The finance minister recently announced tax concessions for the construction sector, which was brought under the ambit of service tax in this year’s Budget. Now, service tax would be levied at 25% of the total sale value of the property compared with 33% proposed in the Budget. Your comments.
We appreciate the government’s gesture in increasing the limit from 67% to 75%. This would mean that the service tax charged on the cost of apartments would go down to about 2.5% from 3.3% proposed earlier. We, however, feel that the method of calculation for the same is not justified because land, the biggest component in the cost of a residential unit, should not be taxed as a service. In the present proposal, the abatement given (where the cost of land is included in the price of the apartment) will be unjust. The fine print, when available, will hopefully address these issues. But this process will make it difficult for the buyers to understand how and what they are being taxed for.
It is seen that brokers usually increase the price to favour owners to increases their commission. How does one minimize the loss on this front?
Buyers should fix broker’s fee before starting the property search. Often, brokers say that their payment is on a commission basis (a percentage of the deal amount), but fixing the fee saves money. For instance, if the buyer reaches an agreement with the broker that he will pay him Rs1 lakh for helping him find a property, the buyer will save some amount. But if the same broker offers the buyer a deal based on his percentage, the brokerage may be higher.
Also, a ground research in the same area to compare the rates of the properties sold will give an idea about the right price. Moreover, dealing directly with the owner helps.
How does a person ascertain whether a contractor, one is hiring for renovating a house, is genuine and experienced? Often, it is seen, that brokers get into this business by getting a licence. What can be done?
The person should first hire a professional, such as an architect or a designer. They are the people who will plan restructuring. The same people will also help him find the right contractor.
It is said that flats built by the local authority are better than builder flats. Is this true? On the price front, the cost of an authority flat is usually lower than a private builders’ flat.
At a given price point, you might find a flat by the local authority cheaper than the builder flat. But often this is location-specific. On the quality front, too, it is difficult to say.
When buying a floor in a two- or three-storey residential complex, what problems can a homebuyer face?
In a small residential complex, there are certain legal and sharing rights. Under these, issues relating to common pipelines and parking spaces should be addressed before taking the possession. Maintenance of the common spaces could be another area of dispute between the floor owners. Moreover, in case of resale of a single floor, there could be hindrance from other occupants.
Is buying a floor better than buying an apartment of around the same size?
Apartments come with added infrastructure and amenities, such as parks, children area and clubs. However, there is a cost associated to these amenities that the occupants have to pay every month. For a family comprising of young people, an apartment would be good choice. But an individual floor complex would be good for the old as they do not move around much. Therefore, paying extra monthly cost on amenities doesn’t make sense. Also, a joint family can buy the entire residential complex with separate floors allocated for each member. On the price front, the cost of an apartment may be higher because of the overall infrastructure.
A property in a mixed land use development has some commercial establishments attached to residential premises. What are the problems associated with such an arrangement?
It is an advantage, too. People who do not wish to spend time on a long commute for going to a grocery store or a mall may look at it as an advantage. But in case someone likes a peaceful surrounding, this is definitely not for them.
Moreover, if the owner/retailer plans to sell off its shop to another businessman who probably runs a manufacturing business or a business that produces noise and pollution, then the situation can become difficult for the residents. This cannot be checked in a mixed land use development.
Often, developers offer modular kitchens in a new project. In terms of cost, is it cheaper to convert a normal kitchen into a modular after you buy the apartment?
It is convenient to get a modular kitchen from the developer. A developer offering a modular kitchen will also incorporate other features, such as wood laminate in the master bedroom or air conditioning. In this case, one can compare with other projects in the vicinity.
Kumar Gera is the chairman of Confederation of Real Estate Developers’ Association of India
Devesh Chandra Srivastava