There is expected to receive a major boost in demand for Residential properties, following the government’s decision to cut the goods & services tax (GST) rates to 5% from effective rate of 12% for the under-construction projects. The government has reduced the GST in a major push to the affirmed objective of ‘Housing For All by 2022’ to marginal 1% for affordable housing while revising the definition of under-construction homes.
Prior to this declaration, the under-construction residential houses attracted rate is 18% and the effective rate is 12% after factoring one-third abatement for the value of the land/ground. The effective GST rate for affordable home was 8%. Ready houses/apartments that have received an occupancy certificate (OC) do not attract GST.
The government is focused on its schema of pushing affordable homes, which is visible in the decision of the government to reduce the GST to a mere 1% for this segment. The lower tax burden on home buyers is expected to push demand in under-construction homes which, in turn, will keep builders to build more affordable homes.
The reduction in the GST for under-construction projects is the most decisive move that will encourage the demand and sales of property and will give the necessary tonic to the demand in the under-construction sector, which has been suffering from low sales levels for last many years.
Aspiring homebuyers now have a more and better range of options to choose from, as the definition of affordable housing is widened, more builders can mobilize projects across the country.
According to experts, the reduction in GST rates with an expanded definition of affordable housing, combined with incentives proposed in the budget and the reduce the prime lending rates by the Reserve Bank of India, supports the sops for the under-construction residential real estate market.
The much-awaited reduction in GST can reduce the buyer’s payout by 6% – 7% on overall purchase, depending on the category.