Rewards to homebuyers is a new hatch by the union government to innervate the growth of stagnant real estate sector along with other measures which include a proposal by homebuyers about marginally elevating the Goods and Services Tax (GST) on housing projects and cutting down the overall cost, people having deep knowledge about the development commented on the state of anonymity.
Two separate meetings were conducted on Sunday by the finance minister Nirmala Sitharaman to put heads together for ways to strengthen the realty sector. Abhay Upadhyay who is the president of the Forum for People’s Collective Efforts (FPCE) – a pan-India forum for homebuyers and Niranjan Hiranandani, who is president of the National Real Estate Development Council (NAREDCO), took active participation in the meeting with the finance minister.
The former meeting was with associations of realtors, wherein a presentation was made by real estate developers followed by a discussion of their issues. The latter one was with the group of homebuyers when homebuyers deliberately discussed their issues with Sitharaman.
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Homebuyers put forth the proposal to Finance Minister to increase the GST on premium housing projects from the current 5% (not including input tax credit) to 8% (including input tax credit). This proposal aims to curtails the cost of a project considerably, as told by one of the persons knowledgeable of the development.
“Needless to say, that the present GST regime of 5% without ITC [input tax credit] is translating into a tax burden of around 14% for consumers… An 8% tax with ITC will offset tax paid by builders on building materials such as tiles, cement and sanitaryware, and bring down the cost,” the statement declared by Abhay Upadhyay.
Input credit implies that a builder can subtract the tax paid which had been already on inputs and forward the curtailed tax liability to the buyer of an apartment while paying tax on output i.e. the completed project.
The squad of homebuyers put forth their views that if the suggested move would be exercised then it would stimulate people to invest in properties. An official ironed out that any such decision would need the consent of the GST Council which constitutes states’ representatives.
On Sunday, in the meeting, the developers shed light on three main issues which are related to liquidity, taxation and finishing the hold-off projects. Sitharaman gave assurance to the builders as well as homebuyers that the government will carry out some measures which will knock off the policy issues, especially the liquidity issues and the suspension of the project.
At the same time, Niranjan Hiranandani confirmed that the growth of real estate and infrastructure is prerequisite to bolster the economy and create employment opportunities.
According to the Confederation of Real Estate Developers’ Associations of India (CREDAI), the Sunday meeting was a clear indication of “earnestness and urgency”.
In the 33rd GST council meeting which held in February, GST rates on under-construction affordable residential properties of value up to Rs 45 lakh and premium segment housing were reduced from 8% to 1% (excluding input tax credit) and 12%to 5%, respectively.
Arun Jaitley, the then finance minister and chairman of the council, said that the measure is the booster for – the vision of “Housing For All” and accomplishing the desires of low & middle-class people. It was a decision which was not biased of revenue and adjudicated because some builders were not giving away the tax rebates benefits to the buyers.
Along with the senior officers of the finance ministry, the minister of state for a home for housing and urban affairs – Hardeep Puri and the minister of state for finance and corporate affairs – Anurag Thakur, also made an appearance in both the meetings and discussed the related issues.
Homebuyers’ representatives who have already paid the money to developers and have been looking forward to the custody from many years urged the government for the compassionate treatment from banks.
Jayashree Swaminathan, homebuyers’ representative of the Jaypee Group said: “The government should provide some relief either in terms of deferring EMI [equated monthly instalment] payments or provide some income tax rebate to protect consumers who are paying both rent and EMIs,”.
