National Real Estate Development Council (NAREDCO), the apex body of real estate sector, under the aegis of Ministry of Housing and Urban Affairs, Government of India, has lauded the government’s move to lower goods and services tax (GST) on affordable housing from 8 per cent to 1 per cent and other housing from 12 per cent to 5 per cent. In the last meeting, the GST Council had announced the lowering of GST on real estate wef April 1, 2019 without input tax credit. The rate cut on affordable housing segment stands at 1 per cent and non-affordable housing segment at 5 per cent in metro and non-metro cities with introduction of price cap of Rs 4.5 million.
Welcoming the move Dr Niranjan Hiranandani, President, NAREDCO said “The reduction in GST rate from respective 12 per cent and 8 per cent is definite a delight to the home buyers improving their sentiments positively with the reduced tax burden. It will result in uptick in sales on under-construction inventory with lowered GST rate across helping developers to revive the industry rolling. The fence sitters will now be enthused to come forward and book their dream homes which will result in an increased home buying scenario and help reducing the existing inventories off the market.”
“This cut in GST rates for under construction homes needs to be compounded with the other positives available to the home seeker. This is also a part of a positive process. We have some state governments levying lower stamp duty on affordable housing at just Rs 1,000; income tax benefits are available, interest subvention is available, the PMAY scheme makes it easier for home seekers. All of these taken together, along with the reduced GST on under construction homes are a huge positive for home seekers, it is something that will kick-start affordable home sales,.” he added. However, according to Hiranandani, the removal of ITC on inputs such as cement and steel will impact finances of various projects, but viewed from a practical aspect, it will bring in clarity.
Elaborating further Parveen Jain, Vice Chairman, NAREDCO said, “High cost of cement will only pinch them further and have impact on housing price. This needs to be rectified or revised at the earliest.”
Earlier, in its pre-budget memorandum, NAREDCO had urged the government to rationalise GST on under construction housing properties and bring it down to 12 per cent slab and increase land abatement to 50 per cent. This would have brought down the effective GST rate to 6 per cent and would have become tax neutral after Input Tax Credit (ITC). This, according to developers, would have been better. “While a lot is still to be done, lowering of GST rate will definitely boost sales of houses and attract investments into the housing segment,” said Rajeev Talwar, Chairman, NAREDCO.