Is GST Going to be a Game Changer for Real Estate and property industry in India

The passage of GST bill by the Rajya Sabha on 03 Aug 16 is being heralded as the single most important reform after independence by the financial pundits. Unfortunately, as everything in our country takes time, the GST bill is no exception. It has taken 30 years, 9 PMs and 12 FMs to achieve the target. When India had started its GST journey only 34 countries had GST implemented today the figure is 165, the figures say it all. But as the hindi saying goes “Daer aye Durust aye”, all’s well that ends well. The bill is being touted as the biggest game changer with the GDP growth rate predicted to go up by 1 to 2%, which would be huge if true.

There is no doubt that GST is going to have an overall positive impact on the Indian economy and everybody stands to gain. The speculations are on as to to what will become cheaper or costlier, not getting into this discussion as it is too early to predict; a few things are for sure; it is going to set in transparency; simplify taxation; set in automation; tax evaders are going to run into difficult times; the country is going to be seen as a unified entity as far as business is concerned and resolve the entire taxation muck in our country.

The real estate property sector in India is going to be one of the most significant beneficiaries.  let’s look at the impact of GST on the real estate industry in India.

Impact of GST on Real Estate Industry

Present a real estate developer pays a set of independent taxes at different rates across states on raw material, construction etc. These include VAT, CST, excise duty, import duty, service tax to name a few. All this stands to get resolved, he would now end up paying one tax at the time of construction which would be the same across all states. This reform is going to bring down the construction costs by a substantial margin. The property rates in India would move towards stabilisation across cities and states.

Impact of GST on Individual Property Investors

Today when an individual investor goes to buy any property he ends up paying VAT and service tax and the tax rates vary across states. This stands to change with GST. The end user will now pay one tax while purchasing property in India and this would be common across the board. However, the stamp duty part would remain outside the GST gambit. A note of caution, certain states have exempted real estate from VAT, depending on the GST rates, the overall property costs may go up in certain states due to a common taxation rate.

Impact of GST on Commercial Property in India

Commercial property in India becomes a separate entity when we look at taxation and GST is going to have a far reaching positive impact on the commercial real estate. Today under the cenvat credit a developer is not allowed to set off credit of construction works against the service tax he pays towards rentals/lease. GST will reduce taxation, as developers will now be able to get input credit, paid for construction against the GST charged on lease rentals.

Whether implementation of GST is going to help in stabilizing or reduce the real estate prices in India will only be known once the taxation rates are finalized and the nitty-gritties are worked out; however, one thing is very clear that it is going to have a very positive impact on the ease of doing business and set in transparency in the real estate in India, which in itself would be a huge game changer.

How to Select the Right Real Estate Website in India

There are a number of real estate and property websites in India and it is difficult for an investor to decide which one to choose. The real estate slump in India has also hit the website industry as well and quite a few have scaled down or shut shop. The main problem with the Real estate websites in India has been that they tried to ‘do it all’ and in the bargain are unable to provide specialized services in particular verticals to an end user.  

Things are in for a change, real estate websites are now coming up which concentrate on a particular vertical and are able to provide customized services to a user. As an end user there is a needs to understand what exactly is one looking for, for example whether residential or commercial property and further whether in the primary or secondary market (resale), as this would decide which web portal to utilize and for what service. It does not make sense to utilize the services of a real estate website which does not specialize in the vertical one is looking for. The next question which comes to mind is, how to decide which is the ideal real estate website for a particular service or vertical.   As an end user one needs to consider the following factors: -

(a)       What is the authenticity of the data being presented; this can be verified by checking data across two or three real estate websites. As a test case one can even approach one odd builder or broker and check out the data. Once the reliability quotient is established one can proceed further.

(b)       Check out the ‘technology quotient’ of the website. Ascertain how much of analytics are being applied to represent data in an ‘easy to comprehend’ form, which helps a user’s decision making process.

(c)       Does the real estate website provide a method in which as a user, one can shortlist property in a structured manner?

(d)       What all services does the property website provide in terms of analysis, search, shortlisting, site visits, on ground guidance, customized reports etc. See if it meets all your requirements.

(e)       As a real estate investor one has a number of queries, like, where should one invest? Let’s say out of two localities in a particular city which one is better and why? Which are the ideal real estate destinations in India? Which project is better than others and on what grounds? Or, how do two or more projects compare to each other? Etc. The real estate website which can answer the maximum number of your queries is obviously the best one.

It is time that the real estate and property websites in India realize that an investor today is much aware of ground realities, due to the availability of information on the internet and therefore is on the look-out of more and more logically analysed inputs. Unless a real estate website is able to satisfy an end user’s quires with well researched data, it will be difficult to survive in days and years to come.