RERA, GST and Real Estate Prices

With the Modi government’s passage of the Real Estate Regulation and Development Act 2016 (RERA), a much needed shot of transparency has come into the real estate sector. The Act, which puts an end to several common practices – like pre-launching of projects without approvals, lack of committed timelines and fund diversion – will boost the confidence of investors and buyers alike.

Industry experts agree that the RERA Act, GST and Demonetization together will impact the real estate economy significantly, with the end customers getting the maximum benefits. Bigger developers with funds in hand will be able to manage their cash flows better and will be positively impacted by RERA. An increased reliance on institutional capital and professionally curated deals is likely as well, propelling companies like SmartOwner India’s largest property marketplace and the fastest growing FinTech company in India by Financial Times, to the status of industry leaders.

With the implementation of GST, we have witnessed one of the biggest tax reforms that the country has ever seen. The GST rate for under construction properties is set to 18%; however, this allows for an exclusion of 1/3rd of the price as land value, bringing the effective tax rate to just 12%. The mechanism of GST involves only taxing the value added at each stage of a product (an apartment for example consumes products like cement, steel, hardware, windows etc. coming from various industries) with the benefit of Input Tax Credit and anti-profiteering clause being that consumable products – like real estate – are not taxed at the same rate multiples times. GST also ensures tax savings are eventually passed on to the end customer, resulting in lower property prices.

The protection the RERA Act offers to buyers will make investments in real estate safer. With concepts like SmartOwner, such investments can offer lucrative and predictable returns at the click of a button. Truly, 2018 is the perfect time to add real estate to your portfolio.

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