Service tax on an under construction property

In my previous post “House Hunting in Mumbai”, I had described how me and my wife have been looking out for property over the last few weeks. Recently, we came across a couple of under construction properties which we really liked and decided to do the approximate costing for those apartments. While doing the costing, we came across another term “Service Tax”, which is being levied at 3.09% of the cost of the property. I was very surprised to see that, but I didn’t pay much attention to it , thinking it is just a component of the overall cost structure of the property. While discussing this with a friend, he asked me what is this Service Tax? He mentioned he didn’t pay the same, when he got a property. So it turns out, the govt. has now decided to levy Service Tax on under construction properties as the builder is providing “us” a service by building the property. This is now applicable since July 2012.

If you are a cost conscious consumer (who isn’t in these days when the budgets are tight), this additional 3.09% is a huge cost.  As it is we are paying 6% stamp duty on the flat cost, plus there is Rs. 35000 of the registration of the property, there is 1% Value Added Tax and now this 3.09% Service Tax. So if you add up, it is an increase by atleast 10% on the overall cost of the property. So if the cost of the property is say Rs. 50 lakhs, the consumers end up paying an additional Rs. 5 lakh on the property. People budgeting to buy homes should also keep this in mind, while arranging their finances.


Man of Steel

The movie Man of Steel comes out next month. Another super hero film – I think this movie is going to be one of the best super hero movies in a long time. However, Superman movies have been around since quite some time now. The comic book has been around ever longer. So what is it that attracts us to Superman? We all know he is a fictional character and things he does are something which normal people like you and me would never be able to do. However, as kids we all wanted to be Superman. Someone who will be able to achieve the impossible. When I think of this, I realize that during the times of crisis or while facing a difficult objective or while following our dreams and passion, we transform ourselves into something more than ordinary to achieve the impossible.  There are times in our lives when we are faced with insurmountable odds, where everything is stacked against us – still we face those challenges and do everything possible to come out on top and win. This is what makes me believe there is a Man of Steel in all of us. This is what I feel attracts us to Superman.


House hunting in Mumbai

So some couple of months ago we, me and wife, decided to get a house of our own in Mumbai. If you are following the realty market in Mumbai, buying a house in Mumbai, with the right price, right views, right locality etc. is like going on wild goose chase. Looking at the prices of the apartments that are listed, makes me wonder – there is way too much money with a lot of people and only we seem don’t seem to have enough. A lot of places where we have seen the apartments, builders and agents have asked us “how much black (cash) we would be paying”? I look at them and wonder – do they think two working professionals with normal jobs would have 10-15 lakh rupees in cash? At such times, our normal answer is we would not prefer to pay anything in cash. However, the cost of flats in Mumbai has seriously sky rocketed. While searching, we realized that there is a concept of carpet area – what is the usable space in the house, and sale able area – includes usable space in the house, plus lobby space in the building, garden etc. and the builders actually charge as per the sale able area. The difference between sale able area and carpet area is usually between 35% to 40%. Basically the cost of the flat increases by 40%. Builders also charge floor rise usually between range of Rs. 35 to Rs. 50 – i.e. every increase in the floor rise would cost Rs. 50 per sq. feet more.

In far suburbs of Mumbai like Borivali, Kandivali, a 1 Bed Room Hall Kitchen (BHK) would easily cost around 65 to 70 lakhs and a 2 bhk could cost anywhere from 80 lakhs to 1.5 crore. We decided to check out areas like Vasai and Virar which are farther north and the rates there are much lower. 1 BHK in Vasai & Virar would cost around 27 lakhs, while a 2 BHK would cost around 35-40 lakhs max. However, the size of the rooms that we saw left lot to be desired. The apartments were match box sized. Hardly any space to have any furniture. Living in an apartment where we have windows on 3 sides and no building surrounding us with super spacious rooms, moving into such rooms was simply not acceptable to us.

Mumbai has everything for everyone, one just needs to keep searching and find it. So far we have not been able to find something that fits what we are looking for. But the chase is still on and the adventure continues. Mumbai – I know will not disappoint me.