Tag Archives: gst rate cut

Affordable Housing blog Buying property gst Real Estate Real Estate News Smart Residential Living

Revised GST rates lead to a drop in housing prices in Rajasthan

Jaipur, Rajasthan

Housing prices in Rajasthan:

The Goods and Service Tax (GST) Council in its 33rd meeting that has been conducted on 24th February 2019 has made a decision to lower the tax burden reducing GST.

Property prices, which had grown exponentially in the state, are expected to fall, as the GST council’s decision of cutting the tax rate on under-construction properties will be implemented from 1st April 2019.

On the under-construction properties, consumers will now have to pay 5% of goods and service tax (GST), as against the existing 12% while on affordable housing to 1% from the current 8%. GST council has also increased the scope of affordable housing to those costing up to Rs 45 lakh and measuring 60 sq-mt in metros and 90 sq-mt in non-metro cities.

Statistics of buying a flat after GST rate slash

In the present condition, if a buyer buys a flat worth Rs.1 crore, he has to pay approximately 18% as a tax, including registry, stamp duty, and GST, which is a huge amount. Now a buyer will have to pay Rs.5L, instead of Rs.12L as GST Tax. This could prove to be a major relief for the homebuyers.

Similarly, a buyer buying a house falling under the affordable housing scheme class will be benefited considerably too. If a flat cost is Rs.20L (under the affordable housing scheme), the buyer will have to pay Rs.20000 instead of existing Rs.36000. As the bracket of affordable housing is increased to Rs.45L in the GST Council meeting, this will also ease middle-income groups.

Homebuyers believe that this move would bring cheer for them and the Rajasthan real estate market which was facing a slowdown. At the same time, it is expected that the market will recover in the months to come.

On the other hand, the developers believe that the lower tax burden on home buyers is expected to drive demand in the affordable segment which, successively, will keep developers engaged in building more affordable homes.

The decision is expected to help the government as well constantly move towards reaching its target of ‘Housing for All 2022′. Furthermore, the move would also inspire developers to construct houses in the government’s scheme, which are not yet getting takers.

Read More
Affordable Housing blog Buying property Real Estate Real Estate News Smart Residential Living Tips

Properties to Get Costlier as Stamp Duty in Mumbai Hiked to 6%/commonfloor

Stamp Duty CF

Stamp duty and registration charges in Mumbai continue one of the largest sources of revenue for the state government of Maharashtra. As a matter of fact, the government has been pitching on Mumbai’s real estate boom to encourage growth and development.

The Maharashtra government’s decision to raise a 1% surcharge on stamp duty for properties in Mumbai, could negatively affect the realty market and home buyers, nowadays when property deals are already charged with high tax rates.

It would be raised on the sale, lease, mortgage, and gift of real estate transaction, within the area of the Brihanmumbai Municipal Corporation (BMC). The existing stamp duty on houses in Mumbai is 5%, which will now increase to 6%, making properties more costly.

Stamp Duty CF

How the Stamp Duty Hike Will Impact the Homebuyers?

This move is particularly discouraging for the mid-segment homebuyers who are thinking of buying property due to easy availability of options and reduce interest rates currently.

Hence, if the ready reckoner rate for a property is Rs 2.75 lakhs and the agreement value is Rs 5,50,000,00 lakhs, then, the stamp duty will be calculated on the agreement value of Rs 5,50,000,00 lakhs.

A Comparative Study of Property Charges Before the Hike

Assume you buy a 200 sqm flat near Andheri where the Ready Reckoner rate for residential property is Rs 264200 per sq.mt. Considering the property’s agreement value is the same as the Ready Reckoner Rate in the locality, your property price calculation will be as follows:

Total Cost of the property before the hike

A. Area of the flat

200 sqm

B. Ready Reckoner Rate

Rs 2,75,000/sqm

C. Price of flat (AxB)

Rs 5,50,00,000

D. Stamp Duty (5% of C)

Rs 27,50,000

E. Registration fee

(1% of C or 30,000, whichever is less)

Rs 30,000

F. Total cost (C+D+E)

Rs 5,77,80000

A Comparative Study of Property Charges After the Stamp Duty Hike

Total Cost of the property after the hike

A. Area of the flat

200 sqm

B. Ready Reckoner Rate

Rs 2,75,000/sqm

C. Price of flat (AxB)

Rs 5,50,00,000

D. Stamp Duty (6% of C)

Rs 33,00,000

E. Registration fee

(1% of C or 30,000, whichever is less)

Rs 30,000

F. Total cost (C+D+E)

Rs 5,8330000

The above table is showing that before rate hike one has to Pay Rs.5,77,80000 for a 200 sqm flat in Maharashtra but after a rise of 1% as a surcharge, for the same property, people have to pay Rs.58330000 which goes Rs.550000 more.

But wait, this isn’t the actual cost of the apartment. There are many other un-advertised costs which are hidden and are calculated over and above the advertised price. And yes, do n’t make the mistake of underestimating these costs as they normally make up to 20% of the advertised cost.

Here are what all the costs a builder/developer will charge you when you actually buy the apartment/property and sign the buyer’s agreement in Maharashtra:

What Are the Hidden Charges a Homebuyer Have to Pay to Buy a Flat in Mumbai?

