Builders see affordable housing prices coming down 3-4% under GST

ytre By Accommodation Times Bureau

Besides stamp duty and other charges, buyers of an under-construction property will have to pay 12% GST.

The implementation of goods and services (GST) can really help you in buying your home for a lesser price, but this will happen only if developers don’t increase property prices in order to keep themselves out of debt to repay returns on investments during this time.

A report by CARE Ratings mentioned the meaning of the implementation of GST means, “In order to avail tax rebates, developers will have to cut on cash component and inputs need to be sourced from registered vendors in order to claim any tax rebate.”

At the beginning, there might be some kind of division in the price at the time of procuring raw materials from registered vendors.

The same reports added by saying, “There would be nil-to-marginal effect on the prices of real estate.”

If we believe Ashok Mohanani the National Real Estate Development Council’s (Naredco) vice president, it is an affordable housing segment that will witness a drop in price by 3-4%.

Verifying the claim, “Under the GST regime, they will experience the benefit of procuring credit. Initially, while builders were paying excise for fittings of cement and steel which would be involved in the property cost, they would never receive any input credit. Due to GST, they will be in a position to procure the credit and would be able to share the benefit with the buyers by cutting down prices. Further, GST will include a more liberal credit system with the developers passing on the aids of augmented credits to the customers,” said Mohanani.

Group managing director of Kolkata-based Siddha Groups Sanjay Jain commented by saying,”Implementation of the new tax regime will help to curb various indirect taxes such as excise duty, value-added tax (VAT) and service tax, which the buyers pay indirectly to the developers.”

As stated by Tushad Dubash, Duville Estates director, it is affordable housing and mid-level real estate that will get a push. Thus, prices of luxury- or premium-segment properties will not be changed.

Under GST, sale of the under-construction real estate properties would be classified as a supply of services and would be accountable for the payment of GST. Nonetheless sale of completed real estate properties and land are exempted.Also, the service tax and VAT charges currently payable on the sale of under-construction properties would be classified by GST.

In accordance with an IRC noteGST rate will be 12% for construction of buildings intended for sale,where the value of land is included in the sale value.In case the land and construction values are doubtlessly identified through separate agreements, the GST rate applicable is expected to be 18% on the construction agreement value. Full input tax credit (ITC) would be available for the various goods and services are put to use in the construction, though any overflow of ITC beyond the output GST liability will not be refunded.

Despite, the impact of GST can vary from state to state due to dissimilarity in current tax structures, Furthermore, the potential savings in the project cost can also differ according to cost structure inherent to each project.

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