Real estate sector to benefit in long run

The real estate sector has seen three major developments in the last one year - demonetisation, introduction of Real Estate Regulatory Authority (RERA) and now the Goods and Service Tax (GST) regime - that is expected to boost transparency significantly. While big players within the sector are looking at some relief, they agree that in long run it is going to be a win-win situation for all and home buyers would be benefited like never before.

“The introduction of GST is a major step towards encouraging ease of doing business for all the segments of the industries as it unifies different taxes into a single tax structure. While for all other sectors, it also comprises their total indirect tax liability, the same doesn’t hold true for real-estate. Developers will still have to bear other expenses like stamp duty which ranges from 5-8% of the value of the immovable property. An additional imposition of GST of 12% on land values is another drawback which will affect the growth of the industry, especially in cases where land value is relatively high,” said Jaxay Shah, President of CREDAI, the apex body of private real estate developers associations.

According to him, for the sustainable growth of the industry which is the second largest contributor to the GDP, the GST Council needs to consider accommodating the abatement of land value in the new regime to ensure that prices don’t rise.

Sunil Mishra, Chief Strategy Officer, PropTiger.com, Housing.com and Makaan.com, said: “GST is the third tool unleashed by the government after Demonetisation and RERA to clean up and simplify buying of Real Estate in India. Although this Trishul of D-R-G has affected the real estate sales for 1 -2 months, we are confident that each initiative will have the final impact of drawing the sector out of the current troubles. Although GST will bring the required transparency in the sector, the change will emerge only after the first few months. After the successful implementation, we foresee investors re-entering the sector.”

Surendra Hiranandani, Chairman & MD, House of Hiranandani, said there is no doubt that it will be a game-changer for the Indian industry, bringing in a more comprehensive and uniform tax structure that will ensure greater transparency in the economy. “However, there are certain areas in which we would like the government to intervene at the earliest and provide clarity on the same,” he said.

Demonetization, RERA and GST are all landmark developments in the country. They are all being implemented within a short span of each other which is bound to cause short term upheaval till the time the economy gets accustomed to it. However, in the long term all these are certain to make the industry more transparent which will boost investors confidence in India, pointed out Hiranandani.

“The impact on the overall economy will filter through to the real estate, construction, and warehousing sector. In construction, inputs such as cement and ceramic, tiles, building blocks and bricks, prefab structural components for buildings among others have been placed in the 28 percent category, whereas other components such as iron and steel have been placed in the 18 percent bracket. Work contracts addressing construction intended for sale were classified as a service and were placed in the 12 percent category,” pointed out Anshuman Magazine, Chairman India & South East Asia CBRE.

"GST will impact pricing for under construction properties but not the ready to move in products. Technically, it will have little or no impact on luxury real estate where buyers are more interested in acquiring a global product and marginal cost increments are largely ignored. However, as a luxury residential major, we work with a huge spectrum of global partners across technology, materials and construction,” said Atul Chordia, Chairman of Panchshil Realty.