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Post GST regime: Should you buy property now or wait?

Homebuyers wanting to purchase a house immediately should go in for projects that have received an occupation certificate or one that is expected to get permission soon.

DDA Housing Scheme

DDA Housing Scheme


The full impact of Goods and Services Tax (GST) on residential real estate is still to unfold. So, should homebuyers waiting on the fence buy now or wait for markets to settle post RERA and GST?

The rate of GST for under-construction and new projects has been fixed at 12 percent. Buyers of under-construction projects will be taxed at 12 percent on that portion of work that is completed after July 1. But levy of GST at 12 percent by builders would also enable developers to avail input tax credits on their purchases of goods and services that are used after July 1 and pass on the benefit to homebuyers.

Homebuyers wanting to purchase a house immediately should go in for projects that have received an occupation certificate or one that is expected to get permission soon. They should check if the basic infrastructure is in place and the credentials of the developer. No GST will be charged on ready houses, say experts.
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“For end-users if a project has received an occupation certificate they can go ahead and buy the property. They should prefer ready-to-move in properties. Since sentiment in the market is low as of now, they may even get better deals,” advises Anckur Srivasttava of GenReal Advisers.

Unlike demonetisation, GST has not had a negative impact nor is it likely to. But consumers should remember that unless the project enjoys a unique location, there is no trigger for capital values to move up under the present market conditions. So, they should buy if they are planning to move in themselves, he says.
 
 
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Close

As per a Knight Frank report, the unsold inventory levels were at 5,96,044 units in the first half of 2017. Also, the baggage of unsold inventory and the state of the residential market, the weighted average prices have also stagnated. Developers in most markets have been forthcoming in offering freebies and discounts for sales closure.

NCR shows an availability of four years of inventory. There has also been a surge in “ready for possession” inventory in India’s top eight cities, reflecting slow demand for even ready apartments where there is no execution risk, says the report.

“Consumers definitely would want to benefit from GST and partake of the correction in prices because of tax efficiency in the system.  If you are a real estate investor, do not buy now as no price growth is expected. Realty growth is not likely to be more than 5 percent and prices are not likely to go up for the next two to three years. Investors’ expectations ideally ought to be around 12 percent and in the next five years prices are not likely to double, so my advice is do not buy,” says Gulam Zia, ED, Knight Frank (India).
first published: Jul 11, 2017 12:10 pm

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