Why GST cuts won't lower home prices anytime soon
What's the story
The new Goods and Services Tax (GST) regime, which came into effect on September 22, has raised hopes of affordable housing. However, market experts warn that homebuyers may have to wait a few more months before any real price benefits are passed on. The revised GST framework is designed to simplify taxation and cut costs across sectors, but the real estate industry remains complicated.
Cost breakdown
Land cost not covered by GST
Industry experts have noted that nearly half the cost of a residential project is due to land, which is not covered by GST. The rest of the construction costs, including materials such as cement, steel, tiles and other inputs, are taxed at different rates. This makes the effect of the new regime on real estate prices less straightforward.
Market adjustment
Developers reassessing project budgets
Developers are now reassessing their project budgets and tax liabilities in light of the new GST rules. This includes determining how input tax credits and revised rates will affect their overall cost structures. Anshuman Magazine, Chairman & CEO at CBRE India, said that while input prices for developers are likely to go down due to GST reforms, it may take some time before these benefits reach homebuyers.
Market impact
Positive sentiment among buyers
Magazine also noted that the overall GST cuts are likely to create a positive sentiment among buyers and could have a ripple effect on real estate, especially retail and industrial & logistics. GST on cement has been reduced from 28% to 18%, along with certain other building materials such as granite and marble blocks.
Future prospects
Prospective homebuyers should temper expectations
Pradeep Aggarwal, founder & Chairman of Signature Global (India) Ltd., said that if cement and marble companies pass on their benefits to developers, the cost of construction would definitely come down. This could eventually lead to relief for homebuyers. However, market observers suggest that prospective homebuyers should temper their expectations for now as it may be premature to expect immediate price drops in this sector under the new GST regime.