GST on brokerage fees should be cut to 5%

Update: 2020-02-01 02:13 IST
Arani Sumanth Reddy

The real estate sector is the second-largest employer in the country, and it accounts for 10 per cent of the GDP directly or indirectly. As the year 2019 has been an eventful year for the real estate sector, we are optimistic and have high expectations from the upcoming Union Budget 2020.

The central government should seriously consider industry status to the real estate sector as it is expected to contribute 13-14 per cent towards the nation's GDP by 2025. A major overhaul in terms of GST relief and curtailing home loan rates should give a big boost to the sector.

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The liquidity crisis has lowered the confidence among many developers. Therefore, any measure taken by the government towards improving the liquidity will have a positive impact on the sector. The value limit in the affordable housing sector should be increased to Rs 75 lakhs as the limit of Rs 45 lakhs is not feasible in major cities due to variable land prices.

Further, the central government should consider reviving Input Tax Credit (ITC) on GST. It is laudable that the Centre had reduced GST from 12 per cent to 5 per cent, but it removed ITC. As the GST input credit is not allowed to real estate developers, the burden is passed on to the buyers resulting in increased cost of the residential units. The restoration of ITC can provide relief to developers and buyers and boost the sales.

On expectations from real estate agencies and consulting firms, the central government should reduce GST on consultancy fees from 18 per cent to 5 per cent as real estate brokers and agents play an important role in facilitating transactions.

On an average two per cent fee is charged towards facilitation of a transaction from the client. The current rate of 18 per cent has become a burden as clients are reluctant to pay the GST and are forcing the brokers to absorb the GST within the fee. This is leading to the loss of pay. Also, they are unable to completely avail the input credit due to the nature of the business.

The central government should also consider granting professional status to real estate brokers and agents that make them avail funding from banks and NBFCs. This will help them in enhancing resources to provide better services and solutions to all the stakeholders.

Post RERA Act, the demand for skill development in this sector is growing. Government should allocate budget for skill development initiatives, as it requires skilled & knowledgeable professionals to handle growing demand for quality services in this sector. Besides, it should consult and negotiate with the states to subsume stamp duty into GST.

With regards to Telugu states, the Centre in association with the Telangana government should develop Central Business Districts (CBDs) around Hyderabad, which can generate more employment and give fillip to the overall growth of Telangana.

Besides, Andhra Pradesh is cash-strapped State and is finding it difficult to build its capital city. Centre should consider providing tax incentives to the capital region as it encourages investors, developers and all the important stakeholders to establish their businesses. This will have multiplier effect and push economic growth in Andhra Pradesh. (The author is president of National Association of Realtors'- India) 

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