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Chennai: Real estate developers have welcomed the passage of the GST bill in the Rajya Sabha, saying the legislation could help bring down construction costs and translate into a reduction in the cost of housing.
Confederation of Real Estate Developers' Association of India (Credai) national president-elect Jaxay Shah said a long-felt need of the industry had been fulfilled. But unless the fine print was read, the impact on the end customer could not be gauged, he said. "Our suggestion to treat GST separately since real estate attracts stamp duty, as well as extending GST credit for construction, should be seriously considered by the government, or else the end consumer will end up paying more for his house," said Shah.
Developers would see a reduced tax burden on essential construction materials like cement and steel under the GST regime, said Credai Chennai president Suresh Krishn. Customers would be encouraged to invest in homes once price reduces, he said. "The bill brings in a more comprehensive and uniform tax structure that will ensure greater transparency in the sector," said Krishn. Developers were waiting for the government to announce the GST rates to gauge the actual impact on the sector, he added.
"We hope the GST rate will be moderate, and the transactions get covered under the lower rate schedules. The model GST law does provide an indication that the home buyer in general could benefit from the introduction of GST, if the GST rates are moderate," said Mumbai-based developer Niranjan Hiranandani.
One of the positives that might come from the bill is the removal of restrictions on credit utilization, which will strengthen the credit chain in the system, said another developer from Mumbai, Neha Hiranandani. However, she cautioned, "The bill treats construction activities as 'work contracts' but is silent about guidelines on valuation of land and has kept the sector away from input tax credit. This could mean higher costs for the end consumer." Also, implementation of the bill will not subsume the stamp duty levied by the states, who may increase it from time to time to meet revenue targets thereby pushing costs higher for the buyer, " she said.
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