Builders club charges, buyers save on taxes

Last updated on: February 7, 2011 11:13 IST

Ranju Sarkar in New Delhi

Builders in Noida and Greater Noida are doing away with charges, such as internal development charge (IDC), external development charge (EDC) and preferential location charge (PLC), among others, which account for 15 per cent of the total cost of a flat.

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Last updated on: February 7, 2011 11:13 IST

These builders are not forgoing these charges or paying from their pockets, but are simply including these in the base price.

"We offer a fully-packaged price so that the customer doesn't experience any surprise later," said Brijesh Bhanote, vice-president, sales and marketing, 3C Company.

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Last updated on: February 7, 2011 11:13 IST

Also, the customer ends up saving on taxes. For instance, if a builder charges separately for power back-up, the customer will have to pay a service tax of 10.3 per cent.

But if the same was added to the basic price, the tax decreased to 2.5 per cent, said a builder.Chairman of the RG Group, Rajesh Goyal, said since January, builders had started offering an all-inclusive price, which includes car parking.

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Last updated on: February 7, 2011 11:13 IST

"These charges have not been waived, merely included in the base price," he said. If a builder charged Rs 1,800 per sq ft at Noida Extension earlier, he's now charging an all-inclusive price of Rs 2,600 per sq ft.

Earlier, builders often quoted a lower base price to attract customers. What's driving the change is a 25-30 per cent oversupply in Noida Extension in the last eight months, which is likely to last for a year.

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Last updated on: February 7, 2011 11:13 IST

However, the trend is restricted to Noida and Greater Noida. It is unlikely to spread to other markets, such as Ghaziabad, Faridabad and Gurgaon.

Builders in Indirapuram and Raj Nagar in Ghaziabad are continuing with the old practices. Head, business development, CHD Developers, Ravi Saund, said it was not possible for builders to do away with these charges in Gurgaon.

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Last updated on: February 7, 2011 11:13 IST

"In Noida, EDC/IDC charges are so less (Rs 60/sq ft) that it doesn't make sense to charge these separately. In Gurgaon, EDC is at Rs 300-400 per sq ft, which is substantial. It is difficult to merge it into the basic sale price. EDC goes to government, which spends it on setting up sewer lines and water treatment plants," he said.

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Last updated on: February 7, 2011 11:13 IST