Roti (food), Kapda (clothing) and Makaan (shelter) are primary needs of an individual. But with skyrocketing property prices, the makaan seems to have gone off the roof, especially for the common man here in India.

Despite of poor demand, property prices are holding up in many parts of the country and even ascending in some pockets. This scenario exists even as the real estate sector at present is facing multiple problems such as huge debt and high inventory. Builders have just not bothered to step down on rates and turnover their inventory, which is why it has not yet translated into a meaningful correction for the real estate market. There's ostensibly a fear that they (builders) would lose their upper hand while dealing with prospective buyers.

However, this may change soon and here's why...,

So, what is going to change?
Real estate developers may be asked to pay tax on the ready flats and accommodations which are lying unsold. The Income-Tax department is planning to change the tax treatment for builders who hold onto inventory to their advantage i.e. to hoard prices.

As per the central action plan for the year 2015-16, the Income-Tax department is planning to assess real estate companies on a turnover basis, based on stamp duty value or circle value, in respect of all transactions relating to land or building or both. This will have an impact in case of real estate developers and traders, where immovable property is kept as stock-in-trade. In other words, it seems that real estate companies will have to pay tax on unsold properties.

In the recent years, Court rulings have gone against builders where Income-Tax department has asked them to pay tax on 'Deemed Income' under income from house property. This is technically because there is no 'conveyance' and they continue to own properties.

This move comes as an effort to increase the tax revenue of the exchequer and if implemented well, could help the Government in walking down the path to fiscal consolidation.

What would be the impact on property prices?

PersonalFN is of the view that if this move is implemented prudently real estate developers would be discouraged to pile up inventories and accept market determined lower prices. As a result property prices may come down.

But given the strong lobby of real estate developers in the Government one needs to see how far it becomes a reality. Given the dire financial state in which some builders are, such a move may even impact the net profit after tax (NPAT) of real estate companies and there are likely chances that such a proposal may be challenged.

What should be your approach while buying a house?

PersonalFN believes if you are buying a primary house i.e. a house to shift and live with your family, anytime is a good time to buy. But ensure that you are careful and smart enough while evaluating your options. After all you don't wish to get into a 'Campa Cola' (society) like situation and be left in lurch when you have moved in with your loved ones.

If you are looking at investing in real estate, probably taking cognisance of the present property market and your financial circumstances would be appropriate before you strike a deal. Investing in real estate is a big decision, so ensure you do it thoughtfully with apt planning.

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bksinghus@yahoo.com Jun 08, 2015 The political parties do need money to fight elections and since this money can come only from big corporates and builders as such no party is in favour of enacting strong laws in this domain. both the main national parties BJP and congress spent scores in their election but none tells from where this comes. So the obvious conclusion being that it is black money donated by big corporates and builders who are the real people behind the running of govt. So nothing has changed in last 12 months. The two major decisions a govt must take are 1. Steps to be taken for controlling population growth 2 steps to be taken for finishing the quota system which was designed for 10 years but all the political parties for their own benefit went on extending and including much more than thought off ate the time of independence.  Let us look the sorry state of affairs in any field and we should be ashamed of ourselves. We treat our fellow human worse than a pet dog which can be seen everyday.democracy works in a system where people understand their rights and duties together.I am writing this as I have suffered in this system being a hardworking honest and law abiding citizen of this country.

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