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Negative outlook for India's residential realty sector - Icra

Infra News - Published on Tue, 09 Apr 2019

Image Source: SteelGuru
According to the rating agency Icra, qwing to weak consumer sentiments despite the recent announcement of various sops for the buyers, India's residential real estate sector outlook remains negative. Factors responsible for negative outlook are demand-supply mismatches in many markets and product segments, leveraged balance sheets and continuing funding challenges for developers, challenging macro-economic environment, and low affordability levels for buyers. Mr Shubham Jain, Icra group head said that "Overall we expects a negative outlook on the Indian residential real estate sector. Consumer sentiment remains weak, notwithstanding recent sops for the sector announced in the union budget."

Icra said that the rationale to revise the rates has been to reduce the high headline GST rates, which have resulted in lower sales of under-construction houses.

The GST rates for affordable housing have been reduced from 8 percent (with full input tax credit) to 1 percent (without input tax credit). Similarly, for other segments the rates have been reduced from 12 percent (with full input tax credit) to 5 percent (without input tax credit).

Mr Jain said that "There have been concerns that developers have not been fully passing on the benefits of the input tax credit availability to customers. However, for developers who have been passing on input credit benefits to customers, its removal will increase cost and constrain profitability unless developers pass on the additional costs to customers."

He said that "The reduced rates will bolster consumer sentiment towards under-construction properties as high rates were a dampener for customer-buying sentiment, considering the high value of such transactions. However short-term transition issues relating to pricing and profit margins in ongoing projects and possible deferment of purchases by customers cannot be ruled out."

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Posted By : Rabi Wangkhem on Tue, 09 Apr 2019
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