It’s time to buy realty, steel and cement stocks - GST rate cut is win-win for homebuyers and investors

GST Rate Cut: In the 33rd meeting, the GST council emphasized more on real estate sector, which is why, they have slashed GST rates levied on under-construction residential properties. This comes as a ray of hope to realty industry and home buyers, who were already struggling with higher price and complicated tax structure in the past. GST tax slab has been cut for both properties outside the affordable housing segment and within the affordable housing segment. Almost 7% deductions have been made in new GST rate for under-construction properties, which will be implemented from April 01, 2019. Such new development, comes also during the time when policy repo rate have been reduced to 6% and furthermore cuts are being speculated. Why? Because with easing in home loan rates would also mean more investment for homes. 

The new tax structure now involves - 5% GST on residential property outside the affordable housing segment from previous 12%. Further, 1% GST on affordable housing from previous 8%. Both the rates  will be charged without an Input Tax Credit (ITC). Residential properties on which GST is payable are exempted of Intermediate Tax (TDR, JDA, lease (premium) FSI) on development rights.

Talking about the new move, Shivendra Foujdar, Founder and Managing Partner, Avighna Trades said, “Real Estate could be considered as underprivileged sector as far as support offered through policies and tax structures in recent past from govt. The 12% GST has further impacted the industry adversely,  Recent announcement from GST council has certainly boosted up the  industry  with revision in  tax slab from  12% to 5% on all housing projects except for affordable housing where GST rates are revised to 1% from earlier 8% .”

After recent reduction in prime lending rate by RBI GST rate cut, Foujdar says, “will certainly boost the demand in under construction projects, A very positive impact is expected on the stocks related to industry.  Apart from this associate industry stocks like cement, steel etc will also get a positive impact.”

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Which stock to buy?

In Foujdar’s view, the positive movement in stocks of housing industry during early trade hours was the reflection of optimistic sentiments resulted through GST rate cut but an important part of the rate cut is that ITC(Input Tax Credit) is not reduced which means consumer will get benefitted, govt will also get their due but the developers are not getting anything so housing stocks will see a rally is debatable as of now. 

Hence, as per Avighna, stocks like Prestige, Brigade, DLF etc are looking good asrate cut has certainly created a positive sentiment. These sentiments will also have their reflection on associate players like Tata, JSW, Jinadal & Sail in Steel. Further, Ultratech, ACC, Ambuja, Dalmia are majors in cement.

Therefore, if you are having an appetite for realty, steel and cement stocks, then you might to consider the above mentioned factors.