Lower tax regime from Centre can reduce real estate prices up to 40%, says CREDAI
In the face of the slowdown of the real estate sector, the Confederation of Real Estate Developers of India (CREDAI), an apex body of the builders has squarely blamed the government for the current exorbitant pricing of the houses.
In a letter to the central government, CREDAI outlined that easing of approvals as well as lower tax regime can easily reduce the realty prices by 25 % to 40 %.
According to Jaxay Shah, national president, CREDAI, approvals still remain an issue as years are wasted securing them. “The government needs to understand that delays in permissions increase the overall project costs. This makes the houses costlier and hence sales are affected,” said Shah.
The letter addressed to Hardeep Puri, Union minister of state (independent charge), housing and urban affairs, points out that the World Bank’s ‘Ease of Doing Business Report’ report on ‘Dealing with Construction Permits’ ranks India at 181 out of the 190 nations.
Shah said another problem is the reluctance of financial institutions to fund the sector. “Despite getting industry status for affordable houses, banks are reluctant to advance us loans. If this continues, there will be a shortage of housing and ultimately prices will increase further,” he warned.
In the last few years, the real estate sector has been plagued with a slowdown. Even though now many builders have reduced costs, homebuyers are not able to purchase due to lack of affordability.
According to Liases Foras, the real estate research, the taxes and premiums in realty sector are not productive in nature. “Today the builders are not able to reduce prices as it is not feasible for them due to levy of huge taxes. High taxes and premiums are not serving any purpose apart from reducing the sales,” said Pankaj Kapoor, CEO, Liases Foras. At present, any buyer has to pay 12% Goods and Services Tax apart from 6% as Stamp Duty and Registration Charges, thus bringing the total tax burden to 18%.