Send us your enquiry
( characters remaining )

Impact of GST On Home Loan In 2024


Goods and Services Tax or GST is levied by the government on under-construction flats only. However, it must be remembered that completed properties, that have already received the completion certificate (CC) are not liable to GST. Let us first understand what is the GST reduction on properties under construction and how the GST loan impact works out.

Buying A Home Becomes More Attractive

In the Union Budget presented in 2019, the reduction in the GST on under construction property was announced. As we stated earlier, the GST is not applicable on properties that have been completed and where the completion certificate has been obtained. This is only applicable to under construction properties.

Effective April 01, 2019, the GST rates on under construction properties were reduced in two slabs.

  • Firstly, the GST on under construction houses for regular homes was reduced from the erstwhile rate of 12% to just 5%.
  • In addition, for affordable properties (defined as homes up to value of Rs. 45 lakhs), the GST rate has been reduced simultaneously from the erstwhile rate of 8% to just 1%.

That is a sharp reduction in the GST rate and should help to bring down the cost of under-construction properties meaningfully.

But there is a catch here.

Prior to April 01, 2019, there was the benefit of input credit (ITC) that was available to the builders on inputs like raw materials and services. However, post April 01, 2019, that particular facility has been withdrawn in lieu of the reduced GST rates. While it may look like a neutral announcement, it does contribute meaningfully to cost reduction of under-construction properties. That is because, prior to the GST Reduction, the ITC benefits were slightly fluid and were not being fully passed to the customer. However, under the GST rules, the reduction in GST has to be mandatorily passed on to the end customer, making properties more cost efficient.

Let us also understand how the impact on GST loan for buying such property

There Are Triple Benefits For Home Buyers

If you look at the sum total of the impact, it has benefits to the home buyer at three levels. At the first level, there is a clear reduction in costs because the GST rate on regular properties is reduced from 12% to 5%, while the GST rates on affordable homes under construction has been reduced from 8% to 1%.

That is a good 700 bps GST reduction in both cases.

Secondly, the definition of affordable loans was also raised to Rs. 45 lakhs, which means a greater number of properties in second tier towns will come under the ambit of affordable housing.

Thirdly, several state governments (including the government of Maharashtra) have been reducing the registration charges or even waiving them for a certain time period to encourage people to buy and register properties quickly. These 3 factors combined have given a big boost to home buying in India.

Will the GST Cut Impact Home Loan Rates?

It must be clarified that the cut in GST refers to the GST charged on the under construction properties. The GST reduction does not apply to completed properties where the builder has already obtained the completion certificate.

The bigger question is whether this GST Reduction also have an impact on the GST Loan?

Remember that no GST is charged on the home loan interest and hence no impact of the reduction on GST will be felt here. In addition, if the bank charges processing fees or any other charges, these are subject to 18% GST. However, this continues to remain at 18% and there is no change in the GST that is charges on the processing fees and other charges.

There is one important point here. The reduction in cost of under-construction property due to GST reduction will reduce the cost of the property.

That means, the borrower now can put in a bigger share as equity margin and go for a lower amount of loan, thus reducing the EMI liability. Of course, this will have to be weighed in the context of the tax benefits sought under Section 24 of the Income Tax Act. While the home loan is largely neutral to GST reduction, it reduces the home loan required, and consequently the EMI too.

A Boost For Home Construction And Renovation

In a nutshell, the GST Reduction has already had a significant impact on the home buying opportunity in India; both for regular housing and for low-cost affordable housing. While this reduction will not impact the valuation of completed properties, it will significantly reduce the cost of properties under construction as well as the cost of renovation of homes. The net effect will also be value accretive in that it will also reduce the amount of home loan you will require, enabling the borrower to offer higher equity and lowering the EMI.

SBICAP Securities Limited through its division SBI Realty solutions deals in Pre Launch, Under construction, Ready Possession. SBICAP Securities Limited through its division SBI Realty solutions provides a unified platform for exchange of information & facts for buyers, builders & sellers. SBICAP Securities Limited through its division SBI Realty solutions is merely an intermediary for exchange of information to facilitate the transactions between Builder, Developers / Seller and Customer / Buyer and is not and cannot be a party to or control in any manner any transactions/disputes between the Seller and the Buyer. Projects featured on are SBI approved projects only. SBICAP Securities Limited through its division SBI Realty Solutions shall neither be responsible nor liable to mediate or resolve any disputes or disagreements arising between the Buyer & Seller and both Seller and Buyer shall settle all such disputes without involving SBICAP Securities Limited through its division SBI Realty solutions in any manner whatsoever. The Website provides in depth analysis of the Property Market with more than 2400 Under Construction Projects developed, which are currently under development by more than 800 Developers. The website features latest prices, digital pictures of projects in various construction stages. The focus of the website is on Home Buyers looking to buy or upgrade to a New Home or Invest in under construction project or pre-launches by reputed builders.