With 2.5% service tax coming into effect from July 1, 2010 on the real estate sector, property prices across India are bound to rise .jpg) Of late, property prices in Mumbai have surpassed the peak levels of the housing boom period during 2007-08. Real estate prices in the country’s financial capital have gone up by a massive 40% over the last few months. Resultantly, residential sales have declined by 20-25% since December 2009. “As the economy gained momentum, buyers returned to the market, thereby improving the demand for property. Enthused developers started raising prices to make up for the loss incurred during the crisis period,” says Ashish Tapre, a Parel-based realty analyst. Mr Tapre further added that the city-based developers have raised prices of both new and existing projects, depending on the possession target and locality.
Interestingly, a significant 20-30% property price correction prompted buyers to return to the market since the second quarter of 2009.
Rising rates
Lodha Bellissimo, a plush residential project located in the heart of South Mumbai, is currently commanding a stratospheric rate of Rs 23,000-24,000 per square feet (sq ft), which is almost 10% higher than what developers were charging at the peak of the housing boom period.
Ashok Towers, another upscale residential project in Parel, Mumbai is now quoting a huge price rate of Rs 28,000-29,000 per sq ft. During the 2007-08 period, property prices for such projects in the region stood at Rs 25,000-26,000 per sq ft.
Home prices to rise further
With 2.5% service tax coming into effect from July 1, 2010 on the real estate sector, property prices across India are bound to rise.
Commenting on this, Gautam Hora, senior vice president (Capital Markets) of property consultant Jones Lang LaSalle Meghraj (JLLM) says, “The imposition of service tax on the sector will increase property prices to the tune of 2.58% and developers naturally would pass it on to buyers, thereby heightening the unaffordability quotient of homes, especially in cities such as Mumbai and New Delhi where buying a house is becoming a dream for many people. On the other hand, in cities such as Pune, Bengaluru, Chennai and Hyderabad, where consumers are more price-sensitive, developers will have greater challenges in increasing the prices. On the whole, demand and sales of residential realty will be considerably impacted across India.”
Urban development minister Jaipal Reddy who met finance minister Pranab Mukherjee in April requesting him for a rollback of the service tax said that the new tax burden could hurt the sector’s growth momentum.
Jeeta Bandopadhyay |
