GST (Goods and Service Tax) is likely change the market of real estate. According to the source, the GST may shift the the mind of developers towards affordable housing as by activation of GST, the cost of affordable housing could fall and for premium segment it could rise.
According to the source, Real Estate (Regulation and Development) Act (RERA), 2016, will help in ensuring the completion of real estate project on time. Provisions in the Act such as imposition of similar penal interest for developers and homebuyers will incentivise timely delivery of projects.
Global Managing Director of Emerging Business, RICS, Sachin Sandhir said that GST will lower real estate costs for the affordable segment of housing while increasing costs for the premium segment. A large part of the real estate market – almost 70% is skewed towards middle to high income segment of housing. We might see developers (especially smaller ones) shift focus to low income housing to gain from GST.
The source also explores the shades and impacts of GST and RERA on Real Estate market and examines specifically if there are any issues that could cause ambiguities or discrepancies in the sector.
Joint Secretary of Housing Ministry and Urban Alleviation, Government of India, Rajiv Ranjan, said that an attempt has been made in the real estate act to balance the requirements of all the key stakeholders, namely consumers, developers as well as real estate agents. We expect much more professionalism… as we start progressing on the implementation of this act and ultimately, we may have a situation where projects are delivered as per the timelines. Two of the states, Gujarat and UP, also notified the rules before October 31 and many states are also in the advanced stage. We expect that the implementation of the act will start at the field level at the earliest and the benefits will start accruing to the sector, consumers, developers, everyone.
The white paper concludes that GST by itself cannot be treated as a panacea for real estate market woes – both for the buyer as well as for the seller or developer.
Broader policies in land and housing/ commercial stock management, ensuring availability of appropriate financing resources etc will be just as important to leverage the opportunity posed by GST, the source said.