How GST applies to under‑construction homes in 2025
What's the story
If you're planning to buy an under-construction residential property in 2025, it's important to factor in Goods and Services Tax (GST) into your budget. Unlike ready-to-move properties that come GST-free, under-construction properties attract a certain GST slab. This tax is applicable on payments made to the developer or builder before a completion certificate is issued for the project.
Tax structure
Current GST rates for under-construction properties
As of August 2025, the GST rates for under-construction properties are similar to the ones proposed in 2019. The tax structure is as follows: For affordable housing, a GST of 1% without Input Tax Credit (ITC) is applicable. Non-affordable housing attracts a higher GST rate of 5%, also without ITC. Affordable housing is defined by certain criteria such as carpet area (up to 90 sq. m) and price limits (up to ₹45 lakh) in cities and non-metro areas.
Payment schedule
When is GST applicable?
GST is applicable on payments made before a project's completion certificate is issued. If you pay for a house after the project is fully constructed and ready, you won't have to pay GST. Builders usually follow an installment-based payment schedule according to construction stages, with GST payable on each installment received before possession. Customers must ensure that the final cost sheet is accurate for their purchases; otherwise, disputes or hidden charges may arise later.
Cancelation policy
Refunds and cancelations
If a buyer cancels their booking before possession and seeks a refund, the builder can claim a set-off for the GST paid to the government. This makes it essential for buyers to carefully read refund terms before making any payment. The removal of ITC has led many developers to increase base prices, passing on this tax burden to customers. Developers are required to issue a valid tax invoice and clearly mention GST separately in the cost breakup.