Industry experts are sounding the alarm that an increase in Value Added Tax (VAT) could have detrimental effects on the real estate sector. According to them, the proposed VAT hike outlined in Kerala's Budget 2013 is expected to drive up prices for essential construction materials.
The budget, while not overtly damaging, evidently lacks significant support for the sector. Concerns arise as industry players fear that the VAT increase will burden the already sensitive real estate market. As prices for key materials like cement, wood, and paint are set to rise, this could directly translate into higher property costs.
The proposed increase in VAT stands at 1.5%, which, if implemented, is anticipated to surge raw material costs, ultimately affecting property prices accordingly.
In a comment on this matter, Antony Kunnel, head of the Confederation of Real Estate Developers Associations in Cochin, expressed that any increment in VAT will indeed spill over into the property market. Nonetheless, he acknowledged a positive aspect regarding the budget's proposal to lower stamp duty by 2% on land transactions.
K A Mohammed Salim, the CMD of Asset Homes, remarked that while the budget's overall influence will be limited, the projected VAT hike might cause indirect repercussions within the sector. He further pointed out that the stamp duty reduction will primarily benefit land acquisitions, rather than apartment purchases.
Moreover, the government’s initiative to connect all registrar offices via the internet garnered appreciation from realty stakeholders in the state. Yet, despite these advancements, concerns linger as many anticipate that the VAT hike could indeed exert a negative impact on the local real estate landscape.