Friday, September 9, 2011

High Property Prices - Why does Government give a free hand?

Tax Cow:


Builders play important role in helping the politicians rule the land. No. I am not talking about "Politicians & Builders Nexus" or bribes, election funds and assistance to convert "loot of taxpayers' money" into white.

I am talking about the "official" business transaction, give & take, between the builders & the men in power - government!

I am talking about - government's "cut" in the property price!

You know what? When a builder charges you Rs. 3,300 per sq.ft., the government's "cut" is, approximately, Rs. 1,087 per sq.ft. - nearly, 33%!

If, the government is 33% partner in real estate sector,
how can we expect government to control the property rates?
How can we expect government to increase 'supply of land'?

How can builders' government take any step which will make housing affordable for the urban middle class?

We have to remember that we are the 'minority' and only "tax cow" for the government.

Stamp Duty, Registration Charges, VAT & Service Tax:


We all know only about what we pay to the government when we register the agreement of our property. Stamp Duty 5% + Registration Charges Rs. 30,000 + Service Tax 2.57 % + VAT 1% = Approximately Rs. 313 per sq.ft. to the government.

"Ravi, that's not all what the government gets from every flat sold!," said Mr. Kapil Gandhi, M. D., Sigma One Landmarks Pvt. Ltd., developers of Grand Stand Kothrud and told me what government gets from the builder.

Let us assume that the 2,00,000 sq.ft. project - 11 story buildings with standard specifications & amenities - is in the D Zone, and the property rate, based on the saleable area, is Rs. 3,300 per sq.ft.

"Besides what you pay, while constructing this project, builder pays to local, state & central government, approximately Rs. 774 per sq.ft. on the saleable area!," said Mr. Kapil Gandhi and gave me the following bifurcation, based on per sq.ft. saleable area:

1) Stamp Duty on Purchase of Land - Rs. 60
2) Registration Charges for above Land - Rs. 14
3) Revenue Matters - Rs. 15
4) NA Charges - Rs. 5
5) PMC Charges & Premiums - Rs. 285
6) Octroi on Materials - Rs. 44
7) MSEB Charges - Rs. 20
8) Environment Clearance Charges - Rs. 10
9) VAT on Construction Materials - Rs. 86
10) Service Tax on Construction Labor - Rs. 57
11) Excise on Construction Materials - Rs. 111
12) Service Tax on Consultants' Fees - Rs. 10
13) Mortgage Stamp Duty on Project Loan (25% of Construction Cost) - Rs. 4
14) Property Tax on Plot for 4 Years - Rs. 12
15) Service Tax on Marketing & Promotion - Rs. 5
16) Premium on Road & Amenity Space - Rs. 38

Animal Farm:




Dear Tax Cows, now you know, why government gives free hand to the builders to abuse & exploit the property buyers and earn huge profits - sometimes, without any 'income tax on the profits'!

On our Animal Farm, builders & politicians are more equal than others and terrorist vultures are special guests!

Related Stories:


1) MONDAY, AUGUST 29, 2011

An Agreement to be a Slave of a Builder

2) THURSDAY, AUGUST 25, 2011

"I refuse to pay "legal charges" for the registration of my property agreement"

3) WEDNESDAY, AUGUST 24, 2011

An Agreement of Your Flat -
It's not a "Sale Agreement", Baby!

4) FRIDAY, AUGUST 19, 2011

Why do we borrow at high interest rates and offer interest free funds to builders?

5) THURSDAY, AUGUST 18, 2011

Pune builders recover the cost of construction and get ready to increase the property prices!

6) WEDNESDAY, AUGUST 17, 2011

Buy a ready possession flat until there is no real estate regulator!

7) MONDAY, JUNE 13, 2011

Is Pune real estate market about to crash?

8) TUESDAY, JUNE 21, 2011

Property Rates in Pune Real Estate Market Going Down?

9) TUESDAY, JULY 26, 2011

Flat 40 % Off!

Feel free to call me:


I enjoy talking, sharing my views and giving advice about buying property in Pune real estate market (so, i do not charge anything for the first 3 minutes!) Call +919860044110

If you like to chat, join me, RaviKarandeekarsBlogs on Google Talk.

Yes, my email id is RaviKarandeekarsBlogs@gmail.com Feel free to write. I reply as soon as i can.

Join me on Google Buzz at
http://www.google.com/profiles/ravi.karandeekar


Subscribe for Free!


