Real estate stocks were trading higher in early trade on Monday after the GST Council cut tax rates on under-construction flats to 5 per cent and affordable homes to 1 per cent, effective April 1.
The Nifty Realty index was trading 2.25 per cent higher at 238.40 at around 9.22 am (IST), while the BSE Sensex was up 0.33 per cent at 10,827.25.
Shishir Baijal, Chairman and Managing Director, Knight Frank India said that the reduction in the GST rates for under-construction projects will give the necessary boost to the demand in under-construction segment, which has been suffering from low sales levels for the last many quarters. He added that the elimination of input credit tax benefit may hit profitability for the supply side. However, the potential demand generation as a result of this move will outweigh any negative aspects leading to greater sales numbers and revenues.
Share price of Brigade Enterprises, Unitech and Sunteck rallied over 3 per cent, while Godrej Properties, Sobha, Indiabulls Real Estate gained between 2 per cent and 3 per cent. Oberoi Realty, Phoenix Mills and DLF advanced over 1 per cent each.
Sameer Kalra, Equity Research Analyst and Founder Target Investing said thathe major cities to benefit will be Mumbai as it has 27 per cent of All India unsold inventory by volume and 30 per cent of All India unsold inventory by value. The small and medium level developers are finding it hard to bring under construction projects to a level where the projects get occupancy certificate because of inability to sell flats or raise funding from NBFCs. He added that Oberoi Realty is the best place to get the benefit without even the GST rate reduction as four of its projects are completed and the rest are being opened for booking at certain stages taking care of less burden of GST.
