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GST cut will boost housing, input tax credit to sting, say industry, experts

IANS  |  New Delhi 

The housing industry on Sunday hailed the decision of the to lower tax on under-construction housing properties to 5 per cent from 12 per cent, and on to 1 per cent from 8 per cent.

The Council also made changes in the definition of carpet area and cost. Properties costing up to Rs 45 lakh will now be considered as affordable. Houses with a carpet area of 90 square metre in metro cities and 60 square metre in non-metro cities will be considered affordable, the Council said.

Abhishek Jain, tax at Ernst & Young, said the reduced (GST) is good news for the industry as the earlier higher rates were a bit of deterrent for buyers of under-construction properties.

The (CII) said, "The decisions more than meets the expectations of the sector and will go a long way towards addressing the needs of the homebuyers. By reducing GST on under-construction houses and affordable housing, the has provided great relief to the sector. The and housing sector drives construction and is a key employment generator. We believe these decisions for a better and simpler tax regime will boost the offtake of housing, thereby, contributing to job creation."

Aashish Agarwal, head (consulting services), India, said, "The decision will remove the final barriers for fence-sitters from investing in real estate. The has been taking steps to revive the sentiment and this decision will allow a more balanced sale of inventory between under-construction and ready-to-move-in apartments, providing relief to developers, buyers and lenders. With 1 per cent GST on affordable housing, young buyers and nuclear families in metros will be encouraged to deploy their savings in real estate. A wider spectrum of home sales in non-metros will now see significant reduction in cost, thanks to the revised cost and area definition."

Commenting on the decision, RK Arora, Chairman, Supertech Ltd, said, "The reduction in GST is a welcome move. It will provide much-needed impetus to the that is facing severe liquidity crunch. But it is disappointing that the council has chosen to not allow developers claim input tax credit. The is in a very poor shape and needs significant help from the to finish the current projects and grow at the rate that is needed for the as a whole."

"GST was introduced to replace the cascading and multi-layered taxation system with a unified tax. It was expected to not just simplify the systems, but also improve adherence. But taxes like stamp duty and were not subsumed under the GST, forcing homebuyers to pay higher amounts for the same homes. The should remove stamp duty and reduce the GST applicable, keeping in mind the 'housing for all' target of 2022," he said.

Shishir Baijal, and at Knight Frank India, said the reduction in GST for under-construction projects is the most decisive move by the council with a clear focus on demand stimulation.

"The move will give the necessary fillip to demand in the under-construction segment, which has been suffering from low sales for the last many quarters. The elimination of input credit tax benefit may hit profitability on the supply side. But the potential demand generation will far outweigh negative aspects, leading to greater sales numbers and revenues," he said.

The reduction in GST would potentially reduce buyers' payout 6-7 per cent on the overall purchase, depending on the category, he said and added, the consequent accelerating sales would bring down the unsold inventory, which has been afflicting the

"The reduction in GST, coupled with incentives proposed in the budget and reduction in prime lending rates by the RBI completes the sops for the residential property market," he said.

The GST cut gives the beleaguered realty sector the much-needed breathing room and will certainly help it maintain some forward momentum in 2019, said Anuj Puri, Chairman,

"Another booster shot by the government is new definition of the budget-range of Extending the definition to houses priced within Rs 45 lakh is credible. It will bring more premium properties into the affordable segment, thus benefit buyers in cities like the Mumbai Metropolitan Region (MMR) where prices are exorbitant," Puri said.

Parth Mehta, Managing Director, Paradigm Realty, said, "It is a buyer-centric move. Developers will be burdened with GST payments to vendors, suppliers, agencies and contractors and it will increase the cost further admid the already shrinking margin due to the dynamic policies of the government."

Rohit Poddar, Managing Director, Poddar Ltd, said, "the reduction in GST shows pro-activeness of the government in addressing issues facing the since the past few months.

"The new definitions for affordable houses will provide clarity to developers under this segment, although absence of input tax credit will probably result in increased prices for customers. The GST rationalisation for under-construction properties is a comprehensive move, which will help developers in liquidating inventories. It will boost the sector and the consumers."

Amit B. Wadhwani, Co-founder, Estate Consultants Chembur Pvt Ltd, said, "The revised GST will be an added boost for homebuyers' across the sector, especially in concurrence with the recent budget announcement and alteration in the RBI repo rate. Rationalising GST for affordable houses is a level-headed move by the council. It will further enhance purchasing power of buyers and help the "housing for all" mission."

While the move would aid the lower income groups and economically weaker sections, we were yet to understand just how much will the realty sector or the builder community benefit from this as the revised rates come with no input tax credit, Wadhwani added.



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sun, February 24 2019. 22:30 IST