MADURAI: The recently announced drop in the Goods and Services Tax (GST) by the Union government and relaxation in the Floor Space Index (FSI) under the Development Control Regulations of the Tamil Nadu Government would be giving the much-awaited push for the construction sector and buyers in Madurai.
Recently GST Council reduced GST on affordable houses from 8% to 1% and from those houses not falling under the criteria from 12% to 5%, from April 1. The 1% GST applies for houses with a carpet area less than 90 square metres (around 960 sq.ft.) and priced below Rs 45 lakh in non-metro cities like Madurai.
“This will be a boon for the construction and real estate industry and for buyers in the city. The industry went through a dull phase over the last 4 years and around 20 to 25% of the apartments still remain unsold. Change in GST rates and FSI are good signs,” said T Pandiarajan, president of Credai, Madurai chapter.
Pandiarajan said that half the members of the Confederation of Real Estate Developers Association of India (Credai) in Madurai became inactive during the dull phase. “Focus of builders will be in the affordable housing sector as buyers in this sector will be benefiting more from the changes announced by the government,” he said.
S Srikumar of Visvas Promoters said that the change in GST rates would not only benefit those going for apartments but also those buying individual houses with a carpet area of 960 sq.ft. as this is excluding the balcony and stairs and land cost. “One can build a comfortable two-bedroom house in this space in the affordable house category,” he said.
The leading builder said that the drop in GST would not bring about a drastic change in the price at which the customer is buying a house as input tax credit has been cancelled. He said that buyers would be able to realize an effective change in the price of houses at the rate of close to 3% due to the GST reduction.
At this juncture, he said that relaxation in FSI coupled with GST rate change would bring about a drastic change in the price of affordable houses and apartments within the city. He explains that the regulation introduced by the state government last month allows two-fold construction area in the place of 1.5 times till last month.
“For example, we could build 1,500 sq.ft. on a 1,000 sq.ft. plot when the FSI was 1.5. Now that it has been increased to 2, we will be able to build 2,000 sq.ft. on the same plot. This will make it possible for buyers to buy affordable apartments at a lesser price in the city as the cost of land will be shared among the additional houses built in the space,” he said.
However, this is not possible for projects that are underway. Builders and promoters said that the change in GST rates have also resulted in a drop in bookings this month as it comes to effect from April 1. “Some customers have asked us to put the registration on hold,” said a builder. However, those under pressure to buy a house to save tax would not be able to enjoy the benefit.
Source- Times of India.