Finally the day came for which the entire real estate industry and the home buyers were waiting for a long time. In a meeting held on Sunday, GST Council has announced that tax would be reduced for both affordable and other segment, too. On the wake of general election, it’s a welcoming move from the Government.
As per the announcement, GST Council has slashed tax rate on under-construction residential properties, and the effective tax rate now would be 5% for the normal category and 1% for the affordable housing category. However, in both the cases, developers will not be able to claim the input tax credit (ITC). The effective rate would be applicable from April 1st, 2019.
Before this announcement, for a long time, the demand of under-construction properties took severe blows because of the high GST rates on them while the ready to move-in properties didn’t attract any GST. There were pressures from all the levels of real estate sector for a rate cut,
Aside the developers, home buyers are the most benefitted lot by this announcement. Especially the first home buyers who are looking to buy affordable houses are going to be very happy by this step as the revised GST rate for this sector has come down to 1%. Apart from the affordable housing segment, the new GST rate would also help the middle class, neo-middle class, and even the aspirational class – said Finance Minister Arun Jaitley.
More than anything, this big decision by GST Council will help the sentiment of the industry which was sliding down constantly, for a long time. With this welcome rate revision, we can finally hope for some heavy-duty improvement in the sentiment of the sector in 2019.
However, Council has expanded the definition of affordable housing; now, GST benefits would be applicable to properties which cost up to Rs. 45 lacs and measure up to 60 square meter (approx. 646 carpet area) in metro areas and 90 square meter (approx. 969 carpet area) in non-metro areas. One more important aspect remains that after removal of ITC, how the developers are going to adjust the benefit and how are they going to package the final cost. Only time will tell!
[The author of this article is a senior Real Estate strategist and runs a Digital agency specialized in Real Estate Marketing. One may contact him at firstname.lastname@example.org for any query or discussion]
(Image Courtesy: zeebiz)