Real estate – After GST

Real estate companies in churn mode after GST & Rera

The real estate sector is slowly catching up after being affected by the goods and services tax (GST) and Real Estate Regulation And Development Act (Rera). It has, however, seen a lot of churning among senior management roles, especially in finance roles.

Real Estate After GST
At least half a dozen senior executives, including chief executive officers (CEOs) and chief finance officers (CFOs), have quit and joined rivals or started as independent professionals in the last couple of weeks.

After the GST and Rera, finance, compliance and legal roles have become very critical and are in great demand. Finance heads are also important today to make the right investment decisions.

Last month, Hari Prakash Pandey, senior vice-president (finance) and investor relations at Mumbai-based real estate company HDIL, quit and joined privately-held developer Runwal group in Mumbai as the CEO. Pushpamitra Das, group CFO at Bombay Dyeing, quit in the same month. Das now works as an independent advisor to real estate companies.

Real Estate and GST
Compulsory registration of projects

Rera, which came into effect on May 1, talks about compulsory registration of projects with respective state authorities, makes it mandatory for developers to put 70 per cent of proceeds from a project in an escrow account and prohibits pre-sales, which is a popular way of raising initial funds, for developers. In short, Rera has hit cash flows of developers significantly.

On the other hand, the GST, which came into effect on July 1, has hit the sales of premium apartments.

Real estate investment Trust

R Suresh, former managing director of head-hunting company Stanton Chase India, said property developers were facing a lot of liquidity issues and needed to do equity infusion, get debt or monetize assets.

 

REIT (real estate investment trust) has also become a big opportunity. Besides, Rera has strict compliance rules that are why they need to be experienced finance professionals.

Real Estate and GST

 

Suresh said that many realtors have bought land, built assets and now want to unlock the value. “They need senior people to do that.

Many promoters want to run their business professionally after Rera. So, there is a lot of demand for professionals. But one should wait and choose the right offer.

 

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GST – Impacts on Real Estate Sector

GST Positive Towards Real Estate Sector

Introduction

GST in real estate: GST may convey a great deal of alleviation to the land area. Production network component in land part to be patched up after execution of GST.

The land segment is a standout amongst the most urgent segment of the Indian economy. Land area assumes an indispensable part in the business era in India. It positions second simply behind agriculture.The significance of Real home area can be comprehended with its normal 5-6% GDP commitment and empowering interest for more than 250 auxiliary ventures.

The land area had a considerable development of 22% in its private value speculations from 2015 to 2016. At the season of the second from last quarter of 2016, there was a 9% expansion in the venture for private properties from the past quarter.

GST – For Real Estate Sector

GST would bring a lot of transparency in the real estate sector and minimize unscrupulous transactions. Under the current tax laws, VAT and Service tax charged by different Contractors and excise duty, entry tax, octroi is paid on the procurements. GST law will increase the margin in the hands of contractor/developer by removing all the above-mentioned taxes.Now whether this benefit gets passed on to the end-consumer is unsure as pricing of real estate is driven by market forces than on cost principles.

How GST impacts on Real Estate

Real estate sector enjoys a lot of benefits from facilities in SEZ and same are expected to be carried forward in GST.GST will help in filling the overwhelming gaps currently existing under the supply chain management process.

There will be many ventures of designers which would require the move from current expense laws onto GST. GST display law did not indicate any arrangements for the move.

GST rate on Real Estate

Right now, the offer of land and structures have been kept out of the ambit of GST however it is relied upon to be burdened at a time of a year. Development of land and building will profit by the rates pronounced for concrete, blocks, and iron under GST.

Bond will be burdened at the rate of 28% under GST. It is higher the present normal rate of duty around 23-24% yet a ton of extra duties charged over the normal rate would be subsumed under GST. Press bars and columns utilized as a part of the development of structures is charged at the rate of 18% which is like the present normal rate of 19.5%.

GST effects real estate in India

Blocks utilized as a part of the development of structures and houses is saddled under GST at the rate of 28% aside from the rate of artistic building blocks which is kept under 5%. As of now, all blocks aside from the clay blocks are charged a normal duty rate of 25-26% comprehensive of all state and focal level duties. Coordination cost of transportation of blocks, concrete or iron will lessen through the subsuming and streamlining of charges.

In Real bequest segment, there is an immense rate of each venture consumption goes unrecorded on the books as of now. GST will chop down this rate because of cloud putting away of invoicing. Land part will likewise profit with new assessment law positively affecting all subordinate industries.