TEAM HERALD
PANJIM: Did you know that over a third of your real estate purchase cost comprises of various indirect taxes? According to a KPMG report titled ‘Housing for all by 2022″, over one-third of all housing costs comprises various taxes, but the budgetary support the sector receives from the government is only in the form of tax incentives and allocation towards housing development.
See table to understand how the government may actually be contributing to the high price you pay for your home.
In order to give legal status to the property purchase transaction, home buyers have to pay stamp duty on the “Sale Agreement”. The rate of stamp duty varies from state to state. In Goa, stamp duty is payable at 2 per cent on “Agreement Value” or the Ready Reckoner rate, whichever is higher. Registration is the process of recording the contents of a document with a registering officer. If the flat is not registered, it cannot be produced as evidence in a court of law. The registration fee again varies from state to state and in Goa it is 1 per cent of the agreement value. However, it is subject to a maximum limit of Rs 30,000. Some states also levy value added tax on property. In Goa like Maharashtra, it stands at 1 per cent. In addition there is also the service tax which is a Central government levy on under construction property and is payable when the installments towards purchase of property are made to the developer. It is not payable if the flat is purchased from the developer after the construction is completed and a completion certificate is received. This is one of the most controversial taxes. Apart from these, there are other indirect taxes like excise, customs, and service tax on the materials and other inputs used in construction. Though these taxes are paid by the developer, they are usually passed on to the property buyer in the form of higher prices.
Rationalisation of these taxes can actually help make property prices more affordable and enable higher flow of investment in the sector. Desh Prabhudessai, President Credai Goa said this was a problem they were aware of. With the increasing cost of land, construction cost and taxation yes it is quite an expensive proposition to buy a flat or bungalow in the state. He said “we also have the infrastructure tax, stamp duty and registration fees which depends on all the factors I talked about earlier which is all passed over to the customer. Today for electricity we have to pay upfront during construction resulting in the cost is then paid by the person who purchases the flats. We have asked the government for a reduction in taxes and yes they are listening to us but it will take some time before things can really move in that direction”.
Another builder who has a residential and commercial project coming up but did not want to be named said that it was but natural that such high taxes would be levied when a mere three percent of the population was paying taxes.
For banks in the state that provide housing loans, it is another business avenue which is turning out to be quite profitable. Karur Vyaya Bank which is headquartered in Tamil Nadu has a branch in Panjim which provides loans at 11 % per annum. Anand Bhat, Branch head said “We receive approximately 20 applications for bank loans and they are all approved. We provide a max of 65% of the total cost. We have never ever suffered giving house loans. With regards to the taxes, it does not really affect us. I suppose the government needs to raise money to pay for the services it provides”
Time will tell if the consumer will continue to pay such high taxes while purchasing a dream home in Goa.
