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Govt mulls VAT on asset buy above Rs 50 lakh
July, 29th 2010

If you are planning to buy a house worth more than Rs 50 lakh, get ready to shell out more money as the Delhi government is planning to impose value added tax (VAT) on all property transactions above Rs 50 lakh.

"There is a proposal of imposing VAT on any property transaction above Rs 50 lakh. Although it is in the initial stage but government is soon going to make a final draft of the proposal," an official in the Delhi government told Mail Today.

As per the official, the buyers may have to pay VAT of one per cent on the purchase of a flat worth Rs 50 lakh to Rs 1 crore and two per cent on the purchase of a flat above Rs 1 crore. At present, state governments like Maharashtra are already charging one per cent VAT on them. The official said the government will exempt houses below Rs 50 lakh so that the affordable housing segment is not affected.

"We do not know anything about this proposal yet, however, it will be ridiculous. Property prices in Delhi have already gone up and rarely any two-bedroom set comes below Rs 50 lakh. So, to say affordable homes will be exempted is a farce," an official from Unitech said. As far as luxury segment is concerned it will not have any impact, he added.

However, this will come as a blow to the home buyers who are struggling due to the revised circle rates, introduced in June this year. The revised rates have pushed property prices to unrealistic levels. The lowest circle rate is fixed as Rs 9,000 per sq mt and for posh localities it had gone up to Rs 1,25,000 per sq mt.

In many pockets, the circle rates have doubled.

Apart from that there are other levies to worry about. The service tax imposed on under-construction property in the 2010-11 Budget already adds 3.4 per cent extra cost, besides the stamp duty and registration charges.

Anurag Mathur, managing director, Cushman and Wakefield, a realty services major, said, "Costs of luxury homes in general has touched the peak level of 2007, while in some pockets of Delhi and Mumbai they have exceeded the 2007-prices."

According to Makaan. com, property prices in south Delhi has gone up by 47 per cent, 22 per cent in Dwarka and 21 per cent in East Delhi, as compared to last year due to metro connectivity and revised circle rates.

Aditya Verma, chief operating officer (COO), Makaan. com, said, "Delhi property prices have moved up at a rapid pace keeping many home buyers at bay. The unexpected fast runup has lead to a mood of caution and disbelief."

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