Friday 30 June 2017

INDIAN REAL EATATE WELCOMES GST



                                         INDIAN REAL ESTATE WELCOMES GST

1st of July 2017; this date will go down in the history books of our country when the biggest tax reform got implemented with full force across the nation in all the industries and sectors. Real estate sector being one of the largest contributors towards the Indian GDP and employment generation, it’s reactions, objections and suggestions are always considered whenever any big policy implementation takes place in the country.
The much awaited Goods and Services Tax (GST) has been finally implemented in spite of all the bottlenecks and confusions looming, where even real estate sector has got its rate finalized. Real estate being a case of land, which is an asset, is neither regarded as a good nor service. As a result, a different solution has been provided to counterbalance the negative effects of tax on the valuation of property. After the final notification, the government has declared the GST rate for under-construction properties in real estate at 18 percent which will be applicable on two-thirds of the value of the property. The one-third or 33.33 percent discount on property value has been given against the land price. Since land is an asset and with court pronouncements, this has resulted in it being kept out of the GST regime.
Previously, a different formula for the calculation of service tax was carried where an abatement of 70 percent was allowed on the total value of the property to adjust against value of land and commodities utilized for the construction of a unit. Therefore, buyers earlier had to pay only 15 percent on the 30 percent of the property value. Thus, the net service tax for the real estate was 4.5 percent only. Whereas now, the GST rate for under-construction real estate has been decided at 18 percent; but the net tax incidence will remain at 12 percent (two-thirds of 18) of the selling price for a unit or property.
Apart from service tax, a property may go through several other central and state levies in the form of VAT, excise, CST, registration and stamp duty charges. These jointly contribute and brings the total indirect taxation to about 5-10 percent, varying with states. Stamp duty and registration charges are exclusive of this and further adds to the net cost for the buyer. But with GST, a 12 percent levy along with registration and stamp duty charges, property prices for under-construction units are expected to go up if the benefit from input tax credit is not passed on by the developers.
Now with the GST in place, it will bring about clarity, transparency and uniformity towards taxation in the country’s real estate sector. Also with the anti-profiteering clause added in the GST law, it will be mandatory to pass on the benefit of tax reduction arising out of the input tax credit to the final customer. The multiplication of taxes will now get curbed as credits of input taxes paid during each stage of production can be availed in the succeeding stages of value addition.
In a nut shell, GST for the realty sector is projected to be beneficial in the long run, if implemented in a proper manner. The only dampener can be if the benefit of the input tax credit is not passed on to the buyers. In the long term and for the overall economy in general, GST is expected to contribute 1-2 percent towards the Indian Gross Domestic Product (GDP).
Industry Reacts:
Avneesh Sood, Director, Eros Group
The biggest tax reform in the form of GST has finally arrived and is expected to pave way for a much transparent and uniform tax structure in the Indian realty sector. For the residential real estate front, this reform is sure to be a sentiment booster in the short run but challenges may come up for the developers due to the initial transition process into the new tax regime. And for the investors and stakeholders of this sector, much gain will be on offer in the long run.

Abhishek Bansal, Executive Director, Pacific Group
Elimination of various indirect taxes, lower transportation and logistic costs, benefit arising out of input tax credit and simplification of tax structure are the major highlights of GST which will allow a much needed breather for the unorganised nature of the realty sector. A simple and clear method of purchasing property under the GST regime will attract the homebuyers towards the sector which in the long run will add onto the demand for property.

Manoj Gaur, Vice President CREDAI-National & MD, Gaursons Group
The wait for a uniform tax structure in the country is finally over and real estate sector amongst others will benefit largely. A well-defined GST implemented for the country will bring about a relief for this sector and its customers. Commercial realty players will be hugely benefited as all the lost Cenvat credit, which is in current regime a cost to commercial developer can be availed if GST is applied in a free flow manner that will also help in reducing costs. A much simplified single tax rate, reduced construction costs and better transparency in the sector will be much welcomed by the developers and its customers.

