Read : Impact of GST on Affordable Housing
One of my friend’s recently paid of the mortgage on his house, which he purchased over ten years ago. He fulfilled his dream of having his own home, which was designed exactly the way he had always wanted. He also, after paying of the house loan, outfitted his kitchen with the biggest fridge, which was a dream of his, as he loves to cook. The dream of owning a home, is a dream many can relate to, however, with the introduction of GST, and already high costs of real estate, the possibility of realizing this simple dream was becoming more and more improbable. Nonetheless, the government heard the pleas of the people and reduced the GST rates from 18% to 12%. This move benefits houses constructed or acquired in the affordable housing projects, such as PMAY-HFA, which is a welcome relief for home buyers.
GST Impact on Low Cost Housing
Post GST implementation, buyers, who buy fully constructed homes, will not have to pay GST, however GST will be applied for under construction properties.
Existing GST Rates – Prior to the 25th GST council meeting, the GST rates for semi-constructed or under-constructed houses bought under Credit Linked Subsidy Scheme (CLSS) was effectively 12% after the cost of land was deducted plus the additional cost of registration and stamp duty. For those purchasing homes under Pradhan Mantri Awas Yojana – Housing for All (PMAY-HFA), GST will not be applied.. However, this exemption will not be available to residential complexes built by private developers. Additionally, CLSS, a component of PMAY-HFA, can be availed by those belonging to Economically Weaker Sections (EWS), Lower Income Groups (LIG) and Middle Income Groups (MIG1/11), whose annual income is less than Rs 18 lakhs/annum.
New GST Rates – Post the 25th GST council meeting, held on January 18th, 2018, the new rate of GST on homes purchased under CLSS, EWS, LIG, MIG1/11 effectively will be 8%, after deducting the cost of land. This concessional rate can be used for buying a house or constructing a new house. Additionally, the low-cost housing projects have also been granted infrastructure status. However, second time home buyers and those that do not qualify under CLSS, will continue to pay 12% effectively GST on purchase or construction of homes.
Impact of GST on Affordable Housing
Advantage of Lower Rates
For developers, who pay GST of 28%-18% on materials used in construction, would be able to avail input credit, which they can pass on to the customer in the form of lower prices. The availability of input credits for developers should motivate developers to get registered under GST, so that input credits can be availed. The lower rates will give the real estate sector a big boost, especially in the low-cost housing sector. This not only means lower prices for home buyers, but the side effect is that it creates more transparency in the industry, which previously was unmonitored and high black money transactions prevailed.Keep reading Impact of GST on Affordable Housing.
With the newer GST rates, the affordability of realizing your dreams of having your own home, just become more plausible. So, instead of sitting and planning your perfect house with the perfect, kitchen or garden, take the steps to realizing your dreams, by taking advantage of the lower rates and buying your new home.