Real estate professionals and developers want the government to rationalise the GST on under construction properties in order to stimulate sales. As a result of having to pay GST in addition to stamp duty and registration fees, the sale of properties under construction has declined.
Pankaj Kapoor, an expert in real estate and the founder and managing director of Liases Foras, expressed concern over the declining sales of properties under construction. “Under-construction property is subject to the Goods and Services Tax; consequently, many homebuyers prefer to purchase ready-to-move-in properties. In addition, there are fewer risk factors associated with properties that are move-in ready. Therefore, developers rush to complete the property in order to generate sales, which requires them to borrow funds. In addition to the interest on borrowings, the increased input costs are added to the property’s value, which the customer indirectly pays. The government should therefore rationalise the GST.”
The demand to the government has always been to make the GST returnable and give credit on input. Combined with the current increase in input and construction costs, the GST increases the price of a project. Therefore, it should be returnable, as we do not receive any input credit for the cost of construction, which we pay on average at 15-18%, and sales are subject to a 5% GST surcharge.”
The government has decided to tax capital gains totaling Rs 10 crore beginning April 1. Kapoor anticipates an increase in cash transactions in the luxury market, including land and commercial office space. He stressed that black money in the real estate market might increase due to the introduction of taxes on capital gains.