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Understand GST for Indian Real Estate Sector

Important points to consider:

Current rate of 12% on under construction projects might marginally bring down prices in the affordable segment owing to the input tax credits, but it is unlikely that similar impact will be felt in mid-priced or premium developments.

More clarity will prevail once the government clears its stand on the abatement available for the land cost for calculating service tax on under-construction projects. If the cost of land is 10% of overall project, there is a possibility of costs not rising much. However, as in case of major metropolitan cities of India, the land cost is almost 50-60% of the total costs, so apartment prices will rise here.

While developers might still get some benefits for projects that are in nascent stage, they will have to bear the tax burden for ready-to-move in projects since they are kept out of GST ambit. One more area that needs immediate attention is stamp duty. It will continue to remain in force even after implementation of GST and the rates are varying for different states. The additional burden on the sector on account of the stamp duty averages 5%-7%. We hope that state governments abolish the same which will bring down the final cost of the apartment.

 

Source: Business Today

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