GST impact on real estate: Home buyers' tax burden won't rise, says report

 

Tax burden on homebuyers in under-construction projects is not expected to increase in Goods and Services Tax (GST) regime, an official from a property consulting firm said on Thursday.

The general perception was that with the 12 per cent GST rate, the tax would go up from 5.5 per cent (service tax plus VAT).

"We expect there will not be any upward impact of tax burden on buyers for under-construction projects after the roll-out of GST. Apparently, with the 12 per cent GST, there is a difference of 6.5 per cent on tax rates as compared to the pre-GST rate of 5.5 per cent. But a lot of efficiencies have been brought in through GST," Knight Frank India's Chief Economist and National Director (Research) Samantak Das said here.

Developers are working on how the input tax credit in the new indirect tax regime would be passed on, he said.

"We have talked to developers and they were trying their level best not to pass on any extra tax burden to home buyers. It is expected there will be no adverse impact on the buyers with the implementation of GST," he said.

Das also said developers know the passing of the extra tax burden to buyers could result in a further drop in sales.

"For new projects, it is expected that base prices would be revised so that post GST, price value of homes remains the same as in pre-GST era," Das said on the sidelines of the launch of new report "India Real Estate - Residential and Office".

According to Knight Frank India, new launches crashed by 41 per cent, lowest in seven years, in the first six months of the current calendar year in top eight cities of Mumbai, Pune, Hyderabad, Chennai, Bangalore, Kolkata, Ahmedabad and Delhi - National Capital Region (NCR).

The report said sales volume was also down by 11 per cent year-on-year in the first half of 2017.

The residential market had barely come out of the demonetisation shock when the need for RERA (Real Estate Regulation and Development Act) compliance put breaks on a large section of new projects, Das said.

He said the first half of 2017 witnessed the resurrection of affordable housing across India with 71 per cent of the launches under the Rs 50 lakh price segment, up from 52 per cent during the same period last year.