The Supreme Court's recent decision on input tax credit (ITC) is expected to boost investments in commercial real estate. This ruling allows developers to claim ITC for construction expenses on properties that will be used for renting or leasing, which has brought clarity to the tax rules.

This change is seen as a positive move for the sector, which includes offices, malls, and hospitality ventures that need significant upfront investments and long-term planning.

Decision Will Reduce Tax Burdens

The decision is likely to reduce tax burdens for developers, making commercial projects more affordable. Experts believe this will encourage new investments and attract developers and institutional investors who might have been hesitant earlier due to high costs.

With the reduction in expenses, developers can offer more competitive rental rates, which may lead to more affordable office and retail spaces, especially in big cities where rents are usually high.

Expert's Opinion

Niranjan Hiranandani, chairman of the industry body NAREDCO, welcomed the ruling, saying it acknowledges the industry's stance on ITC. He said that the commercial real estate sector is seeing a rise in demand, driven by the return of employees to offices and growth in industries like IT, ITeS, and e-commerce. The Supreme Court ruling provides a financial boost to developers, encouraging them to increase the supply of commercial spaces.

The ruling also supports business models that focus on leasing, as developers can now offset their tax liabilities with ITC claims. According to Amit Bhagat, CEO of ASK Property Fund, this is especially beneficial for projects where revenue starts flowing only after the construction is completed, as it helps reduce overall project costs.

Industry experts see this decision as a game-changer because it provides a clearer legal framework. Developers can now plan their tax compliance with more confidence, knowing that ITC on construction expenses will be available when the property is used for taxable activities like renting. As a result, there may be a rise in the supply of commercial properties, giving businesses and tenants more options.