Nature

Amount in Rs.

Calculation Basis

BSP

3000000

1200 Sq. feet * 2,500

PLC

 120000

4% of BSP. PLC location depends on buyers

EEC & FFEC

  60000

1200 Sq. ft * Rs. 50 per Sq. ft.

EDC & IDC

120000

1200 Sq.ft. * Rs.100/ Sq.ft.

Open Car parking space

125000

Fixed amount (differ from project to project)

Covered parking space

200000

Fixed amount (differ from project to project)

Club membership

 45000

Fixed amount (differ from project to project)

Power back-up

 30000

Fixed amount (differ from project to project)

Electric Connection charges

   3000

Fixed amount (Approximate value)

Water, Drainage, and Sewerage

   3000

Fixed amount (Approximate value)

Stamp Duty

180000

6% of BSP. Need to be paid to the government

Registration Fees

30000

1% for every state

GST Tax

360000

12% of BSP. Need to be paid to the government

Total Advertise Cost

3000000

Total (Extra and hidden costs)

1276000

Grand Total

4276000

Please note that all the charges are calculated on the basis of Super Built-up Area and not Built-up Area. As per industry standards, the difference between the super area and built-up area is approximately 18-20%. i.e. while you pay the price for 1200 sq.ft. (super area), the actual built-up area in your apartment would be somewhat 960 sq.ft. (1200 – 20% of 1200) = 960 sq.ft.

Government’s Decision to Deduce the GST Rates

This is not the end. Recently, the GST Council has made a decision to reduce the Goods & Service Tax (GST) rates for under construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of  “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type

Existing Effective GST Rate

New Effective GST Rate

ITC Availability

Residential properties outside affordable segment

12%

5%

Without ITC

Affordable housing properties

8%

1%

Without ITC

Once the decision will come into force, the property rate will decrease and will benefit the homebuyers across the nation. The above property calculation table where the GST rate is taken as 12% on the BSP, the buyer has to pay Rs.3,60,000 as GST charges on their home. The purchase will be reduced by Rs.2,10,000 (Rs.360000 – Rs.1,50,000). We can say that homebuyers will save up to Rs.2,10,000 on their purchase.

How the Stamp Duty Hike Will Impact the Mumbai Property Market?

Property in Mumbai is remarkably overpriced and most of the demand is moving towards Navi Mumbai and Thane. Now, those who are moving from the suburbs to the Island City will be the ones who would be most affected. If the surcharge is imposed, homebuyers will move to Thane and Navi Mumbai for their housing needs more actively.

Read More
Affordable Housing blog Real Estate Real Estate News Smart Residential Living

GST Update: New GST Rates For Real Estate

GST

The Goods and Service Tax (GST) Council in its 33rd meeting has been conducted on Wednesday, 24th February 2019. The discussion on real estate related issues have been discussed and The lower tax burden on home buyers is expected to push demand in the segment which will, in turn, will keep developers committed to building more affordable homes. The decision will provide relief to the middle-class homebuyers in metros as well as non-metro cities. At the same time, the decision is expected to help the govt’s move towards achieving its target of “Housing for All by 2022”.

Demand for residential properties is expected to receive a major boost following GSTthe government’s decision to reduce the Goods & Service Tax (GST) rates for under-construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of  “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type

Existing Effective GST Rate

New Effective GST Rate

ITC Availability

Residential properties outside affordable segment

12%

5%

Without ITC

Affordable housing properties

8%

1%

Without ITC

3. New Definition of Affordable housing – A residential house/flat of carpet area up to 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having a value up to Rs 45 lacks.

Both conditions will have to be met – house having a carpet area of 50 sq mtr valued at 50 lacs will be taxable at 5% and not 1%.

As per GST Council, Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (the whole of MMR).

4. Builders for the above types of residential projects will not be eligible to claim the input credits. As a result, the elimination of Input Credit Tax benefit may hit profitability for the supply side.

5. Transferable Development Rights /Joint Development Agreements / Long term lease premium and FSI(Floor space index) transfers shall be exempted only in case if it pertains to a taxable residential project, in other words, TDR(Transfer of Development Agreements) for commercial projects will be taxable @ 18%

6. Above changes will be effective from 1st April 2019 after notifications are issued

How will the new GST Rate Benefit the Homebuyers?

  1. Now the homebuyers will get a fair price deal. Earlier, the GST Tax rate was 8% for affordable housing properties and 12% for regular housing projects. But in the GST Council Meet that happened on Feb 24, 2019, the GST rate was cut down to 1% for affordable housing projects and 5% for regular housing projects, with no input tax credit.

  2. Affordable Housing plans will get attracted to GST at 1%.

  3. The interest of the homebuyers/consumers towards buying a property has been increased.

  4. Input Tax Credit not being passed on home buyers/consumers will not be an issue.

  5. Un-utilized ITC(Input Tax Credit), which has been used as the cost of the project should be removed and should lead to a better price.

  6. Tax structure and tax compliance should become simpler for builders.

Note:
TDR – Transfer of Development Rights
JDA – Joint Development Agreements
FSI – Floor Space Index
ITC – Input Tax Credit

Read More