Realty check: Realtors say decision will hit sector hard

News Posted - 2010-03-04

Real estate developers have warned that the government’s move to levy service tax on housing will be ‘detrimental’ to the sector which is yet to recover from the demand slump. They have called an emergency meeting to assess the impact of the measures and will approach the government for rollback of the Budget proposal. The meeting is likely to be attended by a number of leading developers, including realty firms DLF and Unitech.

“We will call a meeting of the association to discuss the Budget proposals, particularly the levying of service tax on housing which will have a negative impact on the realty sector,” industry body National Real Estate Development Council (NAREDCO) President Rohtas Goel said. Goel, who is also the Chairman and Managing Director of realty firm Omaxe, said the dates for meeting has not been decided yet.

In the Finance Bill 2010-11, the government proposed that construction of real estate complexes will attract service tax, unless the entire consideration for the property is paid after the completion of construction.

While some developers are of the view that the service tax of 10.3 per cent would be imposed on 33 per cent of the total sales value, others feel it should be imposed on 33 per cent of the total construction cost. “We will demand rollback of this proposal, otherwise it will have detrimental impact on the housing sector,” NAREDCO senior Vice President Sanjeev Srivastava said.

“Affordable housing will become non-affordable and black money would come into play due to this proposal,” an official with leading realty firm said. “This is a clear case of misrepresentation.

The developer sells a flat/ commercial building to the prospective buyer. On this sale, registration charges are paid to the state government. There is no service involved,” he noted.

Source: The Free Press Journal