A lowering of goods and services tax for under-construction houses would bring about greater alignment in the real estate sector, said SBI Chairman Rajnish Kumar.

In an exclusive interview with ETNow, the SBI chief said: “GST on non-affordable housing rate may fall to 5 percent and that of affordable housing to 3 percent. The move will bring alignment in the real estate sector.”

His remarks come against the backdrop of a panel, headed by Gujarat Deputy Chief Minister Nitin Patel, favoring a cut in GST on under-construction residential properties to 5 percent, from 12 percent currently. In its first meeting, the group of ministers (GoM) also pitched for slashing GST on affordable housing from 8 percent to 3 percent.

The GoM was set up last month to examine tax rates and issues and challenges being faced by the real estate sector under the GST regime.

The Chairman of the largest state-owned bank hoped that any such decision by the GST Council in its next meeting will lead to faster clearance of houses.

A build-up in inventory and subdued prices have long been a pain for the realty industry. Reflecting the state of affairs, industry body Credai said people are postponing their decisions to buy under-construction flats because of high GST rate of 12 percent and 8 percent on affordable homes.

About RBI’s recent surprise policy move to slash benchmark lending rate in a bid to boost lending and lift economic growth, Kumar said the benefit will be passed on to borrowers “if our marginal cost of funding comes down”.

Bankers are reluctant to pass on all of 25 basis point rate cut because of loads of bad loans and the high cost of deposits, according to Reuters. For the banks, any cut in loan rates will have to be accompanied by a corresponding fall in deposit rates, which is linked to a significant improvement in cash conditions.

Banks price their benchmark loan rates, known as the marginal cost of funds based lending rate (MCLR), mainly based on the cost of deposits.

Source: Economic Times