Sale of flats slowing down in Tiruchi

Builders blame it on excess supply; buyers cite steep rise in price

March 30, 2015 12:00 am | Updated 05:54 am IST - TIRUCHI:

A view of one of the apartments with a flex board announcing its sale in Ponnagar, a prime area in Tiruchi. —Photo: A. Muralitharan

A view of one of the apartments with a flex board announcing its sale in Ponnagar, a prime area in Tiruchi. —Photo: A. Muralitharan

A number of apartments have been ready for sale in various parts of the city, although there are limited takers for them. While builders and apartment promoters refer to the rise in the prices of building material, guideline value for land, the purchasers say the rates are a bit high.

Many builders say they have to make a huge investment right from the purchase of the land in prime areas to attract the customers. The burden of various taxes was another problem which had to be passed on to the flat buyers. The service tax imposed by the Excise Department in the last few years has added to the cost of the property. Till recent years, the service tax was meant for buildings having apartments with over 22 units. But, in the recent years, it had been extended to projects with more than two flats.

S. Thiagarajan from Swaati Construction says the number of flats available was in excess of the demand in Tiruchi. This was one of the reasons leading to the slow growth in the sales graph. The rise in the prices of building material and cement in particular was posing a serious challenge to builders, he says. The existing service tax is levied at the rate of 12.36 per cent of the one-fourth of the value of the apartment. It is proposed to increase to 14 per cent with effect from the forthcoming financial year, says Mr. Thiagarajan.

Mr. Thiagarajan says the availability of a number of houses in the city either for rent or for long lease has been facilitating a large number of people to opt for rented buildings. The guideline value in property was on the rise, resulting in the huge investment for builders who bought spacious buildings constructed decades ago.

The Tiruchi chapter of the Confederation of Real Estate Developers Association (CREDAI), however, has been hoping that the prospects would brighten in the near future.

“The investment on property in general and on flats in particular had remained a low-key affair till December last year. However, there has been a marked improvement during the first quarter,” says its chairman, T.V. Murali.

The price of the cement stands at about Rs. 400 a bag. “The rise in the price of cement is quite unwarranted. When the growth graph of construction industry is far less, there is no need for increasing the price of the cement,” says Mr. Murali.

Anticipating some downward revision in the rate of interest for housing loans by banks in the next financial year, he says the real estate business would witness a steady progress. He says the service tax brought about another burden for the purchasers.

Mr. Murali says the number of new projects for construction of apartments was far less.

For instance a single bedroom apartment in Sangaliyandapuram is estimated at about Rs. 26 lakh. They say they could not afford to invest such a huge sum for the property with a low plinth area.

The Tiruchi chapter of CREDAI, however, has been hoping that the prospects would brighten in the near future

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