Affordable Housing in Peripheral Areas to Benefit from GST Rate Cuts, Experts Say
The recent GST cuts for ancillary industries have raised hopes that developers may eventually pass on cost savings to homebuyers, particularly in affordable housing projects in peripheral areas.
Gst CutsAffordable HousingReal EstatePeripheral AreasCost SavingsReal EstateSep 27, 2025
The government’s recent GST cuts for ancillary industries have raised hopes that developers may eventually pass on cost savings to homebuyers. However, developers and experts say that any such benefit will take time. It depends on when key sectors like cement, steel, logistics, and other construction-linked services begin passing their cost advantages to developers.
The GST Council decided earlier this month to cut tax rates on key construction materials such as cement, granite, and marble. This is expected to lower project costs for developers and provide some relief to homebuyers. Under GST 2.0, cement and ready-mix concrete will attract 18% GST (down from 28%), bricks, tiles, and sand will be taxed at 5% (down from 18%), and paints and varnishes will come under 18% (down from 28%).
According to Niranjan Hiranandani, Chairman of NAREDCO National, and CMD of Hiranandani Communities, the GST reduction will directly benefit construction and affordable housing. 'For the real estate sector, most of the products had the GST rate of 28%, which has been put down to 18%. This means that cement, steel, bricks, and paints, all the inputs that go into the construction of a house, are also coming down. So, this will have a direct impact on the real estate sector,' Hiranandani said.
'However, the impact on affordable housing will be much more. This is because in the case of high-cost housing, land and other components and other costs, which government taxes are there, are a bigger component. On the other hand, in the affordable housing segment, the construction cost is a big cost, and that benefit definitely goes to the homebuyer. Hence, I think the fall in sales in the affordable housing segment will now pick up again,' Hiranandani added.
The impact of GST benefits for homebuyers may eventually see the light of day in the next three to six months. However, the impact could more likely be visible for homebuyers looking for affordable housing. The impact may be passed on by developers where the land rates are low, and this will be in the outskirts of Mumbai and Pune. For example, Dronagiri, Uran, Vasai, Virar, including the pockets in the outskirts of Pune, said Karan Singh Sodi, Senior Managing Director (Mumbai MMR & Gujarat) and Head-Alternatives, India, JLL, a real estate consultancy firm.
Housing sales in India’s top 15 Tier 2 cities that are considered to be the affordable housing market fell by 8% to 43,781 units in Q1 2025, compared to 47,378 units in the same period last year. On the other hand, sales value rose by 6% to ₹40,443 crore in Q1 2025, compared to ₹38,102 crore in the same period last year, said a report by data analytics firm PropEquity.
According to the report, Lucknow registered the highest growth amongst the top 15 Tier 2 cities, with a 25% increase in the number of units sold in Q1 2025, at 1301 units. During the same period last year, 1,040 units were sold in Lucknow. This was followed by Coimbatore, 21%, Gandhi Nagar, 18%, and Mohali, 2%.
India’s top nine cities are expected to decline by 4% in the third quarter this year (July-September), settling just above the 1 lakh-unit mark at 1,00,370 units, according to a report by NSE-listed real estate data analytics firm PropEquity released last week. New launches, however, are expected to remain flat, touching below the 1 lakh mark at 92,229 units declining by 10% on Q-o-Q basis.
Frequently Asked Questions
When will developers start passing on the GST benefits to homebuyers?
Developers are expected to start passing on the GST benefits to homebuyers after three to six months, as it takes time for the cost savings to be reflected in the construction process.
Which areas are likely to benefit the most from the GST cuts?
Peripheral areas with lower land costs, such as outskirts of major cities like Mumbai and Pune, are likely to benefit the most from the GST cuts.
What materials are seeing a reduction in GST rates?
Materials like cement, ready-mix concrete, bricks, tiles, sand, and paints are seeing a reduction in GST rates under GST 2.0.
How will the GST cuts impact affordable housing?
The GST cuts are expected to have a significant impact on affordable housing, as construction costs form a larger portion of the total cost in these projects.
What is the current trend in housing sales in Tier 2 cities?
Housing sales in India’s top 15 Tier 2 cities fell by 8% in Q1 2025 compared to the same period last year, but the sales value rose by 6%.
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