The average price of upscale properties in Kolkata is ready to soar high up in the air with prices ranging from Rs 35 to 50 lakhs. Premium project developers are awaiting July 1 with fear since GST will come into effect that day and crash the city’s real estate industry as anticipated.
The posh localities of Kolkata like Ballygunge, Alipore, Chowringhee, Southern Avenue, Rawdon and Loudon Streets are going to be most affected since, the development cost in these areas is very high. The developers are obliged to pass GST burden on to the customers as land neither comes under ‘services’ or ‘goods’.
According to the president of CREDAI Bengal, the major real estate projects in Kolkata charge 20 to 80 percent of the development cost for the land. Previously, the 15% service tax used to offer a 70% concession for land. With the calculation of 12% GST, there will be no concession and the tax will increase by 7.5%, instead. The resulting hike in price shall worsen the already dampened market.
The home buyers already need to pay 8.1% of the total development cost in terms of the registration fee and stamp duty. With GST coming into effect, the payment of tax fees will become 1/5th of the total project cost. Unlike the other high-value items, the rate of GST is not low for the real estate industry as stated by the former president of CREDAI Bengal. This will make situations tough for the home buyers in Kolkata. For instance, a Rs 4.5 crore apartment at Alipore or Ballygunge will cost you 34 lakh rupees more from 1st July onwards.
The apartments in the city suburbs will get relatively less affected but the ones in Proper Kolkata will be the challenges for buyers. The cost of land charged by the developers in suburbs of the city is only 15 to 20 percent of the project value. Thus, it is evident that GST is about to create major obstacles to healthy business in the real estate industry.
Other than the land price being high in Kolkata and such other cities, the stamp duty is set on the basis of circle rate that makes it exceed the original transaction value. Thus, the developers have to pay sanction fee, land and development charges accounting for 4 to 5 percent of the selling price.
The past president of CREDAI Bengal believes that apartments within the range of 6000 rupees/ square feet will not get much affected. Consequently, the price of high-end and luxury projects will get higher.
The developers of under-construction projects are worried whether they will be able to benefit their customers at all. As we know, GST abatement on services and raw materials will come into effect only if they have been purchased after July 1. But for projects that are almost complete, input credit will hardly exist. Around 15000 apartments in Kolkata are under construction at present so you can imagine the scenario! For more of such helpful information, just log onto www.transventor.com