GST Cuts in Real Estate: Mixed Reactions as Developers Weigh Benefits and Challenges
The recent Goods and Services Tax (GST) reductions for the real estate and construction sector have elicited mixed responses from developers, with some seeing potential benefits and others expressing skepticism about the impact.
Gst CutsReal EstateConstructionNavi MumbaiTax ReformsReal Estate MumbaiSep 08, 2025
At the 56th GST Council meeting, key changes were announced that will directly affect the sector. Tax reductions on major construction materials are expected to bring down project costs, while higher tax rates on certain services may create new challenges for developers.
The GST on construction materials such as cement, bricks, marble, travertine, granite blocks, and sand-lime bricks has been reduced from 28% to 18%. This is expected to slightly ease overall construction expenses.
“Lower material costs will benefit homebuyers, but the hike in service tax rates means developers must carefully plan—especially for budget housing. Overall, this is a positive move toward transparency, efficiency, and affordability,” said Prakash Baviskar, Chairman and Managing Director of Baviskar Group and President of NAINA Builder Association.
However, GST on infrastructure components like gardens, roads, clubhouses, and other amenities has risen from 12% to 18%. “Builders must maintain separate accounting for infrastructure and building construction to ensure the benefits reach the buyers,” Baviskar added.
On the other hand, Jigar Trivedi, President of the Builders Association of Navi Mumbai (BANM), remarked that construction material costs form only a small fraction of total project expenses. Hence, the reduction would not significantly impact homebuyers or the industry directly.
Instead, he suggested the broader GST cuts across various sectors could indirectly help real estate. “Lower GST on commodities will allow households to save more, which could eventually encourage greater investment in the real estate market,” Trivedi explained.
Key Provisions
1. GST Reduction on Construction Materials
• Cement: GST reduced from 28% to 18%.
• Bricks, marble, travertine, granite blocks, and sand-lime bricks: GST reduced from 12% to 5%.
• This will directly reduce overall project construction costs.
2. GST Increase on Works Contract Services
• GST on specified government projects and subcontractor services increased from 12% to 18%.
• This may lead to increased costs for large-scale infrastructure and public projects.
3. Simplified GST Rate Structure
• Two main slabs will now apply: 5% and 18%.
• A special rate of 40% will continue to apply to specified luxury/sin goods.
• Effective from 22nd September 2025.
4. Establishment of GSTAT
• The Goods and Services Tax Appellate Tribunal (GSTAT) will begin accepting appeals by the end of September 2025.
• Hearings are scheduled to commence from December 2025, with backlog appeals permitted until 30th June 2026.
Frequently Asked Questions
What are the main changes in GST for the real estate sector?
The main changes include a reduction in GST on construction materials from 28% to 18% and from 12% to 5% for certain items. However, GST on infrastructure components like gardens and roads has increased from 12% to 18%.
How will these changes affect homebuyers?
While the reduction in construction material costs may slightly lower the prices of budget homes, the increase in service tax rates could offset these benefits. Developers must carefully plan to ensure the savings are passed on to homebuyers.
What is the role of the Goods and Services Tax Appellate Tribunal (GSTAT)?
The GSTAT will handle appeals related to GST disputes. It will begin accepting appeals by the end of September 2025, with hearings scheduled to commence from December 2025.
How do these changes impact large-scale infrastructure projects?
The increase in GST on works contract services from 12% to 18% may lead to higher costs for large-scale infrastructure and public projects. Developers will need to factor this into their budgets.
What is the broader impact of these GST cuts on the real estate market?
While the direct impact on construction costs is minimal, the broader GST cuts across various sectors could indirectly benefit the real estate market by allowing households to save more and potentially invest in property.
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