Pradeep Aggarwal, Co–founder and Chairman, Signature Global
With prices going up post the tax reform, government will have to find out ways of minimizing the effect of this rise on the average Indian home-buyers. Banks will have to be pushed to further lower down on their lending rates, ensuring that the end payout remains the same in cases of property purchases. Keeping the affordable housing segment out of GST’s ambit is a good move but measures for the removal of stamp duty charges must be taken into consideration to further lower the burden off the mid-segment buyers.

Akshay Taneja, MD, TDI Infratech
Steel currently attracts taxes in the range 18-19% but post GST it will be fixed at a uniform rate of 18%. This goes on to show that the effect of GST on steel would be bare minimum but what everyone is looking at is the inputs of the steel industry like coal and iron ore which have been finalized under the GST slab of 5% might influence steel prices to come down and hence benefit the real estate sector in the long run.
Gaurav Gupta, General Secretary, CREDAI – RNE
Prices of properties are bound to go up post the implementation of GST as under-construction projects will attract taxes in the slab of 12% as against the previous 4.5% approx. With no other rebates from stamp duty and other verticals, home buyers are sure to face the brunt of this. The only respite would be from developers to judiciously pass on the benefits of input tax credits, if any applicable, to the buyers. 

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz
A uniform tax structure in the real estate sector will enhance transparency and keep the tax evaders on check. With the anti-profiteering clause in the GST law, benefits received from the input tax credit will be helpful for the buyers which in turn will create a fresh demand for real estate. Impact of GST in sync with RERA will positively transform the Indian realty sector in the next 18-24 months. Finally, a single tax regime has always been a big hit amongst the foreign investors and thus, we expect the FDI inflow in real estate to double in the next couple of years as REITs and InvITs will also see its operations in India very soon.

Manoj Chaudhary, MD, Airwil Infra Ltd.
Earlier, the homebuyers of this sector were under the pressure of two forms of taxes; service tax and VAT on the purchase of residential units when booked prior to its completion. Before GST, there were numerous components of non-creditable tax costs such as CST, entry tax, customs duty, excise duty, etc. which were duly paid by the developer upon its procurement which were basically ingredients for the cost pricing of the units. With the GST now, a single tax structure will be followed which will remove the multiplication and duplication of indirect taxes that will promote transparency in dealings. We are expecting the demand numbers to grow by a steady 5-7 percent for the residential real estate and 10-15 percent for commercial segment over the course of next 3-5 years.

Dhiraj Jain, Director, Mahagun Group
Cement is as essential a component of the realty sector as any other and the current tax slab of 24-25% would be revised to 28% with the implementation of GST. This will directly influence the construction cost of a project ultimately pushing the prices of properties higher. On the flip side though, GST shall bring a multi-edged positive impact on the sector, bringing in more transparency, eradicating multiple taxation system and making the system more systematic and streamlined.

Piyush Sharma, Senior Vice President, Sikka Group
This is a historic moment for the entire nation where a completely fresh tax reform has been implemented in full force which is projected to boost the economy in the long run. As for the real estate sector, clarity over transacting and eradication of multiplicity of taxation will motivate buyers and bring an end to the cascading effect that inflated the prices earlier. With the availability of input tax credit, benefits will be passed onto the buyers which will gradually pick up the demand.

Vikas Bhasin, MD, Saya Group
GST will without a doubt be a game changer for the Indian real estate sector in the times to come. Ensuring a steady and stable tax regime along with transparency for the buyers, it will allow the sector to increase its contribution towards the economy and the GDP in the next few years. According to the net tax of 12 percent for the real estate sector, under-construction properties falling under the affordable or budget segment level might become cheaper, whereas the luxurious or premium category housing units are expected to see a price rise now.

Rakesh Yadav, Chairman, Antriksh India Group
With the cost of under-construction properties projected to go up due to the new tax rate under GST, the government must now work towards abolishing the stamp duty and registration charges and offer land parcels at much subsidized rates. This, if coupled with lowered rate of interest by banks for home loan will bring about a lot of cheer among the buyers in the sector and bring a sudden surge in demand. At the same time, GST will prove to be a major contributor towards offering more clarity over taxation for the buyers, which has not been a case till date.

