GST Cut on Construction Materials: A Boon for Homebuyers and the Real Estate Sector
The real estate industry has welcomed the GST Council's move to lower the tax rate on cement, which is expected to bring down overall project costs and benefit homebuyers.
Gst CouncilReal EstateCementHomebuyersAffordabilityReal EstateSep 04, 2025
The real estate industry has warmly welcomed this move, stating that it will reduce overall project costs for builders, who can then pass on the benefits to homebuyers. Anupama Reddy, Vice President & Co-Group Head at ICRA Ltd, believes that rural housing will be a significant beneficiary. With cement accounting for 10-12% of total construction costs in rural areas, this tax cut could lead to a 0.8%–1.0% reduction in overall construction expenses.
Industry experts concur, noting that the move is aimed at providing relief to low-income families and supporting the 'Housing for All' mission. The GST cut is expected to result in a price benefit of Rs 26-28 per bag for retail customers, without significantly impacting the profitability of cement manufacturers.
The timing of this move is also strategic, aligning with the post-monsoon period, which sees a surge in construction activity in rural and semi-urban regions. Sunil Goel, Managing Director of Numax Realcon and Co-Founder of Omaxe Limited, views the GST cut on cement as more than just a financial relief. It is a trust-building measure that ensures tangible benefits flow into pricing, particularly for under-construction projects. If developers pass this on transparently, it can strengthen credibility and long-term buyer confidence.
Ashwani Kumar of Pyramid Infratech emphasizes that the reduction in GST on key construction materials will significantly benefit the real estate and infrastructure sectors. Lowering the GST rate from 28% to 18% on cement will reduce project costs for developers, enabling them to pass on the savings to homebuyers. The government's announcement of the GST cut ahead of the festive season is a strategic move that will boost market sentiments, enhance affordability, and empower developers to deliver projects more sustainably and profitably.
However, Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, points out that developers do not receive the full benefit of Input Tax Credit (ITC) in real estate. The high GST rate on cement, currently at 28%, adds to the final apartment cost. The government's decision to bring down the GST rate to 18% is a welcome move. The impact of this reduction will vary across different segments of the real estate market. For residential projects, the reduction in home prices may range between 1-1.5%, considering various types of projects and effective cement cost reduction.
While the impact on home prices may not be drastic, it is expected to improve demand in the affordable and mid-segment housing markets. For premium and luxury properties, the impact on affordability would be marginal, but developers can reinvest the savings to improve quality and amenities. From a macro perspective, the GST cut will positively impact affordability and homebuyer sentiments. Developers will gain in terms of easing working capital pressure, and the overall savings in cost outflow will be significant and beneficial to all stakeholders in the real estate and construction industry.
Vimal Nadar, Senior Director & Head of Research at Colliers India, welcomes the GST Council's decision, noting that the newly announced two-slab structure of 5% and 18% is a progressive move to rationalize the prevailing inverted duty structure, simplify approvals, and enhance the ease of doing business. The reduction in GST on cement will play a critical role in overhauling project cost structures, as cement forms a major value component in the overall cost of construction.
Piyush Bothra, Co-Founder and CFO of Square Yards, adds that the latest GST restructuring is a significant boost for the real estate sector. With the reduction in costs of key construction materials such as cement and steel, input expenses for developers are expected to ease, making projects more viable. Shrinivas Rao, CEO of Vestian, believes that the recent reduction in GST rates will strengthen the real estate sector by reshaping demand-supply dynamics. Lower GST on construction materials is expected to enhance housing affordability by reducing input costs, while reduced GST on other goods could improve disposable income, thereby stimulating real estate demand.
Vikas Bhasin, Managing Director of Saya Group, hails the move, stating that the government's decision on broad GST rate rationalization will benefit the public at large. However, he notes that construction materials account for only about 25-30% of the overall cost of real estate projects, and cement is just one of the many inputs. Therefore, the impact of this move on end prices will be limited. A more meaningful reform, according to Bhasin, would have been a reduction in GST on under-construction properties, as that would have directly and significantly benefited homebuyers.
Frequently Asked Questions
What is the new GST rate on cement?
The new GST rate on cement has been reduced from 28% to 18%.
How will the GST cut on cement benefit homebuyers?
The GST cut on cement is expected to reduce overall project costs for builders, who can then pass on the savings to homebuyers, potentially lowering home prices by 1-1.5%.
Will the GST cut impact all segments of the real estate market?
The impact will vary across different segments. For affordable and mid-segment housing, the impact on demand is expected to be positive. For premium and luxury properties, the impact on affordability will be marginal, but developers can reinvest savings to improve quality and amenities.
What is the significance of the timing of this GST cut?
The timing is strategic, aligning with the post-monsoon period when construction activity surges in rural and semi-urban regions. It also aligns with the festive season, which is expected to boost market sentiments.
How will developers benefit from the GST cut?
Developers will benefit from reduced input costs, which can ease working capital pressure and lead to significant overall savings. This can also enhance the ease of doing business and improve project viability.
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