Buffeted by demonetisation and GST, real estate is in dire straits. While the aftermath of demonetisation resulted in quick liquidity, of late cash flow dried up owing to lean business with tax-related fears both on the part of buyers and sellers, say real estate sources.
Registration of properties also plummeted and never has been able to reach pre-demonetisation levels. But before the revision of land rates in August by the government, registrations saw an upward curve.
Sources say revenue realisation from registration of properties has been keeping up with targets because there has been a downward revision of targets. The general practice is to revise targets upwards.
Dealings in agricultural land with a view to turning them into layouts has almost come to a standstill as present plotted real estate ventures are unable to attract buyers in spite of a dip in prices.
Sources say as against 10 to 15 development agreements a month earlier, the number has come down to one or two, that too for deals that were earlier struck paying advances.
In the Madhurawada area, since most of the apartments are purchased on loans from banks, the projects already launched are able to do some business now. Some projects even in advanced stage are finding it difficult to market. Realtors are wary of launching any new ventures. Projects in gated communities seem to be faring better, observed a realtor. But the small and middle-level builders are finding the going tough, he says.
Land cost in upmarket areas like Endada and Madhurawada sky-rocketing to ₹40,000 to ₹.50,000 a square yard with projected growth of the city in IT, tourism and other sectors is also a factor, say real estate circles.
“GST added to the woes as the total tax component together with registration is coming to 19.5 %,” points out CREDAI Visakhapatnam Chapter President Peela Koteswara Rao. The seller (of plots) has to collect 12 % GST and claim input tax credit on it later, and pay back to the customer. But it is difficult to explain and collect it and the high value components come towards the end, he says. Instead, considering the ease of doing business a slab rate could be fixed, he suggests.
Fall in registrations
In September 2016, in Visakhapatnam zone comprising the entire district, transactions in 5,283 properties took place resulting in revenue of ₹54.76 crore. In comparison, the number of registrations in September 2017 fell to 3,471 earning ₹47.59 crore. “This is a big drop in transactions hitting revenue,” says DIG, Stamps and Registration, T. Saroja.
In 2016-17, the year of demonetisation, the district earned ₹608 crore, falling way below the target of ₹944 crore. This year so far ₹333 crore was realised against a target of ₹363 crore up to September. The annual target is ₹742.5 crore.