Impact of RERA and GST in the Real Estate Industry
  • Nov 10,2017 8:10

Real estate in India is going through a paradigm shift. New reforms and tax measures has been having an adverse affect since last year I.e.2016.

3 major moves have been taken by the government, which has been having an impact on the real estate over all: DEMO, GST and RERA. The good part about these are that it is a short term loss, as consumers are unsure about how this is going to impact the industry on the whole. However on the long run it is good for both the builders and buyers.

The main impacts have been caused by RERA and GST. The regulation bill formed by different states doesn’t only safeguard the buyers but also the builders to some extent in the sense that it forces them to be more organized. One issue that the real estate market was facing

was that it had got too many players coming in everyday. Every family wanted to be a developer and everyone hailing from the lower income strata wanted to be real estate brokers. They thought it was easy and fast money. This made the sector further unorganised and undependable.

As a result there were many scams and commitment issues, and a lot of people lost their hard earned money. RERA would act as a inspection body which will wash away such part time builders, and the legalities would only be practically possible to follow, if you’re a full time builder.

However the government will also have to make sure that the several departments and also administrative bodies like local syndicates and other pressures are controlled and streamlines so that projects don’t get delayed from their side.

GST on the other hand has both its pros and cons. Post GST it is seen that most of the real estate companies have already implemented their discount systems on the over tax (difference in service tax and GST). GST has a positive impact when the projects developed are under the selling

range of rs.5000/- a sqft. As the builders have the advantage of passing on the input tax allowed. The problem arises in the higher valued properties where the cost of land is much higher than the cost of construction, as in such cases the land is getting taxed twice.

On the whole I personally feel that the government will take a few steps and make changes to rectify the few lags, but all these reforms looks promising and positive in the long run. A singular tax reform and a cashless country is a very futuristic vision and these are the first steps towards it. We are already seeing the improvement in the lower segments which is not impacted by the GST with respect to the pricing. Real estate in India in the next few years looks good and should take a better pace in the next 6-10 months.

As a real estate firm we welcome all the reforms, but at the same time hope that the minor glitches are rectified soon. The real estate industry’s recovery is due since quite some time.

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