Real estate stocks were in focus today as the GST Council on Sunday decided to lower rates on under-construction housing to 5 percent from 12 percent and affordable units to 1 percent from 8 percent without claiming the input tax credit, effective April 1. The decision is likely to benefit home buyers, real estate developers in select cities, and housing finance companies (HFCs).
Share prices of various real estate companies opened higher in trade today. Oberoi Realty 2.4%, Brigade Enterprises 5.5%, Unitech 4.4%, Sunteck realty 5.3%, Phoenix Mills 2.7%, HDIL 4.4%, Ashiana Housing Ltd. 4.7%, Godrej Properties2.6%, Prestige Estates 4.2%, Sobha 4.0%, Indiabulls Real Estate 3.7% logged gains in early trade. The BSE realty index also rose 1.7%.
The decision is expected to boost demand and increase sales of under-construction properties as well as simplify tax structure and compliance for builders. The move is also in line with the government's vision of 'Housing for all by 2022'.
NAREDCO President Niranjan Hiranandani said the industry lauds the GST rate cut on real estate as a welcomed and positive move which brings a big relief to the home buyers and help to narrow down the demand mismatch gap. This announcement gives an impetus to the affordable housing and enthuse homebuyers to close the sale deals, he added.
"The real estate and housing sector drives construction and is a key employment generator and we believe today's decisions for a better and simpler tax regime will boost offtake of housing, thereby also contributing to job creation," CII Director General Chandrajit Banerjee said.
"The Council also brought in a twin definition of affordable housing, on the basis of carpet area and cost," Arun Jaitley, Finance Minister and Head of the Council mentioned.
The GST cut, coupled with this critical change in definition, will induce more sales in homes falling in this budget range - a win-win for both builder and buyers, expects Anarock Property Consultants.
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