Tax to check land hoarding likely

NEW DELHI: The urban housing and employment ministry has proposed a landholding tax on developers. The tax is aimed at discouraging builders from hoarding land and making housing affordable for the common man. It is part of the ministry’s Budget proposal submitted to the finance ministry.

According to the proposal, the proceeds collected through the levy will be pumped into development of mass housing for the urban poor. The ministry has already written to various state governments to mull such a taxation policy for the benefit of the urban poor.

Speaking to ET, urban housing and employment minister Kumari Selja said, “We have proposed to do two things simultaneously through the levy. The levy will discourage speculators from hoarding large land masses and the money will be spent only for development of housing for the poor, which is the need of the hour.”

The government feels that land hoarding by developers should be controlled immediately as it is a device for gaining market (or monopoly) power. The resultant increase in land prices makes affordable housing difficult for the common man. “Hoarding hurts an economy by creating artificial scarcities. Hoarding of unrealisable land that can be developed must be immediately curbed through effective and deterrent taxation mechanism,” an official said.

The proposed tax is being modelled on the lines of a similar one in several Western countries, including the US. Even before the ministry of housing formulated its proposal for the tax, Andhra Pradesh had imposed the tax on a pilot basis. The state has been successful in curbing speculation and ensuring faster infrastructure development through the levy. Soaring real estate prices and acute housing shortage have also been kept under check through the measure.

Under the new policy, if a builder fails to construct on a given piece of land within a stipulated time-frame, he will come under fire. In some states, development authorities have started levying penalty on real estate developers who purchase land and leave it vacant beyond a stipulated time period. Greater Noida has levied a similar charge on developers in the area.