By Pradeep Aggarwal
The moment GST got rolled out in India, the real estate sector was in a state of dilemma regarding how to go about the new taxation system and what will be the new rate. However, ever since the rate of 18 per cent got declared for this sector, where effective rate was 12 per cent (after 33 per cent of abatement), a question playing on everyone’s mind was – why is the same rate applicable to the affordable housing segment as well?
In the last Union Budget, affordable housing got accorded with infrastructure status, thus signalling a strong government support for the same. After GST’s implementation, hopes were high that either this segment would be kept out of its ambit or the lowest bracket of tax would be made applicable to it. The only respite that came for developers was the slashing of GST rates for construction works being handed out to independent contractors, in case the developers are not developing the projects themselves. The rate at which the contractors would now charge GST for their work has been reduced to 6%, which will help in marginally bringing down construction costs.
A lower tax net was needed in order to reduce the burden on developers and thereby assisting the customers with lesser tax liability. Furthermore, with the anti-profiteering clause in GST, developers will have to abide by the rule to pass on the benefit of input tax credit to the respective customers. Thus, it is a win-win situation for both developers and customers, that will gradually help expand the demand for affordable housing.
With a housing shortage of over 2 crore units for the urban poor in India and demand for low-cost housing increasing, a simplified and transparent real estate sector had become the need of the hour where RERA has promised to answer the queries and come out with solutions to the customers. Affordable housing will succeed in following the concepts and rules of RERA which will secure the future interests of every buyer. With affordable housing being a brainchild of the Central Government aimed towards fulfilling the mission of Housing for All by 2022 and RERA striking at the correct time, a different parcel of real estate sector will become prominent in the near future.
A disciplined and systematic realty sector will require robust infrastructure at its perusal. This query has already been addressed successfully by the Central and State Governments who are diligently accelerating the work at Smart Cities and on the AMRUT front. Tier 2, 3 and 4 cities, which lacked road connectivity, are now looking at patches being built in double digit each day. Development and connectivity between National Highways, Expressways and State Highways will gradually enhance connectivity. With rapid advancement of infrastructure in the country, the landscape of Indian realty is bound to change.
Finally, the macroeconomic and global scenario is yet to play its part in the growth and development of India’s real estate sector. And as we move towards encouraging foreign investment by relaxing the norms and eradicating the barriers of entry and exit, foreign funds, technology and concept will only better the scenario in India. Affordable housing being a trending concept in India will soon witness heavy foreign fund inflow which will be helpful in meeting the goal of Housing for All. This, on the other hand, will also increase the competition which will greatly benefit the Indian buyers. In a nutshell, the concept of affordable housing has come as a blessing in disguise which will not only help revive the real estate sector in India, but will also take it to another level.
(The author is Co-Founder & Chairman, Signature Global)