LUXURY HOMES NOW MORE EXPENSIVE

The Budget proposal to reduce the rate of abatement from 75% to 70% on homes and flats of 2,000 square feet and above or those costing Rs 1 crore and above, will make luxury homes even more expensive for buyers, says NEHA NAGPAL

Luxury housing will pinch even more now! 
    With the Budget announcement to reduce the rate of abatement from 75% to 70% on homes and flats of 2,000 square feet and above or those costing Rs 1 crore and above, luxury homes will become more expensive for buyers. 
    Experts say that the reduction will have an impact on service tax, which developers will pass on to the consumers. "Effectively, this translates into an increase in the service tax outflow, which means that luxury housing will now become even more expensive," says Anuj Puri, the chairman and country head of Jones Lang LaSalle India. 
    Boman R Irani, the CMD of Rustomjee Group, says, "This will lead to an increase in service tax outflow from 3.09% to 3.71% in the coming year, which will be passed on to the consumers." 
    As per the Jones Lang LaSalle report, there are 182 residential projects in the luxury segment, which have been launched in the top seven cities: the Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata. The total value of these luxury homes is estimated at $30 billion. 
    However, Om Chaudhry, the chairman & CEO of Astrum Homes and founder & CEO of FIRE Capital, says, "The government's proposal to set up an Urban Housing Fund with an allocation of Rs 2,000 crore will infuse liquidity for urban housing, thereby, boosting demand in urban cities." 
    Navin Raheja, the president of Naredco and CMD of Raheja Developers Limited, says, "With this, the infrastructure investment would boost the economy and tone down the acute housing shortage in the country." 
    Experts say that this announcement will not have much impact in Tier II and III cities, as there are not many projects falling under the specified category. Anuj Puri of JLL says: "The cities that will be most impacted are Delhi, Mumbai, Bangalore and Hyderabad. To a certain extent, Chennai and Pune will also be affected because they also offer a noticeable component of luxury housing that cost Rs 1 crore and above." 
    The impact will be seen more in Mumbai, as a majority of properties in the city, with a decent unit size, are priced over Rs 1 crore. 
    Having a common stand, the real estate industry says that there were no reforms in the Union Budget, which would make home buy a priority for everyone. The Budget gave very less impetus to 'homes for all', which is the need of the hour, most industry people reiterated. 
    Another announcement which would impact the real estate sector is the 1% tax deducted at source (TDS) on the transfer of immovable property with a market value of more than Rs 50 lakh. Apart from the increase in transaction cost, this will add to the paperwork for buyers.