The recent proposal of the State government to charge 1% for all under-construction properties will be passed on to the consumers, but will the beneficiaries get the money or will it be used for frivolous purposes?
The Maharashtra Cabinet cleared a proposal last Wednesday to charge 1% tax on all private under-construction property, ostensibly for the welfare of more than 20 lakh construction workers. This new tax has to be paid by developers, which means it will be eventually passed on to consumers.
Real estate research and rating firm Liases Foras had calculated that the amount raised under the new tax would be about Rs1,037 crore from the Mumbai Metropolitan Region (MMR) alone, taking into account 17 crore sq ft of under-construction property currently (for the fourth quarter which ended in March 2010) assuming a weighted average price of Rs6,100 per sq ft. There are a number of unsold properties in Mumbai; this new tax will again increase the unsold inventories in the city. The tax is proposed to be levied on both residential and commercial areas.
“Over time, developers may pass on the pressure of the 1% tax on to the consumers and property prices will also rise due to the new tax,” said Sunil Mantri, president, Maharashtra Chamber of Housing Industry (MCHI).
“The tax will be passed on to consumers. The proposed 1% tax on construction cost is not a big amount, but the construction cost is never revealed to consumers. It remains to be seen how the cost will be calculated, collected and used. The administrative work involved would be huge,” said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.
The tax collected under this scheme will be used for workers’ welfare like insurance, training and scholarships for children. The Maharashtra Cabinet has set up a high-powered committee for this purpose; it has recommended creating a separate Board to initiate various welfare measures for them.
“Real-estate prices are already unaffordable in Mumbai and another 1% tax will add to the burden of the consumers as they are the ones who have to pay the tax at the end of the day,” said Pankaj Kapoor, founder, Liases Foras.
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What should draw attention is, if there is any 'third party monitoring' to enable and verify that the money so collected is actually directed for the stated aim and purpose. The Construction Industry has been rather uncaring in improving the Quality of Life of the 'toilers' and the 'uprooted'. Their motto of: use-reuse-dispose has led to a number of vagrants and unemployed on the streets of the city. Let us focus on these, they usually get killed by illness or fast cars while they dwell on the streets of the city, unknown and uncared.
Govt should levy some tax on builder's profit and not on the sale value.
Like petrol pump , bulder should also disclose his inventory because builder on the first day booking says that all flats are sold but after 6 months he gives adevetisement in newspaper for fresh booking.govement must stop this speculative actitivity.
majority of real estate in mumbai are held benami by municipal engineers, state govt employees, senior tax officials and politicians of all party (they are divided among voters but united for this business)