Will GST Reforms Make Homes More Affordable in Mumbai?
Mumbai's real estate market has seen a significant contribution to the state's revenue through stamp-duty collections. With the recent GST reforms, there is a growing anticipation that the cost of construction materials and, consequently, the overall cost of homes will become more affordable for Mumbaikars.
GstReal EstateMumbaiAffordable HomesConstruction MaterialsReal Estate MumbaiSep 22, 2025
India's festive season generally sees a surge in the volume of goods ranging from motorcycles to cars and even homes. Prime Minister Narendra Modi referred to these reforms as 'GST Bachat Utsav' in his address to the nation. Particularly in the real estate sector, construction materials are expected to become cheaper due to a lower GST tax rate. Several materials have been moved from the 18 percent slab to the 5 percent slab.
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. Although this may not seem significant in percentage terms, it can make a substantial difference in real terms. For example, a 1 to 1.5 percent reduction on a property valued at Rs 1 crore would amount to about Rs 1 to 1.5 lakhs.
How is GST Applied on Real Estate?
When purchasing homes, a Goods and Services Tax is levied based on the classification of the property. Here is a simple list of the rates applied to different types of properties:
- 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 for loans and other banking products. It is important to note that there is no GST on a loan for purchasing a ready-to-move home; however, if an Occupation Certificate is unavailable, a 12 percent GST may be applicable on top of the loan. 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 of these GST reforms could be substantial, considering the volume of real estate apartments sold and built in Mumbai. Mumbai's real estate market has contributed Rs 1,101 crores in stamp-duty collection for the state. With the GST reforms, there is an anticipation that both luxury homes and affordable home sales will pick up.
The reduction in the cost of construction materials could make new projects more viable for developers, potentially leading to a greater supply of affordable homes. This, in turn, could help address the housing shortage and make homeownership a more achievable goal for many Mumbaikars.
Frequently Asked Questions
What is the GST rate on construction materials now?
The GST rate on construction materials has been revised to 5 percent, down from the previous rate of 18 percent.
How much can the reduction in GST save on a Rs 1 crore property?
A 1 to 1.5 percent reduction in GST on a Rs 1 crore property can save about Rs 1 to 1.5 lakhs.
What is the GST rate on under-construction properties?
The GST rate on under-construction properties is 12 percent.
Is there GST on ready-to-move properties?
No, there is no GST on ready-to-move properties. However, if an Occupation Certificate is unavailable, a 12 percent GST may be applicable.
What is the impact of GST on housing society maintenance fees?
GST at 18 percent is applicable on housing society maintenance fees if the contribution exceeds Rs 7,500 per month.
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