GST & RERA: Benefits to Real Estate
GST & RERA: Benefits to Real Estate
GST & RERA: Benefits to Real Estate
GST & RERA: Benefits to Real Estate

The GST and RERA are the most note worthy reforms of this year by the Government of India. These reforms had been long due and India Inc. had been demanding these since a very long time. The Real Estate industry benefits from both of them.

The introduction of RERA, has created a structure into the real estate industry. The RERA not only protects the buyers, but also benefits genuine credible developers and severely penalizes the fly by night developer entities. The result has been that the pre-launch product, where the developers sold flats before construction began, is going to be wiped out. The assumption made while launching this product type was that the real estate prices will always be moving upwards, so a product sold during pre-launch at current market price is being offered at a competitive price, because in the future when the construction is completed, the same product will cost more than current prices. This is a classic textbook case of selling a pie in the sky! Whereby the seller pre-sells the pie before it is cooked, thus transferring majority of the risks to the buyer. In such a scenario the seller can do anything with the funds received from this pre-sale and in most cases can even get away with defaulting on the delivery of the final product. Which has been the case with quite a few players in the real estate industry with the result is that the credible developers suffered a lot, who have delivered on all their products.

While speaking to Team Estrade on MahRERA (Maharashtra RERA), Ashok Mohnani, CMD – Ekta World added, “Real estate Regulations & development Act 2016, (RERA) is a progressive and revolutionary legislation. RERA is a great measure undertaken by the government to augment transparency in the Indian property market along with protecting the interest of home buyers and developers alike. Since the Act has made it mandatory for builders and developers to divulge all the project-related information to the customers, it has greatly helped in offering a leveled real estate scenario, where customers can make well informed purchase decisions”

Maharashtra State Government is leading amongst all state governments for the aggressive implementation of RERA. But so far, the projects registrations have been slow. As the project registrations deadline of July 31, 2017 approaches, the number of registrations will have to increase exponentially across Maharashtra. Commenting on the same, Vivek Mohnani, MD – Ekta World, said, “So far approximately 670 projects have been registered and this number is steadfastly increasing as brand conscious law abiding developers complete the registration process. By the end of the month, I am confident that many more developers will have completed the process”.

It is expected that over time the cost of building materials will be lowered considerably with the introduction of GST. This will ease the transportation costs and other expenses related to spillovers, thereby bringing in the benefits for both the developers and building material companies. Commenting on this, Ashok Mohnani, MC – Ekta World said, “Implementing GST is a Landmark move by the government to simplify taxation in the Indian economy. Undoubtedly, GST will be a milestone in for Indian industries, considering that it will subsume majority of the taxes levied consolidated tax structure. Additionally, the amalgamated tax system will curb multiple taxation practices at state and center level, which hurt consumer with their inflated price points. GST is enforcing transparent transactions and minimizing unscrupulous trades across all realms and bringing all genres under its ambit. For real estate the GST has been fixed at 12% after giving 1/3rd deduction for deemed value of land. For projects in their nascent and early stages of Construction GST will be particularly fruitful since the benefit derived from the input credit can be passed on to the Consumers, initiating lower total outlays. The exact benefit will differ from location to location and from the type of development undertaken such as Luxury or affordable housing.”

Analysts with the Estrade Research Team pointed out that in the real estate industry, raw materials like cement, bricks and sand, cannot be transported over long distances, therefore have to be sourced from close proximity. Thus the credible and successful developers are those who have an in-depth network of local vendors to source such raw materials.

So, GST and RERA are definitely going to benefit, but how much of it, depends upon how well the market accepts these new changes and how well the laws are implemented to create a level playing field for all.

By Vishwasjeet Singh- Editor in Chief – www.estrade.in 

(Disclaimer – The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position ofwww.estrade.in. For further queries kindly feel free to write info@estrade.in)

GST & RERA: Benefits to Real Estate