Comments on: Real estate prices are holding up the recovery?

By: Rajesh

Rajesh — Sat, 06 Oct 2012 07:16:46 +0000

And with the government tweaking policies to support the builders, it is not getting any better… the prices are going sky high…lot of black money avoids the crash.
Renting a house is not roasy too.. u get pigeon holes at a high rent.
Add to that, u never know when to pack your bags because owner wants to..

Having said that, you cannot time the housing market(like in equities). if you get a decent location at a reasonable leverage, go for it.Buying a house for your living is worth it, if you could afford.:)

By: Jai Ho

Jai Ho — Fri, 24 Aug 2012 15:22:28 +0000

Pravin u r so rite. Sometimes I wonder if Income Tax is kept just to feed the Income Tax office employees who are corrupt to the core. Look at the savings on salaries and establishment costs if this tax is abolished.

By: pravin

pravin — Fri, 24 Aug 2012 11:31:57 +0000

actually, the income tax makes up only 8-11% of the central govt revenue budget.so it is not a major component.income tax can be abolished 100% in a decade or so.8-10% efficiency improvement is not a high target over a decade.low hanging fruit like ITization alone can improve efficiency by 4to 5% while a little fraud/abuse/waste reduction of 3-4% over 10 years is something we should demand from a responsible govt(ha!).ending the tax will be a huge positive for the economy.
so when someone tells you that your income taxes are important,tell him the facts.your money only pays a bunch of babus who waste it on their friends and cronies.it is of no use of the poor.

By: Jai Ho

Jai Ho — Fri, 24 Aug 2012 08:14:00 +0000

But none of u have considered the parallel black money economy. As long as this economy flourishes property prices CANNOT COME DOWN and people with disposable black income will keep buying up property.

A good solution is to abolish income tax completely and probably have an indirect consumption tax.

By: pravin

pravin — Thu, 23 Aug 2012 07:49:16 +0000

the 0% compliance was just a little hyperbole.in indira gandhi’s 97% income tax bracket regime, men like KK Birla showed almost no income since their car,house and everything else was a ‘company’ benefit to him.since 100% is a confiscatory tax,in practise only a few fools will pay it.i dont think indians will accept a randomly high tax rate anytime soon. it has to creep up -like in scandinavia or canada.we are in a lower tax regime these last 10 years and a sudden drastic reversal will only look not thought out.

btw,speculation is a good activity.it is not completely useless.in good times it provides liquidity to buyers and sellers.in bad times like now,it shows us that there is an underlying problem -cheap money from the govt/rbi.it is like a high temeperature during fever .it tells you you are sick.merely taking huge doses of crocin or whatever reduces fever temporarily is a bad way to cure the underlying disease/infection.

By: Shan

Shan — Thu, 23 Aug 2012 07:07:32 +0000

Dear LuckyOye, 100% tax on the capital gain will sure demotivate the speculative buying but will also demotivate new investments (new housing projects) and which will lead to acute housing shortage and a high appreciation of old houses….vicious circle

By: LuckyOye

LuckyOye — Wed, 22 Aug 2012 13:49:26 +0000

@pravin…my proposal does not address the problem of unsoundness of paper money (and its abuses by govt). Under my proposal, cost of real estate will still go up, but it will go up in relation to inflation and increase of price of ALL other goods/services in the economy.

In the current situation, we are facing the problem that residential property prices have a significant speculative component (aka bubble) that is preventing genuine acquisition and use of the property for its actual intended use (i.e. as a place to live). I will agree with you that my proposal is only a bandaid in relation to redefining what is money in the economy.

As regards to your inverse ratio of compliance and taxation, it is just a guess, can you support it with examples? Are you saying that with 30% income tax, compliance is only 70%? Or that because of 5% Property Registration fee, Registration Compliance is limited 95%? In that case, maybe under my proposal Residential Property capital gains tax should be 50%, since even at 50% compliance, in a few years, speculation in residential property would be history.

By: pravin

pravin — Wed, 22 Aug 2012 10:04:07 +0000

i disagree with Luckyoye that a tax will solve this problem. taxation will hit only the symptoms without addressing the root cause.real estate and lowered lending standards are a direct result of cheap money,manipulated interest rates and govt’s infinite greed for leading the life of a prince on the income of a pauper.
real estate (and other commodities ,physical stuff etc) arent really appreciating -it is the rupee that is going down.

in fact if you think of it logically,if we had sound money,real estate prices should continuosly go down thanks to competition,better quality of building etc -like in TVs or computers or mobile phones.but real estate is not a competitive market -the prime mover in it is less housing demand and more cheap money seeking protection from the rape of the rupee.
by taxation,you might deter some speculators,but the cheap money will not go anywhere.and with 100% tax,u can be assured that compliance will be 0%

By: subra

subra — Wed, 22 Aug 2012 09:57:15 +0000

not at all connected, but a good read

http://www.forbes.com/2011/04/04/real-cost-mutual-fund-taxes-fees-retirement-bernicke.html

By: krish

krish — Wed, 22 Aug 2012 09:42:54 +0000

Thanks to the govt intervention on all fronts of RE, too many incentives rolled out for the buyers.

Low equity of the buyer

Black money transactions

Peronal Tax incentives

Capital gain tax avoidance options

RE lobby is still fighting for higher tax benefits, escape from the service tax, not to raise the minimum wage of the labor and so on.

Be it RE or Gold, our country continue to create a dead capital with no trickle down effect.