GST Council's Decision to Rationalise Tax Rates: A Boon for the Real Estate Market
The GST Council’s recent decision to reduce tax rates on essential construction materials is expected to significantly ease project costs for developers and boost affordability for homebuyers, particularly in the affordable and mid-income housing segments.
Gst CouncilReal Estate MarketConstruction CostsAffordable HousingRural HousingReal Estate NewsSep 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 main decision of the GST Council regarding construction materials?
The GST Council has decided to reduce the tax rate on cement from 28% to 18% and on construction and finishing materials from 12% to 5%.
How will this decision impact the real estate market?
This decision will significantly ease project costs for developers and boost affordability for homebuyers, especially in the affordable and mid-income housing segments.
What is the estimated reduction in overall construction costs?
Industry voices estimate that overall construction costs could decline by up to 5%.
How will this benefit rural housing?
Rural housing will benefit from the reduction in GST on cement, as it accounts for nearly 10-12% of total construction costs, leading to a 0.8%–1.0% reduction in overall construction expenses.
What is the timing of this decision and why is it significant?
The timing is strategic, aligning with the seasonal surge in construction activity post the monsoon period in rural and semi-urban regions.
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