Post implementation of GST from 1st July 2017, several Indian market sectors are getting effected. Real estate market of India is one of them. GST has covered all indirect taxes like service tax, excise duty and value added tax which apply to the procurement of goods and services during construction, under one single tax structure leaving only the direct taxes (wealth tax and capital gain tax), stamp duty and GST for all property-related transactions.
The alignment of GST is about to bring transparency for both the buyers and the developers. Earlier, the buyers were paying several indirect taxes, which had been much complicated for them to understand. Also, the taxes paid by the buyers were decided by the state government, where property is located and on its status of construction. Earlier, for an under-construction property VAT, service tax, stamp duty and registration charges were to be paid by the buyers. Whereas, there were only stamp duty and registration charge applicable for ready possession apartments.
The latest government declaration updates the GST charges all under-construction properties from 12 % to 18% for two-third of the property value. The earlier 12% GST charge were declared on the total property value. This excludes stamp duty and registration charges. For properties which are ready-to-move-in there is no direct tax applicable. As the ready possession apartments were kept out of the ambit of updated tax regime, it is expected that demand of buying ready possession properties would increase exponentially.
However, the real estate developers are still trying to get accustomed with the new tax regime, they have already started receiving enquiries about the ready possession apartments. As per the current scenario, several properties which were complete yet unsold are going to get a proper justification. Earlier, post demonetization, investors were skeptical about real estate investments, but now, the market is experiencing an enticing growth and the demand of investment in the properties are rising.
The stagnant real estate transactions, due to demonetization last year, left several inventories unsold. From affordable to luxurious, several of these properties were ready possession. According to a latest survey, ready possession properties are going to rule the real estate business, because it is highly demanded, as the buyers get to move in their dream home much early and as it is out from new tax regime, it turns out to be much more enticing.
The lenient government policy on exemption of ready possession properties out of GST ambit has attracted the complete focus of the potential homebuyers towards it.