In a sure shot to boost affordable housing, the Modi government has lowered GST rates on affordable houses and under-construction houses. The under-construction houses will be in the 5 percent tax slab from the 12 percent slab from April 1. The GST on affordable housing projects has also been reduced from the effected rate of 8 percent to 1 percent, the under-construction properties up to 45 lakh rupees in metro and non-metro cities will qualify for the bonanza. “We wanted to give a boost to the real estate sector, as well as relief to the middle class, neo-middle class and the aspirational middle class,” tweeted the Finance Minister Arun Jaitley.
In its 33rd meeting the GST Council has accorded big relief to Real Estate Sector. GST rate on affordable housing has been reduced to 1% from 8% & for others from 12% to 5% for both without ITC.This will give boost to housing for all & fulfill aspirations of Neo/Middle classes.
— Arun Jaitley (@arunjaitley) February 24, 2019
The decision to lower the rate on affordable housing under construction houses could lower the cost of flats by 6-7 percent. “This move will give the necessary fillip to demand in under-construction segment, which has been suffering from low sales for many quarters,” said Shishir Baijal, managing director and chairman of property consultant Knight Frank. As per a report by Anarock, almost 6 lakh under construction houses are in inventory in the top seven cities of the country.
The GST rate cuts on affordable housing will not impact the revenue of the public exchequer as it is a revenue neutral exercise. The builders do not pass the benefits of input tax credit to the consumers in the previous tax regime. Therefore the government decided to pass the benefits of lower taxation directly to consumers rather than through builders. To check any possibility of tax-evasion, the government has made it compulsory for the builders to purchase 80 percent of raw material from GST- registered suppliers.
The move will clear the slug in the real estate sector. After the implementation of GST, purchase of under construction flats almost halted because ready-to-move-in flats are virtually exempt from any indirect tax. The crisis in Non-Banking Financial Sectors (NBFCs) has dried up the lending for real estate sector and this is one of the reasons behind a slowdown in the sector. The government is trying to push affordable housing sector with the aim of ‘Housing for all’ by 2022. The market has responded positively to this and the demand and supply in affordable housing are growing.
Earlier In a boost to ‘Housing for All’ scheme, Modi government has granted 1 lakh crore rupees for affordable housing. Under the ‘Housing for All’, the Modi government aims to build 1 crore houses in urban areas by 2022. The government has also granted infrastructure status to affordable housing to help the developers. Credit Link Subsidy Scheme (CLSS) on home loans for the Middle Income Group (MIG) under which the government gives a subsidy of 2.67 lakh rupees has been extended.
All the poor people and middle class in rural and urban areas can now dream of having their own homes with the government’s assistance. The demand in the real estate sector is growing at a good rate after initial weakness.The tax cut by the government will improve demand in the affordable housing sector and will also help in clearing the glut in the sector. The low prices in this sector will help the middle class and the economically weaker section of the society to purchase flats.
