The GST Council’s rate cut for the housing sector along with upscaling of the affordable housing ceiling value is going to be a big boost for the sector.
On Sunday, the Council decided to cut GST rates for both under construction homes and affordable homes.
Rates for under construction homes reduced to 5% while that for affordable houses reduced to 1%. The Council also enhanced the ceiling value of affordable housing to Rs 45 lakh. Implication is that houses below Rs 45 lakh will be exchanged with a GST rate of 1%.
As affordable housing now being set at Rs 45 lakh and will bring more homes under this category.
The reduced tax burden from rate cut and higher limit for affordable housing is expected to increase the demand for residential properties and raises the prospects of affordable home developers.
As per the new GST new rates, normal under construction houses will get 5% GST rate against the current 12%. In the case of affordable housing, the rate was brought down from 8% to just 1%.
Affordable houses in terms of carpet area is defined as 90 sq m in non-metropolitan cities and 60 sq m in metropolitan cities with a ceiling value of Rs 45 lakh in both cases.
In the budget 2019, the government made several supportive measures for the housing sector including exemption on levy of income tax on notional rent on a second self-occupied house and increased the TDS threshold on rent to Rs.2,40,000.
In February 18th, the government enhanced PMAY Rural target to 1.95 core by extending the scheme to 2022.
Overall, the hosing sector is on upbeat after the last two month’s supportive measures.