GST tweak fails to impress homebuyers

A month after the government lowered goods and services tax rates on realty to pump up sales, demand hasn't picked up as expected. 

Despite the sluggish trend, industry experts believe the sector would see improved sales during the fiscal going ahead.

Pirojsha Godrej, executive chairman, Godrej Properties Ltd said that though he doesn't have the numbers available immediately, there isn't an unusual growth in sales observed due to revision in GST rates.

On the overall view of the sector, post back-to-back shocks of demonetisation and GST rollout, Real Estate (Regulation and Development) Act, 2016 or Rera and the ongoing crisis in the non-banking finance companies space, Godrej said, “The sector has always been cyclical one and this time it's no different, and we would see an up move in demand numbers and sales price. We believe over the next few years. I think the exact timing of the turnaround is somewhat harder to determine.”

In March, the GST Council had announced the realtors can opt for 12% tax rate for under-construction residential projects and claim input tax credit that needs to be passed on to the homebuyers, or else opt for 5% tax rate without any input tax credit.

Similarly, for under-construction affordable homes, the developers can select between 8% and 1% rates.

As part of the transition plan, these options have been made available only for projects launched and home bookings started before March 31. For the projects launched April 1 onwards, the new or lower tax slabs or 5% and 1% are applicable.

When asked about the sales in the last one month, Niranjan Hiranandani, managing director of Hiranandani Group and national president of industry body National Real Estate Development Council, replied, “Market has picked up and sales have grown by around 20%-25%.”

According to him, this increase in sales was led by a revision in GST tax rates.

Pankaj Kapoor, managing director, Liases Foras, said that developers are painting a rebound picture when the data available doesn't reflect the same. “There's a rationalisation. Sellers are ready to adapt, instead of what was happening earlier,” Kapoor said.

Having a lower GST rate is a motivator for the realtor to sell the inventory, as a homebuyer would compare GST to be paid at different projects in the vicinity before finalising his home buying decision.

“Hence, the builder will be bound to go for what the customer wants and this is where the sellers are becoming ready to adapt. The government made a smart move by providing realtors option of different tax rates with certain conditions,” Kapoor said while continuing to add that the sales would only improve during this fiscal and not just in a month or a quarter. Overall, the real estate sector will see 20%-25% growth in sales in this fiscal.

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• Despite the sluggish trend, industry experts believe the sector would see improved sales during the fiscal going ahead
   
• In March, the GST Council had announced the realtors can opt for 12% tax rate for under-construction residential projects