The current economic slowdown has affected many sectors including Mumbai’s real estate sector.
To provide relief to Mumbai’s real estate sector, Maharashtra Finance Minister Sudhir Mungantiwar has asked from GST council to cut down the goods and service tax (GST) rates redevelopment projects.
The current rate applicable to the redevelopment of old buildings and slums is 5 percent.
If the proposal is accepted, GST levied on the redevelopment of old buildings and slums will reduce from 5 percent to 1 percent.
Along with the tax relief, another proposal of increasing the threshold limit for affordable homes in the Mumbai Metropolitan Region (MMR) is also presented by Mumbai’s FM on September 11.
The minister suggested increasing the threshold for affordable housing to Rs 75 lakh from Rs 45 lakh. He pointed out that the state government had planned to provide affordable houses near commercial areas in MMR.
GST council is also asked to allow the benefit of input tax credit (ITC) to help the sector.
However, sticking to the guidelines of providing an area of up to 60 sqm, with a ceiling of Rs 45 lakh is tough and therefore, the ceiling should be raised.
While considering the problem of the developer during his submission, he said the construction through the Slum Rehabilitation Authority (SRA) doesn’t bring a significant return to the developer as the houses go to the original residents with no extra cost and the burden of redevelopment falls on the developer.
A spokesperson from the Builders Association of India feels that these new implementations will bring relief in the two-year recession in the realty sector.
Mungantiwar noted that reduced GST revenues might be a concern for the council, but good quality housing at affordable rates will provide an overall favorable environment.