GST Council meet: Will the rate cut do the trick for real estate?

While a bunch of real estates developers have their fingers crossed over their demand for lowering the GST rate on under-construction units from 12 per cent to 5 per cent, there are some industry insiders who are in fact unmoved by the government agenda of the 33rd GST Council's meet on February 20. They say uniform taxation of under-construction and RTM (Ready to Move) homes is a better option than the GST rate cut.

Elaborating upon the idea Anuj Puri, Chairman at ANAROCK Property Consultants told Zee Business Online in a written statement, "Rather than a GST rate cut, it is the recent hint at a possibility of uniform taxation of under-construction and RTM homes, which would really help. A GST rate cut would compel a few more fence-sitting buyers to take the plunge, but it will not serve the purpose of making under-construction properties as attractive as RTM properties." 

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He said that limited advance sales will continue to curtail cash flows for developers who will have to resort to other financing options. Apart from the fact that private equity is an option only to players with exceptionally strong balance sheets and completion records, PE also comes at higher interest rates.

Standing in sync with ANROCK views Rakesh Yadav, CMD, Antriksh India Group told, "The real estate sector may experience a minor, temporary lift on the back of a GST rate cut, and a bigger, longer-lasting lift of the differential tax is done away with altogether and one uniform tax is applied." Rakesh Yadav of Antriksh India went on to add that the larger issues of the sector that need to be addressed are reducing the dependency of builders on external funding sources and an address to failed or delayed projects. He said that failed or delayed projects have severely diminished buyers' faith in under-construction properties. This issue must be addressed via measures to ensure that such projects are either completed or their buyers are refunded in full so that their home buying options open up once again.