Kushagr Ansal, Director, Ansal Housing
With the dawn of concepts like hustling in service tax coupled with reductions and various mandatory charges collected by developers earlier, highlights the importance of having a same tax base for which GST was the only answer. A single tax rate across the country will now promote fair practices which will further encourage transparency and less evasion in the sector that supports in future growth of demand for real estate. GST will definitely prove to be a game changer for the Indian economy and provide a stimulus to the foreign demand coming into India.

Rajesh Goyal, Vice President CREDAI-NCR & MD, RG Group
The wait for GST is finally over as the much discussed consistency in the tax structure will now be visible. Real estate sector will now be charged at a net tax rate of 12 percent which will be almost 3-5 percent more than the previous combined effect of service tax and VAT on the under-construction properties. But if the developers pass on the benefits of the input tax credit to the buyers, then the effect might get more or less neutralized. Buyers are expected to relish the real estate sector post GST as they will have complete clarity over the taxation.


Thursday 29 June 2017

Construction of real estate to attract 18% GST; home prices may not be impacted

NEW DELHI: Housing prices in India have more than doubled since 2007 and residentialproperties hold strong potential for investment with rates still affordable across cities except Delhi and Mumbai, according to a joint report by KPMG and Magicbricks.

The prices have remained muted in last three years with modest growth of 4 per cent due to demand slowdown and huge delays in project completion, the report said, but expected the market to revive in few quarters.

India's real estate and construction sector in expected to become the third-largest globally by 2030, doubling its share to over 15 per cent in the GDP, the report 'Residential Real Estate: An Investible Asset' projected.

"Indian property prices have more than doubled since 2007 (without adjusting for inflation) -- the second best globally," it said.

There was some price correction in 2013 and 2014 followed by a moderate appreciation in housing prices.

"Over the last decade, affordability to own properties have reduced by 50 per cent as the income growth has lagged property price growth. However, India's property market is relatively affordable as compared to that of its global counterparts," the report said.

Overall, residential property holds strong potential as fundamentals like GDP, urbanisation, income growth, savings rate, mortgage growth and affordability are positive.

The report also said that the residential real estate market, which is facing a major slowdown especially after notes ban, is expected to pick up in the next couple of quarters as the new real estate law and GST are likely to disrupt the market in the short-term.

The realty market has generated strong return on investments to home buyers in the long-term and is expected to continue to perform well on the back of positives like cut in interest rates, interest subsidy, increased mortgage penetration and ease of FDI norms in the sector.

Sudhir Pai, CEO, Magicbricks, said: "The urban population of India is anticipated to grow by nearly 36 per cent to over 580 million by 2030. This, along with GDP growth, job creation and mortgage growth is expected to lead to a substantial increase in demand for housing in India."

India holds a strong potential for housing market growth, which is likely to witness considerable price appreciation over the next decade, said Neeraj Bansal, Partner and Head, ASEAN Corridor, and Building, Construction and Real Estate Sector, KPMG, in India.

Source- ET Realty

Wednesday 28 June 2017

Builders seek 6% GST, exemption to low-cost home

NEW DELHI: Realtors' body NAREDCO has written to the Prime Minister seeking lower GST of 6 per cent on sale of under-construction property from 12 per cent as higher tax will lead to price rise and affect sales.

It has also sought exemption of Good and Services Tax(GST), to be rolled out from July 1, on affordable housing which has gained momentum after getting infrastructure status and interest subsidy.

"The GST regime proposes to tax sale of under construction real estate property at 12 per cent on the total sale value (including the land value). This is in addition to the stamp duty levied around 5-6 per cent on the sale value.

"The total tax burden of around 18 per cent on the sale of under-construction real estate property will lead to inflationary impact on the cost of property," NAREDCO said in a letter to Prime Minister Narendra Modi dated June 17.

The copy of this letter has also been given to Finance Minister Arun Jaitley and Revenue Secretary Hasmukh Adhia.

