Looking to buy a home? Ready-to-move-in apartments to cost more despite GST

Though ready-to-move-in apartments have been kept out of the Goods and Services Tax's (GST's) ambit, they will continue to cost more than those under construction.

Normally, ready properties are priced 20-30 per cent higher than those under construction.

"Ready properties always cost more. Earlier, too, there was no service tax on ready properties but developers always charged more premium on them," said Sandeep Runwal, director at Runwal group, a Mumbai-based developer.

Amit Bhagat, chief executive officer at ASK Property Investment Advisors, said that since buyers have to pay GST they have to take a call whether they will make their contribution upfront and buy ready apartments or buy an under-construction apartment and make a staggered payment over the next five years.

Under-construction properties carry a tax rate of 12 per cent under GST.

"Ready apartments are not affordable for first-time buyers and they always prefer to go for staggered payments given their rising income levels, age and so on," Bhagat said.

He said that depending on the price of the product, the GST burden will increase on the end-consumer if the property is priced above Rs 6,000 per sq ft.

Anuj Puri, chairman of JLL Residential, said that developers were still assessing the impact of input tax credit. "If the input credit is sufficient to cover GST, then they won't charge, otherwise they will charge more from customers," Puri said.

Some developers and industry bodies believe that GST would not have any impact on ready-to-move-in properties and that demand for such apartments would not rise. "We do not see any direct correlation between demand rising and GST. The market would definitely become more transparent in the long run. However, prices would not go up immediately," said Parveen Jain, president of NAREDCO.