In order to boost the sale of residential properties, the Goods and Services Tax Council has slashed property tax rates to five percent. A welcome change for home buyers, the rate has gone down from 12 percent. This makes it easier for people to buy houses. The new tax rate is applicable for under construction properties. Higher end tax is said to have been a major hindrance for property investors. The government seeks to address this issue, by introducing the tax cut. The move is seen as the first step to stimulate higher demands for properties. So, what does this mean for home buyers? Read on! What does this mean for home buyers?
What does this mean for builders?
- The decision to cut down property tax rates aims to push hesitant buyers to start investing in residential properties.
- These rates are applicable for buyers, whose properties are in the construction stage.
- Reduced taxes mean they will be paying much lesser towards their homes. It will be easier for them to pay off loans.
- According to reports, there are over six lakh under-construction houses that remain unsold in Indian metros.
- A majority of these fall in the category of affordable homes-defined as houses priced under 45 lakhs.
- The reduced tax will lower expenses borne by homeowners, sending it down by five to six percent.
- This can push sales upwards and match buyer demands.
On the other hand
- Changes in GST for under construction properties will not affect builders.
- They will not receive any direct benefits, as the new rates are meant to benefit home buyers.
- Builders cannot claim input tax credit (ITC).
- They can, however, benefit from higher sales, as demand for properties is expected to escalate.
- More and more home buyers will seek to buy homes, after the new rates come to effect from April 2019.
- For builders whose projects are in the construction stage, customer advances make for 65% of the cost.
- This makes it important to get in more sales during the early stages of construction.
- Thus, the move can make it easier for builders to recover sale of properties and deliver projects on time.
- The tax cut is not applicable for properties that have been completed.
- If completion certificates have been rolled out to buyers, they cannot claim this benefit.
- There is, however, some good news to look forward to. The panel of ministers responsible for the tax cut have agreed to hold talks to discuss this issue.
It is safe to say that 2019 has been a good year, so far, for real estate. The new budget has introduced pro buyer changes. If things continue the same way, the demand for real estate is sure to reach new heights!