GST to hit construction activity

Vijayawada: Construction activity, which has been crippled due to demonetisation since October /November 2016 in the capital region, will come down further with the implementation of GST and Real Estate Regulation Act (RERA) to be implemented from August 2017.

Developers in the capital region of Vijayawada, Guntur and Mangalagiri are not willing to start new projects due to drastic fall of demand for the apartment flats.

After bifurcation of the state, realtors invested several hundred crores in Vijayawada, Guntur, Mangalagiri, Tadepalli and other areas for the construction of apartments and individual houses. However, the realty business was not picked up even after two years of the bifurcation of the state.

Later, demonetisation of high value notes had further affected the real estate sector since October/November 2016 onwards. Several hundred flats in the two cities are yet to be sold. Many realtors slowed down the construction works due to lack of demand. In this backdrop, the realtors in the capital region are not willing to take up new projects.

N Durga Prasad, president of the Capital Region Builders Association (CRBA), Vijayawada, said the GST and RERA will have huge impact on the construction activity. He said the apartment buyers have to spend about 20 per cent of the flat cost in the form of taxes to the government.

He said the customers used to pay 7.5 per cent stamp duty and 4.5 per cent service tax on the registration cost of the property. He informed that the GST is fixed at 12 per cent from July 1. Durga Prasad said the stamp duty is entirely different from the GST and it must be paid to state government.

He said the developers had spent a huge amount after bifurcation of the state in the capital region but they have not got the returns due to sluggishness in the market.

A Siva Reddy, president of the Confederation of Real Estate Developers Association (CREDAI) Andhra Pradesh, said the registration charges will increase with the implementation of GST. He said the input credit get by the builders will be passed onto the customers as per the GST norms. But, so far there is no clarity how much input credit the government will offer to the builders.

Siva Reddy said the construction activity will come down further in the capital region due to implementation of Real Estate Regulation Act which was enacted by the Central government for strict implementation of construction rules and protect the interests of customers.

Increase of cement, iron and building material prices had already badly affected the construction activity during the last five months in the capital region.

Cement prices came down last month only after the state government had taken tough measures and warned of taking serious action on the cement companies if the latter fails to slash the cement prices.

The builders and common people have alleged the cement companies have created artificial scarcity to increase the price. After intervention of the state government, the prices slashed last month giving some relief to the common people who construct the houses.

By Md Ameen