Uncertain GST Rate Already Impacting Stakeholders of Real Estate in India

Prospective buyers of realestate in India before they take the plunge and buy their dream home, should consider how the soon to be implemented Goods and Services Tax will impact realty in the country.  

What is the GST? 

Over the past few decades there has been no tax reform as revolutionary as the GST is expected to be, once it is implemented in the future. Several industries in the past have been confounded by the cascading and conflicting nature of taxation, something the GST is expected to eliminate to a very large extent. According to experts the elimination of taxation at every stage of production is expected to have a profound effect upon India's economic prospects. It should be borne in mind that the favorable impact of the GST will not be immediate but rather will be felt two or three years after it is implemented on July 1 2017.   

The GST and the Real Estate Sector 

The tax structure of the GST has been announced and what has been made known is that there will be four distinct tax rates in the country of 5 percent, 12 percent, 18 percent, and 28 percent. However which tax slab is expected to apply to the real estate and construction industry is as yet unknown. Most experts commenting on real estate sites in India have stated that the real estate and construction sector is most likely to fall in the 12 percent bracket under the GST regime, yet at this time this largely remains conjecture. Furthermore the GST is not the only important factor when it comes to taxation; other factors such as the abatement rules as they are applied under the service tax regime and the input tax credit facility for developers, will both determine if the effective tax paid on real estate is higher or lower than it is after the GST has been implemented.   

Table of content Real Estate in Bangalore’s KR Puram Lake, Destructive to Water Body Reasons Behind Growing Popularity of Co-working Spaces in India High Potential of Student Housing For Indian Real Estate

GST Impact on Residential Real Estate 

When considering the health of the real estate sector it must be borne in mind that this sector is not only impacted by the applicable tax rates, but also by market and consumer sentiment. The trust deficit between buyers and builders has in the past also led to the slow growth of this sector. To address the trust deficit between buyers and builders the RERA was implemented, the RERA is expected to make great strides in amicably bringing buyers and builders together.  

If house prices under the GST regime do rise, the low home loan rates which are currently prevailing may cushion the blow and may not dissuade as large a number of households from investing in real estate than would have had the interest rates on home loans been higher.  

The Evolution of Developers 

Developers have evolved over the past few years by creating a better brand image to attract buyers to invest in their projects as opposed to earlier decades when projects were simply launched by builders and the brand equity of builders was considered less important. Today brand equity plays a key role in drawing sales of real estate and according to this property site, builders with a well managed brand equity shall be able to triumph regardless of whether real estate prices under the GST rise or fall.  

for more information click here