Real estate developers’ apex group CREDAI-MCHI said on May 8 that more than 25,000 structures in the Mumbai Metropolitan Region (MMR) are eligible for renovation, with a total projected project value exceeding Rs 30,000 crore.
The agency stressed the need to proactively address viability difficulties to fully realise Mumbai’s redevelopment potential. The cost of approval in Mumbai is 55,200 per square metre, which is far more than the 1,800 and 5,500 in Pune and Delhi, respectively. “This underscores the city’s excessively high development fees,” CREDAI-MCHI said.
The highest authority was responding to the Bombay High Court’s decision, which made it clear that GST does not apply in cases when homeowners choose a developer to complete redevelopment work. The court only decided that the GST on development rights is not payable under the reverse charge method, according to CREDAI-MCHI’s legal representatives, and it did not eliminate the tax.
Until the GST Council or a higher court renders a definitive decision, developers are still subject to legal and financial risk, according to the legal representatives.
“There are currently cases pending in the High Courts of Bombay, Delhi, Gujarat, and Karnataka due to the confusion surrounding the GST treatment of development rights,” noted Harsh Shah, Partner, Economic Laws Practice (ELP). Some people have mistakenly believed that the Bombay High Court’s Nagpur bench’s ruling grants a complete exemption from GST, which is untrue.
“Restoring confidence in the sector requires a clear and consistent interpretation of GST law that is in line with the nature of redevelopment transactions,” Shah stated.
The Deputy Managing Partner of Economic Laws Practice (ELP), Rohit Jain, stated that “developers today face up to four layers of GST—5% on sale to customers, 18% on transfer of development rights, 5% on units handed back to existing residents, and non-creditable GST on construction materials.”
“These cascading taxes slow down redevelopment and have a significant impact on margins,” Jain stated. It is crucial to make clear that GST is still applicable—either under forward or reverse charge mechanisms—despite recent high court decisions, and that the ambiguity in interpretation needs to be resolved immediately.
Projects simply do not succeed when layers of GST and regulatory complexity are added. Providing safer houses to thousands of people residing in deteriorating structures, enhancing urban infrastructure, and expanding the housing supply are all important goals of resolving these problems, according to Sunny Bijlani, Joint Secretary, CREDAI-MCHI.
“Redevelopment can be greatly accelerated by correcting GST interpretation and adjusting taxes to reflect local reality. We urge decision-makers to take immediate action because these are low-hanging fruits with significant economic and social effects,” Bijlani stated.
In its statement, the highest authority concluded that the ruling of the Bombay High Court is anticipated to encourage redevelopment in Mumbai, a city where vertical growth continues to be the most viable option due to a lack of available land and deteriorating infrastructure.
Source: Hindustan Times
