In India, the Goods and Services Tax (GST) on the real estate sector directly determines the amount paid or received at the end of a property transaction, particularly for homes and commercial properties under construction. Having good knowledge of the present-day real estate GST, the exemptions, and the application on land and other charges enables both the parties, the property buyer and the seller, to plan the costs, the prices, and the cash flows more efficiently.
The imposition of GST on Real Estate is primarily on the ‘supply’ of construction services, which is why it is charged on under-construction buildings and some development rights, but not on finished constructions, provided they have a completion or occupancy certificate. The majority of homebuyers, therefore, will have to pay GST when they book a flat or a villa that is still under construction. Still, ready-to-move-in homes with a completion certificate are, at present, outside the GST range, although stamp duty and registration still apply.
As far as the real estate industry is concerned, the impact of GST was such that a lot of taxes like VAT, service tax, and state levies that existed earlier were eradicated, forming a more uniform tax treatment throughout the projects in India. The builders now get GST from the real estate sector transactions and pay it to the government while considering input tax credits (ITC) wherever permitted under the prevailing scheme.
The Goods and Services Tax (GST) effective rate for real estate projects under construction in the residential sector as of 2025 will be 5% for normal housing and 1% for affordable housing, both generally without the benefit of input tax credit. Affordable housing commonly refers to the units that meet the specified carpet area limits (for instance, in metro areas around 60 sq. m and 90 sq. m in non-metros) and are within the notified price cap; however, the exact limits may change based on government notifications.
In the case of commercial real estate (office spaces, retail locations, and selected mixed-use properties), the goods and services tax (GST) rate on real estate is capped at 12% with input tax credit (ITC), depending on the project design and use category. The latest news from the industry until the end of 2025 also mentions a 5% tax on many buildings under construction and a tax rate of 0% on completed units with a certificate of occupancy, which greatly influences the demand for the stock that is almost finished or completely new.
The latest publications regarding GST for real estate in 2025 confirm that 1% and 5% residential rates have brought about stability in property buyer expectations and eased the project pricing, which is especially beneficial to large developers in urban centers. This is, however, not the only thing that is happening, as the higher GST imposed on construction materials like cement and steel and which is usually at 18% or beyond, has a direct negative impact on the project cost structures, even if a part of that is neutralized through ITC under eligible schemes.
At the end of 2025, it was reported that the inventory still under construction is taxed at 5% GST, while the finished and ready-to-move inventory has a GST exemption if there is a completion certificate. This situation leads to some homebuyers being attracted to almost-completed projects in order to benefit from the tax exemption. Developers, on the other hand, are reacting to this by adjusting their launch schedule and providing payment plans based on the construction milestones that will harmonize GST liabilities with the progress of construction.
Property movers are also to confirm whether there are additional costs like parking, clubhouse, maintenance deposits, etc., along with the property price that would like to be GST charged on, and in most cases, such extra charges are combined where they are invoiced together. In case of maintenance cost being above the prescribed limit (like ₹7,500 monthly for housing society charges), GST at a rate of 18% can be imposed on the excess, thus raising the recurring ownership expense.
The proper classification of inventory (affordable vs non-affordable, residential vs commercial) is important for developers as it determines the application of the correct GST rate on real estate and guarantees the avoidance of future disputes or penalties. Furthermore, builders will be required to meticulously handle input tax credits on construction materials, subcontractor services, and development rights as the new schemes frequently limit or restrict ITC on residential units sold to homebuyers.
The sellers of the properties that are still under construction have to show GST components explicitly on the invoices and agreements in order for the buyers to be aware of the division of the base price, GST on the estate, and state-level taxes. In redevelopment or joint development projects, the parties concerned should state in writing how GST on TDR, FSI, and revenue-sharing will be shared, as these can greatly affect the project’s feasibility and net realizations.