To receive free emails or free RSS feeds, please, subscribe to Ravi Karandeekar's Pune Real Estate Investment Blog

For my blogs on real estate projects near Hinjewadi, real estate investment, advertising and other related topics, please, visit and join my Ravi Karandeekar's Pune Real Estate Blog Group

46 comments:

  1. hmmm so the govt is taking 33% of property price towards govt taxes like VAT, PMC premium etc.
    thanks mr. karandeekar for sharing.
    But how can you say that the govt is giving a free hand to the builder in abusing the tax payers, i mean do the builders or the buyers have a option by not paying the taxes ?
    I think the property buyers must make a presentation like mr gandhi's to the govt and ask the govt to rethink on their 33% taxes, if you know anyone from them !
    how you can say builders govt when the govt is elected by all.
    And how will any politician benefit by charging so much tax, and how can a builder benefit by paying so much tax !?? actually no one is benifitted, even after paying so much 33% tax, govt is not giving pot hole free roads !

    it is only that the property buyer is paying 33% to the govt via the home purchased.
    So the govt must really hard think on how to reduce the tax burden on the poor property buyer.
    Keep posting such important unknown factors !

    ReplyDelete
  2. Thanks for your concern for "poor property buyers", buddy!

    Do you think that builders will reduce the property prices if government reduces the taxes?

    ReplyDelete
  3. maybe if we have proper representation, like the govt has done in SEZ schemes. also every try is worth, if govt reduces the taxes and premiums for certain affordable homes, then the builder has to decrease !
    but anyways any try is worth ! just by reducing the basic stamp duty and vat etc we have to pay 300 rs less !

    ReplyDelete
  4. I dont know much about tax laws. But I am certain that the numbers are exaggerated.
    Following numbers are per sq.ft.
    PMC Charges & Premiums - Rs. 285
    Stamp Duty on Purchase of Land - Rs. 60
    Can you please give breakup of PMC charges?
    How did you calculate stamp duty? what was the cost of land considered? if we consider it was 750 Rs/sq.ft. then is stamp duty really 8% of purchase cost?

    ReplyDelete
  5. Dear Ajay, this is the official data of CREDAI Pune, given by Mr. Kapil Gandhi.

    Yes, you are right. I will right a blog on - 1) PMC charges 2) Land Prices 3) Construction cost & 4) Bribes builders pay

    However, Dear Ajay, land price is much more than Rs. 750 per sq. ft. in Pune real estate market.

    ReplyDelete
  6. Hi Ravi
    I am not sure about exact numbers and all about the taxes, but other than taxes do you think "holding capacity" of developers is also playing a big part in keeping the prices high?
    Regards
    Nik

    ReplyDelete
  7. The new investment is booming in 2011 from the UK
    with an official certificate and a valid address
    please visit my blog to learn more about this investment in:
    http://en-lexusventure.blogspot.com
    Be a successful mining in your city

    ReplyDelete
  8. Well excellent information and great write up you have shared here, I am so glad to found this post,doral real estate

    ReplyDelete
  9. Excellent informational blog with superb commenting below.I am Costa Rica Condos Expert and really impressed from the post....

    ReplyDelete
  10. Good informative post. Mahagun builders have brought for you this time with the name Mahagun Studio NXT in Noida.

    ReplyDelete
  11. This is very nice blog. I am waiting for your next blog post.

    Thanks,
    Paramountgroup

    ReplyDelete
  12. I am glad to see the nice post related to real estate,actually I am affiliated with Costa Rica Real Estate so I really need some research related to that...

    ReplyDelete
  13. Buy Sell Property in Bangalore

    Buy Sell Property, Rent Homes, Flats, Appartments, Villas, Land, Shops, Office Space in Delhi/NCR.

    http://www.hotproperty.in/

    ReplyDelete
  14. I don't have so much idea of tax related terms.but although its very nice blog.Thanks for your concern for "poor property buyers", buddy! Achitects Worcester

    ReplyDelete
  15. Thanks for sharing.
    this post is Valuable
    please see my project.
    Jaypee Garden Isles

    ReplyDelete
  16. Most of the time, local government or national governments does really want to control property prices. First of all, in most countries, government cannot take control of pricing when it comes to private land or properties, unless it is a government property then they can control it.

