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Post RERA & GST, how is the Real Estate sector shaping up
September 15, 2017

The latest GST reforms and the newly-introduced RERA bill have proven to be a game changer in the real estate industry. The combined implementation of these two reforms has created a huge positive impact on home buyers and developers resulting in a booming property market. The much-needed RERA bill has created a stir in the real estate sector with transparency in transactions. On the other hand, the modified tax structure introduced by the GST reforms has led to the clear-cut pricing of properties for the benefit of both the developers and the consumers. Let’s take a look at the plethora of privileges presented by the GST and RERA bill and their joint role in reshaping the real estate sector.

Increase in brand value
The transparent pricing structure and hassle-free transactions brought in by GST and RERA increases the credibility of builders and provides consumers with assurance on their investment. Any real estate company developing a project on an area greater than 500 square meters needs to get RERA certified. Post approval, the RERA certificate and registration number need to be presented to the home buyers. The fact that a project is RERA certified assures the home buyers of no fraudulent activity and on-time completion of the project which, in turn, increases the credibility of the developer and adds value to their brand. Apart from the positive effects of RERA, the clarity on pricing introduced by the GST reform makes investing in real estate the most cost-effective and convenient investment for home buyers.

Straight-forward pricing structure
Post GST implementation, all the taxes payable by the developer have been merged into a consolidated indirect tax which is comparatively lesser than the overall amount paid. These taxes include costs like excise duty, entry tax and customs duty. Due to this revised tax structure, the GST reform has created a domino effect of discounted property prices for the benefit of home buyers along with the added bonus of knowing exactly what you are paying for.

Additionally, as per the recently passed RERA bill, homes are required to be priced based on the carpet area of the property. Consumers do not have to pay for the super built-up area of the building which comprises of common regions like the lift, lobby, stairways and corridors. This further reduced the rates of properties and gives home buyers increased clarity on the pricing as they are paying only for the region used by them.

On-time handover and discounted under-construction properties
Prices of under-construction properties have reduced further down post the implementation of the GST reforms. These reforms play a huge impact on VAT charges and service tax which are two of the main taxes paid by consumers and developers in the real estate sector. As per the GST reforms, VAT chargers are to be completely nullified for an ongoing project. Furthermore, only 12 percent of the property cost will be taken into account for service tax resulting in an overall subsidised property pricing structure.

As far as the effect of the RERA bill on any ongoing projects is concerned, it is now compulsory for property developers to deposit 70 percent of the project funds into a bank account dedicated to the development under construction, to ensure timely completion. Additionally, in case of a delay, developers are obliged to pay the pre-EMI costs payable by the home buyers. These reforms push real estate companies to ensure timely handover of the projects and provide home buyers with the guarantee of a completed project by the proposed time period.

With such extensive benefits, it is safe to say that the newly-introduced GST reforms and the implementation of the RERA bill have led to a win-win situation for both property developers and home buyers. If you are a first time home buyer, make sure you go through our detailed blog on the top 10 frequently asked questions about RERA for a closer insight into the reform. Head out to the Brigade Group today and make the investment of a lifetime. 

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