Buying property is one of the biggest financial decisions people make in their lives. With changing regulations, GST on real estate is often confusing to buyers and sellers due to changing regulations, increased homebuyer awareness, and the constant push towards transparency.
Understanding how GST affects your property purchase, from under-construction apartments to affordable housing or ready-to-move properties, can save both time and money. If you’ve ever wondered whether GST applies to the home you’re buying, how much you’ll need to pay, or what exemptions are available, this blog breaks it all down in simple terms.
What is GST, and why does it apply to real estate?
The Goods and Services Tax is a unified indirect income tax that replaces multiple state and federal taxes such as VAT, service tax, and excise tax. It was introduced in July 2017 to simplify the taxation system, improve compliance, and reduce the cascading effects of multiple taxes.
GST applies to under-construction real estate and not to properties that are ready for occupancy. The reason is that a flat under construction is considered a supply of both goods and services by the GST law.
If you are buying a property that is still under construction, GST on real estate will likely be included in your overall cost.
GST Rates for Real Estate (as of 2025).
Understanding the GST rates for different types of properties and projects:
Under-Construction Properties:
- Affordable Housing Projects: 1% GST without input tax credit
- Other Residential Projects: 5% GST without input tax credit
Ready-to-Move-In Properties:
- GST 0%
- GST is not applicable if the certificate of completion or occupancy certificate (O.C) has been issued before the purchase.
Commercial Property:
- Shops/Offices Under Construction: 12% GST with input tax credit
- Ready Commercial Units: No GST
What Qualifies as Affordable Housing?
The government defines affordable housing under the GST regime as
- A residential unit of up to 60 sq. In metros, a residential unit can be up to 60 sq. Non-metros are 90 sq.
- Price cap at Rs 45 lakhs
If you meet both of these criteria, your home falls into the GST bracket of 1%. The goal is to increase housing and encourage first-time buyers.
Key Benefits of GST in Real Estate
In the beginning, GST was a controversial issue. Over time, however, both homebuyers and developers have seen the benefits of this system.
You can benefit from GST on real estate:
- Clarity on Taxation
There is no confusion about multiple taxes, such as VAT, service tax, etc. GST offers a single rate.
- Transparency Improved:
No hidden costs for builders. They must include GST in their cost breakdowns.
- Reduced legal disputes:
There are fewer disputes between builders and buyers when there is a clear classification of the property types and GST is applicable.
- Affordable Housing:
The 1% GST slab encourages buyers to invest more in affordable homes.
What is GST not applicable to?
Most property transactions are exempt from GST, and this can have a significant impact on the cost of the purchase. GST does not apply, for example, to land purchases because land is neither a good nor a service. If an apartment is exempt from GST if it has a completion certificate or occupancy certificate, then the certificate must be issued before the sale.
GST does not replace other charges such as stamp duty or registration fees. These must be paid separately by buyers.
Understanding the differences will help you avoid paying too much or misinterpreting costs.
What is the impact of GST on homebuyers?
GST on real estate is relevant to most homebuyers when they purchase a property under construction. How does it directly affect you?
- Due to the 5% GST, initial costs are higher, particularly in segments that are not affordable.
- There is no Input Tax Credit, which means that builders cannot reduce their prices based on the taxes they paid on raw materials
- GST must be displayed in all builder agreements
- Government-backed initiatives have led to a wider choice of housing, particularly in affordable housing.
The ITC was removed, which led to a slight increase in price. However, this has resulted in a more transparent pricing system and fewer chances of being charged excessively.
How to calculate GST on Real Estate
The GST is applicable if you are buying a 2-bedroom flat for Rs 50 lakhs in an unaffordable development.
5% of Rs50,000,000 = Rs2,500,000
Your total amount payable is Rs 52.50 (plus stamp duty and registration).
Understanding the role of GST on real estate when budgeting is important.
Should you worry about GST when buying property?
GST on real estate is a predictable and well-structured cost component, which shouldn’t confuse homebuyers. It’s important to choose a developer with a proven track record. The project should also be RERA-registered and qualify for affordable housing.
It is also important to confirm whether the price quoted by the builder includes or excludes GST so that you are clear on your financial obligations.
Building and GST compliance
The developers are responsible for collecting GST and remitting it on properties under construction. It’s important that, as a buyer of a property under construction, you ensure that the GST amount appears in your payment schedule. You should also receive invoices that include the GSTIN.
You should also confirm that the developer adheres to all government standards. You could face legal or financial problems if the developer does not meet these standards. It’s safer to choose a developer with a good reputation and a trusted name in the industry.
Recent Updates in GST for Real Estate
The GST for real estate continues its review of rates and compliance guidelines to make tax structures more buyer-friendly. Input tax credits could be reinstated or affordable housing thresholds redefined in future adjustments.
Keep an eye out for policy updates. They can help you make better decisions and time your purchases.
Final Thoughts: Be a well-informed buyer
In today’s real estate landscape, knowing the basics of GST on real estate is a competitive edge in today’s market. This will help you to ask the right questions and avoid hidden costs when buying property.
GST is a part of your buying journey. It’s an expense that can add up. Understanding how it works will help you avoid being caught by surprise. Knowing the GST impact when buying your first apartment or investing in real estate is smart.
