Income Tax Department proposes to tax realtors, developers on unsold inventory
Last week the income tax department said to the finance ministry that according to the court order the unsold ready flats held by builders can be taxed as “income from house property” even if they are not rented out was one way of garnering more taxes.
If the government clears the proposal, according to data from property research firm Liases Foras, it will affect developers holding about 100,000 ready or close to be completed unsold properties in top eight cities across the country.
On the basis of notional annual letting value these properties will attract tax computed according to the proposal. This tax will be a huge setback to the industry.
The managing Director of ATS Infrastructure Mr.Getamber Anand said that most builders can’t hold stock because they have to service their debt but market forces today are such that sales are slow.
The managing Director of Bangalore-based Sobha Developers Mr.J C Sharma said that real estate developers are in the business of constructing and selling homes and in the process if some of them remain unsold, it is to be considered stock-in-trade and should not be taxed.
A senior revenue department official, said that this suggestion was part of the plan that was on the agenda at the meeting of the chief commissioners of income tax with the finance minister Arun Jaitely.
Over the past two years, the real estate market has been bettered by a slow economy with home sales sliding drastically and putting pressure on the finance of builders. As per Liases Foras the unsold inventory has risen further from 734 million sq ft or about 734,000 apartments at the end of March to 765 million sq ft or about 760,000 apartments at the end of June which also including properties that are under construction and completed. Home sales in the April-June quarter slid 9 per cent in the top cities as per the research firm.
The only city among the tier l cities is Bangalore that saw a 10 per cent growth in sales.