Treatment of financing cost for real estate developers

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Sonal Kulshreshtha (Querist)
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28 December 2009 My client is developing a SEZ for which he is taking the assistance of a co-developer who would administer the whole project. The construction would be complete in 3 years after which the luxury apartments in SEZ would be sold out. During construction period the client would pay 5% of project cost to the co-developer. What would be the treatment of 5% of project cost paid during construction?Whether it should be included in cost of project which would be shown as Capital WIP during construction period and later as it is it would be debited to P&L A/c at time of sale.

Arjuna Raina

Arjuna Raina (Expert)
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28 December 2009 It is to be capitalized not transfered to P&L account.
But as per deductions
you will get deduction of 100% profits up to 10 years.

Sonal Kulshreshtha

Sonal Kulshreshtha (Querist)
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28 December 2009 Thanks , but if in initial 3 years there is no revenue, then 100% deduction could be deferred in any 15 years or not?

Arjuna Raina

Arjuna Raina (Expert)
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30 December 2009 no

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