... But service tax cuts, not lower duty, to help realty

... But service tax cuts, not lower duty, to help realty
The Times of India, February 25, 2009, Page 26

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The real estate industry is not enthused by the cut in duty on bulk cement from 10% to 8%. However, the cut in service tax rate from 12% to 10% will benefit those who have taken large commercial properties on rent.

Gera Developments CMD Kumar Gera said the reduction of 2% will have no impact at all. “It will make a difference of just Re 1 per square foot on the cost of construction. It is irrelevant and means nothing for the industry,’’ Gera said.

Real estate consultant Ashok Narang too felt that the reduction on bulk cement duty would make no difference on real estate. “The market will kickstart only when banks bring down interest rates to about 7% for a longer period. This cut in duty is just an eyewash. There need to be more incentives for the housing sector.’’

The head of a large real estate company said the cut in service tax will benefit those who are on rent in large commercial complexes. “For example, someone paying Rs 1 crore as rent annually for an office space. Earlier, he would have paid Rs 12 lakh as service tax. Now he would save Rs 2 lakh annually since under the new rate his service tax outgo will be Rs 10 lakh,’’ said the official.

However, industry players feel the government decision could have a positive impact on people’s sentiment. Property redeveloper Pujit Agarwal said that at a time when market sentiments are low, any kind of incentive is helpful, however small. “The duty cuty will bring down the cost of construction by just 1.5%. It is not much, but nevertheless a breather for the industry. The government wants to show it is being proactive,’’ he said.

South Mumbai developer R C Chaturvedi said a cement bag currently costs Rs 260. “With this reduction the saving per bag will be just 1.2%. This will not make much difference on the cost of construction,’’ he added. Developer Sunil Mantri of Mantri Realty said a cement bag will now be cheaper by Rs 5 to Rs 7. “Its a good step by the government, although a small one,’’ he observed.

Developer Pravin Doshi, who is also the president of the Maharashtra Chamber of Housing Industry, however, observed that this will make a difference on big projects. “It will help a lot. The cost of construction will reduce by at least 7% to 8%. It is a good decision.’’