The introduction of several governmental policies and schemes along with the low interest rates have made homebuyers hugely optimistic about purchasing new property in the current scenario. With the GST set to be rolled out on the 1st of July, 2017, there have been several concerns relating to how GST will be affecting existing home loans. GST will be imposed on the loan EMIs of homes that are yet to be finished along with land leasing and rental stays. The sales of buildings and lands will not be included within GST.
The sale of any property will not be falling under the indirect taxation regime/GST and will remain under the purview of stamp duty as stated by the Finance Ministry. Any lease including that of a residential, commercial or industrial complex for business/commerce will definitely fall under the purview of GST. GST has not been imposed on immovable property but on services. GST will be levied at a standard rate of 18% which is more than the 5% payment of VAT on construction material and 3.5% in service tax that is charged currently.
Home loans may become slightly more expensive for borrowers even though VAT and service tax may not have to be paid any more. With interest rates having been majorly increased, the lenders and banks are also expected to increase interest rates slightly on home loans. This is still a matter of immense speculation but there are strong possibilities of home loans becoming more expensive. It now remains to be seen how banks decide to levy rates of interest on home loans after GST is rolled out. There are certain benefits for developers under GST in terms of input credit and this may be passed onto customers. As a result, new homebuyers will benefit from reduced costs and developers will also be able to market their properties more competitively to buyers. However, existing home loan EMIs may be affected in terms of the standardized rate being levied.
The 18% rate may lead to your current home loan outgo increasing every month and this is something that has kept many existing home loan customers anxious. However, sources state that changes, if any, will be quite negligible and will not really affect home owners hugely.