By Runwal Group Posted Feb 22, 2019 In Market trends and insights
Recognized as one of the most significant reforms in independent India, the Goods and Services Tax (GST) has helped streamline many sectors of the economy. Among its many other positive impacts, GST has helped introduce a greater level of transparency and efficiency into India’s real estate sector. From making land deals much more reliable, to boosting the demand for affordable housing, the real estate sector has been impacted in varied ways by GST.
Here are some important ways in which GST has impacted India’s real estate market and its homebuyers.
1. Growing demand for affordable housing:
On February 7, 2018, the Government of India asked real estate developers to stop charging GST from homebuyers who are purchasing property under the affordable housing scheme. Moreover, the Finance Ministry directed real estate builders in India to adjust this GST amount against the input credit, both of which are applicable at the rate of 8 per cent.
2. Reduced cost of construction:
The basic construction cost across the real estate sector has come down, including that of luxury properties. However, this adjustment in input credit will not be enough to bring down any new tax liabilities owing to various other associated expenditures in the case of luxury property purchase. In any case, homebuyers can look towards a more reliable and transparent process.
3. A much simpler homebuying process:
Buying a house in India has always been synonymous with endless paperwork and confusing processes. However, GST has changed that to a large extent by simplifying the process and merging all the assorted taxes into a single, easy-to-understand figure. This has also introduced greater transparency and efficiency into the home buying process, while also making land deals more reliable.
4. GST concession on homes under CLSS:
With effect from January 25, 2018, the GST Council also extended the concessional rate to houses that have been constructed or acquired under the CLSS (Credit-Linked Subsidy Scheme) for the economically weaker section (EWS), the lower-income group, the middle-income group-I (MIG-I) and the middle-income group-II (MIG-II). The concession is also applicable to flats/apartments of up to 60-square metre carpet area. This has greatly benefited homebuyers who are looking to invest in smaller and more affordable properties.
5. GST concession on ready-to-occupy properties:
The revised GST rates have placed emphasis on ready-to-occupy properties in order to solve the problem of unsold inventory in India. For ready-to-occupy properties, the Finance Ministry announced that the existing rate of 12% GST has been brought down to 8%. For properties that are under construction, the rate stands at 12%. This explains why there has been a greater demand for ready-to-occupy flats in the last year.
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