MUMBAI: The real estate sector, which plays a pivotal role in the economy, contributing significantly to job creation and overall GDP, has welcomed the massive GST rate reduction on all construction materials from a high 28% to a low 18%, saying this will lead to higher home affordability, leading to realize earlier than targeted housing for all objective, which in turn will lead to overall economic growth and development.
The tax rate cut on cement and other key building materials is a landmark reform and will provide a much-needed relief for the real estate sector in the ongoing festive season, leading to better demand as the steep tax rate reduction will help lower overall construction costs and ease cost pressures across the sector, thereby creating a more efficient and investor-friendly environment, say relators and other industry players.
Leading developer Niranjan Hiranandani, the chairman of the Hiranandani group and the chair of the developers lobby Naredco, welcoming the the GST rationalisation said this festive bonanza is a strategic boost for the economy.
“By enhancing purchasing power, stimulating consumption, and helping contain inflation, this reform creates a multiplier effect that will propel our growth beyond 8%. At a time of global uncertainty, such fiscal stimulation underscores the resilience of our economy and strengthens confidence in our growth trajectory. Industry and consumers alike stand to benefit from this progressive step,” Hiranandani told TNIE on Thursday.
He further said for the realty and infrastructure sectors, the tax cut on critical construction materials like cement and steel from 28% to 18% is a landmark reform as this will significantly ease input costs, improve project viability, and accelerate infrastructure development.
“Affordable housing, in particular, stands to gain as reduced construction costs can be passed on to homebuyers, making homes more accessible while supporting the government’s housing for all vision. This is not just a boost for developers, it is a win-win for consumers, the housing sector, and the long-term national growth story,” he added.
Anurag Mathur, the chief executive of Savills that is a global commercial, industrial and residential real estate service provider, said the revised GST slab is will lower construction costs, improve affordability, and stimulate demand, especially in the mid- and affordable housing segments.“
It also promises improved input credit flows and reduced compliance complexities, potentially lowering project costs and boosting homebuyer sentiment. Cement and ready-mix concrete now come under 18% GST down from 28%; bricks, tiles, and sand have fallen sharply to 5% from 18%, and paints and varnishes are now at 18% down from 28%.
“These changes will bring down overall construction costs going forward as it will result in a reduction of GST burden by about 20% across various segments of housing, commercial, industrial and warehousing. Additionally, affordable and mid-segment housing stand to gain significantly as lower construction costs can be passed on to homebuyers, enhancing home ownership possibilities,” Mathur said.
Samantak Das, chief economist at JLL India, said since developers do not get the full benefit of input tax credit and hence the high GST rate on cement adds to the final apartment cost, the impact of bringing this rate to 18% will vary across different segments of the real estate market.
“The cost reduction on live home projects may range in the 1-1.5%, considering various types of residential projects and effective cement cost reduction considering the cascading and base price adjustments. This is with the assumption that developers would transmit the entire benefit to the customer,” Das said.
Though it appears that there may not be a drastic slash in home prices, for affordable and mid-segment housing, we are likely to see improvements in demand, while for premium and luxury properties, the impact on affordability would be marginal but the developers can reinvest the savings in the cost of construction to improve quality and amenities, he added.
“However, from a macro perspective, there would be a positive impact on affordability and sentiments of homebuyers. Developers would gain in terms of easing working capital pressure and the overall savings in cost outflow will be significant and beneficial to all stakeholders of the real estate and construction industry, directly or indirectly,” he added.
According to Vimal Nadar, a senior director at Colliers India, the slashing of GST on cement to 18% will play a critical role in rehauling project cost structures as cement forms a major value component in the overall cost of construction.
“Residential real estate, particularly new homebuyers, stand to gain as developers are likely to pass on the benefit of lower costs in the form of reduced housing prices. Developers’ profitability margins, too can potentially improve, enhancing the overall financial health of the real estate sector,” he added.
Neeraj Akhoury, the president of the Cement Manufacturers Association and the managing director of Shree Cement, said the association has been seeking this reduction for long, as cement was taxed at the highest rate among all essential building materials such as steel and several other construction inputs.
Lowering the rate to 18% corrects this long standing anomaly and ensures parity with other core materials. “Moreover, the reduction will enhance the competitiveness of the cement industry by creating a fair game with global peers as cement is a foundational material for infrastructure and housing and so treating it more fairly in the tax structure is consistent with global practices and will likely boost consumption of this key building material towards augmenting considerable infrastructure, including affordable housing.
“Overall, this GST rationalisation will help buyers gain better affordability and more confidence to invest in houses, especially in the affordable and mid-segments where cost sensitivity is high. A rationalised GST regime, thus holds promise not only for individual households seeking security and stability through homeownership but for the economy at large, making housing the driver of sustainable growth. Overall, this is a progressive step for India’s long-term growth story,” said Ramani Sastri, chairman of Sterling Developers.
Housing demand is closely tied to consumer confidence and long-term financial planning and thus for the real estate sector, this buoyancy is meaningful, as it will reduce the cost of construction. Also, the move not only aligns India with global best practices but also provides a timely push for industries that contribute significantly to economic growth, with real estate continuing to be a key driver, according to Lincoln Bennet Rodrigues, founder chairman of Bennet & Bernard which is into premier luxury homes mostly in Goa.
As coworking operators, we invest heavily in infrastructure and fit-outs. Although GST input credits are available, the upfront outflow of GST has historically placed pressure on working capital. These tax cuts will help coworking operators plan growth more efficiently and expand further and thus will support quicker scaling and enhance the value proposition for our clients, said Manas Mehrotra, founder of coworking player 315Work Avenue.
According to Piyush Bothra, a cofounder of Square Yards, the tax rate cut is a major boost for the realty sector and a result projects will become more viable apart from streamlining tax compliance, making processes smoother and faster. For the residential segment, this is likely to translate into tangible benefits for homebuyers as developers pass on the savings over the coming months, he added.
According to Shrinivas Rao of Vestian, the tax cuts will strengthen the realty sector by reshaping demand–supply dynamics. Lower GST on construction materials is expected to enhance housing affordability by reducing input costs, while lower taxes on other goods could improve disposable income, thereby stimulating real estate demand. However, the overall impact may remain limited if these savings are not adequately passed on to end-consumers.
