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Realty doyens talk gains from GST, RERA

However, they held a unanimous opinion that with GST and RERA, opportunities will increase manifold, as there will be integration of taxes and transparency will be achieved in the sector, too.

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Realty players hinted that there are short term pains but long term gains following the introduction of Goods & Services Tax (GST) and the implementation of the Real Estate (Regulation and Development) Act. However, they held a unanimous opinion that with GST and RERA, opportunities will increase manifold, as there will be integration of taxes and transparency will be achieved in the sector, too.

Niranjan Hiranandani, Co-founder, Managing Director, Hiranandani Group, said, "As far as GST on real estate is concerned, there are challenges because the land prices are so high that a set off hasn't yet been given. There are speculations that there will be an inflation in terms of cost of 3.5 or 5.5 per cent, depending on the type of construction and land cost. These challenges that will be dealt by the industry, and as the overall growth improves, I am sure, there will definitely be a rationalisation of these taxes."

Ashutosh Limaye, National Director, JLL, said there will be an effective 12 per cent GST, which is high. "'Today, most states have service tax and VAT, which is 9 per cent. Therefore, there will be an effective 3 per cent increase. The government is expecting to pass on savings that they will make on material purchases and work contracts to compensate the increase with lower cost of materials and contracts." However, he said, developers who have signed contracts earlier, will not enjoy the benefits of GST.

Neel Raheja, Group President, K Raheja Group, said, India is one of the few countries to implement GST. "'There will be 12 per cent GST on buildings under construction, but none on furnished ones. For offices and industrial set-ups, there won't be any construction cost, hence increasing the incremental cost. But there will be 18 per cent GST on land leased by the government."

However, Manoj Paliwal, CFO, Omkar Realtors, said, "Even after accounting the benefits of GST on construction cost, 12 per cent is too high a rate for Mumbai."

As far as the enactment of RERA is concerned, Hiranandani said, most of the states are yet to put regulators in place.

Limaye noted that there are hundreds of developers who do not have a proper business model and don't intend to be long-term players either. "Such developers have no future now, they will have to comply with RERA or else exit the industry. This will benefit real estate,'' he said.

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