IMPACT OF GST REFORMS ON HOUSING SECTOR

Rationalisation of tax rates on construction material by the GST Council is expected to provide the real estate sector some relief even though the rates applicable on property remain unchanged. Sectoral Impact: Lower GST on cement and other inputs directly reduces project cost. Developers may choose to pass on part of this benefit to buyers, improving affordability. b) Stability for buyers: With no change in property GST rates, buyer sentiment remains unaffected, avoiding confusion or deferment of purchase decisions. Supply Boost: Improved margin outlook may encourage developers to launch new projects, especially in affordable and mid-income segments. Impact on premium housing: Reduction in GST on marble, granite and stone will support cost efficiency in high end housing projects.

Overall, the reforms are marginally positive for the housing sector. However, the impact is likely to vary across affordable, mid-income and premium housing categories. Also, whether developers will pass on the benefits to customers will bear watching, says CRISIL research. Property segment: The rates applicable on affordable housing (1%), under-construction properties (5%) and completed properties (exempt) remain unchanged. The status quo offers stability for both developers and homebuyers.

The Experts Views
For developers, cement and steel account for nearly 60% of construction costs and estimates show the tax cuts could lower construction costs by 3-5%, bringing immediate relief across various segments of housing, commercial, industrial and warehousing. However, it would have been encouraging to see brokerage/commission services brought under the lower slab of 5%. Such a measure would have gone a long way in ensuring better compliance. The reforms are expected to bring affordable housing within reach of lakhs of families, with lower costs making projects more viable and boosting demand. Compact homes such of 330–360 sq. ft become even more affordable for f irst-time buyers and young professionals in metro cities. From homebuyer’s perspective, the GST rationalization is expected to increase savings, boost consumption, and improve liquidity and lift overall festive buying sentiment.

This buoyancy is meaningful, as housing demand is closely t ied to consumer confidence and long-term financial planning. When households save more on essentials, it encourages investment in real estate, while also strengthening sentiment around property as a stable and rewarding asset class.

By simplifying tax structures and exempting essential services, the reforms improve clarity and predictability in the real estate sector.

For emerging real estate hubs such as tier II & III cities, GST reduction will encourage new investments, enable sustainable, integrated townships and bolster Tier 2 and Tier 3 markets in alignment with economic growth.

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.

On the industrial front, lower GST on raw materials strengthens India’s cost advantage at a time when a growing number of multinational companies are looking at India as part of their China+1 strategy to diversify supply chains. With labor costs already favorable and trade agreements expanding, India is well-poised to attract more foreign direct investment across sectors such as renewable energy, electric vehicles, automation, and semiconductors.

For the coworking sector, the real advantage lies in improved cash flow management and working capital efficiency. Although GST input credits are available, the upfront outflow of GST has historically placed pressure on working capital. This will help coworking operators plan growth more efficiently and will support quicker scaling and enhance the value proposition for the occupiers.

For businesses, streamlined compliance fosters a climate of innovation and customer-centricity. By simplifying tax structures and exempting essential services, the reforms improve clarity and predictability in the real estate sector. Reduced compliance burdens also lower operational friction, this transparency strengthens the environment for long-term investments and supports more informed decision-making across emerging and established markets.

If the GST reforms benefits are fully passed on to the buyers, it will certainly enhance value and improve overall real estate market sentiment.