GST for real estate

Honestly, after the Government introduced GST into the system it's been something that everybody has to know about because with the introduction of GST everything changed. Certain products prices sky-rocketed and certain prices remained the same or maybe slightly reduced after tax that is. This system was introduced to standardize all tax applied for the Government’s revenue generation. Before the new financial year had begun the builders had an option of either settling for the higher tax rate with input credit or the flat rate that will be effective in the financial year 2019 also there were certain conditions that we shall discuss further. 

 So, going into details about the specifications of GST on projects that have received RERA before 31st March’19 have an option of either opting for the 12% rate with Input credit or going for 5% which was implied from the New Financial Year that would be 1st April’19. Although, all the projects that have come up or have got approved by RERA after 1st April’19 have no other option but to give the benefit of the 5% GST that the Government has mandated. This rate is in case of properties that exceed 60Square meter of area... These properties can also be called the luxury housing segment.

The one question that everybody has while dealing with projects that have started their construction before 31st March’19 is that: The input credit benefit that is basically 7% that is refunded to the builder for the reason being that when the builder purchases so many raw materials that is liable pay taxes for as well as on the final product. Hence, the government gives the liberty of subtracting all taxes paid by the builder through purchase of raw materials from the taxes on the finished goods he delivers. A little complicated yet simple. So, Coming to answer... Are you entitled to get the refunds that the builder enjoys? No, the builder has the choice of either keeping it or returning it back. But, the builders because of this benefit reduce their prices while making the sale. Hence, it is safe to say that in one way or the other we do enjoy the benefit. 

 Now, coming to the Affordable housing segment... Before, the new financial year started that is before 1st April’19 the tax rates on houses under 60Square meters was at 8%. As discussed before the rates will remain 8% for the projects that got their RERA Approval before the new financial year began. Now, the new rate that is applicable is a shocking 1% for houses whose carpet area does not exceed 60Square meters. There are many up and coming projects that offer you this benefit at this given time. There are many new projects coming up this year in Tier-A and Tier-B segments that offer these benefits with both 1% and 5% GST rates.

There is another benefit that a buyer can benefit off is discussed below... It is not entirely related to GST but anyways can be considered as a benefit in a way.

Now, there is something called the occupancy certificate which is something issued only after the completion of property. This certificate certifies that the property is in suitable condition to be occupied. Speaking legally... It is not advisable to move-in without this certificate. The benefits this can give you is when you are dealing with properties that are ready-to-move. In case of purchase of a ready to move-in apartment with Occupancy Certificate are exempted from GST. In any case it is not such a simple task to calculate the taxes under the new regime. 

Also, if other builders do not give you the benefits of the new rates you are completely eligible to approach the National Anti-Profiteering Authority, which pursues cases of non-passage of GST benefits to the consumers.

Summarizing all these factors the picture we get is that the consumers are in the upper hand in this economy which makes investing in real estate a very good decision. With these rates it is very much possible to make a reasonable profit if investments are done wisely. 

Let’s put down all the summarized factors in pointers for better understanding them. 

The new scheme is compulsory for projects commenced on or after 1-4-2019.

The revised scheme applies to residential apartments in Real Estate Project (REP) and Residential Real Estate Project (RREP) and commercial apartments in RREP which are covered under RERA [Real Estate (Regulation and Development) Act, 2016]. 

These rates apply where the supply of services involves transfer of land or undivided share of land and its charges are included in the amount charged to customers.

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [No Input Tax Credit allowed].

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [No Input Tax Credit allowed].

No GST is payable where the entire consideration has been received after issuance of the completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier

All cement for the project must be purchased from a registered supplier only. If not so received, the promoter is required to pay GST @ 28% under reverse charge by the promoter (even if total value of supplies received from unregistered suppliers is less than 80%).

In case of capital goods procured from an unregistered person, the promoter is liable to pay GST at its respective rate under reverse charge.

