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Starting April 1, homes under construction will be levied 5% GST, against 12%. For affordable homes, GST will drop to 1% from 8%

The GST Council approved a sharp reduction in the levy on homes under construction and raised the threshold for affordable housing that will make more purchases eligible for concessional tax, offering substantial relief to buyers ahead of the elections.
Starting April 1, homes under construction will be levied 5% GST, against 12%. For affordable homes, GST will drop to 1% from 8%.

Homes up to Rs 45 lakh and with a carpet area of up to 60 sq metres in metros and 90 sq metres in non-metro cities will be counted in the affordable segment, according to the new twin definition cleared by the council, which is expected to give a big boost to lower-income housing. The earlier limit was a uniform carpet area of up to 60 sq metres for a house in an approved affordable housing scheme. There will be no input tax credit for GST paid on materials such as cement and steel for the sector at these lower GST rates.

In its 33rd meeting, the GST Council has accorded big relief to real estate sector,” FM Arun Jaitley tweeted. “This (rate cut) will give boost to housing for all & fulfill aspirations of neo/middle classes.

The government said in a statement that “the buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%”.

The GST Council deferred a decision on lotteries, Jaitley said, adding the group of ministers (GoM) will meet again to discuss the proposal.

“A reduced effective rate of GST of 5%/1% is good news for the real estate industry as the 12%/8% rate was a bit of a deterrent for buyers of underconstruction properties,” said EY tax partner Abhishek Jain.

Silver Treasure :- Under Constructions Projects in Talegaon Dabhade

 

Intermediate tax on transfer of development rights (TDR), joint development agreement (JDA), lease (premium), floor space index (FSI) will be exempt from GST for such residential property on which GST is payable.

‘Simpler Tax Compliance for Builders’
The government said this will address the cash flow problems faced by the industry.

“There are reports of slowdown in the sector and low offtake of under-construction houses which needs to be addressed,” the statement said.

It would also result in the cost of houses coming down, the government said.
“Unutilised ITC (input tax credit), which used to become cost at the end of the project, gets removed and should lead to better pricing. Tax structure and tax compliance becomes simpler for builders,” it said in the statement.

“Developers will need to increase the base price to recover the loss of input credit but would need to be cautious given the surge in anti-profiteering investigations for restaurants, in similar circumstances,” said Pratik Jain, partner and leader, indirect tax, PwC.

The decision was based on recommendations of a ministerial panel headed by Gujarat deputy chief minister Nitin Patel.

Those designated as metro cities are Mumbai, Bengaluru, Chennai, Hyderabad and Kolkata apart from the National Capital Region — Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad. Separately, the Reserve Bank of India had imposed a monetary limit of Rs 30 lakh for non-metros and Rs 45 lakh for metros for affordable housing loans. Builders had been seeking a lower GST rate.

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The mobile application will allow existing beneficiaries of Pradhan Mantri Awaas Yojana (Urban) to capture and upload photos, videos of completed houses with testimonies: Hardeep Singh Puri. 

NEW DELHI: People wanting to avail subsidy under PMAY (Urban) will soon be able to apply through their smartphones with Union minister Hardeep Singh Puri launching an app on Thursday for beneficiaries of the scheme to prepare a digital database. 

The Union housing and urban affairs minister said the mobile application will allow existing beneficiaries of Pradhan Mantri Awaas Yojana (Urban) to capture and upload photos and videos of completed houses with testimonies. 

Asked if the ministry also has plans to allow an applicant to apply for subsidy under PMAY (U) through this app, Secretary Durga Shanker Mishra said, "We will also make that provision (in the app)." 

The PMAY (U), launched by Prime Minister Narendra Modi in June 2015, aims to ensure 'Housing for all by 2022' by providing financial assistance to beneficiaries. 
According to the ministry, over 73 lakh houses have already been sanctioned. 
Around 40 lakh houses are at various stages of construction, while more than 15 lakh houses have already been completed. 

