Commercial real estate developers involved in building rental assets have urged the government to not levy 18% GST in case of joint development agreement (JDA) between landowner and developers.
If a developer buys land upfront, they pay just stamp duty on it but if they opt for a JDA model, they pay both stamp duty and 18% GST on the JDA agreement.
Instead of outright purchase of land, developers are now looking to enter into a joint development agreement where both landowner and developer share the built up area of the property.
And the GST levied on the project increases cost and ends up reducing returns in case the developer plans for a REIT.
Numerous representations have been made to the government by various industry bodies but to no avail.
“Economically value accretive mechanisms have not taken off for developers aiming to develop build-to-lease commercial real estate, due to excessive taxation. If the office complex is eventually leased out, there is no input tax credit (ITC) available. This is making most Grade A build-to-lease commercial projects unviable,” said Rishi Raj, Chief Business Development Officer, Max Ventures & Industries Limited.
Developers say that the move affects a large number of developers who propose to construct malls, multiplexes, hotels, shopping complexes, commercial towers (including office spaces), industrial parks and warehouses across the country.