IF THE government has its way, there are some hard times ahead for real estate developers speculating on vacant land. The government is finalising a policy that seeks to levy 2% "vacant land tax" on unused urban land. The tax component would be calculated on the value of land registered with the respective area development authority. The policy is expected to be announced next week.

"It has been observed that builders use land for speculative purposes. They buy land from area development authorities and keep it vacant waiting for real estate prices to escalate. The new policy aims at giving them the boot, as such speculative activities would now attract tax", an offical at Nirman Bhawan told ET.

The proposed" vacant land tax" is being modelled on the lines of a similar tax existing 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 has also been kept under check through the measure.

Under the new policy, if a builder fails to deliver any construction on a given piece of land within a stipulated time frame, he will come under fire. It has been proposed that a portion of the collections from the proposed tax will be put into a fund for provision of urban basic services. The fund will be incorporated under the Jawaharlal Nehru national Urban Renewal Mission (JNNURM).