Investing in Real Estate in India involves several factors, including careful planning and consideration of costs. The Goods and Services Tax (GST) is one of the most critical aspects homebuyers must understand. With the introduction of GST on Real Estate, multiple indirect taxes on the sector have been eliminated, making the tax system more transparent and uniform.
GST must be paid on property purchases, along with property taxes, to fulfil tax requirements. Over the past few years, the GST regime has been adjusted to cater to the real estate industry. Investors and homebuyers need to understand how GST affects the real estate sector before making an investment.
GST on a Property: When Do You Have to Pay?
GST must be paid if:
- A home is purchased before the completion certificate is issued, which means that as of the time of booking, the property is still under construction, you have to pay GST.
- There are fees for access to the clubhouse, parking, and maintenance (if you exceed Rs 7,500 per month).
When GST Doesn’t Apply
There is no GST charge if:
- It is a ready-to-move-in apartment (completed with a completion certificate).
- The property you buy is a resale.
- A rented home is used for personal living purposes.
- There is a rent under 20 lakh per year (or 10 lakh in certain states).
GST Rates on Property in 2025
Two key sectors of real estate can be used to categorize GST, which are residential and commercial.
Residential Properties
| Type of Residential Property | GST Rate | Input Tax Credit (ITC) |
| Affordable housing (under construction) | 1% | Not available |
| Regular housing (under construction) | 5% | Not available |
| Ready-to-move or resale homes | 0% | Not available |
| Government housing schemes (e.g., PMAY) | 1% | Not available |
According to government guidelines, affordable housing includes homes priced up to ₹ 45 lakh with specific carpet area limits. Such cases are exempt from GST in order to encourage homeownership.
Commercial Properties
| Type of Commercial Property | GST Rate | Input Tax Credit (ITC) |
| Commercial property (under construction) | 12% | Available |
| Leasing of commercial property | 18% | Available |
| Ready-to-move commercial units | 0% (in resale) | Not available |
Additional Costs That May Include GST
A flat may fall under GST categories of 1% or 5%, but some added services are still taxed at 18%, including:
- Car parking
- Fees for clubhouses
- Added amenities
- Charges for maintenance over ₹7,500/month
Your builder should be able to discuss these additional charges with you in high-end communities.
Impact of GST on Key Stakeholders
GST has impacted numerous stakeholders in India, including buyers, investors, developers, and contractors.
For Homebuyers
Before the introduction of GST, buyers had to pay a combination of VAT, service tax, registration fees, and state-specific levies, resulting in confusion and inflated pricing. Under-construction properties have benefited from GST, resulting in a simpler tax regime. However, despite improved pricing clarity, buyers no longer receive input tax credit benefits, resulting in a slight increase in their tax burden. Even so, the 1% GST rate offers significant relief in affordable housing.
For Investors
The input tax credit (ITC) helps maximize taxpayers’ overall tax outlay, particularly for commercial properties. A GST-based taxation framework is advantageous in industries such as warehouses, co-working spaces, and retail leasing. A GST refund and input credit provision further increases the tax-effectiveness and profitability of commercial real estate.
For Developers & Builders
When the old regime was in place, builders were able to reduce their construction costs with input tax credits. Nevertheless, residential projects are not eligible for ITC under the standard scheme (5% or 1%). Pricing models for developers now incorporate these taxes. It has increased operational costs slightly, but it has improved transparency and compliance, reducing buyer mistrust and disputes.
For Contractors & Vendors
GST is also important for people who supply materials and services to builders. This includes subcontractors, labor providers, raw material suppliers, such as providing items such as tiles, wood, cement, or ready-made construction materials. Depending on the nature of their sales or activities, GST rates can range from 5% to 18%. These individuals must adhere to GST rules properly. They need to provide proper GST bills (also known as invoices) and file regular GST returns. This helps ensure that the entire construction process remains smooth and compliant with all relevant legal requirements.
How to Manage GST Payments
- Make sure GST is paid on time: A GST charge is applied to construction milestones. Penalties can be imposed for late payments.
- Keep proper records of invoices: It is always a good idea to ask the builder for a GST invoice that includes the following:
- GST number
- Amount charged
- Property details
- The builder must comply with GST: Builders must register under GST and deposit the tax they collect from you.
- Be sure to keep all receipts: It is essential to keep receipts as proof of income or in the event of a dispute.
Can properties under construction be exempt from GST?
Under-construction properties are not exempt from GST. However, affordable housing projects receive major relief:
- GST is charged at only 1% (without Input Tax Credit).
- While there is no ITC benefit, the reduced rate helps keep overall costs relatively low for buyers.
- Additionally, housing schemes under the Pradhan Mantri Awas Yojana (PMAY) are included within this concessional GST framework, offering further affordability for economically weaker sections and low-income groups.
So, although not fully exempt, these projects enjoy significant GST concessions.
GST Documents Requirements for Under-Construction Properties
- PAN card (buyer and builder)
- Sale agreement
- GST Registration Certificate
- Builder’s GST Invoice
- Bank statements
- Payment receipts
GST Calculation: Residential vs Commercial
Let’s look at how GST is calculated for both types of properties.
For residential property, GST is only charged on homes that are under construction. For example, if you buy a house priced at ₹50 lakh, the GST is 5%, which amounts to ₹ 2.5 lakh. So your total cost becomes ₹53 lakh including registration and stamp duty. However, if the home is priced under ₹45 lakh, the GST rate is only 1%, which saves you a significant amount of money.
For commercial property, the GST rate is higher—12%. So, for example, if a property costs ₹1 crore, you will pay ₹12 lakh as GST, but if it’s for business use, you can claim this ₹12 lakh as input tax credit, reducing your total tax burden. If you’re leasing a shop or office, GST is 18% on rent, but again, it can be claimed back if you are a registered business.
Conclusion
In 2025, GST continues to play a significant role in shaping India’s real estate sector. While it has simplified tax structures and brought more transparency to transactions, it has also led to price increases in some areas, particularly where input tax credits are not available. However, for businesses and commercial property investors, the ability to claim ITC remains a major advantage. Whether you’re buying an under-construction property or a fully furnished unit, understanding GST is essential to make informed decisions and avoid unexpected financial surprises.
At Brick & Bolt, we make sure everything is 100% GST-compliant. From managing documents to guiding you through tax rules, our team assist you in everything. Whether it’s a home or a business space, we deliver your project on time, within budget, and with complete honesty.
Hemali Patel