Homebuyers alert! Planning to buy flat? Wait! Modi government may give this big relief soon
The 5% GST can help boost homebuyers' favourable disposition towards making a purchase decision. While it may not trigger massive housing sales, it can make a difference.
In a bid to give relief to the home buyers and address the age-old realtors demand to cut the GST on unsold units from 12 per cent to 5 per cent. In fact, to give a relook to their decision on the GST rate cut on real estate sector, the GST Council is meeting on February 24th, informed Finance Minister Arun Jaitley after the GST Council meet on February 20. The seven-member GST panel is in favour of lowering the rate on affordable housing from 8 per cent to 3 per cent as well.
Elaborating upon the impact of this rate cut on the homebuyers Anuj Puri, Chairman - ANAROCK Property Consultants told, "The levying of 5 per cent GST (without the benefit of input tax credit or ITC) can help boost homebuyers' favourable disposition towards making a purchase decision. While it may not trigger the kind of massive housing sales which the industry sorely needs, it can make a difference." Puri went on to add, "Lowering the GST rate can definitely provide a short-term boost for fence-sitting homebuyers to make purchase decisions. Even a marginal reduction in the overall cost of property purchase is a respite. For buyers, it is preferable if the council decides on a flat 5 per cent GST rate without ITC for premium properties and 3 per cent for affordable units. This would remove the ambiguity around the input tax credit."
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Standing in sync with ANAROCK views Pradeep Agarwal, Founder and Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM said, "The proposal of reduction of GST will be a win-win situation for the real estate sector especially the affordable housing segment. With the incorporation of this move, the sales in the realty market are anticipated to rise and bring in cheers for the sector. However, it is very important to keep in track the issues and challenges that are being faced by the real estate sector under the dominion of GST."
Pressing for the input cost redressal Amit Raheja, CMD, Wealth Clinic said, "If the input tax credit is stopped then the cost of construction will go up and hence the prices of the unit will rise. If this happens then the reduction of GST will not have the desired impact on the market as buyers will have to shell out more to get their dream home."
ASking for evaluation of the ongoing projects Dhiraj Jain, Director, Mahagun Group said, “Before reducing GST rates in the real estate sector, it is very important to evaluate how much construction of any property has been completed or how much construction is going on so that it can be ensured up to which extent the impact of GST on the property is going to be. By reducing the rate, the real estate developer and a home buyer want to gain the benefit, get the people in the right direction and have a positive atmosphere in the real estate sector.”
Currently, despite a provision in place for receiving ITC, buyers are unsure about how and when they will receive this benefit. For instance, the ITC calculated on a property worth Rs 5,000 and 1,000 sq. ft. in size is Rs 1,80,000. However, this is a notional benefit at best and depends entirely on if and when the builder passes it on to them. It is a fairly big amount for the largest segment of potential homebuyers and ignorance about the exact transmission mechanism and timeline is not helpful. Therefore, a flat 5 per cent GST without ITC is the best option for buyers.