The Indian government has approved the Constitution’s one hundred and first amendment. Numerous Central and State taxes like excise duty, VAT, and service tax have been abolished in India as a result of the Goods and Services Tax (GST), which took effect on July 1, 2017. GST rates were divided into five different slabs at the time of implementation: 0%, 5%, 12%, 18%, and 28%. Still, it is unclear how GST will affect several sectors, including real estate, coaching, healthcare, and more, in the near future. Everyone is wondering whether or not the installation of the GST will benefit the general public.
Prime Minister Narendra Modi has started the “Housing for All Campaign.” The Prime Minister will provide low-interest housing loans to all residents who fall below the poverty line and low-income families as part of this initiative. All citizens now have a fantastic opportunity to take use of the home loan facility as soon as feasible due to decreases in housing loan rates.
Despite how alluring the idea of buying a brand-new home may seem, many potential buyers may be discouraged by the goods and service tax’s impact on the housing market.
GST Has a Significant Impact on the Real Estate Market (and Home Loan EMIs)
People paying EMIs on home loans to build new homes as well as those renting or leasing homes after the imposition of GST (residential complex, industrial, commercial).
When building a new home, as well as when leasing or renting it out, taxpayers are required to pay the goods and services tax (residential complex, industrial, commercial).
Taxpayers are no longer compelled to pay taxes when selling homes or other structures.
Construction costs are reduced as a result of the GST, which has replaced other taxes including service tax, VAT, and others from the perspective of builders and constructors.
Mortgage Loan GST Rate
Borrowers of home loans are required to pay a regular 18% GST at the time they buy a new home.
GST’s impact on home loan EMIs
Due to the decreased house loan interest rates and the ease with which they may be obtained, many people are now applying for mortgages. The only area of concern in the coming months will be how GST on home loan affects the EMIs on home loans.
Effect of GST on mortgages Here are some examples of EMIs:
Home loans in India are subject to an 18% GST. The introduction of the GST in India resulted in the elimination of the VAT and Service Tax, but the higher GST rate of 18% on home loans makes it rather pricey for borrowers. Banks and lenders will also be raising the interest rates on house loans as a result of the high interest rates.
The aforementioned justifications are speculative, therefore it will be interesting to watch how the GST will impact recurring mortgage payments. What interest rates the banks and lenders would set for home loans and how it would impact the housing market.
Home Loan Benefits After GST Reduction
Home loans are a great way for individuals and families to purchase their dream home. Not only do they provide the necessary funds to make a big purchase, but they also come with several home loan benefits that can make the process of buying a home more manageable.
- Affordability: Home loans are a great way to make homeownership more affordable. With a home loan, you can spread the cost of buying a home over several years, making it much more manageable than paying for it all at once.
- Tax Benefits: Homeowners can enjoy substantial tax benefits when they take out a home loan. The interest paid on a home loan is tax-deductible, which can significantly reduce the overall cost of the loan.
- Forced Savings: When you take out a home loan, you’re required to make regular payments towards the loan. This can be a great way to save money, as you’ll be putting money towards your home each month.
- Forced Investment: A home is considered a good investment because it tends to increase in value over time. By taking out a home loan, you’re essentially investing in property, which can be a great way to grow your wealth.
- Forced Equity: Home loans also force equity, as the payments you make each month go towards paying down the principal balance of the loan, meaning that over time, you own more of your home.
- Forced Appreciation: As your equity increases, so does the value of your home, which can lead to a significant appreciation in the value of your home over time.
- Forced maintenance: When you own a home, you’re responsible for its maintenance and upkeep. This can be a great way to ensure that your home stays in good condition, which can help to increase its value over time.
- Forced Sense of Belonging: Owning a home can give you a sense of belonging and stability. It’s a place you can call your own, and where you can create memories with your loved ones.
Overall, home loans are a great way for individuals and families to purchase their dream home, as they come with several benefits that can make the process of buying a home more manageable. With a home loan, you can make homeownership more affordable, enjoy substantial tax benefits, and invest in property, which can be a great way to grow your wealth.
