Chennai: The new tax relaxation announced in the budget on notional rent paid by property developers, will benefit only 9 per cent of the unsold property.
The budget had extended tax relaxation on notional rent for unsold inventory for another year. As per earlier norms, after one year of project completion, the builder had to pay taxes on notional rent on flats to the respective state government and this has now become two years. According to Anarock Property Consultants, the new tax relaxation on notional rent paid by developers will benefit unsold ready-to-move-in units.
As per Anarock’s data, the current unsold stock across the top 7 cities is 6.73 lakh units, of which merely 85,000 are ready-to-move-in. Moreover, of this ready stock, only 63,000 units can avail the benefit of the new tax relaxation on unsold inventory. The remaining 22,000 ready units have been completed before 2017, which means that they will still have to pay taxes on notional rent.
“The additional tax-free year effectively gives developers more time to handle unsold ready inventory. After the initial euphoria, it is ironic that only a handful of them will actually benefit from this new rule as on date,” said Santosh Kumar, vice chairman, Anarock Property Consultants.
Out of the remaining 5.88 under-construction unsold stock, at least 33 per cent comprises of luxury housing units or those priced above Rs 80 lakh. Luxury property sales are moving at such a slow pace that even two years’ of extension will not provide any major support.
Anarock also finds that there will also be some setback to homebuyers considering ready-to-move options. They may no longer get heavy discounts from builders, who will now prefer to hold on to their unsold stock for another year rather than engaging in distress sales.
“To this effect, the Budget in reality failed to address the larger woes of builders. Against this sombre background, the liquidity crunch post the NBFC crisis continues to cast a shadow over the immediate and mid-term prospects of the real estate industry,” said Kumar.
