The GST new two-tier structure of 5% and 18% from September 22 is a welcome stride towards simplifying taxation in India. The cut in GST on cement from 28% to 18% and reductions on other key construction materials are crucial as it will help moderate construction costs, easing pressure on real estate developers and encouraging sustainable infrastructure growth.
The move is also expected to revive stalled real estate projects, particularly in low- and mid-income housing segments, by improving cost viability.
GST Reduction on Materials – A Hit
From the perspective of the housing market, especially the affordable and mid-income segments, GST reduction on Cement is timely and impactful. Rising construction costs and pressure on margins have presented significant challenges to the sector.
Venkatesh Gopalakrishnan, Director Group Promoter’s Office, MD - Shapoorji Pallonji Real Estate (SPRE), welcoming the GST Council’s decision to rationalise tax rates on essential construction materials said, “It will significantly ease project costs for developers and boost affordability for homebuyers. For developers, this relief lowers input costs and strengthens project viability. Industry voices estimate that overall construction costs could decline up to 5%. This offers scope for improved margins, as well as better pricing for end-users.”
"Rural housing will be a key beneficiary from the Government’s decision to reduce GST on cement from 28% to 18%. With cement accounting for nearly 10-12% of total construction costs in rural housing, this tax cut translates into a 0.8%–1.0% reduction in overall construction expenses. This provides some relief to low-income families and supports the broader Housing for All mission. The timing of this move is also strategic, aligning with the seasonal surge (post monsoon period) in the construction activity across rural and semi-urban regions,” says Anupama Reddy, Vice President & Co-Group Head, ICRA Ltd
" The reduction in GST on cement is a significant step towards making homeownership more accessible and stimulating growth in the real estate sector. By lowering construction costs, this move will have a positive ripple effect on the entire industry. This aligns perfectly with the Prime Minister's vision of 'Housing for All,' and we believe it will play a crucial role in achieving this goal, shared Murali Malayappan, Chairman & MD, Shriram Properties Ltd.
“The impact will be especially pronounced in the mid-income and affordable housing segments, where price sensitivity is highest and demand continues to surge. The reductions on other essential building materials such as marble, granite, and bricks will allow developers to accelerate launches, ensure timely project completions, and pass on benefits to homebuyers,” added Manju Yagnik, Vice Chairperson of Nahar Group and senior Vice president of NAREDCO Maharashtra
One important aspect that many are missing is fly ash bricks. Today, almost nobody uses traditional clay bricks; fly ash bricks have become the norm. The GST rate on these has also come down from 12% to 5%. This shift will impact the real estate sector positively because bricks are such a fundamental building material,” says Vivek Jalan, Partner at Tax Connect Advisory Services.
Reduced Compliances Enhance Transparency
Simplified taxation is expected to accelerate both ongoing and upcoming developments across residential and commercial spaces.
“With compliance made simpler and the tax regime more predictable, developers and investors alike benefit from reduced uncertainty. This clarity supports faster execution, encourages steady capital inflows, and contributes to a healthier supply pipeline for housing and infrastructure,” said Vishal Raheja, Founder and Managing Director, InvestoXpert
“Reduced compliance burdens also lower operational friction, allowing stakeholders to redirect focus toward strategic planning and value creation. As affordability improves for households, demand across housing and infrastructure is expected to rise, energizing the ecosystem more broadly,” informed Pratap Alwat, Managing Director, Pranshi Infra Advisor Pvt. Ltd
Festive Season Bonanza
Housing demand is closely tied to consumer confidence and long-term financial planning. When households save more on essentials, it creates a positive environment that encourages investment in real estate, while also strengthening sentiment around property as a stable and rewarding asset class.
Binitha Dalal, Founder & Managing Partner, Mt. K Kapital says, “With the festive season around the corner, the timing couldn’t be better to boost homebuyer confidence and accelerate purchase decisions. From an investment perspective, it signals a conducive environment for long-term capital deployment, strengthening the sector’s growth outlook.”
Mohit Goel, Managing Director, Omaxe Ltd., says, "This reform comes at an important moment with stable interest rates, strong festive sentiment and rising demand for quality housing shaping a positive outlook."
Shekhar Patel, President CREDAI expressed that the process reforms announced alongside these rate changes mark a positive step towards a more transparent and efficient tax regime, likely to result in improved GST compliance and increased revenue collections. This is a game-changing initiative that is expected to stimulate demand across sectors and provide a much-needed boost to manufacturers, suppliers, and developers alike.”
What the Reforms Missed
While the latest GST reforms, are expected to benefit the real estate sector, some key reforms were missed, particularly concerning affordable housing, commercial real estate and the pass-through of Input Tax Credit (ITC) benefits to homebuyers.
Dhaval Ajmera, Director- Corporate affairs, Ajmera Realty said, “By lowering the tax incidence on critical building materials and creating ease of compliance, the input costs will reduce and enhance project viability as a whole. The reform will lower overall costs by around 5%, providing a big relief to the developers and the consumers. Although we still hope that the GST on low-cost housing will also be amended in the near future. A decrease in this segment would further encourage Housing for All.”
Anuj Puri, Chairman – ANAROCK Group shared, “Commercial real estate currently attracts 12% GST with Input Tax Credit (ITC) available. However, recent developments have complicated the landscape a bit. The elimination of ITC on commercial property leasing implies that developers will no longer be able to claim ITC on project-related costs. This retrospective amendment may increase operational costs and rental prices for office spaces and other commercial properties. The Reverse Charge Mechanism (RCM) for commercial property rentals by unregistered suppliers, which requires tenants rather than landlords to pay 18% GST on such rentals, adds compliance burden for businesses renting commercial spaces.”
Concerns Going Forward
A key concern is whether developers will pass on the cost savings from reduced cement prices to homebuyers or retain the benefits, which impacts overall housing affordability. “There’s a possibility they may developers will retain it to safeguard their margins, rather than lowering prices,” stated Abhishek Kumar, founder and chief investment advisor of SahajMoney, a financial planning firm.
Rajul Bohra, Partner, JSA Advocates & Solicitors too expressed similar sentiments, “The impact on home prices will depend on several factors. Greater clarity is needed on input tax credit for buildings meant for rental use, and it will need to be seen whether benefits will be passed to homebuyers or not."
Furthermore, the retrospective nature of some of the changes, particularly the elimination of ITC on commercial leasing, raises concerns about increased operational costs and potential disputes. The retrospective amendment may increase operational costs and rental prices for office spaces and other commercial properties, say sector analysts.
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