Realty firms want GST cut for affordable housing

Mumbai: The real estate industry is hoping for a reduction in the goods and services tax (GST) for the affordable housing segment in the forthcoming Union Budget that would give a major boost for the government’s plan of providing housing for all by 2022.

The industry has also requested the government to grant industry status to avail long-term finance at a lower cost.

Currently, under construction projects are subject to 18 per cent GST rate with one-third abatement for land bringing down the effective tax rate to 12 per cent.  “We recommend lowering of the GST rates only for affordable housing projects to 12 per cent with 50 per cent abatement for land taking the effective GST rate to 6 per cent. This shall provide a boost to the cause of housing for all by 2022,” said Shishir Baijal, chairman and managing director of Knight Frank India.  

According to him, around 10 million houses are planned under the ‘Housing for all by 2022’ out of which 95 per cent of the houses are to be constructed for economically weaker sections and low income groups.

As the affordability of this segment is low, GST at 18 per cent with one-third abatement of land would impart upward pressure on the overall cost of the house.

“In major metros, the share of land is more than 50 per cent of the project cost. We therefore recommend that the government aligns this with market realities and accordingly increase the abatement for land to 50 per cent,” he added.

Property consultant Cushman & Wakefield has requested the government to incentivise homebuyers by increasing the deduction limit of interest paid on home loan from Rs 2 lakh to Rs 3 lakh. “This will give a push to homebuyers who are on the fence, and in the long run, clear inventory with developers,” it said.