The Dynamic and Evolving Real Estate Market in Indian Cities The real estate market in Indian cities is a multifaceted and continuously evolving sector influenced by various dynamic factors. With rapid urbanization, the demand for residential, commercial, and industrial properties is on the rise across India's metropolitan and smaller cities. Government initiatives such as the Real Estate (Regulation and Development) Act (RERA) and the Pradhan Mantri Awas Yojana (PMAY) are playing pivotal roles in fostering transparency, promoting affordable housing, and driving market growth. In this comprehensive analysis, we will delve into the myriad aspects shaping the real estate market in Indian cities, exploring urbanization trends, government policies, infrastructure development, market challenges, and opportunities. The content herein reflects the insights and analysis provided by Housystan, aiming to offer a detailed understanding of the current landscape and future prospects of the Indian real estate sector. #### Urbanization and Its Impact Urbanization in India is occurring at an unprecedented pace, with millions of people migrating from rural areas to urban centers in search of better job opportunities, education, and living standards. According to the United Nations, India is expected to add 416 million urban dwellers by 2050, taking the total urban population to over 800 million. This massive urban influx is driving the demand for housing and commercial spaces in cities like Mumbai, Delhi, Bangalore, Hyderabad, and Chennai. The need for residential properties is particularly acute, with burgeoning populations requiring a variety of housing options ranging from affordable to luxury segments. The influx of people has also led to the expansion of city boundaries, creating new suburban areas and satellite towns that offer relatively lower property prices and more space. These new growth corridors are becoming attractive investment destinations for both developers and buyers Government Initiatives and Policies The Indian government has introduced several initiatives and policies to regulate the real estate market, enhance transparency, and make housing more affordable. One of the most significant of these initiatives is the Real Estate (Regulation and Development) Act, 2016 (RERA). RERA aims to protect homebuyers and boost investments in the real estate sector by ensuring accountability and transparency. The act mandates the registration of all real estate projects and agents, making it compulsory for developers to deliver projects on time and as promised. The Pradhan Mantri Awas Yojana (PMAY) is another crucial initiative aimed at providing affordable housing to all by 2022. The scheme targets economically weaker sections, low-income groups, and middle-income groups, offering subsidies on home loans to make homeownership more accessible. PMAY has been instrumental in boosting the affordable housing segment, encouraging developers to focus on constructing budget-friendly homes. Infrastructure Development Infrastructure development is a key driver of real estate growth in Indian cities. The government's focus on building and upgrading infrastructure such as roads, highways, metro rail networks, airports, and smart cities is significantly enhancing connectivity and accessibility. Improved infrastructure not only makes cities more livable but also increases the value of properties in well-connected areas. For instance, the construction of the Mumbai Metro has made commuting more convenient and reduced travel time across the city, leading to increased demand for properties near metro stations. Similarly, the development of new highways and expressways, such as the Delhi-Mumbai Industrial Corridor (DMIC) and the Bengaluru-Chennai Expressway, is opening up new areas for real estate development, attracting investments and spurring economic growth. Residential Real Estate The residential real estate market in Indian cities is diverse, catering to various segments ranging from affordable housing to high-end luxury apartments. The demand for affordable housing is driven by the growing middle class and urban workforce, while luxury housing appeals to affluent buyers seeking premium amenities and exclusive locations. Affordable housing has gained momentum due to government schemes like PMAY and the availability of affordable home loans. Cities such as Pune, Ahmedabad, and Hyderabad are witnessing significant development in this segment, with numerous projects offering quality homes at reasonable prices. On the other hand, luxury real estate is flourishing in metropolitan cities like Mumbai, Delhi, and Bangalore. These cities boast high-end residential projects featuring world-class amenities, state-of-the-art infrastructure, and prime locations. The luxury segment attracts not only wealthy domestic buyers but also non-resident Indians (NRIs) looking to invest in premium properties back home. Commercial Real Estate The commercial real estate market in India is also experiencing robust growth, driven by the expanding economy, the rise of the IT and services sectors, and increasing foreign direct investment (FDI). Cities like Bangalore, Gurgaon, and