Real estate developers across the country has urged the Central Government to reconsider the proposal to bring FSI (Floor Space Index) and additional FSI charges under the ambit of GST. Expressing concern over this initiative, CREDAI, the apex organization of the real estate sector, said that if this happens then a 2BHK flat priced at Rs 50 lakh will become costlier by about Rs 5 lakh. At the same time, a luxury flat priced at Rs 1 crore will become costlier by up to Rs 10 lakh. Actually, the government has proposed to impose 18 percent GST on FSI charges. Concerned over this, CREDAI (Confederation of Real Estate Developers Association of India) said in a letter to the Finance Minister that this step will increase the cost of building houses, due to which even affordable housing projects will become expensive. This will affect those people who are middle class and for whom buying a house is already a challenge. CREDAI has asked the government to reconsider the proposal to impose 18% GST on FSI and additional FSI charges. The organization says that if this happens, house prices may increase by 10%, which will increase the financial burden on people planning to buy a house and reduce demand.
What is FSI and its impact on cost
- FSI is the ratio that shows the total area of a plot and the total floor area built on it.
- Developers buy FSI so that they can create more floor space.
- If 18% GST is imposed on FSI, it will have a direct impact on the cost of construction. This will increase the price of the flat.
Calculation of FSI Cost and GST
- Suppose, the developer purchased a plot of 1,000 square meters.
- The FSI price is ₹5,000 per square metre.
- Total FSI cost = ₹5,000 × 1,000 = ₹50,00,000.
After adding GST
- 18% GST on FSI = ₹50,00,000 × 18% = ₹9,00,000.
- New cost of the flat = ₹50,00,000 + ₹9,00,000 = ₹59,00,000.
CREDAI also said that if the government implements this rule retrospectively, there will be a huge financial burden on developers. This may halt many projects midway, and the savings of home buyers who have already invested will also be affected.
Crisis on cheap houses
The organization said that the cost of construction is already increasing due to inflation of raw materials. If GST is imposed on FSI charges, it will make affordable housing projects more expensive. About 70% of the middle class people buy such houses, but due to increased prices these houses may become out of their reach. CREDAI Chairman Boman Irani said that FSI charge is an important part of the cost of any project. Imposing 18% GST on this will have a negative impact on both the supply and demand of houses. House prices will increase, making buying a home more difficult. The government should reconsider this proposal and keep the FSI charge out of the purview of GST.
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