Small and affordable housing gets more affordable as the GST Council announced a GST rate cut of 4% and has been reduced from 12% to 8% for homes with size up to 60 sqm, which sums up to about 2 BHK homes – for first time buyers.

The budget-friendly and affordable housing sector has a reason to be happy about as the GST Council has decided to slack off GST rates by 4% to give the perspective small house buyers, a booster and a relief. The tax burden will be eased off by 4% and hence, the GST will be reduced to 8% from 12% – effective from January 25. The reduction is applicable for homes with size up to 645 square-feet and purchased under Credit Linked Subsidy Scheme (CLSS) of the Prime Minister Awas Yojana (PMAY). The reduction is aimed to increase the sales rate and give momentum to small-house buyers. However, the rest of homebuyers will continue to pay 12% GST. And also, the subsidy can only be availed if a buyer buys his/her first home in the country under PMAY.

As per CEO & Country Head of JLL India, Ramesh Nair, the potential buyers of the small and affordable housing segment are extremely price sensitive and even a small change will impact the overall outlay of sale and purchases made. So the drop in GST rates will make major impact and give the sector a major booster, especially when coupled with interest subsidy provided by the government. Even builders and real estate junkies are thinking this step will boost the sales rate. A builder said, “It (GST reduction) will be a huge and impactfull impact on real estate sector because customers are expecting that GST should fall in real estate sector. Customers weren’t willing to buy because of the increase by 4-5 per cent, but I feel if GST goes down we will get positive note from customers. ”

It is also double-fold goodness as the GST rates are likely to benefit builders too, because the higher Input Tax Credit that they can avail on construction material and services can be used to offset GST that a buyer may pay, further incentivizing the pricing of homes and buying activity. The government has been pushing affordable housing in a big way for the past three years. In addition to granting infrastructure status to affordable housing, it has also offered PMAY benefits to push its vision of ‘Housing for All by 2022’.