Tag Archives: affordable housing

Hike in concession rate of service tax

As per the budget proposal for 2010-11, the finance ministry has suggested service tax on construction and sale of property. The contractor was entitled to claim abatement to the extent of 66.7 per cent of the value of services rendered by him. But recently, the Finance Minister has increased the concession on service tax applicable to construction of residential complexes from 66.7 per cent to 75 per cent of gross value of property, including land value.

Suppose you are buying a flat costing Rs. 50 lakh (cost of land, Rs. 40 lakh, cost of construction, Rs. 10 lakh). As per the 2010 budget, the applicable service tax was supposed to be Rs. 171,495 calculated at 10.3 per cent on 33.3 per cent of property value. With the amendment announced by the Finance Minister, the applicable service tax comes down to Rs. 128,750 calculated at 10.3 per cent on 25 per cent of property value. Thus, the savings will be Rs. 42,745.

The Finance Minister has also declared exemption from service tax for low-cost housing segment (less than Rs. 20 lakh). Suppose you are buying a flat in a smaller city for Rs. 18 lakh (cost of land, Rs. 6 lakh, and cost of construction, Rs. 12 lakh). With the amendment announced by the Finance Minister, there would be no service tax applicable.

The notification will be published in July 2010. Till issue of notification, there will be no service tax for under construction property. Property Buyers can pay amount for property and service tax will not be levied till July 2010. After issue of circular or notification, Service tax will be applicable only for under-construction properties and not for resale property.

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AP plans Integrated townships plan to tide over the shortage of affordable housing

Hyderabad: The Andhra Pradesh government has devised a model `integrated townships plan’ to tide over the shortage of affordable housing in the state. According to state housing minister, a recent survey had indicated that nearly 1.76 lakh houses are needed to be built for urban people in the state.  State housing minister C Shilpa Mohan Reddy said that the biggest barriers to realtors in providing affordable housing were skyrocketing of prices of land and raw materials, and over-taxing of housing that accounts for almost one-third of the cost.

At a one-day seminar on ‘Housing For All’ organised by the Confederation of Indian Industry (CII) Reddy said that as part of this plan the state government was in the process of allotting 100 acres of land in each of the municipal corporations, 50 acres in each of the municipalities, and 10 acres in each mandal.
Apart from this, the state government is constructing 26,000 flats in and around Hyderabad and 50,000 flats across the state under its own `Rajiv Swagruha scheme’.The state government had also taken up a massive housing scheme for those living below the poverty line (BPL) under the `Indiramma Program‘. About 81 lakh houses have been sanctioned in rural and urban areas for BPL families, of which about 27 lakh houses have already been completed.

The biggest barriers to realtors providing affordable housing were skyrocketing of prices of land and raw materials, and over-taxing of housing. If taxing of housing is made more rational and transparent, and levied through a single-window, then it will help the developers a great deal in providing affordable housing.

Reference:

AP plans integrated townships to provide affordable housing