Affordable housing at one percent: the conditions that decide eligibility
Two numbers, a carpet area and a value, and a project classification. Miss one and the rate multiplies by five.
An affordable residential apartment is one having a carpet area not exceeding sixty square metres in metropolitan cities or ninety square metres in cities or towns other than metropolitan cities, and for which the gross amount charged is not more than forty five lakh rupees, in a residential real estate project. Such apartments are taxed at one percent without input tax credit, subject to the eighty percent registered procurement condition. Other residential apartments are taxed at five percent without credit.
The conditions
Carpet area within the prescribed limit, measured as defined under the real estate regulation law, which differs from built up and super built up area.
Gross amount charged not exceeding forty five lakh rupees, which includes the amounts specified in the notification and is not confined to the base price.
The apartment must be in a residential real estate project as defined, which turns on the commercial carpet area not exceeding the prescribed percentage of the total.
The eighty percent registered procurement condition applies to the project, with reverse charge on the shortfall and on cement from unregistered suppliers.
Credit is not available, and credit availed must be reversed as prescribed.
Where eligibility fails
The gross amount charged exceeding the threshold because of preferential location charges, parking, or other collections that the notification includes.
Carpet area computed on a different basis from the statutory definition.
The project failing the residential real estate project test because the commercial component exceeds the permitted percentage.
The eighty percent condition failing, which does not change the rate but adds a reverse charge liability.
In each case the assessment is a project audit, and the working papers decide it.
What to do on Monday
Compute the gross amount charged under the notification definition for every apartment near the threshold.
Use the statutory carpet area definition in the sales system, not the marketing area.
Test the project against the residential real estate project definition before adopting the scheme.
Maintain the eighty percent procurement working monthly.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Does the forty five lakh limit include parking and preferential location charges?
The gross amount charged is defined by the notification and includes the specified amounts. Compute strictly rather than on the base price.
Which carpet area definition applies?
The definition under the real estate regulation law, not built up or super built up area.
Can a single project have both affordable and other apartments?
Yes, and each apartment is classified on its own facts, provided the project qualifies as a residential real estate project.
Is credit available at one percent?
No. Credit is not available under the concessional scheme.
Does failing the eighty percent condition change the rate?
No. It creates a reverse charge liability on the shortfall and on cement from unregistered suppliers.
In this cluster
- GST on real estate: the complete developer position
- Munjaal Manishbhai Bhatt: the one third land deduction is optional, not mandatory
- Joint development agreements: who pays, when, and on what value
- Transfer of development rights: the exemption and its conditions
- Works contracts under GST: classification, rate and the credit position
- Government contracts, escalation clauses and rate changes
- ITC restriction under Section 17(5)(c) and (d) for construction
- Preferential location charges, club charges and society transfer fees
- Redevelopment, slum rehabilitation and the value of free flats
- Leasing of land and buildings: the exemption boundary
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.