Imposing 18% GST on FSI will increase the burden on home buyers

GST Council Meeting: Real estate developers across the country have urged the central government to reconsider the proposal to levy 18% GST on Floor Space Index (FSI) and additional FSI charges. The Confederation of Real Estate Developers Association of India (CREDAI) has expressed concern over the move as it is likely to lead to a huge increase in construction costs and house prices.

What is FSI?

FSI (Floor Space Index) is the ratio that shows the total area of ​​a plot and the floor area built on it. It provides additional construction capacity for property developers. Developers have to buy this FSI in the form of fees. If 18% GST is imposed on it, the construction cost will increase directly, which will also increase the prices of flats.

Effect of FSI on construction cost

If GST is imposed on FSI charges, its economic impact can be understood from the following example:

Suppose: Developer buys a plot of 1,000 square meters.

FSI price: ₹5,000 per square meter.

Total FSI cost: ₹5,000 × 1,000 = ₹50,00,000.

GST (18%): ₹50,00,000 × 18% = ₹9,00,000.

Total cost: ₹50,00,000 + ₹9,00,000 = ₹59,00,000.

This means that the cost of a house may increase by up to 10% when GST is implemented. For example, the price of a 2BHK flat worth ₹50 lakh may increase by around ₹5 lakh and the price of a luxury flat worth ₹1 crore may increase by ₹10 lakh.

Impact on middle class home buyers

CREDAI has warned that this move will make it more difficult for middle class people, who are already struggling with inflation, to buy a house. Due to increase in the price of affordable houses, they may become out of reach.

Crisis on affordable houses

CREDAI said that imposing GST on FSI charge will affect affordable housing projects the most. The construction cost has already increased due to the increase in the prices of raw materials. If this charge is implemented, the financial pressure on developers will increase, due to which many projects may remain incomplete.

Appeal to the government

CREDAI President Boman Irani has urged the government to reconsider this proposal. The organization says that FSI charge is an important part of the cost of any project. Imposing 18% GST on it will have a negative impact on both the supply and demand of houses.

Conclusion

The real estate sector is already facing challenges. If GST is implemented on FSI charge, the prices of houses will increase, which may increase the financial difficulties of people planning to buy a house. The government should reconsider this decision, so that a balance can be maintained between the interests of both the real estate sector and home buyers.