Individuals, especially middle and low income families planning to buy their dream houses, may have to shell out a bit more from April 2007. In addition to spiraling realty prices, residential apartments of a particular category are likely to become dearer as developers are queuing up to pass on the additional burden, following non-extension of the income tax benefits under Section 80IB (10) from next month.

Real estate developers confirmed that the price per square feet (sq ft) of nearly all newgen apartments sanctioned after March 2007 may appreciate by nearly 5-10 %. Some of them were unwilling to quantify the percentage increase saying that the increase will vary from developer to developer, depending on the developers’ ability to absorb the burden.

A section of the housing loan financiers also corroborated that the move would further fuel real estate prices. As per the criteria laid down in Section 80IB (10), residential projects approved before March 31, 2007, will be able to avail of the income tax exemptions. Apartments in metros like Mumbai and Delhi with a built-up area of less than 1,000 sq ft are eligible for the benefits under the said Section, while in other cities, those with a built-up area of less than 1,500 sq ft are eligible. This apart, the section also states that `the project is on the size of a plot of land which has a minimum area of one acre.’

Industry circles claim realtors have been burdened with rising input costs, including that of cement, clinker, steel and rising construction cost. “Discontinuation of tax holiday will also have an impact on developers’ margin,” an industry source said. Confederation of Real Estate Developer’s Associations of India governing board member Pradip Kumar Chopra said private equity investors, including foreign direct investments , invest because of an assured minimum return by developers.
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