Published date | 21 August, 2019

GST Rate Cuts To Boost Real Estate Sales But May Increase Prices For Buyers

The GST Council had slashed the GST rates on the under construction homes from the 12% to 5%, and from 8% to 1% only in the case of affordable housing, without any extra input tax credit. The new rates, which will come into effect from 1st April 2019, has already garnered a positive response from the home buyers who were worried about their home buying budget.

The GST Council had slashed the GST rates on the under construction homes from the 12% to 5%, and from 8% to 1% only in the case of affordable housing, without any extra input tax credit. The new rates, which will come into effect from 1st April 2019, has already garnered a positive response from the home buyers who were worried about their home buying budget. It is expected that the developers will now finally be able to clear their unsold inventory of over 6.73 lakhs homes over 8 cities. Nevertheless, according to industry experts, the home buyers will still have to bear the brunt of raised prices because of the lack of input tax credit. Niranjan Hiranandani, the MD of the Hiranandani Group has lauded the move. 

The catch here, however, lies behind the scenes. According to the experts, the real estate sector still remains to be one of the highest taxed sectors in terms of GST implementation because although the slash in GST in non- affordable and affordable housing will encourage the home buyers to buy their dream homes, at 28% tax input for construction, this sector still has to pay a lot more compared to other sectors and there has been so remarkable reduction in these rates. In fact, there will also be no input tax credit and with the new GST rates being implemented from the 1st of April, any improvement in the scenario will only be seen in the next financial year.

According to Rajan Bandelkar, the CEO of NAREDCO West, the new rates will mean that there will only be a minimal difference in the taxes of under- construction and ready to move properties, and those postponing their purchases will now be ready to take the plunge and close the deal. Since the demand had moved radically to ready to move properties- because such properties with completion certificates do not have to pay GST, it had become increasingly difficult for the developers to complete their ongoing projects but the rate cuts are definitely going to result in considerably more investment in the under construction projects.





The reduction in GST rates for affordable houses to 1 percent would also help the government realize its ‘Housing For All’ move by 2022 and provide vivacity to the residential real estate market”, said Tanuj Shori, Founder and CEO, Square Yards.


 


Rohit Poddar of Poddar Housing and Development Ltd says that the move by the government is commendable as it aims to mitigate the problems faced by the real estate sector. Moreover, there has been a better clarity both among home buyers and developers as which homes are affordable housing and which are not. The sizes of affordable homes have been increased from 30 sq meters to 60 sq meters in terms of affordable homes but some experts caution that there has still been no significant cuts when it comes to paying the vendors. Nevertheless, it is expected that with the new and revised GST rates with reduced percentage, the government's “Housing for All” mission will be realized by 2022.

Tanuj Shori Tanuj Shori India Tanuj Shori UAE Tanuj Shori CEO Tanuj Shori Square Yards

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Square Yards is a technology-enabled, global real estate aggregator and India’s largest player for primary residential real estate. It’s subsidiary Square Capital is one of the largest marketplace for secured mortgages in India. Square Yards platform offers an integrated consumer experience & covers the full real-estate journey from search, discovery to research, transactions, home loans and post-sales service – fully integrating buyers to an extensive network of 500+ partner real estate developers, and 90+ banks & NBFCs. Square Yards is led by accomplished professionals, ex-bankers, and Ivy school alumni and is backed by the competence of more than 2500 employees in 30 cities and ten countries.