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GST effect: Ready possession houses high in demand
DNA  |  February 4, 2019

Sudhir Suryawanshi

The developer and buyers who were expecting a reduction into 12% GST on the under construction houses got disappointed from the Budget. They said that if the government did not act quickly, the real estate sector will face major trouble .

 

According to the data, collected by the Mumbai based real estate research firm Liases Foras, the inventory of the under-construction houses have been piled up and showing decline in its sale. "The main reason behind this decline in the sale is that the high GST of 12%, while on the ready to occupied houses, there is no GST. As a reverse result, the sale of ready possession houses are picked up. As per data, it has gone up by 27% this year in six major metro cities against 11% last year," stated in the report.

 

The report further says that in the Mumbai Metropolitan Region, the ready possession houses sale is gone up by 26% in 2018. "Last year, the sale of ready possession houses was up by 22%. On the other hand, under construction inventory has been piling up. In 2014, 6.42 lakh under construction houses on all major metropolitan cities registered while in 2018, these under construction houses inventory gone up 8.64 lakh," reads the report.

 

Pankaj Kapoor, MD at Liases Foras, real estate research firm said that the tax relaxation for two years from one year will help the developer to dispose of the piled inventory. "In budget government exempted leverage of tax on notional rent on unsold inventory for two years from the date of completion of the project will also to reduce the financial burden. And at the same time, they will get two year window period as well for these piled up inventory sale. The ready possession inventory has been also gone up marginally."

 

Kapoor said that the government should also slash the high GST charges on under construction houses. "If anyone is buying a Rs 1 crore worth of house, then he has to pay Rs 12 lakh as a GST apart from the 6% stamp duty and registration charges. So to buy the house for buyer is quite cumbersome. Therefore, the sale in under construction has been gone down. Actually, earlier people used to prefer to buy the under-construction houses and developer also used to sell these houses at reasonable rate compared to ready possession. The reason developer used to get fund from buyers in instalments. That helped him to ease the debt burden and fund the project as well. It was a win-win situation for the buyers and developers. Now, the trend is reversed. The developers need more holding capacity and there are very few developers who have that long holding capacity," Kapoor said.

 

Arvind Goel, president of Maharashtra Chamber of Housing Industry, (Navi Mumbai) said the real estate sector is going through in a very tough time. "We expect government more lenient towards this sector that is a major contributor in GDP growth. It also generated maximum employment. However, presently the real estate sector condition is not good. We hope as they promised that the ministers' committee will be set up to study the GST impact on under construction houses and market. We expect that this committee will recommend slashing this GST rates as early as possible before the market goes haywire," Goel said.

 

Goel further said that they had also made the presentations and put forward the reducing GST demand to the government.

 

KEY FINDING

 

According to the data, collected by the Mumbai based real estate research firm Liases Foras, the inventory of the under-construction houses have been piled up