Union Budget 2012-13: Buying or building of a house will cost more.

Realty players said that purchase or construction of a house would now cost more due to expected rise in prices of key raw materials cement and steel and a hike in service tax by 2 per cent.Barring low-cost housing, property prices are expected to rise in the coming days after the proposed hike in service tax from 10 per cent to 12 per cent.

TDS at the rate of 1 per cent on transfer of immovable property (other than agricultural land) above a specified threshold will also add to the cost of buying a house. The threshold would be over Rs 50 lakh an urban areas and Rs 20 lakh elsewhere, according to the budget proposals.

Cement and steel manufacturers have already hinted at a price hike after the Budget proposed raising the excise duty to 12 per cent.

Commenting on the budget proposals, Confederation of Real Estate Developers’ Association of India (CREDAI) Chairman Pradeep Jain said, “Application of TDS on the purchase and sale of property and increasing Service Tax by 2 per cent will further add on to the overall cost of property and are bound to make property more costly in coming days.”

Realty consultant DTZ said that increase in the service tax is going to further increase marginally the overall burden on the home buyers of mid and high segment (dwellings costing more than 25 lakh). The impact of service tax would be about Rs 40,000 on a Rs 75 lakh home.

However, DTZ said that affordable housing, being part of negative list, is exempted from service tax and the move would give a boost to the affordable housing segment.

Jones Lang LaSalle India Chairman and Country Head Anuj Puri said that “the increase in the service tax rate from 10 per cent to 12 per cent will increase the cost of production for developers, who are already reeling under high input costs. It follows that this increased burden will be passed on to end users”.

Realty players demand Industry status and affordable housing as a priority from the Budget 2012-13.

The Union Budget 2012 to be presented by the Finance Minister Pranab Mukherjee is being looked at to provide relief in terms of policy reforms with the real estate sector of the economy coming under repeated credit pressures owing to high interest rates for borrowing.

Experts say that the real estate sector needs government support as well as further stimulus to get out of the current slump. With the first step, experts have sought industry status for real estate, since the sector is a major driver for economic growth and generates countless jobs across its various verticals and associated industries. Experts this feel will also help the sector raise debt from FIs at a much lower rate.

Common demand across all real estate companies is that of an industry status being assigned to the sector in the Budget 2012-13 with ways to make affordable housing available to a larger section of the society.

Samir Jasuja, founder and chief executive officer at Prop Equity said, “In this budget, we expect the central government to grant the real estate sector the industry status as that would help the reeling sector raise debt from financial institutions at a much lower rate, which may partly improve the liquidity crunch crisis.”