It will not be wrong to say that the Real Estate Sector of our country has seen a lot of developments in a short span of time. While demonetization did stump the sector for a while, RERA & GST soon gave it the strength to be up and running. Highlighting the two biggest initiatives, RERA & GST together are stimulating the existing uncertainty in the market. It will go a long way in ensuring transparency, efficiency, promote growth of buyer’s confidence and help boost investments in the real estate industry. GST will free homebuyers and investors from the hassle of paying several state taxes at different levels, therefore removing the double taxation impact. RERA on the other hand, will give all developers a level field and will drive them to ensure timely delivery which will encourage buyers and help the sector grow. It also seeks to bring clarity and fair practices that would protect the interests of buyers, imposing penalties on errant builders.
Genuine requirement for homes coupled with the advent of affordable housing also increased housing finance options; realty does seem likely to pick up more pace. Due to RERA, buyers and sellers will have the same type of information about projects in an area.
Research states that GST rate for under-construction development assets is 12% on property value (including land). This would only make the construction sector flourish. Now developers will get input credit on paying excise for cement, fittings, steel etc., which was included in the cost of the property. Although, the work contracts will attract around 12% and several goods connected to the real estate industry are falling under the 18% and 28% slab.
By allowing deduction of land value equivalent to one-third of total amount charged it is a win-win situation for both the developers and buyers because GST provides for an anti- profiteering provision which makes it compulsory for the dealer to pass on the benefit of GST to the end consumer. It will also boost foreign investment and benefit the NRI community for investment in the sector because of a seamless all-inclusive channel available.
RERA is implemented to align the sector, property prices are not likely to come down till the time ready reckoner rates are reduced. The high cost of land and construction too needs to be brought down to reduce the overall cost of a home. In addition there is a premier on stamp duty and transfer of development rights (TDR) which also adds up to the total cost. A dip in TDR and ready reckoner rates will solve the problem to a great extent.
There are a number of implementations happening along with RERA and GST. Property rates still stand independent of its radical policy reforms and may witness some alteration in long term horizon .As developers have responded well to GST ad RERA, they will try certainly not to pass on any extra cost burden to the end user.
By Ms. Manju Yagnik, Vice chairperson of Nahar Group
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