GST Council’s Decision on Construction Materials: A Boon for Real Estate and Housing
Mr. Venkatesh Gopalakrishnan, Director Group Promoter’s Office and MD of Shapoorji Pallonji Real Estate, discusses the impact of the recent GST rationalisation on the real estate sector. The rate cuts on essential construction materials are expected to significantly ease project costs and boost affordability for homebuyers.
Gst CouncilReal EstateConstruction CostsHousing MarketShapoorji PallonjiReal EstateSep 05, 2025
From the perspective of the housing market, especially the affordable and mid-income segments, this development is timely and impactful. Rising construction costs and pressure on margins have presented significant challenges to the sector. The potential pass-through of savings will encourage renewed demand. It will also enable more accessible homeownership.
At Shapoorji Pallonji Real Estate, we see this GST rationalisation as a much-needed stimulus. It simplifies tax structures and enhances transparency. It also aligns with the current positive buyer sentiment. We are optimistic that this reform will enhance purchase intent. This is especially true as we enter the festive season, a traditionally strong period for the real estate market.
Anupama Reddy, Vice President & Co-Group Head at ICRA, adds that 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 price benefit of Rs 26-28/bag will be transferred to retail customers, without materially affecting the profitability of cement manufacturers. The timing of this move is also strategic, aligning with the seasonal surge (post monsoon period) in construction activity across rural and semi-urban regions.
Frequently Asked Questions
What is the significance of the GST rate cut on cement?
The GST rate cut from 28% to 18% on cement is significant because it reduces input costs for developers, making construction projects more viable and affordable for homebuyers. This can lead to a reduction in overall construction costs by up to 5%.
How will the GST rationalisation impact the affordable housing segment?
The GST rationalisation will provide relief in terms of lower construction costs, making homes more affordable for the mid-income and affordable housing segments. This can encourage renewed demand and support accessible homeownership.
What does Anupama Reddy from ICRA say about the impact on rural housing?
Anupama Reddy from ICRA notes that the GST rate cut on cement will benefit rural housing by reducing overall construction costs by 0.8%–1.0%. This will provide some relief to low-income families and support the Housing for All mission.
How does the timing of this GST decision align with the real estate market?
The timing of the GST rationalisation is strategic as it aligns with the festive season, a traditionally strong period for the real estate market. This can enhance purchase intent and boost demand.
What is the expected impact on the profitability of cement manufacturers?
The price benefit of Rs 26-28 per bag will be transferred to retail customers without materially affecting the profitability of cement manufacturers, ensuring that the benefits are passed on to the end-users.
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