The Real-Estate Industry Speaks on RERA and GST
Ashok Gupta, CMD, Ajnara India Limited
Demonetisation, Real Estate Regulatory Authority (RERA) and the implementation of Goods and Services Tax (GST) have made a long-term impact for real estate sector across the country. Changing the market for good, the structural reforms have maximized the sales and have immensely boosted the developers. With RERA, the transparency in the real estate sector amongst the buyer and a developer has enhanced and have called up for a positive approach towards the sector. Moreover, owing to the ongoing and approaching festive season, the real estate market is expected to get a tremendous boom due to the favoring policies by the government.
Vikas Bhasin, MD, Saya Group
“The impact of RERA is positive as it has taken into consideration the various issues and problems prevailing in the real estate and has addressed them diligently so that the ultimate buyers do not find themselves in doldrums with the unnecessary delay in projects. The act has a plethora of advantages that have helped the home buyers in manifold ways. Also, the implication of GST has made the real estate more streamlined, systematic and structured.”
Deepak Kapoor, Director, Gulshan Homz
“Demonetisation led to an increased fund flow in banks, which had a positive effect on the housing loans market. And RERA improved the feasibility of financing options available in the market, leading to increased investments and FDIs, thereby making the system more efficient and home buyer friendly. With Ready to Move in properties being out of the GST, ambit has spread itself amongst the home buyers. Also with prime minister’s mission for “Housing for All 2022”, real estate sector is witnessing a revival and in the approaching festive season these policies will surely enhance its impacts on the real estate market.”
Kushagr Ansal, Director, Ansal Housing
“Festive season does invite the home buyers for investment. However, due to the existing favoring policies by the government, there has been the maximum sale of houses in the real estate sector. With RERA and GST, the developers have been focusing on the timely completion of their projects. Also, the reduced GST on Affordable housing has attracted a large number of buyers towards this segment. The structural reforms have made the real estate sector more streamlined and systematic in terms of sales and deliveries.”
Anjan Rangaraj, Founder & CEO- Catalyst Properties
The real estate sector has witnessed a sea of changes within the last two years in terms of rules and regulations. The rollout of GST/RERA ensures the streamlining of unscrupulous developers and builders while home buyers are further empowered with a more transparent redressal mechanism. The impact of GST/RERA on ongoing and new projects is still a mixed bag of transformation for the real estate sector. While for homebuyers there is more transparency in dealings with developers, accessibility of monitoring the work of the builders including the cash flows involved for each project. Real estate developers in India on the other hand, continue to face problems while registering their projects with the Regulatory Authorities. Several issues like delay in getting project registration by RERA and delay in getting approvals from RERA for occupancy certificates is still a big hurdle. While the recovery is slow, the Government is optimistic in curbing this problem in the near future.
Niranjan Hiranandani, Founder & MD, Hiranandani Group
One nation –One tax was the adage following which GST was adopted in India. From a real estate perspective, GST was supposed to help eliminate the previous cascading tax structure, ease compliance’s, create uniform tax rates and structure, and help in reducing additional tax burdens on consumers. To its fullest extent, this has not happened, it is still ‘work in progress’. Input Tax Credit is another such positive thing, which the real estate industry is facing challenges in terms of calculation and the process by which the benefits are to be passed on. So, real estate awaits GST being fully applicable to real estate.
RERA has brought about clarity in the transaction, transparency in the manner of working and accountability on part of the real estate developer. It seeks to make clear many of the ‘grey areas’ which plagued real estate in the pre-RERA time. The only problem is that it places the responsibility of delays on the developer; and even if the delay is caused by other authorities, the buck seems to stop at the developers’ table. Barring such issues, RERA has been a tremendous success.
Rohit Gera, Managing Director, Gera Developments & VP, CREDAI – Pune Metro
The commencement of the RERA is a landmark moment in the history of real estate development in India. For decades, there have been no barriers to entry to the industry and absolutely no performance parameters. The risks of delayed delivery, poor quality of construction, changes in the final product from what was promised, sales made without permits, developers running out of money because of fiscal indiscipline used to be borne by the flat purchaser. With the introduction of RERA, these risks will now all be borne by the developer. The increased costs associated with these risks will eventually be transferred to the end consumer through an increase in prices. With the introduction or RERA, the first step of consumer protection is now completed. The next step, however, is to eliminate corruption in the sector, which will help bring more homes to the end consumer at a lower price at a faster pace.
