Affordable Housing Projects To Boom After GST 2017

In India, the real estate industry is estimated to account for about five per cent of the gross domestic product (GDP) and is considered the second-largest employer in the country, according to an E&Y report from 2015. In spite of that, this sector faces challenges in terms of macroeconomic conditions and fiscal policy changes. Another challenge is multiple indirect tax levies such as vat, service tax, excise, stamp duty and registration fees.

Impact of GST on Home Buyer’s Sentiment

The implementation of GST will eliminate double taxation and curb the soaring prices of homes. It subsumes multiple indirect taxes and is expected to simplify tax compliance. GST is expected to bring down the costs for developers and that implies affordable homes, as they would pass on the benefits to home buyers.

Among the various ongoing residential projects in Mumbai, most of them fall under affordable to mid luxury segment. This gives home buyers a reason to celebrate even if they have to pay slightly more in case the standard GST rate is high, as the overall process would be hassle free and regulated. Thus the sentiment of investors and home buyers, keen on buying an affordable home is predicted to be upbeat for the right reasons.

With the rollout of GST, the markets would witness higher liquidity and that is sure to bring prices down. The cost of construction and associated costs would also decrease and boost the sale of affordable homes.

GST is expected to be a game changing reform for India’s real estate, as it envelops 16 major taxes and encourages levying of a single consolidated tax.

Rise in affordable homes in Mumbai

With the roll out of phase II of PMAY (Pradhan Mantri Awas Yojana) affordable housing has seen a rise in metropolitan cities including Mumbai. There has been a spike in the demand for affordable homes and developers are aware of the changing pulse of the market.

Major developers have shifted their focus from luxury to affordable segment among ongoing residential projects in Mumbai. Many buyers are often end-users and are willing to commit to owning properties in good locations. Also affordable homes now come at growing locations, with promising infrastructure developments and seamless connectivity. With no compromise on amenities, these homes are available at convenient payment plans for the keen home buyer. Post demonetization, the rise for demand in affordable homes has boosted its supply thereby reviving the property sector.

The government’s moves have been accommodative of the concerns of the realty sector and met the industry's much awaited demand to accord infra-status to affordable housing.

Now developers have more avenues to raise funds with the affordable housing segment. The shift in eligibility criteria for affordable housing from built up area to carpet area will increase the unit size by 20-30 per cent also offers home buyers the benefit of owning larger units under government schemes and subsidies. Besides, more and more no development zones in Mumbai are set to be opened up for construction over the next 20 years for building affordable homes. The city’s development over the next two decades is about to witness major changes. The changes will drastically increase the builders’ share, to attract many more of them to come forward to build affordable homes, a move the owners will benefit from.

With these changes only well-established and reputed developers are expected to venture in the luxury segment of housing and affordable housing would continue booming in Mumbai.