Post-demonetisation curbs on cash withdrawals, GST of 18% and land conversion cess of 9% have hit realtors, leading to a slump in real estate business and fall in the quantum of registrations in Kurnool.
The quantum of registrations fell to about 70% up to September-end this year compared to the previous years, following demonetisation and levy of GST, according to Kurnool Joint Sub-Registrar I. Mahabub Basha. Moreover, the registrations were mostly of small properties, he added. The registration department surpassed the revenue collection target in 2015-16, but it fell to 63 per cent in 2016-17.
The Real Estate (Regulation and Development) Act that stipulated a five-year workmanship guarantee and its violation mandating refund of the money with the interest on prime lending rate of banks coupled with a penalty of 2% has given greater safeguards to the customers but has put enormous pressure on realtors and eating into their profits, averred Ramana Gorantla, district chapter president of Confederation of Real Estate Developers Association of India (CREDAI).
The land conversion cess of 9% in the integrated Andhra Pradesh was not revised in Andhra Pradesh, thought it was reduced to 3% by Telangana Chief Minister K. Chandrasekhara Rao, he added. Revision of the land conversion cess on a par with Telangana or at least to 5% would give a breather to realtors in A.P., Mr. Ramana said. The land conversion cess was 3% in Vijayawada and Visakhapatnam, he added. Realtors paid a service tax of 4.5% and VAT of 1.25% in the past, but were burdened by GST of 18% on buildings, though a 33% rebate was given to apartments.
The real estate business was about 40% now compared to a decade ago and those investing their monies in real estate business and those doing business by securing loans were in a quandary, he said. The patronage to multi-storeyed apartments is dwindling and people are now preferring independent houses and gated colonies, the CREDAI president said. About 30 to 40 apartments were being built in an year in Kurnool now compared to over 100 in previous years, he said.
The price of land which was around ₹1 lakh per acre in 2001-02 skyrocketed to about ₹1 crore per acre in a decade in Kurnool owing to the unprecedented boom during the Y.S. Rajasekhara Reddy rule, leading to scores of financiers and businessmen taking up real estate business expecting manifold returns. The real estate business has become saturated with sellers not reducing the jacked up land prices.
A former police constable-turned-realtor K. Lakshminarayana, who is Managing Director of Rohini Infra Avenues Private Limited, said housing projects have good demand in Kurnool town, but not on the outskirts. The craze for apartments has of late shifted to individual housing, as it has become easier to secure home loans for the customers who own the land and have scope to expand them in future when they can mop up resources, he said. Land prices remained steep, but none were willing to reduce the prices and sell them at a loss, he added.
Curbs on liquid cash has hit the turnover of realtors. The Prime Minister’s housing scheme, with private and public partnership and with Central and State subsidy has been benefiting realtors, Mr. Lakshminarayana said. GST and rise on cost of sand has jacked up the construction cost.
G. Srinivasulu of Seven Hills Consultancy who only purchases and sells lands and house plots said there was a 60% fall in real estate business. There were fewer transactions but land prices did not fall. Aadhaar card link-up to banks and registrations have led to fear among people that the properties that they owned would be exposed warranting taxes, he added.
About a dozen financially strong realtors and builders are going strong, but most players in the field are in doldrums, but fear putting forth the realistic position as it could mount pressure for repayments from debtors. The PM’s Awas Yojana has come handy for the builders. The slump might continue this year too, says the realtors of Kurnool.
