Impact of GST on FSI and Real Estate Prices
The 18% GST on Floor Space Index (FSI) and Additional FSI is set to increase construction costs, with property prices expected to rise by 7-10%. For example, a property worth ₹50 lakhs may now cost ₹3.5 to ₹5 lakhs more, making homes less affordable for buyers.
Rising Construction Costs and Supply Challenges
With cement and steel prices already surging (30% and 25% respectively in 2023), the GST burden will further inflate costs. Developers may delay new projects, reducing housing supply and increasing unsold inventories, particularly in Affordable Housing.
Unfairness of Retrospective GST
Retrospective GST, taxing past transactions, is a financial burden on homebuyers who already paid in full. This erodes trust between developers and buyers, disrupting financial planning.
Challenges in Pune’s Real Estate Market
Pune is seeing a slowdown, with an 11% drop in property registrations in November 2024 and a 49% dip in new project launches in Q3 2024. Rising costs and uncertainties are making the market tough for developers and buyers.
Struggles of Middle-Class Buyers
Middle-class families, the backbone of the real estate market, will be hit hardest. A 5-10% price hike could make homes unaffordable, with even smaller homes in cities like Mumbai rising by ₹7-12 lakhs.
Impact on Affordable Housing and Economy
Rising prices threaten the government’s ‘Housing for All’ mission, especially under PMAY. Additionally, higher GST burdens could hurt the real estate sector, which contributes 6-7% to India’s GDP and supports allied industries like cement and logistics.
Recommendations
- Exempt FSI and Additional FSI from GST.
- Allow Input Tax Credit (ITC) for developers on construction costs.
- Eliminate Retrospective GST.
- Fully exempt Affordable Housing projects from GST.
Conclusion
The real estate sector reflects the dreams of millions. Addressing these GST concerns can ease the burden on buyers and developers while boosting the economy. Share this information, commen