Several real estate developers have reached out to the government for clarity and concessions on the issue of double GST payment in redevelopment projects, a factor that has led to cost escalation at a time when margins are already under pressure.
The economics of redevelopment projects has gone away in the last few years following the implementation of GST in 2017, say, industry trackers. The problem arises due to the way GST is computed on these projects.
“The GST is paid firstly on the cost of construction without the input tax credit, and secondly when the area is delivered to existing residents at market price. Both GST payments are absorbed by a developer, which often becomes a huge cost,”
Real estate players say they have been disrupted during the covid-19 pandemic in the two years with increase costs falling revenues and other problems such as labour shortage. In a typical redevelopment project, a real estate developer takes over a project and rebuilds it with additional space and apartments. In most cases, the original residents return to their apartments with some extra or bigger apartments