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Expensive proposition: The State budget proposals will push up costs, say builders.

According to the builders, a person building or buying a house for Rs. 25 lakh would be shelling out Rs. 7.25 lakh to the government in stamp duty, value-added tax (VAT) on construction material, contractor’s VAT, construction workers’ welfare cess and various kinds of licence fees. Altogether, the government would earn revenue of Rs. 500-900 a square foot, says M.A. Antony, secretary of the Kerala Builders’ Forum. According to him, in addition to the mentioned costs, interest on the loans taken from financial institutions to buy the home will effectively add up to 14 per cent. In comparison, in the neighbouring States, the buyer has to pay only two-thirds of this amount, Mr Antony says.

For those not taking central sales tax registration, the compounded tax will be at 3 per cent (up from 2 per cent), according to the budget. For those opting to take a registration, the compounded tax will be at 8 per cent (up from 4 per cent).

However, such a concession is rather impracticable because this can be achieved only if the contractors or builders do not buy anything from outside the State. As this is likely to be more or less impracticable, no one, not even a small-time builder or contractor, will opt for such a concession because there are hardly any building materials that are produced in the State. Hence the people in the State will be subjected to an extra tax burden as the budget proposals get implemented. The total extra burden of 4.04 per cent, including the cess, will result in a VAT of Rs. 160 to Rs. 300 a square foot — indicating an extra tax burden of Rs. 80 to Rs. 150 a sq ft.

The price of steel alone has increased by Rs. 13,000 a tonne, resulting in the cost of building houses going up by Rs. 80 to 100 a sq ft. The construction sector, which had been looking for some relief in the budget proposals, has had its hopes dashed.

Mr. Antony says that increase in the value of stamp duty is rather huge because it is being compounded on the total cost of the house. Earlier, registration charges were made on the undivided portion of the land (in case of flats), which would come to about Rs. 2-3 lakhs. Over and above, there is also a VAT of 8 per cent. But the government offers a concession of deducting the amount of VAT from the stamp duty value. However, this offer remains on paper as it is the builders who take the sales tax registration for the flats. Only if each buyer registers at the sales tax office for paying VAT, can he or she claim the concession for that amount from the stamp duty.

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