Three major reforms — demonetisation, Real Estate Regulation and Development Act (RERA) and Goods and Services Tax — introduced in a short span, seem to have taken the wind out of the sails of real estate sector in Telangana.
While demonetisation derailed the momentum of the real estate for sometime that saw its resurgence after the formation of Telangana State, uncertainty over the notification of rules under the RERA and high GST rates have put a huge strain on the real estate sector, say sources.
The Confederation of Real Estate Developers’ Association of India (CREDAI) feels if the State government does not intervene soon, the situation may result in delay in the launch of new projects and cost escalation of the ongoing projects. The final burden will have to be passed on to the end consumers, they feel.
Retrospective clause
The retrospective clause under the RERA will increase the apartment price at least by 15 to 20% for buyers than what they had agreed to pay. A rough estimate puts the number of apartments under construction at 40,000 to 50,000 in Hyderabad and elsewhere in the State, CREDAI representatives said.
The RERA, 2016, passed by the Centre that came into effect from May, 2017, is welcomed by corporate players and consumers alike as it enables the latter to enforce their rights and seek redressal of grievances from the designated authority and bring transparency into the operations of the sector, besides streamlining it.
But what worries the sector now is the delay by the Telangana government in notifying the rules under the RERA.
“We welcome the RERA, but wish the government is practical in implementing the Act and notifying the rules soon,” say CREDAI sources. So far, 16 States have notified the rules under the RERA, including A.P. and Karnataka. Andhra Pradesh exempted the ongoing projects from RERA rules and Karnataka, like many other States, gave exemption to the ongoing projects with 60% of work done.
About the GST, the Association represented that contrary to ‘one nation– one tax’, it would lead to double taxation on real estate. The GST does not subsume NALA (Non-agricultural land assessment tax), vacant land tax, change of land use tax, city-level impact fee, approval fee and charges, etc., adding to the cascading effect. Thus the government could help by reducing the GST rate on real estate.
They said either registration charges may be subsumed under the GST or relief on land value or instead of 12%, the rate may be reduced to 5% since there is no refund of the overflow of credit.
A majority of goods for construction like cement are under 28% tax slab. The input tax credit for the ongoing projects, reduction of rate for pre-cast building products from 28% to 18% and GST exemption for economically weaker and lower income group housing are what the real estate sector is banking on.
