Buying your dream home is a near reality as the government in lieu of making the affordable home’s agenda successful has reduced the GST rates on residential real estates. Home loan buyers are in for a rejoice as this would result in a reduction in housing cost. The new rates are effective from April 1, 2019.
In order to fulfil the PM’s dream of providing housing for all, the government during the 33rd GST Council Meeting introduced new GST rates which are lower than the previously charged GST rates. The meeting that was held on 24th February 2019 witnessed some important amendments pertaining to residential properties. The rates proposed by the council are effective from April 1st, 2019. This is a wave of joy for the home loan seekers who can now take a home loan to buy their dream home. With GST rates going down, the cost of properties will also fall thereby making the otherwise exorbitantly priced residential properties more affordable and within the reach of the general public.
As per the new amendments,
- The GST rates have been reduced to 5 per cent from earlier 12 per cent for houses which are under construction.
- The GST rates have been reduced to 1 per cent from 8 per cent for the affordable housing category.
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These GST rates are without the Input Tax Credit or ITC as it is commonly referred to as. The 34th meeting of Goods and Service Tax Council had some key decisions for the builders. The builders can still avail the old rates with ITC benefits for unfinished residential properties. It means that the builders have the option to either opt for the 1 per cent without any tax rebate or opt for 8 per cent with tax rebates for affordable houses segment. For an under-construction house, the builder can avail either 12 per cent with tax benefits or opt for 5 per cent without any tax rebate. These options can only be availed by the properties whose construction is not completed by 31st March 2019.
Affordable homes too also have a new meaning now. As per the GST Council norms, the affordable housing in metros is the houses having a carpet area less than 60 square metres. The metro cities covered are Chennai, Kolkatta, Bengaluru, Delhi-NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Mumbai (Mumbai Metropolitan Region) and Hyderabad. For non-metro cities, affordable housing refers to a house with less than 90 square metres and costing up to Rs. 45 lakhs. This is a great move from the buyer’s point of view as they would be able to buy high budget properties in prime locations by taking housing loan. GST will not be applied on properties which have been fully constructed and uphold completion certificate. However, fully constructed properties without completion certificates will have GST applicable.
Home loans can now see an upsurge with houses becoming more affordable. Apply for a home loan in India via LoansJagat portal to grab the best deal in terms of rate of interest, loan amount, loan tenure, EMI by comparing different lenders. With RBI linking loan interest rates of retail loans like home loans, auto loans etc to the external benchmarks and replacing MCLR, the prospective home loan buyers are in for a treat. This would save them a considerable amount and will lower the burden on their pockets.
It is to be noted that the stamp duty and registration fees are subject to the state and location of the property and needs to be paid. Also, the buyers opting for ready to move in residential house or commercial property will not be taken under GST housing amendments.
The new GST regime will result in considerable savings for the buyers. A buyer opting for an affordable home under Rs. 45 lakhs will save roughly 4.5 – 4.7 % of the total cost. For example: If a house costs Rs. 40 lakhs, then the buyer is supposed to pay 1 per cent i.e. Rs. 40000 as GST. The net cost of the house to the buyer will be Rs. 40.40 lakhs. It is opposed to the massive 8 per cent which accounts for Rs. 3.2 lakhs as GST and bringing the net cost of the house to 42.40 lakhs (post deducting the ITC at 2 per cent). The buyer will save a significant amount (Rs. 2 lakh or 4.7 per cent) which is great. For other properties above Rs. 45 lakhs, the buyer will again be saving a considerable amount. For example: If a property costs Rs. 80 lakh, then according to the new GST alterations, he is liable to pay 5 per cent which accounts for Rs. 4 lakh thereby bringing the property rate at Rs. 84 lakh. As per the previous GST regime, the buyer had to pay 12 per cent (Rs 9.6 lakh) as GST. The 2 per cent ITC claimed saves Rs. 1.6 lakh and making the final cost of the house equal to Rs. 88 lakh. Herein the buyer will be able to save Rs. 4 lakh which is about 4.5 per cent of the total cost of the house.
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