A multidimensional approach on GST
The buzzword of 2017 was GST- After much debate, discussion and regulation GST was implemented in India with the idea of uniform tax. The decision by the Goods and Services Tax Council to reduce the GST rate of under-construction properties was well-received by the majority of the real estate industry. The rates were slashed from 12% with an input tax credit (ITC) to 5% without ITC on non-affordable housing. In affordable housing, it was brought down to 1% from the earlier rate of 8%.Renewed hope for homebuyers
The slashed GST rates have raised the hopes of homebuyers and opened the doors to steady sales in real estate, primarily in the affordable housing sector. Low GST is a key determining factor that allows aspiring homebuyers to believe in the “affordability” of these housing projects. The main objective was to create faith amongst real estate buyers regarding the impact of reduced GST rates on under-construction projects.Removal of uncertainty over ITC
The GST rate reduction has certainly boosted the hopes of a lot of home seekers as well as those on the fence about home buying. The direct impact may not be drastic but, it has helped in bringing about a realistic approach towards affordable housing. On one hand, buyers can be free of suspicions regarding ITC benefits and on the other hand, they will be well-informed that the benefits are included in the property package. All these help in enhancing the customers’ trust on builders and developers.Impact of GST rates under the new scheme
On the surface it may appear that the revised GST rates are lower than the previous rates however, the new scheme doesn’t allow developers to avail ITC on their procurements or services which in turn is highly likely to increase the construction cost of the apartments. This implies that the developers may now apply the revised GST rates on the already higher cost of construction.Probable rise in property prices
Although it’s not certain, the real estate industry is estimated to witness a marginal rise of 5-6% on the property prices. This is expected to happen once the new rates are fully in effect for new projects. This makes it attractive for home buyers to look out for properties which have received completion and are ready for possession as they would be the ones which would be not impacted by either tax regime. The scenario now hints at some respite in the industry as well as the promotion of some positive sentiment in the immediate future amongst home buyers.
Overall, the reduction in the GST rates has opened a floodgate of possibilities with regard to home buying. It has created a win-win situation for both the parties involved and suggests a stable rise in the purchase of constructed properties in the near future.