GST council said any residential apartment costing up to Rs 45 lakh in cities would be now categorised as affordable housing.
Mumbai: The much-awaited reduction in the Goods and Services Tax (GST) rate for under-construction residential projects and change in the definition of affordable housing are likely to bring down the cost of a residential unit by 6-7 per cent. This, according to realty consultants, would nudge fence sitters to finally loosen their purse strings.
The GST council on Sunday slashed the GST rates for affordable homes to 1 per cent from 8 per cent and for under-construction normal homes from 12 per cent to 5 per cent. However, input tax credit cannot be claimed in both cases.
Shishir Baijal, chairman and managing director, Knight Frank India, said the reduction in the GST rates for under-construction projects is the most decisive move by the GST council with a clear focus on demand stimulation. “We estimate that the reduction in GST can potentially reduce the buyers payout by 6 per cent – 7 per cent on the overall purchase, depending on the category. The consequent accelerating sales will bring down the unsold inventory, which has been afflicting the real estate sector,” he said.
Altering the definition of affordable housing, the GST council said any residential apartment built on an area of less than 60 square metres and costing up to Rs 45 lakh in metro cities would be now categorised as affordable housing with effect from April 1, 2019. For non-metros, the limit has been set at 90 square metres and Rs 45 lakh. This would bring a large number of premium homes under the bracket of affordable housing.
According to data compiled by property consultant ANAROCK, there are as many as 5.88 lakh under-construction homes lying unsold in the top 7 cities. Of these, 34 per cent are priced below Rs 40 lakh alone.
“With affordable housing now being defined within the Rs 45 lakh budget, more properties qualify for this ‘sweet spot’ category,” said Anuj Puri, chairman, ANAROCK Property Consultant.