Developers · Inventory · The Propah POV
Inventory ageing: when should a developer hold, and when should they cut?
Most developers treat ageing as a slow drift. It is not — there is a hard dated event in the middle of it. On the day the completion certificate is issued, unsold stock becomes an exempt supply and you must reverse a proportionate slice of the input tax credit already claimed, in that month’s return. The same day, those units become GST-free to the buyer. Both facts should be in your hold-or-cut decision, and usually neither is.
The event nobody plans around
Under Schedule III, entry 5 of the CGST Act 2017, the sale of a building where the entire consideration is received after the completion certificate is issued — or after first occupation, whichever is earlier — is treated as neither a supply of goods nor a supply of services. No GST arises.
For the buyer that is a genuine saving against the 5% on non-affordable residential and 1% on affordable that applies to an under-construction purchase. For you it is the strongest marketing fact you will ever have about your aged stock, and most developers never say it out loud.
The other half of the same event is a cost.
The ITC reversal, in plain terms
- On the CC date, unsold inventory becomes exempt supply. Under Rules 42 and 43 of the CGST Rules 2017, you must reverse a proportionate share of the input tax credit already claimed on construction.
- The proportion is unsold carpet area over total project carpet area, applied to cumulative ITC claimed. A 340-unit project with 47 units unsold at CC reverses roughly 14% of project-level input credits.
- It is reversed in the GSTR-3B for the month the CC is issued and reconciled annually in GSTR-9. Reversing late attracts interest under section 50.
- The exemption is assessed unit by unit, not project-wide: a unit qualifies only if the entire consideration was received after the CC. A part-payment taken before it changes that unit’s treatment.
Every unsold unit at completion carries a bill you pay in that month’s return. It is the one deadline in the whole ageing curve that has a date on it.
What that means for the decision
It gives you three distinct windows, and they call for different behaviour.
| Window | What is true | What to do |
|---|---|---|
| Launch to mid-build | Your best pricing power. Velocity is visible and compounds; ITC flows normally. | Sell hard. Escalate on absorption, not dates. |
| Approaching CC | Every unit still unsold on the CC date carries a proportionate ITC reversal. | Quantify that reversal before the CC month and let it inform how aggressive you are in the run-up. |
| Post-CC | Reversal already taken. Units are now GST-free to the buyer and physically inspectable. | Reprice and remarket on ready, no GST, see it today — a different proposition, not a discount. |
The practical implication runs against instinct. A developer who is going to be left with unsold stock at completion is often better off acting in the quarter before the certificate than in the two quarters after, because the pre-CC period is the last one in which a sale avoids the reversal on that unit. That is a real number you can compute, and it belongs alongside the holding-cost and anchoring arithmetic rather than instead of it.
The context you are ageing into
Bengaluru held 79,200 unsold units at Q2 2026, up 34% on the year, with roughly fifteen months of overhang and launches running 42% ahead of absorption. Ageing stock is not a company-specific embarrassment in that market — it is the market. What distinguishes developers is not whether they have aged inventory but whether they know, unit by unit, what it is costing them.
How to run an ageing review
- Age by unit, not by project. A project is never uniformly slow. Cohort the stock by configuration, floor, facing and tower, and the pattern is usually obvious within an hour.
- Separate “never had a chance” from “lost momentum”. Units nobody ever enquired about have a product or pricing defect from day one. Units that got visits and no bookings have a different problem, and the fixes are not interchangeable.
- Price the reversal per unsold unit at your projected CC date, and put it in the same table as holding cost and the anchoring effect of any cut. Three numbers, one decision.
- Decide what the residual stock is for. Some of it should be sold at a corrected price. Some should be let and held, if the yield beats your cost of capital. Some should be repositioned to a different buyer entirely — an overseas buyer values different things and often wants exactly the floor a local end-user rejected.
- Use the post-CC facts. Ready to move, GST-free, physically inspectable, no delay risk. That is a genuinely stronger proposition than an under-construction unit at the same price, and it should be sold as one rather than apologised for.
- Set a stop. Decide in advance what evidence would make you cut, and at what date. An ageing review without a decision rule produces a quarterly meeting rather than a decision.
When to hold
Holding is a legitimate strategy and is undersold, though only under conditions you can state:
- The corridor has a visible demand catalyst with a date — a metro phase, an office completion, a road — rather than a general expectation of appreciation.
- The units can be let at a yield that meaningfully offsets the carry.
- You are not funding the hold with expensive short-term debt. Holding on private credit at real rates is a decision to pay someone else for optimism.
- The stock is genuinely differentiated — last remaining large configurations, a corner unit, a view that cannot be replicated. Scarce stock rewards patience; commodity stock does not.
If none of those hold, you are not holding. You are deferring, and the reversal and the carry are both running while you do.
What this does not cover
- GST treatment described here is the general position under Schedule III entry 5 and Rules 42 and 43 as published. GST in real estate is technical, has changed more than once, and turns on facts including how consideration was received. Confirm your specific position with your auditor before acting on any of it.
