Budget Wishlist | Avert recessionary trend in real estate sector: Era Group

Budget Wishlist | Avert recessionary trend in real estate sector: Era Group
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First Published: Tue, Feb 19 2008. 04 58 PM IST

Sanjay Gupta, vice president, business development, Era Group
Sanjay Gupta, vice president, business development, Era Group
Updated: Tue, Feb 19 2008. 04 58 PM IST
New Delhi: The Reserve Bank of India’s Credit Policy has failed to live up to the real estate sector’s expectations. All eyes are now on what the Finance Minister announces in Budget 2008.
Sanjay Gupta, vice president, business development, Era Group
There is no denying the fact that the realty sector has made significant contribution to the Indian economy. Unfortunately certain myopic policies are forcing the sector to some degree of recession.
Key Recommendations
* Rationalize stamp duty: While stamp duty is a state subject, the government should initiate steps to rationalize it to enable all states to have a uniform stamp duty structure. This would provide a more level playing field to developers since it forms an important cost component
* Lower stamp duty and levy it on value addition: Presently there is tremendous under-valuation of property, primarily in the resale market, on account of high incidence of stamp duty. This has led to a situation where transparency is compromised. Lowering it will encourage more people to get their property registered at actual price rather than at lower rate. Besides, concept of levy of stamp duty on incremental value of property, much like MODVAT, should also be introduced
Currently, it is levied each time a property changes ownership, adding to the cost of the property. Levy of duty only on increase in value will greatly help in lowering cost of property thereby making it more affordable. On the flip side there is a possibility of unscrupulous elements taking advantage of this provision, but this can be structured in a manner to overcome this bottleneck
* Treat property as a long-term asset after a year’s holding instead of the present three-year period: Property, like shares, should be considered as a long-term asset after one-year holding of the same. This would greatly impact the tax incidence on gains from such transactions and go a long way in prompting greater disclosure of true transaction value, which in turn would bring greater transparency in the sector
* Abolish service tax from construction contracts: Housing is one of the basic necessities and ranks high on the government’s list. But to provide affordable housing especially to the middle and lower middle class population, steps must be initiated to reduce cost of construction which would in turn lower selling price. The service tax levied on construction contracts has only increased the cost of the finished product which has to ultimately be borne by the end-user
Sanjay Gupta, vice president, business development, Era Group
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First Published: Tue, Feb 19 2008. 04 58 PM IST