GST Rate Cut: Is This Another Good Reason To Buy Your Dream Home Now?


Bringing cheers among home buyers, the Goods and Services Tax (GST) Council on February 24 slashed the tax rate on under-construction residential properties. As per the new ruling, GST rate been slashed for under-construction flats to 5 percent and affordable homes to 1 percent, effective April 1.

Currently, GST  is levied at 12 percent with an input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale. For affordable housing, the existing rate is 8 percent. Ready properties that have received an occupancy certificate (OC) do not attract GST.

The scope of affordable housing is now expanded to units costing up to Rs 45 lakh and measuring 60 square mt (earlier 30 sq mt) in metros and 90 sq mt (earlier 60 sq mt) in non-metro locations. The move is seemingly in line with the government’s vision of ‘Housing for all by 2022’.

However, post the GST cut, builders will not be able to claim the input tax credit.

The GST cut has brought some cheer in the real estate industry, which is currently under the burden of ever-increasing unsold inventory. The reduction of GST is expected to stimulate the sales and demand by pushing the fence-sitters to take the plunge.

“The elimination of input credit tax benefit may hit profitability for the supply side; however, the potential demand generation as a result of this move will far outweigh any negative aspects leading to greater sales numbers and revenues,” Money Control quoted Shishir Baijal, CMD, Knight Frank India, as saying.

This is indeed a good time for the prospective home buyers who have been contemplating to invest in real estate for quite a while. The recent GST cut seems to be icing on the cake as a Knight Frank’s recently released Affordability Index report states that the real estate market is witnessing a spike in the affordability of homes since 2010 in most of the Indian cities.

This simply implies that the property prices have gone below the benchmark level compared to the average annual household income in most of the cities in India.

Another favorable factor of home buyers is that home loans are set to become cheaper owing to the RBI rate cut to 6.25 percent from 6.50 percent earlier.


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