A government panel on Goods and Services Tax (GST) for real estate is preparing an interim report with recommendations that could impact affordable housing across India.

The Group of Ministers (GoM) is looking to raise the affordable housing price limit from the current ₹45 lakh per unit to ₹56 lakh per unit, making more homes eligible for the 1% GST rate that currently applies to affordable housing without Input Tax Credit (ITC).

The GoM suggests applying this new affordable housing limit across all regions in India. They also discussed potentially revising this limit further based on an upcoming formal report by the Reserve Bank of India (RBI).

Another important point raised in the meeting was the GST charged on land cost in housing projects. The GoM is considering whether GST should apply only to the construction cost, with no tax on the land component.

If implemented, the cost of land in a housing project would be calculated using either the circle rate or two-thirds of the unit's total cost, whichever is higher. Currently, land cost in these projects is calculated at two-thirds of the overall project cost, while construction makes up the remaining one-third.

The interim recommendations, if accepted, could make housing more affordable for homebuyers across the country.

Source: CNBC TV 18