In an interview with Property House Magazine, Rakesh Reddy, Director, Aparna Constructions And Estates Pvt. Ltd. answers a few questions on GST and its likely impact on the real estate industry.

Q. Will resale properties become costlier under the GST?

A. Well, prima facie, it seems there would be no or very little impact

of the Goods and Services Tax (GST) on resale properties simply

because home-buyers are not liable to pay any indirect tax for the

purchase of already completed houses. However, we will have to

wait and see how it plays out in the medium term as the housing

inventory has hit a 10-qtr low now post RERA and demonetization.

Q. Is it true that under-construction properties will be costlier

compared to ready-to-move-in properties?

A. GST allows developers to avail full input set-off credit for under-

construction projects, but not for ready-to-move-in properties. Hence,

developers will have to bear the tax burden for such ready-to-move-

in projects. And that could essentially mean no cost relief for

homebuyers of ready-to-move-in flats. As far as under-construction

properties are concerned, the expected marginal decline in prices

only if builders avail of input tax credits and pass on the benefits to

the buyers would be offset by the fall in new project launches in the

wake of RERA and already dwindling inventory. It is also worth noting

here that property prices in the country have been stabilizing over

the last few years while the demand has still been, more or les,

stable. At the same time, any clarity on certain grey areas such as the

abatement available for the land cost will go a long way in

determining the GST impact for real estate sector.

Q. Will the GST impact the stamp duty on buying a property? What

about registration charges, maintenance charges, etc.?

A. No. Of all the taxes applicable for real estate in the previous tax

regime, GST will only subsume VAT levied by State governments and

Service Tax by the Central government. This would essentially mean

that stamp duty & registration charges will continue to be applicable

and would vary from State to State. As far as maintenance charges

are concerned, they will go up to the extent of the increase in tax,

which earlier was at 1 5.5% and will now go up to 18% post-GST

Q. What are the problems that developers are facing to register

projects where a regulator has been put in place?

A. Every landmark regulation brings in it a set of challenges along

with the changes it promises to deliver. To the credit of some of the

state governments, they have been proactive in resolving some of the

issues with the registration. I also believe that the transition to the new

regulation has been largely smooth for large players. However, for

smaller developers, complying with new procedures and furnishing

an unusually vast amount of information regarding their projects

have, nonetheless, been challenging. That said, I have no doubt with

RERA infusing the much-needed transparency and addressing key

issues like delays and quality of construction, real estate’s future in

India is all set on a long-term growth track