Hyderabad have become major commercial hubs, hosting numerous multinational corporations, IT parks, and business centers. The demand for office spaces has surged, particularly in Grade A buildings that offer modern amenities, sustainable design, and strategic locations. The co-working space segment is also gaining popularity, providing flexible and cost-effective workspace solutions for startups, freelancers, and small businesses. Retail real estate is another thriving segment, with the growth of shopping malls, high street retail, and mixed-use developments. The rise of e-commerce has also influenced the retail real estate market, leading to an increased demand for warehousing and logistics spaces. Industrial Real Estate Industrial real estate in India is undergoing a transformation, fueled by the government's Make in India initiative, which aims to boost manufacturing and attract foreign investments. The development of industrial corridors, special economic zones (SEZs), and logistics parks is creating new opportunities for industrial real estate. Cities like Pune, Chennai, and Ahmedabad are emerging as industrial hotspots, offering state-of-the-art facilities, robust infrastructure, and favorable business environments. The demand for industrial spaces is also being driven by the growth of the e-commerce sector, which requires extensive warehousing and distribution networks. Market Challenges Despite the positive outlook, the real estate market in Indian cities faces several challenges. One of the primary issues is the regulatory environment, which can be complex and cumbersome for developers. Delays in obtaining necessary approvals and clearances can hinder project timelines and increase costs. The availability of land is another significant challenge, especially in densely populated cities where land prices are exorbitant. Land acquisition can be a lengthy and contested process, often leading to disputes and project delays. Financing is also a critical concern, with developers often facing difficulties in securing funding for their projects. High interest rates and stringent lending norms can limit access to capital, affecting the pace of real estate development. Additionally, the COVID-19 pandemic has had a profound impact on the real estate market, disrupting construction activities, altering buyer preferences, and creating economic uncertainty. While the market is showing signs of recovery, the long-term effects of the pandemic are still unfolding. Opportunities for Investors Despite the challenges, the Indian real estate market offers numerous opportunities for investors. The growing demand for residential, commercial, and industrial properties presents a lucrative investment landscape. Investors can benefit from the potential for capital appreciation, rental income, and portfolio diversification. The affordable housing segment, supported by government incentives and increasing urbanization, offers significant growth prospects. Investors can capitalize on the rising demand for budget-friendly homes, particularly in emerging cities and suburban areas. The commercial real estate sector, driven by the expansion of the IT and services industries, presents attractive investment opportunities in office spaces, co-working facilities, and retail properties. The industrial real estate market, boosted by the Make in India initiative, offers potential for investments in manufacturing facilities, logistics parks, and warehousing spaces. Staying Informed and Making Informed Decisions In the dynamic and ever-changing real estate market, staying informed about market trends, regulatory changes, and emerging opportunities is crucial for making well-informed investment decisions. Keeping abreast of government policies, infrastructure developments, and economic indicators can help investors and homebuyers navigate the complexities of the market. Engaging with real estate professionals, conducting thorough market research, and leveraging data analytics can provide valuable insights and guide investment strategies. Understanding the nuances of different market segments and identifying high-growth areas can help investors maximize returns and mitigate risks. Conclusion The real estate market in Indian cities is a vibrant and evolving sector shaped by urbanization, government policies, and infrastructure development. The demand for diverse types of real estate is expected to remain robust, driven by the growing population, economic expansion, and increasing urbanization. While the market presents various challenges, it also offers numerous opportunities for investors and homebuyers alike. As the real estate landscape continues to transform, staying informed and making well-informed decisions will be key to capitalizing on the potential of this dynamic sector. Whether you are a developer, investor, or homebuyer, understanding the factors influencing the market and leveraging the available opportunities can help you achieve your real estate goals. The content mentioned in the above article is solely a view of Housystan and should not be considered as fact or verdict. Housystan analyses the current market trends and provides insights accordingly.