Impact of GST Rate Cut (Real Estate) on Stock Market

Goods and Services Tax (GST) is an indirect tax levied in India on the supply of goods and services. The GST was introduced in India from 1 July 2017. There have been a couple of modifications to the GST slabs for different products. A recent GST rate cut has been announced by the Govt. of India on 24th Feb 2019.

Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax. The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.

The GST Council, consisting of the Finance Minister of India Mr. Arun Jaitley and all the finance ministers of respective states had met on 24th February 2019. In these earlier meetings of the GST council, the discussion on the GST rate in real estate sector was going on from a long time. After the latest (24th February 2019) GST council meet, a GST rate cut for the real estate sector has been approved.

GST Real Estate Rate Cut

This is a very positive and good news for the real estate sector as this sector has been struggling for the last 3-4 years. The demand in the sector was impacted severely because of the 12% GST rate on under construction properties. For example, when a customer buys a house which has a price of Rs. 1 Cr. The customer straight way had to Rs. 1.12 Cr plus the stamp duty and other chargers. So, this huge increase in the price impacted the demand in the real estate sector.

So now, the government has cut the GST rate from 12% to 5% without ITC (Input Tax Credit). And this rate cut is on all housing projects – under construction (except affordable housing).

GST Rate Cut impact on Affordable Housing

In Metro areas, housed with a carpet area up to 60 sq. mtr. (645 sq. ft.) come under affordable housing. And in non-metro cities, housed with a carpet area up to 90 sq. mtr. (968 sq. ft.) come under affordable housing.

In affordable housing, the GST rate has been brought down to 1% from the earlier rate of 8% without ITC (Input Tax Credit)

GST Rate cut impact on Stocks

There are some stocks which can be affected by this GST rate cut news. They are as follows:

  • DLF
  • Godrej Properties
  • Purvankara
  • Oberoi Realty
  • Sobha
  • Prestige Estate
  • And also the other real estate stocks

Cement sector stocks such as UltraTech, Dalmia may also have positive impact in the market.

GST Rate Cut Summary

  • The GST rate cut might bring some positivity in the real estate industry.
  • Whenever real estate experiences a positive impact, other allied sectors relating to it such as steel or cement or aluminum will also experience positive impact. Gradually the demand in the real estate sector may rise now. And as the demand in real estate sector rise, the associated sectors (steel, cement, aluminum) will also experience positive impact.

Notes: –

  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • We are also not suggesting anyone to immediately go and buy the stocks or invest in the stock markets.
  • No judgments or final statements are being made here.

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