Probing builders for not passing on GST benefit too harsh, say realtors

Demonetisation, Rera and GST have impacted the sales and cash flows of developers, causing a spurt in consolidation in the sector

The proposed move of the National Anti-profiteering Authority (NAA) to investigate property developers for not passing on the benefits of lower taxes under the goods and services tax (GST) regime is a new tool to harass real estate firms, some developers told Business Standard.

"There is unnecessary harassment for developers whenever a new policy comes up. In fact, there is out-of-pocket expense for developers even after charging GST from buyers," said Getamber Anand, chairman of ATS Infrastructure and chairman of Credai (Confederation of Real Estate Developers Association of India), an industry body.

"We want the government to bring down the GST rate to six per cent from 12 per cent now," Anand said.

He said there is a lot of misunderstanding about GST among buyers and the government.

It is a harsh measure (the authority probing developers). Almost All developers are passing on the benefit to buyers. There should be due time given to developers to understand the new law. And this should not become another tool to harass developers.”," said Shailesh Puranik, managing director at Puraniks, a Mumbai based developer.

Demonetisation, Real Estate (Development & Regulation) Act or Rera and GST have impacted the sales and cash flows of developers, giving a spurt in consolidation in the sector. 

About 94,000 units were launched in top seven cities of the country between nine months of 2017, which is a drop of 55.7 per cent  from the same period in 2016. In the corresponding period last year, 2,12,000 residential units were launched, according to Anarock Property Consultants.

However, the last quarter of 2017 looks encouraging - in the first two months of this quarter, around 18,000 units were launched, which is around 90% of the new launches in Q3 2017, Anarock data said.

The sales of residential units, nationally, also declined by 29.3 per cent. Only 1,59,000 units were sold during first nine months of the current calendar year, compared with 2,25,000 in the corresponding period of 2016.

Owing to this, unsold units in India declined by eight per cent between Q3 2016 and Q3 2017. This decline was primarily due to restricted new launches amidst the green shoots of sales recovery.