Prospective buyers reel under budget effect High-rise dreams die hard

Apartments under construction behind the IGMC Stadium in Vijayawada. Photo: Raju V.  

VIJAYAWADA, MARCH 11. "I saved every paise I could for the sole purpose of buying an apartment, but that has become a distant dream," says D. Chandrasekhar, a schoolteacher. The money he saved towards down payment is not enough, thanks to the Union Budget.

Overnight, builders hiked prices. He was told that the two-bedroom apartment he wanted to purchase would cost Rs. 1 lakh more. Mr. Chandrasekhar would have to wait a year to save the money needed for the down payment. "Who knows what will happen in one year," he wonders.

The cost of three-bed room apartments has also increased by Rs. 1.5 lakhs to Rs. 2 lakhs.

VAT effect

The Vijayawada Builders' Association general secretary, A Siva Reddy, says the cost of apartments will shoot up after March 31 with the implementation of VAT. Materials like steel, cement, ceramic tiles, electrical goods and paints used by the construction sector will cost more from March 31 because of the Budget.

While VAT and hike in the prices of building materials will affect construction business as a whole, the budget has for the first time singled out apartment builders by slapping a 10.5 per cent service tax on them. There is a lot of confusion about the items that would attract the provisions of this service tax on apartment building.

Middle class worst hit

A former general secretary of the builders' association, A. Nagamalleswara Rao, says that the middle class will be the worst affected by the developments. "The rich do not need the assistance of the Government for their housing needs, the poor are provided ample support in the form of loans and subsidies, but it is the middle class which bears the brunt and get heavily taxed," Mr. Rao says.

The Government keeps increasing taxes keeping in view the profits some builders are making, but they do not bother to consider the plight of the end users, the apartment-owners, he says.

There are at least two dozen trades that depend entirely on the construction sector for their subsistence. The human resources engaged by the construction sector belonged to the unorganised sector and they will be the first to be affected by a slump in construction activity, Mr. Nagamalleswara Rao says. Permitting foreign direct investment (FDI) will not help the middle class because multinational companies will be interested in providing services to high-end customer.