Impact
of GST on Home Buyers and Renters in India
The
Lower House of Parliament of India has cleared four bills in planning
of the upcoming roll out of the Goods and Services Tax (GST)
administration: Integrated GST, Union Territory GST, Central GST, and
Compensation Bill.
This
sets the stage for states to authorize laws and actualize the new tax
system from July. The duty rates applicable on items and services are
relied upon to be declared by the legislature by April-end.
Therefore, once GST becomes effective from July, the leasing of land
and buildings - and home loan EMIs paid by the individuals who buy
under-development flats - will pull in the appropriate duty rate.
Depending upon the tax rate that gets reported for land, the impact
could be higher or lower than today.
Industry
Expectations
The
industry experts hopes that a lower tax rate of 12% on
under-construction real estate projects will help diminish the cost
of homes and increase affordability for end-users. However, a higher
rate of 18 per cent will make under-construction apartments more
expensive for buyers, making it difficult for them to invest in
residential projects.
Impact
of Central GST on Affordable Housing
After
implementation of Goods and Services Tax, leasing of land and
buildings, as well as EMIs paid on the home loan taken for purchasing
an under-construction housing unit, will attract tax. Needless to
say, the impact of this new tax on real estate market can be guessed
only after the declaration of the tax rate.
Experts
believe that input credit allowance will bring down the cost for
builders, directly affecting the overall price of a property. If
builders transfer the benefit to the clients, home buyers in India
will be able to save up to 20 per cent. Though GST will make property
expensive for the end-users due to increased rate of taxes, they can
still get benefited from it, if builder pass on the reduced cost to
them.
Given
the Government's objective of 'Housing for All by 2022', this
exception is probably going to proceed under the new tax regime.
Ministry of Housing and Urban Poverty Alleviation (MHUPA) has also
asked for the states and union regions to consider waiver or defense
of stamp obligation on moderate lodging ventures.
