A GST rate cut on cement will reduce the overall cost of development - but will developers pass this benefit on to buyers?
Tag: GST Rate Cut
Besides the usual demand for single-window clearance and industry status for real estate projects, what should ideally be included in the budget are further tax sops to homebuyers as well as investors
Anuj Puri, Chairman – ANAROCK Property Consultants
The slash in GST rates to 5% without ITC from the previous 12% with ITC for premium homes, and to 1% minus ITC for affordable homes from the earlier 8%, gives the beleaguered realty sector the much-needed breathing room and will certainly help it maintain some forward momentum in 2019.
Another booster shot given by the government is changing the very definition of the budget-range of affordable housing.
Extending the definition to housing priced within INR 45 lakh is credible. It will make more properties from the premium budget fall into the affordable segment category, and thus benefit buyers in cities like MMR where property prices are exorbitant.
Yet again, the affordable segment has got a major push today and buyers of this segment will benefit immensely. This will certainly cause sales of housing units within this segment to rise to a significant extent. Most players currently have considerable unsold stock within this segment.
ANAROCK data confirms that there are as many as 5.88 lakh under-construction homes lying unsold in the top 7 cities. Of these, 34% are priced below INR 40 lakh alone.
Anuj Puri, Chairman – ANAROCK Property Consultants
- GST rate cut or not, GST-exempt ready-to-move draws maximum sales
- Of the total unsold stock of 6.73 lakh units in the top 7 cities, only 13% are ready-to-move-in
- Of 5.88 lakh unsold under-construction units, 20% to be completed in 2019 – the addition of 1.16 lakh RTM units
- Can a marginal tax saving on overpriced properties trigger sentiment revival in delay-tainted under construction segment?
The recent interim budget announced fresh sops for the Indian real estate sector – which, on closer scrutiny, did not really send clear revival signals to the market at all. Now, the strident demand for lowering GST rates on under-construction properties is on the table.
In fact, the prime minister and finance minister have proactively assured that they are considering this collective demand from the industry positively. Will a GST cut infuse enough positive sentiment to help the languishing real estate sector revive?
Perhaps, rather than debating whether a GST cut will do the trick, we should ask ourselves whether it would actually solve the ‘real’ problems the sector is facing.
Anuj Puri, Chairman – ANAROCK Property Consultants
- Benefits aside, a cut could have been a major setback to the affordable housing segment
- GST rate cut, clarity on / abolition of ITC – boosted demand vs. actual sales
After much anticipation, the GST Council has failed to deliver a final verdict on GST applicable on real estate – but how much would it really have mattered?
Here’s a Utopian vision – the government would announce a GST rate cut, homebuyers would cheer up since prices would reduce marginally, and the market revives. Really?
The biggest paradox in Indian real estate is that numbers suggest a massive burden of unsold housing stock in the midst of a chronic shortage of housing. As long as prices don’t reduce significantly, the housing shortage will only widen regardless of tax sops.
What we have today is a nation of aspiring homebuyers, many of which are perpetually on the fence, waiting for a slew of minor policy windfalls to cumulatively make a home purchase feasible and attractive.
Anuj Puri, Chairman – ANAROCK Property Consultants
A possible GST rate cut at the very beginning of 2019 could bring in the much-needed respite for the Indian residential sector, which is still reeling from reformatory changes.
Though ANAROCK data indicates that sales numbers picked up by nearly 16% in 2018, sales are still far from their peak levels.
The ongoing 12% GST rate levied on under-construction properties has proved to be a major deterrent for homebuyers, who understandably shied away from this added burden on their finances.
ANAROCK’s consumer sentiment survey also confirms that the prevailing GST rate has prevented as many as 49% of property seekers from buying under-construction homes liable for GST. They preferred ready-to-move-in homes that were exempt from this tax.
To attract home buyers and kick-start a more convincing revival of the residential sector, the GST Council is now considering reducing the GST rate for under-construction homes during its next meet in January 2019.
In fact, this move was expected in December 2018; nevertheless implemented, it will be a perfect New Year bonanza for millions of aspiring homebuyers looking to buy under-construction homes in the coming year.