Building Impact Fee (Part of Approval Costs) cut by 30 to 50%

News Posted - 2010-06-09

To encourage construction activity, especially residential apartments, the Municipal Administration and Urban Development (MA&UD ) department has reduced the city-level infrastructure impact fee by 30 per cent in the Greater Hyderabad Municipal Corporation (GHMC) limits and 50 per cent in Hyderabad Metropolitan Development Authority (HMDA) limits (outside GHMC limits).

The MA&UD department on Monday issued a GO giving relief to builders, reducing impact fee and also increasing the number of installments from three to five years to other projects. The rebate in the impact fee would be applicable to projects which will be approved for the next two years. However, the MA&UD department said the approved projects should commence within two years of approval and completed within six years to avail the concessions. The fee cut would be applicable to other municipalities, corporations and other urban development authorities in the state.

The city-level impact is collected for constructions above ground and five floors as there would be a burden on city infrastructure with high-rises. In view of recession in the realty sector last year, the state government had allowed builders to pay impact fee in six installments within three years by giving post-dated cheques.

For the past few months, builders associations have been asking the government to give two more years to pay impact fee installments. The government order (GO) said the facility of payment of more installments would be extended effective from January 20, 2010.

In respect of new proposals, the fee could be paid in six installments within a period of three years. However, in the first two installments, the developer has to pay 10 per cent of impact fee each time and remaining four installments at the rate of 20 per cent of the impact fee.

For ongoing projects, which have already been approved and where the deferred payment is already availed, such developer could opt for differed payment of impact fee for next five years, including the period already availed with 10 equal installments with no rebate and reduction in the impact fee.

The realty sector welcomed the government move. This is a fantastic move. We hear about the government increasing taxes all the time, but this is quite unprecedented that they have reduced impact fee. Not only the impact fee, but they have also given other concessions. GO No.3 which expired on December 31, 2009, is now being proposed to be renewed and will be applicable until December 2012.

They have also reduced the stamp duty on mortgage from 3 per cent to 0.5 per cent and they also reduced stamp duty on lease deeds. We hear that registration costs are coming down to 5 per cent. Construction in the real estate sector is an indicator of the health of the economy and because we have a chief minister who knows finance, he understands this well, Andhra Pradesh Real Estate Developers Association president Prem Kumar told TOI.

Buyers and developers both stand to gain from the move. While buyers can hope to get a better deal now, developers, who had kept their projects on hold due to the slump, can now think of starting up their ventures again, Aparna Constructions director D S Prasad said.

Source: TOI 8/6/10