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🏗️ GST Impact on Real Estate: What Homebuyers Should Know
The recent decision by the GST Council to reduce tax rates on key construction materials—such as lowering GST on cement from 28% to 18%—has generated optimism across the real estate sector. These rate cuts, effective from September 22, 2025, aim to bring down construction costs, boost affordability, and encourage demand, particularly in mid-income and affordable housing categories.
But how exactly does GST influence real estate? Let’s break it down in simple terms.
🔍 GST and Its Role in Real Estate
Real estate contributes nearly 7% to India’s GDP and supports more than 250 allied industries. Given this massive economic footprint, GST has been expected to create long-lasting changes in taxation and transparency within the sector.
Initially, GST rates on properties were higher—8% and 12%—which burdened both builders and buyers. To improve housing affordability, the rates were revised in 2019. Now, with the 56th GST Council Meeting, the government has simplified slabs and reduced tax on major construction inputs.
🏗️ Key Updates Announced by the GST Council
Effective September 22, 2025, the revised GST structure includes:
✔️ Two GST Rate Categories
- 1% GST on affordable residential units (priced below ₹45 lakh)
- 5% GST on other under-construction residential units (without ITC)
✔️ Lower GST on Construction Materials
- Cement: Reduced from 28% to 18%
- Fly ash bricks, granite, marble, uncut travertine blocks: Reduced from 12% to 5%
These changes are expected to reduce builder expenditure and may lead to lower property prices over time, especially in projects nearing completion.
🏠 GST Rules for Different Property Types
The tax liability varies significantly depending on the type and status of the property:
1️⃣ GST on Residential Properties
The GST applied depends on whether the property is under construction or completed.
Ready-to-move (RTM) Homes
- GST not applicable
- Applies to both new and resale units
- OC/CC must be issued to qualify for exemption
Under-Construction Homes
- 1% GST for affordable units
- 5% GST for other residential units
- No Input Tax Credit (ITC) benefits for buyers
2️⃣ GST on Commercial Properties
GST applies only to under-construction commercial units, and the rate is typically higher than residential property GST due to income-generating potential.
Completed or ready possession commercial spaces are not subject to GST.
3️⃣ GST on Agricultural or Vacant Plots
- No GST on the sale or lease of agricultural land or vacant plots
- However, related services—brokerage, documentation, legal—attract 18% GST
⭐ Why GST Matters for Real Estate
GST is widely considered a market stabiliser because it:
- Reduces the burden of double taxation
- Simplifies compliance for builders
- Enhances price transparency
- Lowers the cost of construction
- Improves buyer confidence
However, GST rates may evolve based on government policy, so buyers must check updated rates before making investment decisions.
❓ Frequently Asked Questions (FAQs)
Real estate agents or brokers charge 18% GST on their commission or service fee, regardless of the property type (residential, commercial, or land).
GST is calculated as a percentage of the property’s cost for under-construction units only.
For example:
- GST = (Property Value × Applicable GST Rate)
If it’s an affordable home: 1%
If it’s a standard under-construction home: 5%
There is no GST if the property is ready-to-move with an OC/CC.
GST on property purchase is paid by the buyer when purchasing an under-construction property.
Builders charge GST as part of the invoice, and then deposit it with the government as per GST regulations.
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