Luxury homes to be more expensive and costlier
Luxury homes are going to cost more after the finance minister reduced the abatement on service tax availed by real estate developers for homes and flats above 2,000 sq ft or costing Rs 1 crore and above to 70% from 75%.
The impact will be expanded in Mumbai for all the home buyers of under-construction apartments as the city no more offers any decent sized apartment at less than Rs 1 crore, the criteria used for applying the measure.
The rate of abatement or reduction is used in calculation of service tax to be paid by the real estate developers. Reduction in abatement will result in higher input cost that will be considered for calculation of service tax.
Home buyers in tier II and tier III cities and peripheral areas besides distant suburbs of metros, but not within the metros, will not be affected by this budget as they does not fall in this category. The only affected cities are Delhi and Mumbai, whose basic housing cost is around Rs 1 crore and this will affect almost all the buyers.
Recently, Jones Lang La Salle India reported that in 182 luxury residential projects offering 25,570 units across the top seven cities of NCR-Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata, launched between 2008-2012 was around $30 billion.
Reduction in the rate of abatement will affect only few people as not many home buyers falls in this segment.The finance minister declared an additional tax sop for new home loan borrowers, which would partly boost budget housing projects in cities besides residential property sales in smaller towns.
People who would be eligible for additional interest subvention of Rs 1 lakh are the first time home buyers who are availing loan of up to Rs 25 lakh between April 1, 2013 to March 31, 2014. Currently, this is allowed up to Rs 1.5 lakh for the taxable income.
The big disappointment was for real estate-focused private equity funds. Realty funds are covered under the alternative investment fund (AIF) II category which the finance minister did not touch upon. The industry was hoping that the tax benefit available to AIF I category (venture funds and infra funds) would be extended to other AIFs.
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Affordable Housing, Apartments in India, Budget 2013-2014, Housing sector, Increase in Service Tax, Luxury homes, Private equity funds, Real Estate Sector, Realty News, Service tax on construction, union budget
