Home prices to go up by 2.5pc as service tax kicks in

Home prices will increase by about 2.5 percent with the implementation of service tax on the residential segment with effect from today, a leading property consultant said.

“The implementation of service tax on residential properties will result in an increase in the price of homes for end-consumers. Developers will justifiably be unwilling to absorb this new tax burden and naturally pass it onto the buyers,” Jones Lang LaSalle Meghraj senior vice-president for capital markets Gautam Hora said.

The increase would be to the tune of 2.58 percent. Following this, overall demand and sales of residential properties will take a significant hit in all cities,” Hora added.

In the budget 2010-11, Finance Minister Pranab Mukherjee had brought in real estate complexes under the ambit of service tax, unless the entire consideration for the property is paid after completion of construction.