Fair Value Hike may Drag Housing Sector into Deep Trouble
Confederation of Real Estate Developers’ Associations of India (Credai), Kochi, president John Thomas said that the market would be badly affected by the fair value hike
Oct 04, 2014
Source : The New Indian Express
Credai Kochi


KOCHI: The State Government’s decision to hike the fair value of land by 50 per cent will have a negative impact on the real estate sector, which has already become stagnant due to the high price of land and houses.

Though the government plans to generate an additional revenue of `500 crore through the hike in fair value of land experts in the real estate sector are of the view that it would have a negative impact. The real estate sector is already in a crisis, and the number of transactions will come down further as people are likely to opt for other investments. Confederation of Real Estate Developers’ Associations of India (Credai), Kochi, president John Thomas said that the market would be badly affected by the fair value hike. While registering the ongoing projects, builders will have to bear the extra amount to be paid as they have already entered into agreements with the customers on the total cost of the property.

“When an apartment is completed, around 30-36 per cent of its cost is paid to the government as various taxes like VAT, service tax, registration fees, income tax and sales tax. Now, with the additional burden of fair value, the investors will likely move to the other states,” he said.

  Already, there is excess supply of apartments in Kochi as there are no takers for them. Builders who are into the villa business are the worst affected.

Asset Homes managing director Sunil Kumar  said that after six months, the government would realise the fact that business has come down. The government’s expectation to increase revenue by hiking the fair value will not be realised.

“When such a decision is taken, either discussions should be held with the stakeholders or a study should be conducted. How can the price of a piece of land be increased by 50 per cent just to increase the revenue of the government?” he asked. “Following the implementation of the CRZ norms, construction activities in the coastal areas have already come down and the price of land is declining,” he said.

According to John Thomas, with the hike in land prices, affordable housing projects would not come up now. “Only a few will be able to buy houses, paying high registration cost.Now, investors will think twice before purchasing land in the State, considering the high cost of registration,” he added.

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