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Real Estate Developers' Take On Impact of GST on Their Sector Realty industry regulator National Real Estate Development Council believes that the change in the tax rates on account of GST will be minimal

By Komal Nathani

Opinions expressed by Entrepreneur contributors are their own.

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India is on the threshold of embracing the Goods and Services Tax (GST) Act, a unified tax structure about to roll out on July 1, 2017, and real estate players have started predicting a major reduction in property prices.

They have vouched for transparency that GST coupled with Real Estate Regulatory Act that has come into effect on May 1, 2017, would ensure in the realty sector.

Realty industry regulator National Real Estate Development Council (NAREDCO), however, believes that the change in the tax rates on account of GST will be minimal.

NAREDCO Chairman Rajeev Talwar told reporters, "The organization is of the view that the actual tax incidence under GST would match or be lower than the existing multiple indirect taxes in the sector."

The sector is currently witnessing a widespread confusion over the impact of GST. Entrepreneur India spoke to realty biggies to understand their views on the matter.

Home-buyers Will Benefit

Siddha Group Managing Director Sanjay Jain said, "GST in the realty sector is expected to reduce property prices and ward off ambiguity in the buying process. The Act will curb indirect taxes like Excise Duty, Value Added Tax & Service Tax, which buyers pay indirectly to the developers."

More Transparency In The Process

Dhiraj Jain, Director, Mahagun Group said, "Realty players will be hugely benefitted 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."

Jain told the Entrepreneur India that the group, which is focused on Delhi NCR, is predicting a nationwide realty sector growth by almost 15-20 percent than projected in the course of next 5-7 years if GST is followed.

Reduction In Housing Project Costs

Talking about the impact on housing project costs Kushagr Ansal, Director, Ansal Housing said, "Housing projects depend a lot on allied industries like steel, cement, IT and BFSI. A lowered GST rate of 18 per cent will offer a huge benefit as the overall construction cost will reduce. There will be direct benefit with property registration as well because of tax cuts."

Increase In Demand For Property

Avneesh Sood, Director, Eros Group, advocated that tax deductions and lower property prices would hike the demand in ripple effect. "A single tax structure will soon be on the run which will bring down the costs of under-construction units. Developers and buyers will make the most of this as reduced costs will positively increase the demand for property."

Input Tax Credits To Reduce Cost Of Raw Material Procurement

On the government fixing the GST rate at 12 per cent on under-construction buildings, Chintan Sheth, Director, Sheth Corp said, "Unlike the current practice, legal contracts in the construction business will be considered as services and the GST rate for the same will be effectively lowered as input tax credit (ITC) will also be available. The ITC facility will, in turn, slice the cost of raw material procurement. GST will help cut cash component in construction as products have to be sourced from registered vendors to get input tax credits."

GST Will Augur Well In Foreign Investments And NRI Market

On GST's impact on foreign investment and NRI market, Tushad Dubash, Director, Duville Estates said, "The simplification of taxation is probably the most positive aspect of GST and it will augur well for foreign investments. It will also raise the confidence of the NRI market to invest in Indian real estate. Together with RERA, GST will go a long way in ensuring transparency in the realty sector and increasing customer confidence."

Komal Nathani

Former Correspondent, Entrepreneur Asia Pacific

A firm believer of hard work and patience. Love to cover stories that hold a potential to change the momentum of business world. Currently, a part of all-women web team of Entrepreneur’s Asia Pacific edition to jig the wheel of business journalism!

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