Hailing the GST reduction on housing sales, the cash strapped realty sector said that the GST Council's decision will not only spur sales but also boost demand, especially in the affordable housing segment. The rate cut is expected to give the necessary fillip to demand in the under-construction segment, which has been suffering from low sales levels for many quarters.
However, the new rates are likely to come with a condition that majority of purchases would need to be from GST registered vendors. Therefore, monitoring the compliant vendor eco-system would continue to be critical for the industry.
"The reduction in GST rates, coupled with incentives proposed in the budget and the reduction prime lending rates by the RBI, completes the sops for the residential real estate market. We feel that the government has taken all necessary steps to create demand and boost sales. One could not have expected anything more from the policy side that has addressed all major concerns of the beleaguered sector, both from the demand and the supply side," said Shishir Baijal, Chairman & Managing Director of Knight Frank India.
Anuj Puri, chairman of ANAROCK Property Consultants, said there are as many as 5.88 lakh under-construction homes lying unsold in the top 7 cities. Of these, 34 per cent are priced below Rs 40 lakh. "With affordable housing now being defined within Rs 45 lakh budget, more properties qualify for this sweet spot category. The GST cut, coupled with this critical change in definition, will induce more sales in homes falling in this budget range — a win-win for both builder and buyers," said Puri.
However, the National Real Estate Development Council president Niranjan Hiranandani said had the GST rate cut been implemented with immediate effect, sales of residential real estate units would have witnessed a rise in the current fiscal. "The rise in sales figures is expected in the next financial year since the rate cut will be effective from April 1. The GST rate on cement has not been reduced to 28 per cent, and it remains among the highest taxed inputs for construction. The developers will face a challenging time as there will be no input tax credit," opined Hiranandani.
Furthermore, Deloitte India Partner MS Mani observed that the GST cut will provide a boost at least in the short-term as more fence-sitters who had been postponing their purchase decisions will now have an additional incentive to take the plunge.
On the other hand, PwC India Partner and Leader (Indirect Tax) Pratik Jain said the GST council has cleared what looks like a 'quick fix' solution to the perception that industry was not 'passing on' the benefit of the input tax credit to customers, just like restaurants. "It's good that April 1 has been agreed to be the date when the new rates will become effective. This will give some time to industry to assess the impact and work out the new prices. Developers would need to increase the base price to recover the loss of input credit but would need to be cautious given the surge in anti-profiteering investigations for restaurants, in similar circumstances," added Jain.
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