How GST effects properties

July 5, 2017 Finance Talk Valli Sarvani No comments

With the Goods and Services Tax (or GST) coming out, a new era is in store for the entire economy of India, including the Indian real estate market.

There seems to be both good and bad in store for customers.

On one hand, real estate developers with a lot of inventory left to sell will hike their taxes for the upcoming home buyers.

However, on the other hand, new homes coming on the market will have a much smaller cost, which lifts the burden off of both the buyers of these places and the developers of upcoming real estate projects.

Under the Goods and Services Tax (GST), all taxes on projects that are under construction has increased by a factor of 12%, which ends in an increase of 6.5% for the customers buying the property.

Current developers will have to bear the burden of this tax alone, since it cannot be passed onto the customers buying the property or homes that are ready to sell.

Vinod S. Menon, the CEO of Citrus Ventures, notes how the over benefits of the GST are always the focus of discussion, never the details on the tax.

However, Shishir Baijal, the chairman of Knight Frank India, says how, similar to the note ban, the benefits of the GST exist in the long term.

There will be some disturbances in the market at first, but afterward, things will smooth out and show overall improvement.

Additionally, the affordable housing market will see the benefits of the GST right away, since there will be no tax on it.

Therefore, this tax will focus on the middle-income and high-income segments, which take up about 70% of the entire housing market.

However, there are many who are still unsure if the Goods and Services Tax will be beneficial to the housing market as a whole.

There is still a negative outlook on the Indian real estate market for the near future, and it remains to be seen whether or not the controversial procedures of the GST will turn it around.

Image by Gerd Altmann from Pixabay (Free for commercial use)