KOLKATA: If prospective home buyers were enthused by the GST rate slash in under-construction projects announced on Sunday, here’s a reality check. Customers in Kolkata are unlikely to benefit from the rate cut with developers set to proportionately increase the project price citing withdrawal of input credit. However, buyers of homes in the suburbs that are labelled ‘affordable’ can expect a saving of 1-2%.
Credai National vice-president and Merlin group chairman Sushil Mohta said the builders would have to increase prices of projects as 5%-7% discount they earlier offered to customers on account of input credit would have to be withdrawn. With developers paying 18% GST on construction material, the input credit waiver will see construction cost increase from Rs 2,000/sq ft to Rs 2,360/sq ft.
“In regular homes that are purchased by middle class families, GST has been reduced from 12% to 5%. But for the developer, the withdrawal of input credit means the construction cost component in his project will increase. Unlike elsewhere, developers in Kolkata had passed the benefit of input credit to customers through discounts. With the credit now gone, the discounts will also be withdrawn. That will result in price increase. But for the customer, it will not make an impact as his payout for the apartment will remain the same,” Mohta explained.
With 85% of 15,000-odd apartments in Kolkata are sold in the ‘under-construction’ stage, the high GST was a dampener. Thus when news of a GST rate cut was announced on Sunday, it led to optimism among prospective home buyers. But with developers now pointing to an inevitable price hike, it is sure to be a disappointment.
Sureka group chairman Pradeep Sureka, too, conceded the price impact of GST cut on customers would be nil on regular homes in Rs 60 lakh to Rs 1 crore category although buyers of affordable homes in Rs 25 lakh to Rs 45 lakh bandwidth would see a 1%-2% reduction in prices. “The GST slash is great news for customers but withdrawal of input credit is bad for developers,” he said.
Market analysts, though, argue that not all developers passed on the benefit of input tax credit to buyers. Credai-Bengal chairman Nandu Belani, though, is confident that the GST slash will boost sales, particularly in projects where sales had slowed down to a trickle due to 12% GST rate.
