How GST 2.0 Reforms Could Make Homes More Affordable in Mumbai
Mumbai's real estate market, a significant contributor to the state's economy, is set to benefit from recent GST reforms. These changes are expected to make construction materials cheaper, potentially reducing the cost of homes by 1-1.5%.
Gst ReformReal EstateMumbaiAffordable HomesConstruction MaterialsReal Estate NewsSep 22, 2025
India's festive season typically sees a surge in the purchase of goods, ranging from motorcycles to cars to homes. Prime Minister Narendra Modi referred to these changes as the 'GST Bachat Utsav' in his recent address to the nation. From a real estate perspective, the cost of construction materials is expected to decrease, which could make homes more affordable.
How Much More Affordable Will It Get?
With the GST slab on construction materials revised to 5 percent, the overall impact is likely to be in the range of 1 to 1.5 percent. While this may not seem significant in percentage terms, it can make a substantial difference in real terms. For instance, a 1 to 1.5 percent reduction on a property valued at Rs 1 crore would result in savings of about Rs 1 to 1.5 lakhs.
How is GST Applied on Real Estate?
When buying homes, a Goods and Services Tax is levied based on the classification of the property. Here is a simple breakdown of the rates:
- Affordable Home: 5 percent
- GST on Land & Ready To Move Properties: Exempted
- GST on Under-Construction Properties: 12 percent
- GST on Housing Society Maintenance Fees: 18 percent if the contribution exceeds Rs 7,500 per month
GST can also be levied on processing fees charged by banks on banking products such as loans extended to borrowers, processing fees, and EMIs. It's important to note that there may not be a GST levied on a loan for purchasing a ready-to-move home. However, if an Occupation Certificate is unavailable, a 12 percent GST might be applicable on top of the loan. The GST on loan processing fees ranges from 0.25 percent to 1 percent of the loan value.
What Will Be the Impact?
The overall impact could be substantial, considering the volume of real estate transactions in Mumbai. Mumbai's real estate market contributed Rs 1,101 crores in stamp-duty collection for the state. With these GST reforms, there is an anticipation that luxury homes and affordable home sales will pick up.
Conclusion
The recent GST reforms are expected to make construction materials cheaper, potentially reducing the cost of homes by 1-1.5 percent. This could be a significant benefit for Mumbaikars looking to purchase homes, especially during the festive season. While the percentage reduction may seem small, the actual savings could be substantial, making it a welcome change for the real estate market.
Frequently Asked Questions
What is the GST rate on construction materials now?
The GST rate on construction materials has been revised to 5 percent.
How much can I save on a property valued at Rs 1 crore due to the GST reform?
You can save about Rs 1 to 1.5 lakhs on a property valued at Rs 1 crore due to the 1 to 1.5 percent reduction in costs.
Is GST exempted on ready-to-move properties?
Yes, GST is exempted on ready-to-move properties.
What is the GST rate on under-construction properties?
The GST rate on under-construction properties is 12 percent.
Is GST applicable on housing society maintenance fees?
Yes, GST at 18 percent is applicable on housing society maintenance fees if the contribution exceeds Rs 7,500 per month.
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