GST regime fuels new buying trend

Tax norms play a major role in property buying decisions of consumers in India. This is the reason why new on repo rate is eagerly awaited as the home loan interest rate figures hinge on RBI decisions. Another tax norm that has affected home buying decisions to a large extent in the past one year is the GST. So much so that its effect has set a new trend of preferring ready-to-move-in homes in motion in the market.  According to a recent consumer poll conducted by property site as many as  67 per cent respondents maintained that the new tax policy in the past one-year has affected their buying decision.

Commenting on the trend, E Jayashree Kurup, Editor, Magicbricks said, “Any rebate that can lower house prices is lapped up by consumers. With a waiver of GST on completed houses, the government has created a difference between the price of ready-to-move-in and under-construction categories. Being the largest spend in most lifecycles, real estate savings are always received well by consumers. The Magicbricks data backs this consumer demand to lower prices of homes for self-use.”

Currently, a buyer does not pay any GST charge while buying a ready-to-move-in property, while for under-construction properties one has to pay effective tax of 12 per cent. Thus, on a house worth Rs 50 lakh, GST charges would amount to Rs 6 lakh. This tax has made many choose    ready-to-move-in units as compared to under-construction properties, previously considered a cheaper option.

Even for affordable housing, to buy an under-construction property with Credit-Linked Subsidy Scheme (CLSS) benefits, the effective GST is 8 per cent. So, a Rs 50 lakh affordable home with CLSS benefits will attract a GST of Rs 4 lakh.


Over and above the property value and GST, consumers also have to pay stamp duty and registration charges, which  are outside the ambit of GST as of now.

The GST has also had an impact on consumer search trends  as Magicbricks data shows that in the Jan-Jun 2018 quarter, about 80 per cent people searched for ready-to-move-in properties as compared to just about 20 per cent searching for under-construction units. — TNS



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