What Real Estate Market Is Doing Today and How It Impacts Your House
Real estate industry in India is one of the most recognized sectors which has gone through a notable change in the recent past affecting builders as well as the final buyer to some extent.
Latest happenings in real estate industry
One of the most recent happenings is that the new GST tax rates for real estate sector were approved. The new rates became effective from 1st April, 2019 where GST rates for affordable housing and normal housing properties have been reduced to 1% and 5% respectively. However, the plan allows real estate developers to choose between old tax rate with ITC (input tax credit) and new tax rates without ITC for residential projects which are under construction aimed at resolving issues with ITC.
For ongoing projects builders are allowed to pay tax at old rates (8% or 12% with ITC) only once where construction and booking started before 1st April, 2019 but could not be completed before 31st March, 2019. However, on all new projects tax rates of 1% and 5% without ITC will be applicable for affordable houses and UK sangfroid andheri respectively. In addition, it has been imposed that 80% of the building material should be procured from registered dealers only. Builders who violate this norm will have to pay a tax of 18%. For example, cement purchased from unregistered dealers would be charged 28% as duty.
It’s pros and cons
• Pros
Builders who would choose to go with the second option (5% without ITC) on under-construction flats will possibly not go for price hike in the nearest future. The new tax rates will not affect buyers much as they can continue to look forward to lower rate of tax. The objective of reducing GST rate is to improve demand in the real estate industry and fulfil the mission of Housing for All by 2022.
• Cons
Real estate developers expressed concern with the announcement of the new GST tax rates without ITC because they hardly had any I dea about what’s going to happen to the input stock which is accumulated as part of their long-term purchase. Moreover, developers will now have to purchase a very high percentage of their building materials from GST-registered suppliers.
It’s Impact on your property
The change in GST rates will not prove to be very beneficial for you as a home buyer. So far UK sangfroid andheri is concerned, the previous tax rate of 12% according to CGST/SGST Act 2017 the developer was allowed to take all credit on all inputs. The only limitation on the developer was they were not supposed to claim the refund of unutilized ITC. But still the credit did not cost the developer much as the credit could be utilized in some other ventures. Previously ITC on inputs, capital goods, and input services was not included in the cost but now the cost will include all those. If builders are up to making the same amount of profit as with the previous rates they will have no other option but to go for a hike in the selling price.
What next
It appears that with this revised tax rate, the developer’s business will be affected if they increase the price of the property and it will not provide any benefit to home buyers also. The main objective of the government behind this revision in tax rate is Housing for All but time will say whether it will ultimately materialize or not.
Latest happenings in real estate industry
One of the most recent happenings is that the new GST tax rates for real estate sector were approved. The new rates became effective from 1st April, 2019 where GST rates for affordable housing and normal housing properties have been reduced to 1% and 5% respectively. However, the plan allows real estate developers to choose between old tax rate with ITC (input tax credit) and new tax rates without ITC for residential projects which are under construction aimed at resolving issues with ITC.
For ongoing projects builders are allowed to pay tax at old rates (8% or 12% with ITC) only once where construction and booking started before 1st April, 2019 but could not be completed before 31st March, 2019. However, on all new projects tax rates of 1% and 5% without ITC will be applicable for affordable houses and UK sangfroid andheri respectively. In addition, it has been imposed that 80% of the building material should be procured from registered dealers only. Builders who violate this norm will have to pay a tax of 18%. For example, cement purchased from unregistered dealers would be charged 28% as duty.
It’s pros and cons
• Pros
Builders who would choose to go with the second option (5% without ITC) on under-construction flats will possibly not go for price hike in the nearest future. The new tax rates will not affect buyers much as they can continue to look forward to lower rate of tax. The objective of reducing GST rate is to improve demand in the real estate industry and fulfil the mission of Housing for All by 2022.
• Cons
Real estate developers expressed concern with the announcement of the new GST tax rates without ITC because they hardly had any I dea about what’s going to happen to the input stock which is accumulated as part of their long-term purchase. Moreover, developers will now have to purchase a very high percentage of their building materials from GST-registered suppliers.
It’s Impact on your property
The change in GST rates will not prove to be very beneficial for you as a home buyer. So far UK sangfroid andheri is concerned, the previous tax rate of 12% according to CGST/SGST Act 2017 the developer was allowed to take all credit on all inputs. The only limitation on the developer was they were not supposed to claim the refund of unutilized ITC. But still the credit did not cost the developer much as the credit could be utilized in some other ventures. Previously ITC on inputs, capital goods, and input services was not included in the cost but now the cost will include all those. If builders are up to making the same amount of profit as with the previous rates they will have no other option but to go for a hike in the selling price.
What next
It appears that with this revised tax rate, the developer’s business will be affected if they increase the price of the property and it will not provide any benefit to home buyers also. The main objective of the government behind this revision in tax rate is Housing for All but time will say whether it will ultimately materialize or not.
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