Affordable Housing in India: Official Definitions and Limits

India has no single legal meaning of affordable housing. For GST, an under-construction flat is affordable if its carpet area is up to 60 square metres in the six metro areas (90 elsewhere) and the builder charges no more than ₹45 lakh. It then attracts 1% GST instead of 5%. PMAY-U 2.0 uses the same size and value test, while RBI sets separate loan limits by city size.

Key facts

GST definition and rate

The GST Council’s FAQ on real estate defines an affordable residential apartment as one with a carpet area of up to 60 square metres in metropolitan cities, or 90 square metres in other cities and towns, where the gross amount charged by the builder is not more than ₹45 lakh. Both tests must be met.

The metropolitan cities for this purpose are:

• Bengaluru, Chennai, Hyderabad and Kolkata;
• Delhi NCR, limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad;
• Mumbai, covering the whole Mumbai Metropolitan Region.

Villages and every other town fall in the 90 square metre group.

These are effective rates on the total price after the deduction for land value. They apply to projects that began on or after 1 April 2019. Ongoing projects could opt for the old effective rates of 8% and 12%. The rates were not changed in the September 2025 GST rate overhaul, according to tax software publisher Busy.

A flat bought after the completion certificate is issued is outside GST altogether, under Schedule III of the CGST Act read with Schedule II. Our page on GST on property purchase covers parking, preferential location charges and other add-ons.

RBI priority-sector housing limits

RBI’s Priority Sector Lending Directions, 2025, in force from 1 April 2025, let banks count individual home loans as priority sector only if both the loan and the home’s cost are within these caps:

Repair loans have lower caps: ₹15 lakh, ₹12 lakh and ₹10 lakh for the same three groups. Bank loans for affordable housing projects also qualify where at least 50% of the FAR or FSI is used for homes with a carpet area of not more than 60 square metres.

Priority-sector status is a bank’s classification. It does not by itself set your interest rate or your eligibility. Loans to a bank’s own staff do not qualify.

PMAY income and carpet-area limits

PMAY-U 2.0 defines an affordable house exactly as GST does: up to 60 square metres in metros and 90 square metres elsewhere, worth up to ₹45 lakh. Its benefits carry separate conditions:

Our guide to the four PMAY 2.0 verticals explains which suits you, and EWS, LIG and MIG income limits covers state housing boards’ own bands.

How builders label affordable projects

“Affordable” in an advertisement is not a certificate. A project may use the word for several reasons:

• it meets the GST test and charges 1% GST;
• it is built under a state policy, such as Haryana’s affordable housing policy, with a price cap and a draw;
• it is a government agency scheme, such as those run by state housing boards or West Bengal’s HIDCO;
• it is marketing for small flats with no official tie.

Lenders also use “affordable housing loan” for small-ticket home loans. The term has no RBI definition, so compare the rate, fees and terms of any such loan like any other home loan. Run the numbers on the EMI calculator first.

What it means for your loan and tax

For FY 2025-26 returns, these deductions are claimed under the 1961 Act. A tax adviser can confirm what carries over under the Income-tax Act, 2025 for later years.

Checking a project’s status

1. Find the project on your state RERA website and note the carpet area of your flat type.
2. Check the carpet area in the agreement for sale against the 60 or 90 square metre limit for your city. Our RERA carpet area guide explains how it is measured.
3. Add up the gross amount the builder is charging and compare it with ₹45 lakh.
4. Check that the builder’s demand letters and invoices show GST at 1%, not 5%, if both tests are met.
5. For a PMAY subsidy, confirm the lender takes part in PMAY-U 2.0 and apply through the lender or the scheme portal.
6. For a state scheme, check the allotment on the agency’s own website.

Frequently asked questions

What is the price limit for affordable housing under GST?

₹45 lakh gross amount charged by the builder, along with the carpet area limit of 60 or 90 square metres.

What is the GST rate on affordable housing?

1% without input tax credit for under-construction flats in projects starting on or after 1 April 2019. Other residential flats pay 5%.

Is there GST on a ready-to-move affordable flat?

No, if the flat is sold after the completion certificate is issued. The sale of a completed building is outside GST.

Which cities are metros for the affordable housing definition?

Bengaluru, Chennai, Delhi NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and the whole Mumbai Metropolitan Region.

What is the RBI limit for priority-sector home loans?

Up to ₹50 lakh for a home costing up to ₹63 lakh in centres with 50 lakh or more people, with lower caps in smaller centres.

Is an affordable housing loan cheaper?

Not automatically. The term has no official definition for loans, so compare rates and fees across lenders.

Sources

• FAQs on real estate sector — GST Council (checked 16 Sep 2026)
• CGST Act, Schedule III — CBIC (checked 16 Sep 2026)
• Master Directions: Priority Sector Lending – Targets and Classification, 2025 — Reserve Bank of India (checked 16 Sep 2026)
• PMAY-U 2.0 operational guidelines — Ministry of Housing and Urban Affairs (checked 16 Sep 2026)
• Deductions for salaried individuals, Section 80EEA — Income Tax Department (checked 16 Sep 2026)
• Section 80EEA conditions — Tax2win (checked 16 Sep 2026)
• GST rates for builders from 22 September 2025 — Busy (checked 16 Sep 2026)