Builders are seeing a surge in demand for ready-to-move-in properties because such apartments with occupancy certificates are not within the ambit of Goods and Services Tax, which has raised overall taxes on property.
An under-construction project attracts a flat GST rate of 12%. In the pre-GST era, the total tax — including VAT, service tax, Swachh Bharat cess and Krishi Kalyan cess — roughly worked out to 9% of the total sale value (cost of land and construction).
According to a recent report, for ready-to-move-in properties, customers need to pay only the registration and stamp duty charges over the sale value. “Queries for ready-to-move-in properties 12 months ago comprised roughly 25% of the overall enquiries, but only 16% of the overall sales. Now, the figure has increased to 25% of the overall monthly moving average sales. The Buyers who had postponed their decisions in the run-up to GST and the Real Estate Regulation Act (RERA) have returned to the market. The builder has set up a dedicated team to sell ready-to-move-in projects. Usually, ready-to-move-in as an asset class constitutes a small portion of the total revenue for developers as 75%-80% of a project gets sold between launch and completion.
Experts believe that restricted supply of fresh projects after the implementation of RERA has also contributed to the growth in demand for ready-to-move-in houses. Builders are stuck with old inventory and are keen to sell it off before launching new projects.
Under RERA, many developers may move to a format where they would complete the project and then come to market to sell it, in order to minimize risks.