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With GST rate cut, the best time to plan your new home is now

  • Highlights

  • The GST Council has reduced taxes on loans for all housing projects

  • Starting April 1, homes under construction will be levied 5% GST instead of 12%

  • For affordable homes, GST will drop to 1% from the previously levied 8%

Providing relief to home buyers ahead of the general elections, the Goods and Services Tax (GST) Council approved a reduction on tax levied on home loans for all housing projects on Sunday, February 24.

The announcement makes more home purchases eligible for concessional tax and offers scope for growth of the housing sector.

“In its 33rd meeting the GST Council has accorded big relief to Real Estate Sector. GST rate on affordable housing has been reduced to 1% from 8% & for others from 12% to 5% for both without ITC. This will give boost to housing for all & fulfill aspirations of Neo/Middle classes,” Finance Minister Arun Jaitley tweeted.

The announcement comes into effect from April 1 and is expected to provide a major boost to demand for residential properties.

Before this, under-construction residential properties were charged an effective GST rate of 12%. The effective rate for affordable homes was 8%. Constructed properties that already have an occupancy certificate (OC) do not have to bear GST.

According to the new definition of affordable homes cleared by the council, houses up to Rs. 45 lakh with a carpet area up to 60 sq meters in metro cities and 90 sq meters in non-metros will be classified as affordable. The earlier limit was a carpet area of up to 60 sq meters for homes in approved affordable housing schemes.

Additional Read: What is GST?

The reduction of GST to just 1% for the affordable housing segment is in line with the government’s ambitious “Housing for All by 2022” mission, better known as the Pradhan Mantri Awas Yojana (PMAY). Lower taxes will help raise demand, which will help developers build affordable homes.

“This move is a significant triumph for home buyers and will play a huge role in boosting their sentiments,” said Jaxay Shah, National President of the Confederation of Real Estate Developers Association of India (CREDAI).

With this announcement and the recent reduction in repo rate by the RBI, the best time to buy your dream home is in the coming months. Read up on home loans and check out handy tips that can help you get your application approved instantly.

Bajaj Finserv, one of the most diversified non-banking finance companies (NBFCs) in India offers affordable home loans up to Rs.3.5 crore with easy balance transfer and top-up facility. Check your loan eligibility and start planning your dream home today.

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