Increase in the Value added tax (VAT) may affect the real estate sector adversely. Industry experts stated that increase in VAT would result in materials for construction.

The Kerala Budget 2013 proposes an increase in VAT.

It is true that the budget 2013 has not done any indirect harm to the realty sector. The budget, though did not help the sector, cannot be termed as unfriendly to the real estate sector. However the realty players in the state fear that the proposed increase in VAT would affect the realty sector.

The prices for cement, wood and paint are likely to go up with the proposal to increase VAT. The prices of the above mentioned items are directly related to construction. So in short the prices of the raw materials will have an impact on the property prices too. The property prices will shoot up proportionately.

The budget 2013 has proposed an increase of 1.5% of VAT. This will directly affect the prices of the raw materials used for construction.

If the VAT is increased as suggested by the budget 2013, the realty sector will be affected adversely.

Speaking on the issue, Confederation of Real Estate Developers Associations of India, Cochin unit head Antony Kunnel said that the proposal to increase the VAT by 1.5% will have an impact on the realty sector. On the other hand he welcomed the proposal, in the budget for the land transactions, to reduce stamp duty by 2%.

K A Mohammed Salim, CMD of Asset Homes, said that the budget will not affect the realty sector much. He too admitted that the proposal to hike VAT may affect the reality sector, yet indirectly.

Mr. Salim added that the 2% deduction on Stamp Duty will not affect the sale of apartments as the deduction is applicable only for the land deals. Those who purchase land will gain concessions, but not those who buy apartments.

The government has also decided to connect all the registrar offices via internet. Realty players of the state appreciated and welcomed this proposal too. However they still remain cautious over the hike in VAT. They fear that it may affect the sector adversely.