With the upcoming GST, there shall be no benefit in the rental as well as the residential capital markets of India. Therefore, input credit should be allowed in rental markets.
What will be its implications on the final property cost to be borne by a homebuyer? Which side will the property prices swing post GST – up or down?
As far as the implications are concerned, they can be derived from the fact that there is no GST on completed projects as on 1st July 2017. For under-construction mid-segment projects, there is no impact up to Rs 5,000 per sq ft.
As on date, no service tax is levied on affordable housing below 60 sq m, but in GST there is only one slab of 12 percent. There is no benefit for affordable housing as it shall impact the end user by an increase of 5 to 6 percent in the price.
How will it impact the cost of land in your city?
In this scenario, where the land cost is 30 percent of the total cost of built property, there shall be no impact, but wherever the land cost increases and the construction cost decreases, there shall be no input credit and property price shall increase by three to six percent.
Which raw materials will witness a hike and a dip in values, post GST? How is this going to alter the ratio of construction costs to selling price?
Post GST, there shall be negligible impact on above because of getting the input credit. Even Foreign Direct Investments (FDI) and Private Equity (PE) funds in real estate will witness a negligible hike on the back of GST.
How will Input Tax Credit (ITC) benefit real estate stakeholders including developers and buyers?
There shall be negligible benefit because of input credit tax to real estate stakeholders including developers and buyers, but transparency shall increase as GST is a single consolidated tax system against multiple taxes.
Overall, do you view GST in positive light for the real estate industry of India? And why?
Bringing in GST is going to be a positive development for the real estate sector. GST shall bring a multi-edged positive impact on the realty sector by inducing more transparency, abolishing multiple taxation system and making the system more systematic and streamlined.
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