Over a couple of years, the Indian real estate sector has noticed many impactful reforms including the Goods and Services Tax (GST) council that took a major step to boost the demand in the property market. On February 24, 2019, the GST council slashed tax rates for under-construction flats to 5% and affordable homes to 1%. Currently, the 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 units, the existing tax rate is eight percent
Following are the impacts that are expected from the GST cutback:
Benefit for the homebuyers: One of the biggest benefit that the homebuyers ensue with the GST slash is the fact that they would now have to pay an upfront GST. 1 percent for affordable houses and 5 percent for non-affordable houses without worrying about getting back the input tax credit from the developer. The billing systems are expected to become more transparent.
Change in the definition of affordable housing: The definition of affordable housing now allows apartments of 60 sqm for metro cities and 90 sqm for non-metro cities, with a cap on the value of the asset at Rs 45 lakhs. This will bring more residential apartments across Tier II and Tier III cities under the ambit of affordable housing.
Good news for landlords: Those who are earning a rental income by letting out their properties for residential use will not be taxed under the GST. However, those who have given their premises on rent to be used for commercial or industrial purposes will have to pay an 18 percent tax in case they are earning over Rs 20 lakh annually.
Improvement in developers in metros: Customers usually wait for under-construction projects to be completed to avoid the burden of GST. This increased the financials of under-construction projects that were constrained due to weak demand and stable real estate prices. The GST slash has benefitted both the buyers and developers as more buyers would be investing in under-construction properties that in turn improve the financial health of the developers.
The GST regime will pass on the benefit of a lower cost of construction to the end-buyer who had been missing in the market. With the slash, growth in the demand for properties will also be noticed in the Indian real estate market.
With so many positive transformations entering the real estate market of India, this could be the perfect time to invest in a home. If you’re planning to buy a home in Pune, take a look at Amanora, the best residential project in Pune. It’s a fully-integrated township that comprises of one of the best and luxurious developments of Pune. Adorned with a range of exciting lifestyle amenities, experience the gold standard of living only at Amanora.