A change in the real estate situation of Kolkata is evident and the government-driven reforms are offering a significant shot in the arm to developers and buyers alike. The decrease in GST on construction material including cement is one of the most prominent new developments and has a direct effect on the project costs. Although this may sound developer-friendly reform, in practice the trickle down effect is increasingly flowing down to the homebuyers as value added benefits, price stability and affordability.
One of the most important parts of a construction project is cement. A reduction in GST rates will mean considerable savings on developers, who will cut construction costs per square foot by up to [?]15. In a very price-sensitive market such as Kolkata, the slightest cost reduction can affect the choice of buyers. Instead of just using these savings, most developers are opting to transfer them to the form of other benefits. As an example, the purchasers of small units would now be entitled to free modular dining table or wardrobes and the high-end home buyers are being offered air conditioners, designer lighting and other lifestyle enhancements as freebies.
Another distinctive feature of the Kolkata housing market is that it has a significant demand of small and low priced apartments. Recent registration statistics indicate that the units of less than 500 sq ft have become the most popular unit with more than half of the new registration units belonging to this segment. When it comes to first time buyers, even the slightest incentive such as free furnishings or lower maintenance fees can take a huge burden off their wallets. GST reforms are thus not just helping to lighten the burden but also making the budget homes more attractive, young professionals, nuclear families and retirees are definitely reaching out to the property market without fear.
Although affordability is the main concern, there has also been a significant rise in mid-segment and luxury housing demand in Kolkata especially in the districts where the areas stand to gain by the metro connectivity. In this case, GST induced cost-reductions are enabling developers to add value without increasing headline prices. Homeowners who spend [?]1 crore-plus are now getting value added features such as modular kitchens, smart home fittings and branded interiors- benefits that would have costed them extra. This not only makes the projects more appealing, but also assists the developers to be able to distinguish themselves in an ever competitive market.
These reform effects on the mind should not be underemphasized. As soon as the buyers believe that the developers are giving them more items at a cheaper price, the general confidence in the market increases. Recent surveys suggest that in India, it has already become the leading investment option of more than 60 percent of the surveyed respondents in real estate. In Kolkata, the GST-related favour is also enhancing this feeling, where fence-sitters will turn their interest into bookings.
