Post Demonetization And RERA, Real Estate Is Now Gearing Up For GST

While real estate segment is still jostling with the post-effects of demonetization and RERA, GST is on its way to be implemented on July 1 making it more difficult for this segment to cope up. RERA was implemented on May 1 where developers are required to be registered within 3 months. Most of the builders are waiting for last minute registration for their projects. RERA will raise the cost of project as it held builders to be responsible for any delay in the project

Tax officials already disclosed that GST may derive profits to the developers and builders but the end-user will end up paying more. This shall be mainly due to the slash-down in the input cost to the developers. As against 28% of service tax over raw materials, developers shall now be required to pay 12% under GST. The builders will have lesser liability and more credit as the input tax surplus shall not be refunded to the developer.

RERA has already upscale property pricing in Bhopal by 12% and GST is expected to worsen the situation further. While GST is expected to bring rationalize tax structure, home-buyers as end users are hardly expected to derive any benefits out of it as real estate developers and builders are not expected to pass on the benefits.

Further due to economic setback, post-demonetization impacted the sales by pushing it down further quarterly. Even there is no demand of homes due to lack in employment generation.

No developer is keen to launch any new projects and in a way only distress selling is upheld in realty segment. In order to release investments, investors are selling off on-going projects under current scenario at break-even also.

Post GST rolling, it is expected that the overall cost of new project shall be inflated by 6%. Under such scenario, as no developer is taking initiative to launch new projects, it has been projected that their will be shortage of houses in Bhopal if the current situation persists.

Taking into account last 3 years sales, post RERA and demonetization, realty segment is experiencing slowest growth with low sales. Over 300 projects bearing more than 6000 units at Delhi are still waiting for their buyers. Demonetization has already pushed down property pricing by 40%