25 Feb 2019Posted By: Mudit Handa

Government reduces GST in Realty & Housing Sector

Real estate is truly one of the most significant sectors in our economy. It has emerged as a lucrative sector and has witnessed rapid growth in the past few years in terms of revenue. Moreover, the Realty sector is a huge contributor to India’s GDP and opens numerous employment opportunities.

Although the Goods and Service Tax regime has enhanced ease of doing business in the real estate sector, the investors and builders having GST registration were still facing certain difficulties. This demanded simplification of GST framework in the real estate sector.

Focusing on the drive towards “Housing for All by 2022”, the 33rd GST council meeting that was held on the 24th February 2019, introduced a number of reliefs for the home buyers. In order to boost the affordable housing segment of the real estate sector, the GST council has introduced substantial GST rate cuts in its 33rd meeting.


#1. How much reduction has been made to GST on housing?

The government had promised that every citizen would surely have a house and that the urban areas would be totally slum-free by 2022. The GST council has effectively worked towards this aim and has therefore hugely dropped the GST rates in the housing sector. These are as follows:

  • GST rate on under-construction residential properties (other than affordable segment) is reduced from 12% to 5%. Very importantly, Input Credit shall not be available on it.
  • On the affordable housing segment of the real estate sector, GST has been reduced from 8% to 1%. Here also, Input Credit shall not be available.


#2. How has the GST council simplified GST on housing?

The 33rd GST council meeting has indeed worked towards simplification of GST on the housing sector. For this, it has framed a new definition of affordable housing property, which is as follows:

  • The affordable housing property refers to a residential house or flat that has a carpet area of not more than 90m2 in case of Tier-II cities and towns and up to 60m2 in case of Tier-I cities.
  • Apart from that, an affordable housing property is one that has a value up to ₹45 lacs (both in case of Tier-I & Tier-II cities).


Hence, a developer or a realtor having GST Registration must consider these parameters while dealing in affordable housing.


#3. Which are the Tier-I cities?

The GST council has also listed all the Tier-I cities in India. These are as follows-

  1. Bengaluru,
  2. Chennai,
  3. Delhi-NCR (i.e. Delhi, Noida, Greater Noida, Ghaziabad, Faridabad and Gurgaon ),
  4. Hyderabad,
  5. Kolkata and
  6. Mumbai (entire MMR).


#4. When will the new GST rates on housing be effective?

The new GST rate on the housing sector shall be brought into effect from 1st April 2019.


#5. Why did the GST council make huge rate cuts in the housing sector?

Since long, there were complaints regarding the slump in the real estate sector.

  • Especially the purchase of under-construction properties and that too, in the affordable segment. This had to be urgently addressed.
  • The slowdown in the real estate sector was a key issue for the GST Council.
  • At the 32nd GST meeting, the GST council had predicted about the formation of GoM for simplification of the Residential Segment of the Realty Sector.  
  • Hence, the GST Council in its 33rd meeting has made huge GST rate reduction in the residential sector, besides framing a new definition of affordable housing property.


#6. What reliefs have been given to the builders?

Notably, the government has given a major relief to the builders and developers by-

  • Exempting GST on Transfer of Development Rights (TDR) and Joint development agreements (JDAs).
  • GST has also been exempted on long term lease (premium), and Floor Space Index (FSI).


#7. What are the advantages of the reduction in GST on housing?

The new GST rate will bring the following advantages for the buyers as well as builders:

For buyers-

  • The home buyers will now get a fair price. Especially, the affordable houses will now be available at a very attractive price due to low GST rate of 1%.
  • The current of lowering GST rates will protect the interest of property buyers. The benefits of input credit not passed on to the buyers shall not be an issue, from now onwards.
  • The Unutilized input credit shall now be removed. This would lead to better pricing of the property. Earlier, the Unutilized ITC used to get added to the cost of the project after completion.  

For builders-

  • GST is exempted on the development rights, long term lease (premium) and Floor Space Index (FSI). This will address the Cash crunch problem of the builders.
  • The GST structure has been simplified, which will make tax compliance simpler for the builders. Moreover, this will boost GST compliance among the realtors and builders.

All in all, the 33rd GST council meeting has brought huge reliefs for the home buyers as well as the developers having GST registration.

Also, read the 

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Posted Date 2019-02-28 12:24:16

ABOVE 90 Sq m2 and 60 Sq m2 what will be the GST RATE? Pls let us inform ASAP

Posted By Mudit Handa
Posted Date 2019-03-09 15:16:46

Sir, You haven't specified the city. As per the new law, if carpet area is not more than 90sqm in case of Tier-II city and up to 60sqm in case of Tier-I city, it will be taken under affordable housing segment, on which GST Rate=1%. If the carpet area is more than that, GST Rate=5%.

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