Has GST changed the rules for housing in Mumbai?


An already expensive real estate sector is reeling under the impact of GST’s increased tax burden. Here’s looking at what GST means for home buyers.

The much awaited Goods and Services Tax (GST) was finally implemented all over the country on July 1, 2017. Since then, it has had an impact on prices of commodities. But its impact on construction and housing in the country is still under consideration.

GST and its impact on housing

The GST implementation struck fear in the heart of the real estate sector in the country, especially in expensive metros like Mumbai and Delhi. With so many housing units already unsold, and the prospect of increased taxes looming large, developers feared that the already stagnant sector would be plunged in further gloom[1].

GST was implemented all over the country on July 1, 2017. In terms of realty, it seeks to introduce 12% tax on raw materials in construction (steel, cement, bricks, etc.) but the GST on the construction sector overall was hiked to 18%[2]. The latter was applied as land input tax to current constructions of buildings, building complexes and civil structures[3]. However, the Government exempted ready buildings where construction was already completed. Thus, real estate developers in Mumbai with completed projects heaved a sigh of relief, if their projects had already received the OC (Occupation Certificate) and CC (Completion Certificate) were granted by the municipality.

The months leading up to the implementation of the GST were characterised by hectic completion of pending projects across properties in Mumbai.

But the right time to buy homes is now!

There is an interesting paradox at play in terms of the GST and the flats for sale in Mumbai. While prices of houses have certainly increased with increased taxation, home loan rates have been on the decline since demonetisation was announced in November 2016. From a high 10% and above, leading banks and financial institution are offering reduced rates starting from 8.5%. Thus, it is a propitious time to buy a house with the loan rates reduced.

Those looking to buy properties in Mumbai are wary, however, of the GST making the home loan expensive. Under the earlier tax regime, Service Tax of 15% was levied on home loans, which has now been increased to 18%. However, it must be remembered that the GST is not to applied on the loan amount or the interest payable: it is levied only on the processing charges that the lending institution receives from the loan applicant. Since the processing fees are normally about 0.5% to 2% of the overall loan amount, an increase from the previous 15% tax to the current 18% is not a very high sum of money.

Hence, if you are looking for flats for sale in Mumbai, the time to buy one is now.

The best housing in Mumbai

Mumbai already boasts of a range of luxury housing projects all over the city. The biggest real estate developers in Mumbai have created prime luxury projects that are sustainable and sophisticated. Besides, they have been built to the highest standards of creativity and quality, so buyers can finally buy their dream homes in Mumbai.

[1] https://realty.economictimes.indiatimes.com/news/industry/will-gst-make-homes-expensive/59252316

[2] http://www.firstpost.com/business/gst-launch-tax-rate-on-construction-sector-hiked-to-18-from-12-3761241.html

[3] http://www.moneycontrol.com/news/business/personal-finance-business/gst-how-will-it-impact-home-buyers-975694.html