Now that the initial euphoria over the Rajya Sabha passing the Constitutional Amendment Bill on 03 August 2016 has settled down, and the Government has set April 2017 as the target date for implementing GST, it is time to take a second look at what potential it has vis-à-vis real estate, said Niranjan Hiranandani, CMD, Hiranandani Communities and Founder and First President, NAREDCO Maharashtra.
“For starters, this is definitely a major economic reform undertaken by the Narendra Modi Government. I don’t think anyone doubts that it will impact the economy positively. Like all things in the Indian economy, there is a proviso: it must be implemented properly and managed well. These two happening, GST has the potential to add at least one per cent to India’s GDP growth,” said Niranjan Hiranandani.
For the home seeker, the expected positives depend on a key factor: the GST rate applicable on purchase of residential units, said Niranjan Hiranandani. “If the GST rate will be ‘moderate’, and the transactions get covered under the ‘lower rate schedules’, it will result in positive scenario for home buyers,” he said, adding that the model GST law does provide an indication that the home buyer in general could benefit from the introduction of GST – subject, of course, to the proviso that the GST rates are moderate.
“It all depends on the rate of GST and opinions over the impact are divided,” said Niranjan Hiranandani, adding that completed homes would be ‘out of purview’, as a buyer already pays stamp duty to the government. It would be only applicable to under-construction property and the overall cost of construction might increase for buyers if the rate is higher than current applicable Service Tax rate, which is 15 per cent,” he added.
“While we hope to see the positive impact being felt by the real estate sector, the devil is in the detail – we have some details about different aspects, some aspects are not very clear,” said Niranjan Hiranandani. Even though one would hope things will improve, as of today, it is a little premature to conclude that GST will give the real estate sector a boost. Yes, we are hopeful of an overall conducive environment for business; but there is a need to wait for finer points to unravel, especially pertaining to the appropriate rate post abatement for the Land Value. Also, clarity on input tax credit will define the eligibility criterion for developers,” he added.
“It seems that GST has the potential to bring about a change in real estate sector – at certain layers – but it will depend on the nature of transaction and rate of tax,” said Niranjan Hiranandani. “I foresee a positive scenario if GST succeeds and results in GDP growth in the long run – obviously, the real estate sector will definitely benefit. Proper implementation of GST will result in GDP growth, will be positive for real estate; should be ‘advantage home buyer’,” he concluded.
Niranjan Hiranandani is Founder & MD, Hiranandani Group, his recent initiative is Hiranandani Communities. He is the Founder and First President (Maharashtra), National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Poverty Alleviation, Government of India.