Friday, 12 August 2016

Impact of GST on Real Estate




India’s attraction as an investment destination is surely going to grow with the implementation of GST. Touted to bring about more transparency and ease of operation in all property deals, GST will impact real estate in a big. While it is too early to predict whether GST will bring down property prices, the industrial and warehousing segment will surely benefit in the short term.

Impact on industrial and warehousing property market
This industry will most likely be the primary beneficiary of the GST since warehouses will no longer be built on the benefits of tax arbitraging but on the most efficient logistic route. Consequently, the travel time will be reduced significantly as tax checkpoints will be removed. Most logistic companies would strive to established larger warehouses on strategic transit networks, with smaller warehouses on feeder lines. Thus the cost of products would reduce and there would be one common market.

Impact on Commercial Property
The major portion of overall commercial property business is made up of commercial leasing which qualifies for service tax. After the implementation of GST, the treatment of it will remain same and leasing of commercial property will be subject to GST. The impact of GST will primarily depend on the rate.

Impact on residential property sector

In the case of residential property, it is still early days to determine whether GST will bring down residential property prices. While the sale of immovable property doesn’t seem to be impacted as they will not fall under the ambit of GST, the construction of the same will be covered, there will be some benefit only if tax credit is available for the developers for the GST paid on goods and services.