The demand for affordable homes is going to witness a massive increase following the government’s announcement of cutting the Goods and Services Tax (GST) on under-development properties to 5 percent from 12 percent. In a huge escalation towards achieving the vision of “Housing for all by 2022”, the government has decreased the GST to only one percent for affordable homes.

Before this move, 18% GST was imposed on the under-development properties and effective rate of 12 % after considering the one-third decline in the land value. While already completed properties do not attract any GST, 8 % GST was imposed on the affordable homes effectively earlier.

The government is determined to propel the affordable housing segment, which is clearly validated by their approach towards reducing the GST rates. The deducted tax rates will create less burden on the buyers which are expected to result in a higher sales rate as well as elevating developers’ commitment towards building more affordable homes.

gst rate deduction

Jaxay Shah, national president of Confederation of Real Estate Developers Association of India (CREDAI) termed it as a revolutionary step and a major victory for the home buyers which is intended to boost the India real estate world. The deduction in the GST for under-development properties is the most conclusive step which will encourage the demand and sales of these kinds of properties that has been witnessing low sales levels for some time now.

Shishir Baijal, CMD of a prestigious real estate company added that the removal of input tax credit advantages may affect the profitability for the developers, but the high demand possibility will lead to greater sales eliminating all negative aspects. The deduction in the GST will possibly decrease the overall price for homes by 6 to 7 %, which will help in bringing down the unsold properties, he concluded.

According to Gagan Banga, VC and MD of a prominent real estate company, more developers can assemble properties across the country as the clarity on affordable homes is widened, which will provide the buyers a bigger and better range of properties to choose from.

According to the experts, the deduction in the GST rates along with the incentives provided in the budget will effectively propel the real estate market and will prompt the buyers to buy their dream home who were in two minds till now.

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