Understand GST impact on apartment prices in Kerala 2025, from rates to savings.

If you’re planning to buy an apartment in Kerala, understanding how GST affects pricing is crucial. GST impacts not just the base construction cost but also materials, builders’ margins, and compliance with Kerala’s AAR rulings. Affordable housing projects may attract only 1.5% GST, while non-affordable ones face 7.5%. Recent GST Council cuts on materials like cement (28%→18%) and tiles/marble (12%→5%) can reduce construction costs by 2–5%, but savings depend on whether builders pass them on. At the same time, composite works contracts may reduce these benefits as higher service tax rates apply. It’s also important to note that land costs, stamp duty, and approvals remain outside GST and still form a major part of your final ticket price. For buyers, verifying whether the project qualifies as affordable housing, checking documentation, and comparing under-construction vs ready-to-move flats are key steps to avoid overpaying. This blog breaks down GST rules, rulings, and practical tips so you can make an informed investment decision in Kerala real estate.

If you're considering buying an apartment in Kerala, perhaps in Kochi, Thiruvananthapuram or Kozhikode, it helps to understand exactly how the Goods & Services Tax (GST) affects what you pay. GST isn’t just a line item on your invoice; it influences material costs, builders’ margins, input tax credits, and ultimately your final apartment price. In this post we’ll break down GST on apartments in Kerala, recent rate changes, affordable housing rulings, and what buyers can do to avoid overpaying. 

What is GST on Residential Real Estate 

• Under-construction vs Ready-to-move-in: GST is paid on under-construction projects; once a building has a valid Completion Certificate or is “ready to move,” GST generally does not apply. 

• Affordable vs Non-affordable Apartments: Under certain conditions, apartments that qualify as “affordable housing” get a much lower GST rate. 

• Input Tax Credit (ITC): Builders can claim credit for many of the GST paid on materials, services etc., but this benefit is often not passed on fully to buyers. Also, in many affordable housing GST rates, ITC is not available. 

Kerala-Specific Rules & Recent Rulings 

Kerala has some specific rulings through its Authority for Advance Ruling (AAR) that greatly affect how much GST you might pay: 

• In Kerala AAR (Crescent Builders case, Oct 2022): Affordable residential apartments (carpet area ≤ 60 sq. m in metros, ≤ 90 sq. m in non-metros) were held to attract 1.5% GST (0.75% CGST + 0.75% SGST) even if the larger project included apartments that are not affordable.  

• In Kerala AAR (Palal Realty case, Feb 2023): Again, services of construction of affordable residential apartments attract 1.5% GST; non-affordable residential apartments attract 7.5% GST (3.75% + 3.75%) under relevant notifications. Also, the ruling allows builders to deduct one-third of total consideration (land portion etc.) when computing taxable value.  

Working with developers like Synthite Realty ensures such compliance is handled transparently, so buyers don’t end up overpaying. 

Recent GST Council Changes & Impact on Construction Material Costs 

In 2025, the GST Council in India approved reasonable cuts in GST for key construction materials. These changes directly impact how much builders spend, and how much cost may flow down to you. Some highlights: 

• Cement: GST reduced from 28% to 18%. Cement is one of the single largest cost inputs in apartment construction. 

• Marble, Granite, Bricks, Tiles, Sand-lime bricks etc.: Many of these moved from 12% to 5%. Finishing and structural materials become cheaper per unit.  

• Composite works contracts: However, many builders still use composite works contracts (materials + labor bundled), which may be taxed at a higher rate (18%) in many cases. The risk is that savings on materials may be offset by higher GST applied on the works contract service.  

How These Changes Translate into Apartment Prices in Kerala 

Putting all this together, here’s how GST changes affect what buyers in Kerala might actually end up paying. 

Realistic estimate in Kerala: For a mid-segment 1000-1200 sq ft apartment under construction, prior to recent material GST cuts, GST component + higher material cost might have added ~5-8% of base cost. Post material rate cuts, a buyer might see a 2-4% drop in final price if builder passes on savings. For affordable segment flats that qualify under Kerala’s definitions, the drop could be higher proportionally because base cost and GST burden were previously higher relative to total initial cost. 

Limitations, Challenges & Why All Savings May Not Reach You 

Even though GST rate cuts and favorable rulings exist, many apartments in Kerala may not see full benefit because of: 

1. Builders not passing on savings: Just because material costs fall doesn’t mean the builder reduces your price. Sometimes they retain margins or adjust other charges. 

1. Lag in implementation: Projects under older contracts may be bound by earlier cost structures; contractors, procurement may still under old tax regimes. 

1. Non-material costs: Labour, regulatory fees, land cost, stamp duty, infrastructure charges often unaffected by GST changes. These can swamp any GST savings. 

1. Composite contracts vs splitting cost: If the developer uses composite contract model, where the works contract (materials + labour) is taxed as a service at high rates, GST advantages on material may be partially offset. 

1. Exemptions, documentation, compliance risk: To qualify for reduced GST (1.5% or effective 1%), there are strict conditions; non-conforming projects may be charged higher GST, or builders may misclassify. Buyers must verify. 

What Buyers Should Do to Get the Best Price 

If you’re buying an apartment in Kerala and want to make sure GST impacts are minimized, here are steps to follow: 

• Check whether your apartment qualifies as “affordable residential apartment” under Karnataka’s/ Kerala’s definitions: area limit, price limit, carpet area etc. 

• Inspect developer’s documentation: AAR rulings, compliance with Notification 11/2017 & 3/2019. Ask the builder to show how they are computing GST, whether land portion is being deducted, what rate is applied. 

• Demand cost breakup: How much is for land, how much for construction, how much for finishing; which materials are being used; whether material costs have dropped and whether builder is reflecting those savings. 

• Observe material GST changes: For example, check if cement and marble/tile GST cuts (e.g. 28→18% or 12→5%) have been incorporated for finishing / structural material procurement. 

• Compare ready-to-move vs under-construction: If ready-to-move (with CC / occupation certificate), GST may not apply. That can save significantly. 

Conclusion 

GST has become a major factor in what you end up paying for an apartment in Kerala. Thanks to rulings like those of the Kerala AAR (Crescent Builders, Palal Realty), and recent rate cuts on construction materials, there is scope for real savings — especially in affordable apartments that meet the thresholds. But the full effect depends on whether developers pass on cost savings, how contracts are structured, and whether all qualifying conditions are met. As a buyer, knowing the ground rules, asking for the right documentation, and comparing multiple projects can help you avoid paying more than necessary.