18% GST on FSI?: Builders and Consumers Fear Housing Cost Surge

Pune, 25th December 2024: House prices in Mumbai, Pune, and other cities have been rising steadily, and the recent proposal to impose an 18% Goods and Services Tax (GST) on the Floor Space Index (FSI) of houses has sparked significant opposition.

The Akhil Bharatiya Grahak Panchayat (ABGP) and real estate developers have voiced concerns, fearing that this move will further inflate housing costs.

The GST Council has proposed imposing the 18% tax on both the original and additional FSI of properties. Since the Covid-19 pandemic, house prices have seen a sharp rise, with Pune and other cities witnessing a substantial increase in the last five years. This new proposal to apply GST to the FSI of houses has raised alarms within the construction industry, with experts predicting that such a move would place an additional financial burden on consumers, especially the middle class.

Ranjit Naiknavare, President of CREDAI Pune Metro, warned that the proposed GST on FSI would lead to a 10% increase in house prices. He pointed out that the middle class, which constitutes about 70% of homebuyers, would be particularly affected by this hike. “The rise in land and raw material costs has already placed a strain on housing affordability. Adding GST to the FSI will make housing projects economically unfeasible,” Naiknavare said.

He urged the government to reconsider its stance and maintain the current pricing structure, excluding the FSI from the GST framework. The ongoing opposition from both consumer and industry groups reflects growing concerns about the impact this new tax could have on the real estate market and housing affordability for many families.