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Tata Capital > Blog > Looking to finance a Property? Here is How GST Will Impact Real Estate

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Looking to finance a Property? Here is How GST Will Impact Real Estate

Looking to finance a Property? Here is How GST Will Impact Real Estate

Buying a property is a big decision for everyone. And given the high cost of real estate these days, it’s even tougher now to imagine buying a property without taking any home loan.

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Interestingly, the government is taking multiple steps to ensure that property prices attain reasonable levels so as to help property buyers. GST is also expected to help in this vision indirectly.

Let’s see how the recent implementation of GST is going to impact Real Estate in future

For under-construction properties, buyers have been paying VAT as well as service tax till now. While VAT was a state levy and its rate differed from one state to other, service tax was a central tax (@15%).

Earlier, the developer had to pay several taxes on the procurement side like Customs duty, Central Sales Tax, excise duty, entry tax, etc. Post GST, these will be rolled into one single GST. This is expected to bring down the actual project costs for the developers. For developers, the actual tax effect will be lower than the existing one mainly due to the input tax credit on raw materials that builders get against payment of taxes on inputs like steel and cement. Consequently, the prices of homes too should ideally come down if the developer decides to pass on the benefits of reduced costs to the buyer.

So as you see, there is a reasonable chance that implementation of GST would help your case. The property prices are expected to fall a little (if developers pass on the benefits) or stay stable (if not). Suppose earlier you were getting a flat for Rs 70 lac, it’s possible that it might now be available at Rs 65-67 lacs. Assuming you take a loan of 80% on this, your total savings on interest paid (in addition to upfront savings of Rs 3-5 lac on reduced cost) would be about Rs 3-4 lacs). So GST has actually come like a blessing in disguise for property buyers like you should not wait to make the purchase with the help of home loan soon.

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