Buying or construction of an apartment will now cost more, owing to expected rise in prices of key raw materials such as cement and steel, besides a hike in service tax by 2 per cent on contract constructions.
With the exception of low-cost housing, property prices are expected to rise in the coming days after the proposed hike in service tax from 10 per cent to 12 per cent, developers said.
Cement and steel manufacturers have already hinted at rising prices of the construction inputs after the Budget proposed raising the excise duty to 12 per cent.
For one, TDS (tax deducted at source) at the rate of 1 per cent on transfer of immovable property (other than agricultural land) above a specified threshold will also add to the cost of buying a house.
As per the Budget proposals, the threshold would be over Rs 50 lakh in urban areas and Rs 20 lakh elsewhere.
Commenting on the issue, Confederation of Real Estate Developers’ Association of India Chairman Pradeep Jain said: “Application of TDS on the purchase and sale of property and increasing in service tax, will further add on to the overall cost of property and are bound to make property prices go up.”
Realty consultant DTZ also agreed saying this will be new burden to the home buyers of mid- and high-segment (dwellings costing more than Rs 25 lakh).
The impact of service tax may be about Rs 40,000 on a Rs 75-lakh home.
However, affordable housing, being part of negative list, is exempted from service tax and the move would give a boost to the affordable housing segment, said DTZ.
Omaxe Chairman Rohtas Goel also noted that Budget would give boost to affordable housing, but felt that “what nullifies the above positivity is an increase in service tax and excise duty to 12 per cent each resulting in an increase in cost of raw material.”
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