will be a saving of 10 per cent, which will increase disposable income and
their affordability. This will mean that they can pay a higher equated monthly
installment and will be eligible for higher loans.”
“Overall,
the home sales may go up, but there is no incentive for developers to launch
more affordable housing projects. Why should we launch affordable projects?”
said Niranjan Hiranandani, managing director of Hiranandani Constructions.
The biggest worry of
developers was the re-introduction of service taxes. In April 2009, the Delhi
High Court stayed the service tax on lease rents when some of the retailers
approached it opposing the government move to impose the same in 2007.
According to the Finance
Bill, service tax will be levied for renting immoval property or any other
service to such renting with retrospective effect from June 1, 2007. The
service tax rate is 10 per cent at present.
The
budget has increased the permissible built-up area of shops and commercial
establishment s in housing societies from from 2,000 square feet to 5,000 sq
ft.
However, the hotel
industry has given a thumbs up to the finance minister’s move to give
investment-linked deduction to new hotels with two-star category and above.
Source: Business Standard 27/2/10
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