Our Bureau

New Delhi, Feb. 28

THE Government on Monday imposed a 10-per cent service tax on services such as construction of residential complexes with over 12 houses or apartments with common areas and other appurtenances. Terming the decision as "retrograde," the real estate industry said the move could lead to a consumer bearing an additional cost of up to Rs 25 per sq. foot for an apartment.

"If you remove the cost of material and take the cost of services, there will be a price rise of Rs 20-25 per sq. foot in the cost of a residential apartment," Mr Kumar Gera, President of the Confederation of Real Estate Developers' Association of India, said.

Stating that the industry was yet to go through the fine print, Mr Gera said the move to impose the service tax was "surprising" and could lead to an across-the-board increase in the cost of a house.

Mr Amitav Ganguly, Vice-President, Ansal Properties and Infrastructure Ltd, said the imposition of service tax was a "retrograde step" at a time when the Government was trying to give a thrust to the real estate sector by undertaking various measures such as liberalising foreign direct investment norms.

Said Mr K.P. Singh, Chairman of the board, DLF Universal Ltd, "There will be an additional burden on developers. However whether this is passed on to the consumers would depend purely on the demand and supply situation. It is difficult to comment at this point."

(This article was published in the Business Line print edition dated March 1, 2005)
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