    Online Real Estate School

    ReplyDelete
  17. there are a very valuable information here for the real estate i observe it very nice
    for Revanta Raheja

    ReplyDelete
  18. I observe that many valuable information is here for digital marketing

    ReplyDelete
  19. i found your article on High Property Prices - Why does Government give a free hand is very interesting and i also like to recommend gurgaonproperties.net if you like to Find Property in Gurgaon, Commercial, Residential Property in Gurgaon, Gurgaon Real Estate, Gurgaon Property Dealers, New Residential Projects in Gurgaon. Buy Sell and Rent Apartments, Flats, Plots and Villas in Gurgaon.

    ReplyDelete
  20. Gurgaon real estate is cult realty in India because of the opulent properties. Commercial properties in Gurgaon have given the millennium city a world class spot for high value returns. Virtually every area and sector of the city speaks the success story of Gurgaon real estate.

    ReplyDelete
  21. Thanks for this great information. Your blog contains a huge and knowledgeable information

    Thanks,
    Paramount Group

    ReplyDelete
  22. Real Estate investment in india,Real estate services for NRI, Premium Properties in India, Luxury projects in India, Property Management Services, Investment options in India,Best cities for Real estate Investment,Apartments in Delhi NCR Noida Gurgaon,residential plots in gurgaon,purchase gurgaon properties,Apartments in Delhi NCR Noida Gurgaon.
    Real Estate investment in India
    Real Estate services for NRI

    ReplyDelete
  23. Real Estate investment in india,Real estate services for NRI, Premium Properties in India, Luxury projects in India, Property Management Services, Investment options in India,Best cities for Real estate Investment,Apartments in Delhi NCR Noida Gurgaon,residential plots in gurgaon,purchase gurgaon properties,Apartments in Delhi NCR Noida Gurgaon.
    Real Estate investment in India
    Real Estate services for NRI

    ReplyDelete
  24. I have been looking around for this kind of information. Will you post some more in future? I’ll be grateful if you will.
    http://www.realestateforsalemississauga.ca/

    ReplyDelete
  25. Very well said. I am so glad that I came across to your valuable post. My pleasure to visit this and any updates of this? Thanks.

    Charles|condo manila

    ReplyDelete
  26. In this days property market is in demand and people invest lots of money in this market because they have trust to get good return on the investment.

    شقق مفروشة جدة

    ReplyDelete
  27. What happen if the government reduces the taxes? Just still wondering why the government wants to control the price property when it comes on real estate on business.

    philippines properties for sale

    ReplyDelete
  28. The high property brings this question in mind that why does the government is allowing it
    license course real estate
    RES

    ReplyDelete
  29. This comment has been removed by the author.

    ReplyDelete
  30. This comment has been removed by the author.

    ReplyDelete
  31. This comment has been removed by the author.

    ReplyDelete
  32. The high property prices and what are its implications are shared on the post here. Know all about it

    Singapore Condominium

    ReplyDelete
  33. this is indian govt and it is expecting from them that for their personal benefit they can go down to any level.
    Land surveyor Birmingham,AL

    ReplyDelete
  34. This comment has been removed by the author.

    ReplyDelete
  35. This comment has been removed by the author.

    ReplyDelete
  36. This comment has been removed by the author.

    ReplyDelete
  37. This comment has been removed by the author.

    ReplyDelete
  38. Live-in Space offers its customers a complete suite of Plug and play office space for rent in BangaloreSolutions including buying, Lease and sale of property with an approach that is multi-disciplinary, well thought-out and completely integrated. Accredited with an ISO 9001-2000 certification, Live-in Space is an eco-friendly firm who has effectively delivered numerous commercial projects by providing professional yet personalized services to our clients. Office space for rent

    ReplyDelete
  39. nice blog ,Are you facing problem in finding office space for rent in bangalore dont worry we are always here to help you in ur need

    ReplyDelete
  40. Hi,im very much impressed by your blog ,Renting office space is a big step towards establishing your business. First you fix a budget that you can spend for an . office space for rent in bangalore from your business budget.

    ReplyDelete
  41. Thanks so very much for taking your time to create this very useful and informative site. I have learned a lot from your site. Thanks!!
    Web Developers Bangalore

    ReplyDelete
  42. I am always very interested to read about real estate matter. Thanks for sharing useful information. Website Developers Bangalore

    ReplyDelete
  43. Its one my great post i ever seen, Thanks to make me as happy
    Ecommerce Development Bangalore

    ReplyDelete
  44. The blog is absolutely fantastic. Lots of great information and inspiration, both of which we all need. Thanks…...
    Best electronic cigarette

    ReplyDelete