New Delhi, November 14, 2020: Developers and real estate experts in Gurugram said on Friday the union finance ministry’s decision not to impose additional tax liability on buyers and sellers where the differential between market price and circle rate is up to 20% will help in reviving the realty sector.
The developers said this decision will help in making houses cheaper, reduce registration charges and help buyers in under-construction projects as GST will also get reduced.
The move is likely to boost market sentiment as till now, buyers and sellers had to pay an income tax penalty if the difference in market and circle rates is more than 10% due to which there was reluctance to transact in property.
Circle rate is the rate at which property transaction is registered by the revenue department. It is fixed by the state government.
Realtors said not only in Gurugram but in many markets across the country, the market value of property had gone down almost 20 to 30% and there was reluctance to transact in real estate because of the income tax for a property differential over 10%.
Under the new regime, there will be no penalty if price differential is up to 20% for properties up to Rs 2 crore.
“The differential of up to 20% in collector rate and market rate allowed for primary residential transactions of up to Rs 2 crore without income tax penalty will make home buying more attractive. Developers will be able to liquidate their unsold inventory at up to 20% below circle rate. Home buyers will enjoy triple benefit of reduced property price, lower GST and less registration charges,” said Vinod Behl, a city-based real estate expert according to the reports published in hindustantimes.com.
Realtors said property prices are stagnant in the city and across India and developers were working on thin margins due to which there was no flexibility regarding price. “The decision will allow us to reduce prices or offer tax benefits to buyers, which earlier was not possible. The announcements regarding price differential or funding boost for real estate sector will help in reviving realty,” said Pravin Jain, chairman, Naredco, Haryana.
Prashant Solomon, managing director, Chintels, and spokesperson, CREDAI, NCR, said they have been asking the government to increase the permissible difference between market price and circle rate for quite long. “This move will help reduce the inventory lying with builders without any liability and reduce the pressure on home buyers,” he said.
Rajat Goel, joint managing director, MRG Developers, said tax relief on residential units priced up to Rs 2 crore is a great step as most of the housing units fall under this price category. “Owing to this, homebuyers will surely be able to take a decision of purchasing their own house,” said Goel.
Overall, the stakeholders were of the opinion that the realty market in the city could see a revival in the next six months as more end-users could enter the market to buy houses enthused by this announcement .
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