Residential Real Estate Project

This query is : Resolved

N.MURUGASAMY (Querist)
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28 February 2025 Residential Real Estate Project:
Tri-party Agreement (Parties Involved: Landowner, Developer, and Construction Company)
The construction company raises bills to the developer with GST. Both the construction company and the developer are registered dealers.
The total construction area is shared as follows: 75% by the developer and 25% by the landowner.
Now, the landowner receives 25% of the constructed area as his share for providing the land for the project.
Question No:1
If the landowner sells the houses during construction (before obtaining completion certificate) and gives the power to the developer, then the developer receives the amount on behalf of the landowner and hands over the amount to the landowner after deducting the GST amount.
Here, we have a doubt regarding whether the landowner needs to take the required registration certificate under the GST Act and to pay GST or not necessary.
Question No: 2
For the development rights, we understand that GST is to be paid under the reverse charge mechanism (RCM) at the time of completion of the houses and handover to the landowner. However, in the situation mentioned above (where the houses belong to the landowner’s share), if the houses are sold during the construction period, what will be the taxability of the development rights, and at what rate GST to be charged? Who is liable to pay the tax? Whether developer have to raise a bill for the development rights apart from regular bills for constructed appartments (25 share) to the landlord.
In the above situation, the GST is payable at what percentage, when to pay, and who is liable to pay?
1. For development rights
2. For the transfer of completed houses
3. For houses sold during the under-construction period
Our Assumptions:
For the development rights, the developer raises a bill to the landowner and pays RCM @ 18% on the value of the houses (completed houses) at the time of handing over the houses to the landowner. During the handover of the houses, the developer raises bills to the landowner and collects 1% or 5% of the value of the houses. Is it correct?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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12 August 2025 This is a detailed and important GST query related to residential real estate projects involving landowners, developers, and construction companies. Let me break down the answers clearly based on current GST laws and practices:

Scenario Recap:
Tri-party setup: Landowner provides land, Developer manages project, Construction company constructs.

Landowner’s share: 25% constructed area.

Landowner sells houses during construction, developer collects money on their behalf.

Questions on GST registration, liability, rates, timing, and invoicing on development rights and sale of under-construction and completed units.

Question 1: Does the landowner need GST registration and pay GST if selling houses before completion certificate (under construction) through developer’s power of attorney?
Key Points:
GST registration is required if aggregate turnover exceeds ₹20 lakh (₹10 lakh in some states).

Sale of under-construction flats (before completion certificate) is taxable under GST.

Even if the developer collects money on behalf of the landowner, the landowner is deemed supplier for their share of sale.

Therefore, landowner should obtain GST registration if turnover threshold is crossed.

Landowner must pay GST on sale of under-construction flats at applicable rates.

Question 2: Taxability of development rights and houses sold during construction?
2a. Development Rights GST Liability:
Development rights transferred by landowner to developer is a supply of service.

GST applies under Reverse Charge Mechanism (RCM) @ 18% on the value of development rights.

RCM GST is payable by the developer to the government when the project is completed and handed over.

Developer raises invoice to landowner for development rights (service).

2b. Sale of Houses during Construction (Landowner’s share):
Sale of under-construction houses is taxable supply of goods under GST.

GST rate: Typically 5% (without ITC) or 1% (with ITC) under the affordable housing scheme.

Landowner must charge GST and pay to government.

Developer collecting amount on landowner’s behalf is agent, so amount collected is on principal (landowner)’s behalf.

2c. Sale of Completed Houses (Landowner’s share):
If completed and sale is after completion certificate, GST does not apply.

Sale is treated as exempt supply under GST.

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