The introduction of the Goods and Services Tax in 2017 was one of the most ambitious structural reforms in India’s fiscal history. It replaced a fragmented and cascading web of indirect taxes with a unified framework, signalling India’s commitment to tax simplification and economic integration.

Over the years, however, the complexity of multiple GST slabs, restricted input tax credits, and frequent classification disputes has somewhat diluted its original intent.

Now, with Prime Minister Narendra Modi’s announcement of next-generation GST reforms moving towards just two principal rates of 5% and 18%, along with a 40% rate for sin goods, the country stands at the point of another transformative shift.

For the domestic market, GST 2.0 promises simplification, reduced costs, and potentially higher consumption. But for NRIs, who account for a significant share of property purchases in India, this reform could carry an even deeper significance.

It is not just about marginal cost savings. Rather, it is about creating a transparent, predictable, and globally competitive tax environment that strengthens India’s position against other real estate investment destinations such as Dubai, Singapore, or London.

A shift from margins to liquidity

The conventional narrative around GST reforms often focuses on developer margins or homebuyer affordability. Yet, from an NRI perspective, a simplified GST regime has the potential to reshape liquidity in the property market. Real estate in India has long been characterised by opacity, disputes over tax classifications, and uncertainty in final pricing. By collapsing multiple slabs into two, GST 2.0 addresses a crucial friction point: the predictability of tax treatment.

For an NRI investor, especially one holding properties as part of a long-term portfolio, liquidity at the time of exit is as important as cost savings at entry. Simplified taxation reduces disputes, enhances clarity in documentation, and improves buyer confidence in secondary transactions. This means NRIs looking to repatriate capital or rotate their portfolios after 5–10 years are likely to find smoother, faster transactions with reduced risk of disputes. In a market where resale liquidity has traditionally been constrained, GST 2.0 could quietly enhance the exit landscape for global investors.

The currency–compliance connection

One of the less-discussed aspects of GST rationalisation is its interaction with currency dynamics. For an NRI, the journey of investment begins with converting foreign currency into Indian rupees, navigating bank charges, compliance paperwork, and taxation layers. Currently, the complexity of multiple GST slabs creates hidden costs in compliance, legal advice, and procedural delays. Each additional layer effectively erodes the foreign currency advantage that NRIs enjoy when remitting capital to India.

By streamlining GST into two slabs, these hidden compliance premiums are reduced. A transparent tax environment makes it easier for Indian banks and financial institutions to design standardised NRI-focused products, further lowering transaction costs.

At a time when the Indian rupee hovers around 83 to the US dollar, even small efficiency gains translate into meaningful improvements in effective returns. For example, a Tier-1 city property worth ₹3.25 crore could see embedded cost savings of 0.6–0.9% through GST 2.0 reforms — amounting to nearly $2,000–$2,500. For NRIs building portfolios of multiple properties, these benefits are cumulative, reinforcing India’s attractiveness relative to other global destinations.

Affordable housing as the untapped NRI play

Traditionally, NRIs have gravitated towards luxury housing in metros, attracted by prestige, location, and aspirational value. However, this segment has limited sensitivity to marginal tax reductions. The true structural shift lies in affordable and mid-income housing, where GST 2.0 can act as a catalyst.

With construction materials like cement and paints moving from the 28% slab to 18%, developers’ embedded costs reduce significantly. Even without input tax credits — which remain restricted in residential projects — the absolute reduction in construction cost provides an opportunity for competitive pricing.

Coupled with the concessional 1% GST rate on affordable housing and the government’s ongoing policy push, this segment offers NRIs a unique value proposition. For instance, Tier-2 cities such as Pune, Ahmedabad, and Kochi are delivering rental yields of 3–4%, compared with 2–3% in metros.

Lower entry costs, combined with stable rental income and long-term appreciation potential, make affordable housing a more compelling investment case for NRIs seeking steady cash flows rather than speculative capital gains. If the definition of affordable housing expands from ₹45 lakh to ₹75 lakh or ₹1 crore, as the industry has long advocated, it could open a new goldmine for NRI investors.

Unlocking cross-border financing opportunities

Another underexplored dimension of GST 2.0 is its impact on financing structures. Today, many NRIs rely on external remittances, NRE/FCNR accounts, or limited home loan products tailored to overseas buyers. The compliance complexity and frequent tax disputes around property transactions often discourage financial institutions from innovating in this space.

A simplified GST regime can change this dynamic. By standardising tax treatment across states and reducing classification disputes, banks and NBFCs gain greater confidence to design structured mortgage solutions for NRIs. We could see the emergence of cross-border financing products where Indian banks partner with global institutions to offer competitive home loans denominated in multiple currencies.

Such products not only reduce cost of borrowing for NRIs but also deepen India’s integration into global capital markets. For developers, this translates into improved access to a broader buyer base, and for NRIs, it expands options beyond cash-funded acquisitions.

India versus global hotspots: The competitive benchmark

Finally, the strategic question: can GST 2.0 position India more competitively against other NRI investment destinations? Dubai offers zero property tax and high rental yields but limited long-term residency benefits. Singapore provides a transparent market but imposes high stamp duties on foreign buyers. The UK offers a mature legal system but is constrained by economic headwinds and fluctuating pound values.

India’s challenge has been the unpredictability of its tax and regulatory frameworks. By collapsing GST slabs, eliminating classification disputes, and sending a strong signal of stability, GST 2.0 addresses this perception head-on. It is not just about cost savings; it is about confidence. A simplified, transparent regime reassures NRIs that the rules of the game will not change arbitrarily. Combined with India’s high-growth economy, favourable demographics, and government-backed infrastructure push, this could be the inflection point that tilts the global investment map in India’s favour.

The GST 2.0 reform is far more than a technical adjustment to tax rates — it is a structural reset that could redraw the contours of NRI investment in Indian real estate. While the direct savings may appear modest at 0.6–0.9% of property value, the cumulative benefits in liquidity, compliance simplicity, financing innovation, and global competitiveness are substantial.

For policymakers, this is an opportunity to complement GST reform with aligned measures such as stamp duty rationalisation, clarity on input tax credits, and expansion of affordable housing definitions. For developers, the imperative is to pass on at least part of the cost savings to strengthen trust and stimulate demand. And for NRIs, the message is clear: India is signalling that it wants to be a predictable, competitive, and globally attractive investment destination.

If GST 1.0 was about creating a unified domestic market, GST 2.0 could well be about positioning India on the global stage. By marrying tax simplification with economic ambition, the reform holds the potential to not only make housing marginally more affordable but re-establish India as a frontrunner in the global competition for NRI capital. The world’s investment map is constantly shifting. GST 2.0 may just be the reform that ensures India occupies its rightful, central place. – Image by freepik – editor@nrifocus.com

The writer is Director,
Eros Group.