Report reveals post-gst effect on house prices

Goods and services tax (GST) was expected to bring down housing prices but hasn’t, a joint report by consultants JLL India and PWC said.

The report titled ‘Impact of GST on Residential Market’ released in April said businesses were expected to pass on the benefit of lower taxes under GST. However, price benefits out of Gst-led cost savings are likely only in the “distant future”, it said.

Though GST on property is 18%, the effective rate is 12%, due to abatement provided on land value. Before GST, the rate was 10-15%.

Given the slow reach of GST awareness amongst contractors and low level of compliance in initial stages, the benefits of reduced cost, by virtue of input credit being passed on by such contractors, is yet to be realised by developers, the report said.

“The tax reform is aimed at reducing the final prices for the consumer, but this will depend on market forces and the effectiveness of the measures that the government takes from an anti-profiteering perspective,” the report said.

Cost of land makes a big difference to property prices.

“In projects where the land cost is low, the savings can be close to the estimated savings. However, where the land cost is high, the savings on account of GST may not be significant,” the report said.

According to Ramesh Nair, chief executive officer (CEO) and managing director, JLL India, the specifics of implementing GST must be addressed swiftly.

Buyers of affordable homes are expected to benefit most as compared to other segments like luxury and ultra-luxury.

The report also pointed to considerable lack of clarity and awareness not just among developers, tax payers and buyers, but also among tax officials.