The central government has taken a big step towards simplifying the GST system of the country. Under the new proposal, only two slabs- 5% and 18% will apply to most goods. At the same time, a special rate for luxury and ‘SIN’ products has been fixed at 40%. This new framework can be implemented till Diwali.
Currently, different GST rates are applicable on construction materials in the real estate sector. Such as 28%on cement, 18%on steel, 28%on paint, and 18%on tiles and sanitaryware. This input cost directly affects the total cost and housing price of the project.
In such a situation, the question arises that what will be the impact on the real estate sector to end the GST slab of 12% and 18%. Will the cost of new houses decrease and homebayers will get cheap houses. Let’s know the answer from experts.
What does home buyers mean?
Experts believe that this simplicity in tax structure will reduce the cost of developers. In such a situation, its benefit can reach home buyers. Yashank Vasan, managing director of Royal Green Realty, says, “The government’s proposal to keep GST only 5% and 18% is quite good for the real estate sector. This will make the rules easier and developers will benefit less tax. Due to this, home buyers will also be able to get houses at cheap rates.
At the same time, the founder and president of Prime Developments says that the government on GST makes the progressive step in the input tax cost of the developer, which will make housing projects more economical. Low tax slabs will reduce financial burden on buyers, promote demand. This will speed up inventory clearance. It will benefit both the builders and homebeeers.
GST change will also increase transparency
According to Taxmanger. in Founder and CEO Deepak Kumar Jain, buyers will directly benefit when the government applies GST at a lower rate with the benefits of input tax credit.
He says that currently the buyer gets the benefit of input tax credit (ITC) on 5% GST projects in real estate GST system. At the same time, builders do not pass this benefit on projects with 18% GST, due to which the buyer has to pay more tax. According to Jain, new changes will reduce the cost of buyers and increase transparency in the housing sector.
Impact in Delhi-NCR market
The positive impact of GST reforms in Delhi-NCR market has already been seen. In 2019, the GST rate on under-construction properties was reduced to 5%, which increased the trust of buyers and improved sales in Noida, Gurugram and Ghaziabad. However, the real estate industry says it is necessary to partially bring back the input tax credit, so that developers get adequate margin and buyers can be available affordable houses.
The new GST structure can reduce construction costs and 10–20% tax relief can improve property prices in metro and tier-2 markets. However, some experts also say that construction costs may increase when 40% slab is implemented due to expensive material and foreign finishing in the luxury segment. However, this factor will be limited only to luxury house. It will not affect the affordable segment.
GST changes will be cheap houses?
According to Vikas Bhasin, MD of Saya Group, GST reform is positive for both consumers and industries. These reforms are likely to reduce the total tax burden including GST on incomplete construction properties.
Bhasin says that currently the cost of property increases by 13–14% by adding GST, stamp duty and registration fee. This causes heavy financial burden on home buyers. GST cuts will lead to more economical, trust in real estate sector will increase and sales will be encouraged in primary market.
Prices of homes will decrease
Pradeep Aggarwal, founder and chairman of Signature Global, believes the same. He says that GST improvement will be relieved for the common man and will reduce tax burden on essential goods.
He says that the real estate sector will also benefit from two-level GST structure. This will reduce the input cost, will improve cash flow and reduce the prices of homes. Long -term tax clarity will be able to plan projects with more confidence. These reforms will strengthen the spirit of the industry and support sustainable development in the housing market.
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