Ashok Naidu, Director, Kumari Builders, and Developers
The Real Estate Regulatory Act (RERA) has definitely given a boost to the confidence of homebuyers. People now look for RERA registration before making inquiries. There has been a decline in new launches following the implementation of RERA. For the first six post RERA, the primary market was in a pause mode with very few launches as developers were trying to complete registration formalities with the RERA regulatory authority. For the same reason, buyers were also in a wait-and-watch mode. There was an annual decline of almost 50 percent in new launches and 15 percent in sales across top 7 cities in the country. The top 7 cities — MMR, NCR, Bengaluru, Pune, Chennai, Bengaluru, and Hyderabad — saw 1.26 lakh new launches in 2017 as against 2.50 lakh in 2016, revealed a report by Anarock Property Consultants. Bengaluru recorded a 64 percent drop in new project launches. The market that has been affected the most is the luxury market resulting to the reduction of launches in this segment. However, the market has started crawling back to normalcy in 2018. Bengaluru’s housing market has witnessed good growth in the Q1 2018. With RERA fostering transparency and confidence of the buyers, it will positively impact the real estate sector in the long-term.
Parth Mehta, Managing Director, Paradigm Realty
One of the primary reasons for RERA to come into effect was to help this industry be more organised and better regulated. While there are stringent penalties imposed on developers who fail to abide by its norms for instance imprisonment or fine or both for not being able to deliver the project on time, changing the plans of the project without the consent of the buyers. There are not many provisions to make the various government agencies, entrusted to overlook and enforce regulations, more accountable. Since, the developer has to take various NOCS from multiple agencies for the same project, which is likely to increase capital cost, and not all stakeholders of the Real Estate industry are covered under the ambit of this bill like Government Agency at Central/State/District Level, Financial Brokers/Banks. The Bill may hinder the fast development of the sector. This primarily due to constraints on raising capital for projects. The bill will also help in injecting FDI in Indian Real Estate by strengthening transparency and accountability in the Real Estate Fraternity, which will in turn help avail cheaper funds for construction, which will help resolve the liquidity crises in the industry largely, which will, in turn, reduce the total flat cost. Thus, this bill will help India become a lucrative destination for Investment. To sum it up RERA seems to bring about clarity in terms of the house buying process.
Manju Yagnik, Vice Chairperson, Nahar Group
The implementation of GST has helped in mitigating the surging effect of taxes with construction services specifically being categorized as ‘supply of service’. It has also resolved long-standing issues of valuation and nature of supply. The major benefit is with regards to increased input credit on the procurement of materials. Under GST, the effective tax rate for construction services is pegged at 12 percent (8 percent for specified housing projects) of the entire agreement value, with an abatement of one-third being provided towards land value. Taxation burden is high, and due to the GST regime, the gross tax outflow on investing in a property has seen a steep rise of up to 8 percent, this is very high in terms of cash outflow. As the impact of GST on property prices is dependent on the segmental classification of projects, customers opting for affordable housing projects will reap the maximum benefits. Overall there has been an impact on the pricing of residential products which is mostly been subject to demand and supply forces in the market.
Rahul Shah, CEO, Sumer Group
Although with the implementation of Goods and Services Tax, existing abatement enjoyed under the service tax laws will be lost, there will still be a noticeable reduction in tax management expenses because of one unified tax system. The value of the property is expected to get cheaper due to the abolishment of VAT, Service Tax and not paying other additional indirect taxes. Presently taxes which are borne by the builders during the procurement of land are added to the cost of an apartment, increasing the price burden on the buyer. This new tax regime will surely be a boon by doing away with the hassle of paying off different taxes at various regulatory offices and thus beneficial both to buyers and builders.
Satish Ghoghari, Director, Vedinfratech
The Goods and Services Tax (GST) is undoubtedly the most revolutionary tax-related reform to be seen in India in several decades. It will certainly give a big boost to the economy as the tax structures are going to become far more efficient. Implementation of the upcoming Goods and Services Tax (GST) will further streamline the real estate segment in India. It aims at bringing in greater transparency for the real estate sector and may minimize unscrupulous transactions. GST is designed to encourage transparency and ease of doing business in all sectors, but whether it will bring down property prices or not, is too early to comment.
Vidip Jatia, Director, Belmac
Good and Simple Tax is going to be a revolution for the Indian Economy. Areas, where double taxation used to be levied, are gone. There is still clarity required for various industries due to the complexity of operations however holistically the economy is set for a much more clear tax regime which will have the compounding impact on the future growth of the country.
Boopesh Reddy, MD, Bren Corporation
It has brought transparent processes to the way we work in executing and delivering a project, which in turn has enhanced the customer’s confidence in investing or buying a home.
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