Recently, the Indian Government announced a reduction in GST slabs, which means things will get cheaper for consumers. People will now enjoy lower rates on many things like electronic items, clothes, food items, and especially on real estate sector. The government reduced GST on cement from 28% to 18% which means it will lower overall construction costs approximately 3% to 5% for developers. It will help ultimately homebuyers who will save up to 1% to 1.5% depending on the project stage.
But one thing here to keep in mind for the homebuyers is that these new GST changes are only applicable on under-construction properties, not on ready-to-move-in properties.
What Homebuyers should now:
Reduction in material cost will benefit you: As government has reduced the GST slabs from 28% to 18% this will reduce the cost of materials like bricks, tiles and sand which are reduced to 5% from 18%. Builders will save money from this change of rates as their construction cost will come down and they have to pay less amount for construction, but its not like you will see an immediate price cut in your home price. Real Estate Dealers or Real Estate companies may offer festival discounts to pass on a portion of these savings to buyers.
GST Exempt on ready to move houses: There will be no GST on the purchase of a ready to move property either its house or flat. As that is already received its occupancy or completion certificate.
Reduced prices on new project launches: By reducing the GST rates developers will get benefit from lower construction costs, because of this competitive pricing or attractive festive season will be offered by developers. For existing under-construction projects, developers may offer discounts instead of direct price cuts.
Cost for Stamp Duty and registration: Buyers must keep this thing in their mind that GST has not replaces stamp duty and registration charges, they will remain same according to each state policy.
GST on additional services: If you are opting for amenities like parking, clubhouse or any other maintenance that will attract GST which is typically 18% if the bill will generated separately.
For developers: Lower costs and clearer rules
Reduced construction cost: Builder will get benefit from GST on key building materials like cement has been cut from 28% to 18% and on other hand items like marble and granite now carry 5% GST instead of 12%. This will lower overall project cost by 2-4%.
Healthy Margins: Due to cut in GST on many items like cement, marble and other items will improve their cash flow and ability to invest in n new projects.
Mixed impact on commercial property. While residential projects benefit, the commercial real estate sector faces mixed implications. Developers lose the ability to claim Input Tax Credit (ITC) on commercial leasing, which could increase operational costs and rental prices.