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GST GoM proposes raising the affordable housing cap from ₹45 lakh to ₹56 lakh, which could expand access to the 1% GST rate for more buyers across India.
A Group of Ministers (GoM) on Goods and Services Tax (GST) for real estate is preparing an interim report to reshape affordable housing eligibility in India. The panel recommends increasing the affordable housing limit from ₹45 lakh to ₹56 lakh per unit. If approved, this change will enable more homebuyers to access the 1% GST rate on affordable housing, which applies without Input Tax Credit (ITC). The updated cap would make homeownership more affordable for a broader range of buyers across regions in India.
The GoM’s recommendation to apply the ₹56 lakh limit uniformly across India aims to make affordable housing accessible in both urban and rural areas. This measure seeks to address regional price disparities in the real estate market. Additionally, the Reserve Bank of India (RBI) is expected to release a formal report on property prices, which may influence future adjustments to the affordable housing limit.
The GoM is also exploring modifications to the GST structure for real estate, particularly regarding how GST applies to land costs within housing projects. Currently, two-thirds of a property’s total cost is attributed to land, with the remaining one-third allocated to construction. The panel suggests that GST should apply only to the construction portion, thereby excluding land costs from GST calculations.
To determine land cost, the GoM recommends using either the circle rate or two-thirds of the unit’s total cost, depending on which is higher. This proposal aims to simplify GST calculations for real estate projects and potentially lower the tax burden on homebuyers.
The GoM’s interim recommendations mark a significant step towards making housing more accessible in India. By raising the affordable housing price cap and revisiting the GST on land costs, these measures could lower the financial barriers for homebuyers and stimulate the real estate sector.
The GST GoM’s proposal to raise the affordable housing limit and adjust GST on land costs holds the potential to make housing more affordable for buyers across India. As these recommendations progress, they could reshape the landscape of India’s real estate sector, benefiting homebuyers and encouraging more investments in affordable housing projects.
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