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What Changes Come in Real Estate Market After Demonetization?

Even though the immediate impact of demonetization on the real estate sector in the country has been negative, there are many favorable changes that are happening in the real estate market in recent times. With demonetization and the new rules imposed by the Government, the sector is going through a sea change.

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Builders Forecast Affordable Housing Prices Falling by 3-4%

The recent implementation of GST (Goods and Service Tax) is looking to cut down the cost of affordable housing although it depends on the developers also. If they don’t enhance accommodation prices to get enough money to repay investment return during this period, the prices can be controlled with the help of practice of GST. After implementation of goods and service tax (GST), now the developers have to cut on the cash component and source their inputs from the registered retailers to apply any tax rebates. There might be some price rupture while purchasing raw material from the registered retailers. 

The buyer of under construction property will have to pay twelve percent GST (good and service tax) besides to stamp duty and any other charges. Corresponding to Ashok Mohanani, NARECO (National Real Estate Development), and Vice President-affordable housing part can see the price drop of about three to four percent. Ashok Mohanani also added that- affordable housing in Delhi, Mumbai or any other cities in India would have benefits of purchasing input tax credit. Earlier, the developers used to pay excise for fittings of steel and cement that would involve in accommodation prices. They did not get any source of input credit, but after goods and services tax they will be able to purchase credit that will permit them to cut down accommodation prices, benefiting the buyers as well. Hence as per the experts, the new tax will be helpful to the overall industry and also to the buyers in the affordable housing segment. 
GST (Goods and Services Tax) will rein down many indirect taxes such as VST, excise duty, service tax, etc., that were indirectly paid by buyers to developers. Although, this influence may not be seen in the premium or lavish housing segment and they will less or more remain the same.  A sale of upcoming real estate property in Delhi, Mumbai or any other cities will be classified as the supply of the services, and it will be subjected to goods and service tax payments while the sale of complemented land and real estate properties are excused. Also, the VAT charges and service tax paid on the sale of an under-construction property will come under goods and service tax. 
As per the ICRA report, goods and service tax rate will be twelve percent for buildings constructed for the sale that includes the land value as well as the sales value. If the accommodation and building value happen to be a separate agreement, an expected goods and services rate will be eighteen percent on the construction agreement value. An ITS (Input Tax Credit) for various construction good and services used in the building will be fully available although if the Input Tax Credit exceeds output goods and service tax liability, it will not refund. The influence of goods and service tax differ from state to state due to various tax structures followed in several states. Similarly, savings in project cost may also differ accordingly, depending on the project cost.  


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