Due to a new decision of the Central Government, there is a possibility of additional burden on the pockets of home buyers. The government has announced the imposition of 18 percent GST on FSI (Floor Space Index) charges, which has created a stir in the real estate sector. The country's largest real estate organization CREDAI has written a letter to the Finance Minister regarding this decision and expressed deep concern and also appealed to the government to reconsider this proposal.
According to CREDAI, this step may increase house prices by 10 percent. A 2BHK flat priced at Rs 50 lakh may now become costlier by up to Rs 5 lakh, while a luxury flat worth Rs 1 crore will have to cost an additional Rs 10 lakh. CREDAI says that this will increase financial pressure on home buyers and will have a negative impact on the demand for houses.
FSI is a standard which shows the ratio of the total area of a plot and the floor area built on it. Developers can create more floor space by purchasing it. There will be a huge increase in the cost of construction due to the imposition of 18 percent GST on FSI by the government.
Understand for example, if a developer purchased a 1,000 square meter plot and the FSI price is Rs 5,000 per square meter, then the total FSI cost would be Rs 50 lakh. By adding 18 percent GST, this cost will increase by Rs 9 lakh, taking the total cost to Rs 59 lakh.
CREDAI has said that construction of affordable houses is already becoming expensive due to rising raw material prices. Now this crisis will deepen with the imposition of GST on FSI charges. Buying a home is already a challenge for middle-class families, and the new prices will further push away their dream of owning a home. CREDAI Chairman Boman Irani said that FSI charge is an important part of the cost of any project. Imposition of GST on this will affect both the supply and demand of houses. This step will not only make housing schemes expensive, but will also have a negative impact on economic growth.
CREDAI also argued that as per government notifications 14/2017 and 12/2017, GST cannot be levied on works related to urban planning and land use. FSI charge also falls in this category. Therefore, imposing GST on it is legally unfair. CREDAI has demanded the Finance Ministry to withdraw this proposal and keep the FSI charge out of the purview of GST.
The organization says that this step will not only increase house prices, but will also have a deep impact on the growth rate of the real estate sector. If the government does not reconsider this decision, many projects may come to a halt, and it will become more difficult for home buyers to purchase already expensive properties.
