18% GST on residential rental to impact rental real estate.

In the 47th GST Council Meeting, the Finance Ministry’s revenue department has introduced 18 per cent GST on residential rentals across the country. The dynamics of renting residential property under GST has changed with an immediate effect from 18th July 2022. On the basis of notification, a residential dwelling rented to a person registered under GST would attract a tax of 18%, as it would be treated as a supply of service. This is surely a major setback for the business of rental housing in India.

Commenting on the impact on rental business, Dr. Sachin Chopda, Managing Director, Pushpam Group said, “The decision by the Government to implement the new GST rules will curb the rising demand for rental business across the real estate industry. In recent years, the rent has been an important source of income for many, therefore the current regime is going to impact the sentiments of the homebuyers for the period to come. The Government should soon intervene and provide a few measures that shall encourage the end-users to continue their investments.”

Reiterating the same, Mr. Jitesh Lalwani – President, Homesync Real Estate Advisory said, “The introduction of 18% GST on residential rentals will have a major impact on the homebuyers sentiments. The decision will also have a severe effect hampering the demand for rental real estate.”

“Rental businesses have become one of the major sources of income for people and with the new rule in GST, the residential rental market is expected to get impacted. Earlier the GST was only levied on the commercial properties that were open for rent, now focus has shifted to the current soaring residential rental market which might experience a little downside,” said Mr. Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory.