National Real Estate Development Council (NAREDCO), has requested Government of India to fix GST rate for the real estate sector at 6 per cent from the current rate of 12%. NAREDCO feels that GST rate of six percent with input tax credit will be a win-win situation for all stake holders.
According to NAREDCO, capping GST at 6% will incentivise buyers to invest in under construction properties, who otherwise are waiting for completed properties to save 12 percent GST. This will create huge job opportunities.
NAREDCO has conveyed this to the Government in a meeting with Hasmukh Adhia, Secretary, Finance and P. Radhakrishnan, Minister of State for Finance & Shipping. NAREDCO delegation included Rajeev Talwar, Chairman and Mr. Niranjan Hiranandani, President, besides others submitted a detailed note on above issue for their consideration.
NAREDCO, Chairman, Rajeev Talwar says “We are requesting Government for a GST rate of six percent with input tax credit. We feel a step like this would go a long way in boosting demand. The buyers stand to benefit as developers would pass on the benefit to the buyers. The Government also stands to benefit as they will collect more tax because of increase in demand. This is a win-win situation for all.”
Under the special schemes for affordable housing, in partnership the effective rate for housing projects with unit sizes up to 60 sq. metre is presently eight percent. NAREDCO has requested a GST of six percent for all housing projects across the board.
NAREDCO President, Niranjan Hiranandani says “Land cost is the most significant part of the project cost in a real estate project. The abatement of 30 percent for land cost is not enough and it should be pegged at 50 percent, even though the land cost in cities like Mumbai and Delhi NCR it may go up to 60-70 percent of the property cost.
According to analysts the tax differential between the tax rates for a ready to move property and an under construction property has compounded the problem. The GST rate for under construction properties is 12% whereas for ready to move properties it is zero percent.