Published On: Tue, May 30th, 2017

GST Likely to Encourage NRIs to Buy & Invest in Property Sector

India’s long-awaited goods and services tax (GST), considered to be the biggest a uniform tax regime that is expected to replace the current convoluted system of differing taxes across 29 states, likely to be rolled out on July 1 could boost investment into the property sector and encourage non-resident Indians to buy homes in the market, according to developers.

Sukhraj Nahar, the chairman and managing director of Nahar Group, a developer based in Mumbai said that GST is likely to boost foreign investment and benefit the NRI [non-resident Indian] community for investment in real estate.  A simpler tax regime is conducive to investments. The existing channels include issues of multiple taxation amounting to indirect taxes and no uniformity.

According to a survey by Sumansa Exhibitions, there are 16 million Indians living outside India. More than 40 percent of NRIs surveyed in the UAE said that property in India was their preferred investment,

In recent years, home sales in India have been hampered due to high interest rates and more recently the demonetisation move. But the findings of the latest sentiment index by property consultancy Knight Frank, along with industry bodies Ficci and Naredco, show that 64 percent of industry leaders surveyed believe that residential sales will improve in the coming six months.

Ashish R Puravankara, the managing director of Puravankara, a builder based in Bangalore said that with the rates in place now, the implementation of GST to their business is expected to bring down the project cost for the developer. Specifically, the impact of taxes on construction materials, cement and steel will come down considerably for developers.

He said that the new tax regime will create “a level playing field” for builders across the country. There are multiple benefits for both developers and home buyers with the GST implementation. A single consolidated tax system will bring more clarity, transparency and avoids double taxation, which is relevant in the real estate sector where developers and users end up paying multiple taxes and duties.

Developers can benefit from being able to earn tax credits for their costs under GST, which could allow them to reduce home prices.

Earlier, builders would pay excise on fittings, cement and steel without getting input credit on the same, said Ashok Mohanani, the vice president of the National Real Estate Development Council for the western region. Under the GST regime they will experience the benefit of procuring credit.

Surendra Hiranandani, the chairman and managing director of House of Hiranandani, a luxury property developer said that currently real estate industry is plagued with a myriad of indirect tax issues both at the centre and state level, GST clears the air, bringing in a more comprehensive and uniform tax structure that will ensure greater transparency in the sector.

GST will have a multiplier effect on all the sectors of the economy and further make India an attractive place for investments as it will boost the overall attractiveness of the market.

The GST rate unveiled for the property sector is 12 percent for under-construction property.

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