- The 340-unit example is an illustration of the proportion mechanic, not a benchmark.
- The 5% and 1% rates are for non-affordable and affordable residential apartments respectively, under the applicable rate notification, and are subject to conditions.
- Bengaluru inventory and overhang figures are Anarock’s for Q2 2026 and are citywide.
- This is general commentary, not tax, accounting or pricing advice.
What happens to unsold flats when the completion certificate is issued?
Two things at once. Under Schedule III entry 5 of the CGST Act 2017, a sale where the entire consideration is received after the completion certificate or first occupation is neither a supply of goods nor services, so no GST applies — the units become GST-free to buyers. At the same time, that unsold stock becomes exempt supply, and under Rules 42 and 43 the developer must reverse a proportionate share of input tax credit already claimed, in the GSTR-3B for the month the certificate is issued.
How is ITC reversal on unsold inventory calculated?
By carpet area proportion. Take unsold carpet area as a fraction of total project carpet area at the completion certificate date, and reverse that same fraction of cumulative input tax credit claimed on construction inputs and input services. A 340-unit project with 47 units unsold at the certificate date would reverse roughly 14% of project-level input credits. The reversal goes into that month's GSTR-3B and is reconciled annually in GSTR-9; reversing late attracts interest under section 50.
Is there GST on a ready-to-move flat?
No, provided the entire consideration is received after the completion certificate or first occupation, whichever is earlier. Schedule III entry 5 of the CGST Act treats such a sale as neither a supply of goods nor a supply of services. That contrasts with an under-construction purchase, which attracts 5% on non-affordable residential apartments and 1% on affordable ones. It is assessed unit by unit rather than project-wide, so a part-payment taken before the certificate changes that particular unit's treatment.
Should a developer sell before or after the completion certificate?
Before, where the choice exists, because every unit still unsold on the certificate date carries a proportionate input tax credit reversal that a pre-certificate sale avoids on that unit. This runs against instinct — developers commonly wait for the certificate believing ready stock sells more easily. It does become an easier proposition afterwards, since the units are GST-free, inspectable and carry no delay risk, but that improvement arrives after the reversal has been paid. Quantify the reversal before the certificate month and let it inform the run-up.
When should a developer hold unsold inventory rather than cut price?
When four conditions hold: the corridor has a demand catalyst with an actual date rather than a general expectation of appreciation, the units can be let at a yield that meaningfully offsets the carry, the hold is not being funded with expensive short-term debt, and the stock is genuinely differentiated — last large configurations, a corner unit, a view that cannot be replicated. Scarce stock rewards patience; commodity stock does not. If none of those apply, that is not holding, it is deferring while the carry runs.
How should a developer analyse aged inventory?
Unit by unit, not project by project. Cohort by configuration, floor, facing and tower — the pattern is usually obvious within an hour. Then separate units that never attracted an enquiry, which have a product or pricing defect from day one, from units that drew site visits but no bookings, which have a different problem entirely. Price the input tax credit reversal per unsold unit at your projected completion certificate date, and put it alongside holding cost and the anchoring effect of any price cut.
Is aged inventory a sign of a badly run project?
Not in this market. Bengaluru held around 79,200 unsold units at Q2 2026, up 34% year on year, with roughly fifteen months of overhang and launches running 42% ahead of absorption. Ageing stock is the market condition rather than a company-specific failure. What distinguishes developers is not whether they hold aged inventory but whether they know, unit by unit, what it is costing them in carry, in tax credit reversal, and in the price it will eventually anchor the rest of the block to.
How should ready-to-move unsold stock be marketed?
As a different product, not a discounted one. Post-certificate units are GST-free to the buyer, physically inspectable before commitment, and carry no delay risk — three things an under-construction unit at the same price cannot offer, and each of them addresses a specific fear that stops buyers committing. Marketing them apologetically as leftover stock concedes the very advantage they have. The proposition is ready, no GST, see it today, move in next month.
GST treatment of post-completion sales under Schedule III entry 5 of the CGST Act 2017, input tax credit reversal on unsold inventory under Rules 42 and 43 of the CGST Rules 2017, the carpet area proportion mechanic, GSTR-3B and GSTR-9 reporting and interest under section 50, and the 5% and 1% rates for non-affordable and affordable residential apartments, checked across published guidance in September 2026. GST in real estate is technical and has changed more than once; confirm your specific position with your auditor. Bengaluru inventory, overhang and absorption figures are Anarock’s for Q2 2026. This is general commentary, not tax or accounting advice.
Still deciding, or want this applied to your own situation?
Tell us where you are and we will come back to you. The first conversation is free, and we will tell you plainly if we are not the right people for it.
Next
The completion certificate is a date, not a milestone.
Know what your unsold stock will cost you in that month’s return, and the quarter before it stops being a quiet one.
Ask an Advisor