[vc_row][vc_column width=”2/3″][vc_column_text]July 1, 2017, was the date when GST came into effect that is more than two and a half years from the present. But there is still a lot of confusion among purchasers and builders regarding certain aspects. We are sure that most of you are also trying to understand how GST works on real estate. So let’s take a look at what is GST and how it impacts buying or selling of a property.
When the GST council had a meeting in the last year they came up with some new rules. The revised laws of GST state that the builders can either select the new GST rate or stay with the old GST rate. The new GST rate is reduced and does not have the input tax credit. But the old GST rate will still have the input tax credit.
Prior to this meeting, the GST rate for affordable housing was 8% including the input tax credit. Earlier GST rate for real estate was 12% which also included input tax credit. This was revised in the GST council meeting which was held in Mumbai in February of the last year. The latest GST rates are 5%for real estate and 1% for affordable housing respectively. These new revised rates do not include any input tax credit. But these new rates raised a substantial amount of concerns among developers.
The developers stated that the problem was not the latest GST rate but the drop in input tax credit. When this issue was taken into notice by the government gave the developers a choice to choose either the old or new GST rate. But this choice was only applicable to the projects that were started before April 2019.
All the projects that started after April have to obey the new GST rates. If you are a buyer you may not see any significant decrease in the prices as they would remain the same depending on the market. The developers may not be able to increase the prices as strict rules are being imposed. Moreover, the developers can only put a price tag based on the demand in the market.
[/vc_column_text][vc_column_text]
The impact of GST on Hyderabad real estate
The real estate market in Hyderabad is very different from other cities in the country. The market has been fluctuating for a long time. This was due to social and political situations. Though the demand for real estate was high there was a lack of supply. Thanks to the business-friendly policies of the new government, the real estate started to boom. So many reputed multinational companies and organizations started to establish their bases in Hyderabad. The cost-effectiveness, land space availability and being in the zone – II of the seismic map which means least hazardous for earthquakes has made Hyderabad a perfect place for IT companies to build their campuses.
Another major factor for the boom in real estate is the affordable price. True, compared to other metropolitans in the country Hyderabad has the most affordable rates. With all the promising factors developers started investing in this region. This led to a sudden increase in the inflow of cash. With new laws like RERA and increased GST rates, Hyderabad has seen a drop in the real estate sector temporarily. However, after these laws were revised the demand started to rise again. Despite the country’s economic slowdown, the demand for the real estate market in Hyderabad has not decreased. This mainly due to the rapid growth of the IT sector in the city.[/vc_column_text][vc_column_text]
[/vc_column_text][vc_column_text]
The current real estate market in Hyderabad
All over the country, the real estate market has taken a severe blow due to the recession in 2019. However, it is totally a different scenario if you are talking about Hyderabad. The demand for real estate in Hyderabad has seen a considerable increase even when the whole country was suffering from the recession. Like mentioned before this demand is mostly because of the rapidly developing IT scene in the city.
Unlike other cities where the sites booked before construction the properties in Hyderabad are bought mostly after the project ends. Companies like Amazon are building their largest campus outside of the USA in Hyderabad. This might give you an idea of IT growth. The city is going to be very significant for IT in our country in the coming years. As many national and international firms are building their establishments in the city, the employment opportunities are also seeing a rise like never before.
The surge in employment opportunities means a rise in the incoming population and a rise in population means a rise in demand for residential property. Since many organizations are setting up their businesses the demand for employees has risen to millions. Most of the metropolitan cities have housing issues like shortage of water, costly prices on daily needs and the cost of living are also very high. But Hyderabad is completely alien to this kind of lifestyle. The city offers everything to its residents for affordable prices. The cost of living is also very low compared to other cities. That does not mean Hyderabad lacks any facilities. It has everything a citizen wants in a city.
The areas like Madhapur, Nanakramguada, Raidurgam, and mainly Gachibowli are seeing massive growth in the real estate area. Even with all these developments, Hyderabad still has a shortage of housing and office spaces. This means that the city needs a lot more constructions to meet the rising demand for developments that are taking place. So if you want to invest in a profitable real estate market, Hyderabad is the right place to invest.[/vc_column_text][vc_column_text]
Some advantages and disadvantages of GST on real estate
Advantages
- A single tax system means that taxes all over the country will remain the same for everyone. This means that developers cannot choose regions depending upon their tax rates.
- This will propel the ease of doing real estate business around the country.
Disadvantages
- GST will increase the prices for buyers if they want to buy a property that is under construction.
[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_column_text el_class=”post-contact-form”][fc id=’2′ align=’center’][/fc][/vc_column_text][/vc_column][/vc_row]