GST: property rates may shoot up

Hyderabad: Real estate prices in Hyderabad and districts in Telangana are poised to rise thanks to the passage of GST (Goods and Service Tax) Bill. Realty experts forecast that the cost of every property may increase by 20 per cent. Construction material prices including cement are also expected to go up marginally, according to S Ram Reddy, President, CREDAI (Confederation of Real Estate Developers Association of India), Hyderabad. The Mission Bhagiratha and other irrigation projects will ensure abundant water supply across the State and this will take the real estate to the higher level in the near future.

Reddy said: “With service tax not reaching the service providers or developers, but only the government, the prices might have to be increased by them. The GST rates are expected to be higher than VAT or Service Tax. This may lead to higher pricing of properties.”

Credai’s members opined that it’s too early to predict price rise or fall as the GST rate is yet to be determined by the Centre. The members of CREDAI spoke to the media in Hyderabad to brief about the fifth edition of ‘Hyderabad property Show-2016’ held from August 13, 2016. The three-day event will have 115 developers showcasing more than 15,000 properties at Hitex.
Credai sees price rise potential in Hyderabad and other parts of Telangana as the state has good infrastructure.

Experts highlight a clause in the GST bill which says input tax credit shall not be available in respect of the goods or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery. This is also causing further confusion among builders.

“It is wise to invest in properties in the next three months before the GST is levied. With IT majors and R&D centres being set up in the city and with favourable policies by the State government, the city will be a major hub for housing too,” said CREDAI President.

Ramchandra Reddy, General Secretary, Credai Telangana sees more demand in property show this time when compared to previous editions of Hyderabad Property Show, which has been attracting builders, manufacturers of building materials, financial institutions and consultants.

Experts highlight a clause in the GST bill which says input tax credit shall not be available in respect of the goods or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery. This is also causing further confusion among builders.

What if a higher percentage is fixed for GST
GST will be imposed on the raw materials used by a developer for construction which will be trickled down to the end consumer through a higher cost. If at all GST percentage goes higher than the consolidated current rates of 20 percent and becomes fixed, this would not just burden the developer but buyer too, by increased cost and an additional cost of registering the property. Though, this would only happen if the GST percentage is high.