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The Indian real estate sector has witnessed a sea change, over the last couple of years. However, in spite of the advancements in construction, the use of high-end technology, the advent of smart homes and flexible apartment configurations being made available according to the evolving market, the industry is going through a lull. Real estate experts maintain that with all the major policies having been implemented in the last five years, 2019 could be the year that the property market bounces back. Nevertheless, they add that several niggling issues also need to be addressed, so that all the stakeholders in the sector can reap the benefits of a bright first quarter in 2019.
GST rate on real estate
Revising the rates of the Goods and Services Tax (GST) on various segments connected to the real estate industry, could help both, consumers and developers.
The developers’ community is hopeful that with the GST Council meetings underway, if the GST on cement could be lowered from 28 per cent to 18 per cent or lower, it will be a game-changer. GST is also a big hindrance for buyers. “The only thing hampering the demand for housing in the market, is the GST of 12.5 per cent. This has to be substantially reduced by the government, as it will help in boosting the demand for housing and the overall GDP of the country,” says Dhaval Shah, joint managing director, Parinee Group.
Merging of GST with stamp duty and registration
Property buyers are required to pay 12.5 per cent GST on under-construction projects, five per cent stamp duty (which has now increased to six per cent in Mumbai) and registration charges.
“So, when we talk about real estate being unaffordable, the truth is that 20 per cent of the cost is spent in tax components, stamp duty and registration, which is a deterrent. We are hoping that the stamp duty and registration are merged into the GST. This will make properties cheaper for the customer and benefit the buyers,” explains Aditya Kedia, managing director, Transcon Developers.
Improvement in finance and an end to the NBFC crisis
The prevailing financial turmoil, vis-à-vis NBFCs (non-banking financial companies) and HFCs (housing finance companies) is likely play out in the year 2019. Mayank Ruia, founder and CEO of Maia Estates LLP, points out that its resulting effect on liquidity available to the developers, shall determine the pace of new projects and launches. “The financial chaos may also prompt developers to liquidate existing stock aggressively, to avoid duress. However, as long as home loans are easily available and at affordable rates, good opportunities will be available for consumers,” Ruia concludes.
Macro-economic factors that could affect the property market in 2019
- The general elections in 2019, could be a big turning point in how the real estate market will behave and progress.
- The real estate industry is expected to see a continuing process of clean-up in 2019, with evolving regulations on funding and the further evolution and implementation of the Real Estate (Regulation and Development) Act (RERA).