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GST 2.0 Reforms from September 22 to Cut Construction Costs and Boost Indian Real Estate

Published: September 22, 2025 | Category: real estate news
GST 2.0 Reforms from September 22 to Cut Construction Costs and Boost Indian Real Estate

The Indian government's Next-Gen GST Reforms are set to be implemented from today, i.e., September 22, 2025, following approval from the GST Council led by Finance Minister Nirmala Sitharaman. These reforms aim to simplify India's tax framework, moving from a four-rate system of 5%, 12%, 18%, and 28% to a primarily two-rate system: 5% (merit rate) and 18% (standard rate), along with a 40% special rate for sin and luxury goods.

The reforms are expected to significantly boost the residential, retail, and office real estate sectors. By reducing GST on key construction materials such as cement, construction costs are projected to fall by 3-5%, enhancing project viability, increasing housing demand, and attracting more institutional investment.

Lower GST on construction materials is expected to reduce construction costs by 3-5%, potentially lowering home prices by 1-1.5%, particularly in affordable and mid-segment housing. This makes homeownership more attainable for a larger population, boosting buyer confidence.

Developers will benefit from reduced GST rates and Input Tax Credit (ITC), which allows them to claim credit for taxes paid on construction materials like cement, steel, tiles, and services including architecture and engineering. The ITC reduces total tax burdens, safeguards margins, and ensures cost savings are passed on to buyers without affecting profitability. By replacing multiple state-level taxes with a centralized GST system, the reforms enhance transparency, reduce tax evasion, and strengthen investor confidence. The organized real estate sector benefits from streamlined compliance, accurate invoicing, and a more predictable tax framework.

The simplified two-slab GST system under GST 2.0 is expected to transform India's real estate market, making housing more affordable while boosting transparency and market stability. Lower GST rates on construction materials will decrease property prices, benefit buyers, and create a more accessible and profitable environment for developers. With these reforms, India's real estate sector is poised for growth, increased investment, and renewed buyer confidence.

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Frequently Asked Questions

1. What are the key changes in the GST 2.0 reforms?
The key changes in the GST 2.0 reforms include moving from a four-rate system (5%, 12%, 18%, and 28%) to a primarily two-rate system (5% and 18%), with a special 40% rate for sin and luxury goods. This simplifies the tax framework and reduces complexity.
2. How will the GST 2.0 reforms impact the real estate sector?
The reforms are expected to boost the real estate sector by reducing construction costs through lower GST on key materials like cement. This will make housing more affordable and increase demand, particularly in the affordable and mid-segment housing markets.
3. What is the impact of reduced GST on construction materials?
Reduced GST on construction materials is expected to lower construction costs by 3-5%, which can reduce home prices by 1-1.5%. This makes homeownership more attainable for a larger population, boosting buyer confidence and demand.
4. How do developers benefit from the GST 2.0 reforms?
Developers benefit from reduced GST rates and Input Tax Credit (ITC), which allows them to claim credit for taxes paid on construction materials and services. This reduces their total tax burden, safeguards margins, and ensures cost savings are passed on to buyers.
5. What are the exempt categories under the new GST 2.0 reforms?
The exempt categories under the new GST 2.0 reforms include ready-to-move-in homes with completion certificates, resale properties, and the sale of land. These categories are not subject to GST.