NAREDCO has suggested that the government should allow deduction for land in the GST law or the GST rate for sale of under construction real estate should be fixed at 6 per cent on the agreement value to make it comparable to the present situation.

The association has welcomed the GST regime, which aims to boost country's growth exponentially.

"The objective of GST is to ensure that all businesses engaged in making products or providing services become accountable. However, there are still some unresolved issues emanating from the GST law for the sector as a whole, which need the immediate attention of your office," it said in the letter to PM.

NAREDCO has also sought extension of proposed exemption on taxability of long term leases to other than industrial plots. It wants that granting of development rights to be treated similar to sale of land;

The association has sought allowance of input tax credit of construction of property for renting/leasing purposes, besides clarity on taxability of PLC, parking charges.

Source- ET Realty

Tuesday 27 June 2017

DDA likely to launch new housing scheme with 12,000 flats on 30 June

New Delhi: The Delhi Development Authority’s much-awaited new housing scheme with 12,000 flats on offer is “almost certain” to roll out on 30 June, officials said on Tuesday.
Top DDA officials said the brochure for the scheme was ready and all other modalities had been put in place. “We are all set for the launch of the new scheme. As of now, 30 June as the date for its roll-out looks almost certain,” a senior official said.
Logical constraints, from printing of brochures to linking with partnering banks, had been ironed out, he said. “We have to ensure everything is in order before we make the scheme public. And, at this time, things do look in order,” the official told PTI.
The urban body had set mid-June as the target date for the launch of the scheme, which was earlier slated to be announced by February. But ancillary infrastructure work, such as building of connecting roads and installation of street lights, had stretched the deadline, he said.
“The scheme has also been linked to the Pradhan Mantri Awas Yojana,” the official said.
Out of the total number of flats, most of them are in Rohini, Dwarka, Narela, Vasant Kunj and Jasola. 10,000 unoccupied flats were from a 2014 housing scheme, while 2,000 flats had been lying vacant.
Seeking to deter “unserious buyers” and check market speculation, the DDA this time has proposed multi-tiered penal measures. “If a prospective buyer surrenders his application before the date of draws, no money will be deducted from his or her registration fee. If a buyer does so after the draw but before the issue of a demand letter, 25% of the registration fee will be forfeited,” another official had earlier said. If the flat is surrendered within 90 days of the issue of the demand letter, 50% of the fee would be cut. “Beyond that time period, the entire registration fee will be forfeited,” he said.
For the LIG (Lower Income Group) category, the registration fee will be Rs1 lakh while for Middle Income Group and High Income Group flats, Rs2 lakh will be charged.
The urban body has tied up with 10 banks for the sale of application forms and scheme-related transactions. The banks are Axis Bank, Yes Bank, IDBI, Bank of Baroda, Central Bank, SBI, Kotak Mahindra, HDFC, ICICI and Canara Bank.
“People are free to visit the areas where the flats are being offered. We have also removed the lock-in period clause, as we realised this was also a factor in buyers surrendering flats. This is also to keep a check on those elements who do market speculation,” he said.
Lieutenant Governor Anil Baijal, who is also the DDA chairman, had instructed senior officials to ensure that adequate public transport connectivity and other necessary basic infrastructure were put in place before the launch of the new scheme. Baijal has already given his approval to the scheme.
Under the rules, a husband and a wife can apply for the scheme but if both get an allotment, one of them will have to give it up.
Sources said most of the flats were one-bedroom LIG flats from the last housing scheme. “About 10,000 are LIG flats from the 2014 DDA scheme.
Unlike the EWS (Economically Weaker Section) category last time, in this scheme there will be no such category,” the official said.
Application forms will be available both online and offline, he said.
The DDA this time has planned to put the scheme online —for forms for application, refund and so on —to reduce long queues of flat buyers at its headquarters.
The 2014 scheme offered 25,040 flats across categories, with prices ranging between Rs7 lakh and Rs1.2 crore. The online response was so massive that the DDA’s official website crashed soon after the launch. The one-bedroom flats were offered in Dwarka, Rohini, Narela and Siraspur areas.

Source- Livemint