New regime to cement real estate sector, benefit buyers

Sector experts believe the proposed GST would streamline the domestic supply chain and have a beneficial effect for home buyers

A single consolidated tax, freeing the real estate sector from 16 major taxes and levies, has the real estate sector pumped.

Sector experts believe the proposed national goods and services tax (GST) would streamline the domestic supply chain and have a beneficial effect for home buyers.

“Streamlining the sector’s domestic supply chain will lead to a consolidated and efficient warehousing infrastructure. This will give a needed push to the retail and industrial sectors. The positive sentiment after passage of the Bill will receive a further boost if the Reserve Bank does its bit in reducing policy rates, on the back of a good monsoon and controlled retail inflation,” said Shishir Baijal, chairman, Knight Frank India.

With state and central government taxes being fused, double taxation would be avoided. The sector faces issues of multiple taxation, amounting to at least 25 per cent in indirect taxes.

“With the uniform tax, developers will have free input credits on GST paid for services and goods purchased by them, which will reduce cost and can be passed as reduction to buyers. It will ensure a uniform tax structure and improve tax compliance by developers. GST will have a cascading effect for home buyers - developers, with more margins in their hands will be able to restructure the cost of products in favour of consumers,” said Brotin Banerjee, managing director, Tata Housing.

Anshuman Magazine, chairman for the region of CBRE, the multinational realty agency, said the 250-odd ancillary segments would also benefit. “Unified taxation will also infuse needed transparency into our taxation system. Overall, the Bill is expected to have a long-lasting and progressive impact on the economy, enhancing the prevalent business sentiment,” he said.

At present, there are different types of taxes on almost all aspects of the real estate business, including land and construction, by state and central governments. Value added tax is levied by states and that on value of services by the Centre.

"The heavy taxes that are being paid by developers will automatically go down by a considerable percentage. Construction costs would be reduced to some extent and this could be passed on to customers, triggering transactions in home buying. There would also be a positive impact on the commercial property segment; commercial real estate, starving from funds, could see some revival," said Parveen Jain, president, National Real Estate Development Council.