Real Estate: Decoding the GST impact

From July 1, uniform GST rate would be applicable to all real estate developments & transactions. We expect GST to be positive for the sector with property prices likely to soften by ~1-3% and / or some expansion in developer margin. Southern markets may benefit more followed by northern and western markets. Impact could vary depending on extent of input credit transferred, cost structure and property completion status. We see no impact on rental business. Interaction with developers suggests some slowdown in new sales over last 1M given uncertainty around GST and RERA implementation and may continue in the near-term, we believe. We remain constructive on the sector in view of RERA+GST led improvement in transparency, favorable long-term fundamentals and supportive macros.

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