Govt mulls move to levy tax on purchased FAR
LUCKNOW: The state government is mulling a proposal to bring building owners who have purchased floor area ratio (FAR) under the tax net.
FAR is the permissible height for a building defined on the basis of plot area and its limit varies. To give a fillip to vertical growth, development authorities allow building owners’ to build their structures taller than the prescribed limit by purchasing additional FAR to add extra floors.
In most cases, the additional floors are added by builders post registry, it is on the value of extra floors/construction that the authorities now wish to impose stamp duty.
“Stamp duty is to be paid on the total value of land and building. Development authorities are earning revenue by selling extra FAR but the stamp duty on the enhanced value is not paid by the building owner,” said an official of the stamps and registration department.
He said a similar move was initiated in 2016 by the state government but was dropped following resistance from the powerful builders lobby. To bring these property owners under the stamp duty net, the authorities have asked development authorities, housing board and all other local bodies and government agencies to furnish a list those who have purchased FAR in the past 10 years. The move is expected to generate additional revenue, which had dwindled by around 30 per cent for the state government. But the decision to invoke stamp duty with retrospective effect on builders/ developers may invite a slew of litigations and virtually open a Pandora’s box.
WHAT IS FAR?
To reduce the increasing pressure of urbanisation on agricultural land, the state government had introduced a policy in 1999 to encourage vertical growth and thereby allow greater height than usual to a building (FAR in technical parlance). To raise the required resources for strengthening of the infrastructure because of the higher densities and consequential growth pressure, the development agencies imposed a fee under Purchasable Development Rights to be deposited by the plot owner.
The underlying idea was that every urban location has an optimum FAR and it should be left to the market forces to bring out the true potential of a given site. Thus, a flexible or free-market FAR with certain restrictions warranted by accessibility, building height and fire safety is permitted on advance payment of proportionate land premium. But the policy was silent on the payment of stamp duty by the buyer on increased FAR.
Apart from multi-storeyed commercial complexes, high rise group housing, integrated and hi-tech township projects are the major beneficiaries, who would be at the receiving end of this state government diktat.
When contacted, the owner of a posh hotel in Gomti Nagar, who has added at least two additional floors to his project by paying the additional FAR, said, he would challenge the move in the court.
Requesting anonymity, another prominent real estate developer said such a move would be bad in the eye of law.