The pandemic hit the real estate market like a bolt of lightning. With construction on hold and a prolonged demand slump, the situation only got worse. But the latest GST revisions might bring a ray of hope for the new buyers! After the pandemic, the government has significantly reduced the GST rates on real estate transactions.
Wondering what are the effects of GST on propertymarket today? Or what it means for you? Then, read on.
What is GST in real estate?
Though the real estate market does not directly come under the GST tax laws, it does affect certain taxable services in the industry.
Before the introduction of GST, developers had to pay different state and central taxes, often increasing the project’s cost. Further, lack of uniformity led to confusion and non-compliance with rules.
But under the new GST regime, the following changes came into force.
|Property Segment||Previous GST Rate||Revised GST Rate|
|Affordable Housing||8% with ITC (Input Tax Credit)||1% without ITC|
|Non-affordable Housing||12% with ITC||5% without ITC|
With the revised rates, you can enjoy a cost reduction of up to 4%-6%, allowing you to save more!
Impact on revised GST rates on homebuyers
1. Affordable housing costs
With the drop in tax rates after the pandemic, the real-estate market has become full of opportunities for potential buyers. It has reduced the overall cost of constructed properties, allowing more and more people to invest in their dream homes with instant home loans.
2. GST on loans
No GST is directly applicable on loans, home loan interest rate, or repayment. However, lenders do charge a specific rate of GST for providing services during the borrowing process. Depending on the lender, you may have to pay tax on the processing fee, legal fee, technical valuation fee, and more.
Additional Read – Here Are Some of The Changing Dynamics of Real Estate Sector in India
Impact of the revised GST rates on real estate
1. Reduced cost of construction
The impact of GST on real estatehas been significant. Since GST unifies the tax system, it has decreased the cost of construction for the developers. With streamlining of taxes, the cost of transportation, logistics, and raw material has also been reduced, further increasing the profit margin for developers.
2. Increased transparency
The new GST regime has facilitated added transparency in the real estate market. Earlier, developers used to add unused ITC to the total construction cost and charge inflated rates. However, after the elimination of ITC on GST, property prices have become a lot fairer. This has increased accountability for the developers and agents, resulting in enhanced buyer trust.
The implementation of GST has made housing convenient and more reasonable for today’s buyers. Are you also looking for a new house? If yes, then get in touch with Tata Capital.
We offer quick housing loans at attractive interest rates and an extended loan tenure of up to 30 years. Enjoy a simple online application process and easy-to-meet home loan eligibility criteria for a seamless borrowing experience.
Contact us to know more!