Also, 12 lakh houses are being constructed using new and emerging technologies. 

"I hope that in the first quarter of 2020, we would sanction one crore houses. And, the number of 40 lakh houses being grounded would reach 75 lakh," Puri told reporters. 

Giving details about the app, secretary Mishra said the photos and videos uploaded by beneficiarieswill be scrutinised at state as well as at central level. 

The selected beneficiaries from states and Union territories would be awarded and invited as special guests for anniversary celebrations of the scheme. 

Various measures announced to address both demand and supply side of the sector

The interim budget was presented by interim Finance minister Piyush Goyal on Friday and the real estate sector had a huge reason to rejoice as several direct and indirect measures were proposed for the ailing sector.

The finance minister has proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year, in which the project is completed. 

For making more homes under affordable housing, the benefits under Section 80-1BA of the Income Tax Act is being extended for one more year, that is, to the housing projects approved till March 31, 2020.

Furthermore, the benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore.

There is also a proposal to exempt income tax on notional rent if one has a second self-occupied house. “Currently, income tax on notional rent is payable if one has more than one self-occupied house. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents, etc, I am proposing to exempt levy of income tax on notional rent on a second self-occupied house,” said Finance Minister Piyush Goyal during the budget presentation. 

Real estate developers and consultants have hailed the budget, for the various measures announced, which they say address both the demand side as well as the supply side of the sector.

“The budget has ensured better liquidity and lower tax burdens on the purchase of homes. The benefit of rollover of capital gains has been increased from one house to two houses, up to Rs 2 crore, is a tremendous step by the government that will boost sales in both primary and secondary markets,” said Shishir Baijal, chairman and managing director of consulting firm Knight Frank India.

Beyond the direct measures, the income tax rebate on income up to Rs 5 lakh automatically increases the disposable income, especially for the middle class, which, coupled with increase in standard deduction should translate into improved affordability for home purchases, added Baijal. 

“An observed pattern in India is increased savings bring people closer to their aspiration of becoming home owners. This, of course, augurs positively for the affordable housing segment. Secondly, the benefits of rollover of capital gains from investment in one residential house to two residential houses will help home buyers dream of buying their second home,” said Ashish Puravankara, MD of real estate developer Puravankara. 

India’s residential sector took a huge hit in the last two years, particularly following the government’s move to ban high-value currency notes in late 2016 and then, the uncertainty post the implementation of the Real Estate Regulations and Development Act (RERA), and Goods and Services Tax (GST). The proposals announced in the budget, should help the sector revive, say experts.

“The housing demand will witness good uptick with measures like no income tax on notional rent on second self-occupied home and also capital gains benefit allowed on second houses in select cases,” said Ramratthinam S., CEO, Muthoot Homefin.

Another positive step announced in the budget is that TDS threshold for deduction of tax on rent is proposed to be increased to Rs 2.40 lakh from the current Rs 1.80 lakh. This can attract more investors to buy second homes for earning rental income, feels Anuj Puri, chairman of Anarock Property Consultants. 

Across India’s top seven cities, there are currently more than 6.73 lakh unsold units, pointed Puri, therefore, welcoming the move to exempt levy of tax on notional rent, on unsold inventories, from one year to two years.

Developers have also welcomed the steps that are being taken towards infrastructure and rural development, which could give a boost to the commercial real estate sector.

“The impressive development of roads, infrastructure over the last five years has been significant and if the same momentum is continued, then the increased connectivity will have a positive rub-off on all segments of real estate, including commercial and industrial developments,” said Surendra Hiranandani, founder of House of Hiranandani. 

Although, by and large, the sector seems to be extremely happy on the slew of proposals announced, there were a few that were missed out point out experts. One among them and long pending, is the demand for industry status for the sector, which has still not been considered.

The sector has been impacted in the wake of the liquidity crisis faced by non-banking finance companies following the defaults at infra lender IL&FS. Puri said no announcements were made to address that “deadlock.”

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