“Why should a Bentley car manufacturer make a vehicle to compete with Nano? Or a luxury-hotel chain construct a small boarding lodge? Similarly, it is not a private developer’s responsibility to provide affordable houses and they will never do it because their clientele is not more than 5% of the population,” said an expert.
They were reacting to a TOI report on how the Budget announcement last week, offering 100% tax waiver on profits for builders constructing small flats would be just an “eyewash”. However, the announcement by Union finance minister Arun Jaitley was silent on how much price the builder can charge for the small-sized flats.
TOI then gave an illustrative example of how a builder could construct 30 sq m flats, in a prime area like Nepean Sea Road in south Mumbai, and charge Rs 70,000 a sq ft for it. “The intentions of the government are clear. It is shying away from resolving the basic right of a common man to have a simple roof over his head,” said architect and civic activist Nitin Killawala.
Ashok Datar of the Mumbai Environmental Social Network said the subsidy should be available to only those dwellings, which are less than 400 sq ft and cost no more than Rs 5,000 a sq ft. “The government can provide interest-free or low-interest loans or tax benefits to anyone who invests in such dwellings to be rented. The rent should not be more than Rs 8,000 a month,” said Datar. However, developer Rajesh Doshi said the new law regarding small flats may not be applicable to general builders, but on for affordable projects in partnership with housing bodies likes Mhada. “We should wait for the fine print,” he said.
Doshi said the customer too would benefit because the service tax, which will now be waived, was collected from the flat buyer. Another industry source said the tax exemptions will encourage construction of smaller flats for the lower-middle class. These flats can be rented out to students etc. “To my mind it’s not a bad provision. There are built-in safeguards already. And Minimum Alternate Tax provisions of income tax still apply to such projects,” he said. But critics warned such tax benefits will allow unscrupulous builders to start making small apartments and then selling combined flats in posh areas.
Credits ET Realty