GST Cuts on Building Materials Boost Real Estate Sector
The real estate industry welcomes the significant reduction in GST rates on key construction materials, which promises to enhance affordability and stimulate demand.
Gst ReductionReal EstateConstruction CostsAffordable HousingEconomic GrowthReal EstateSep 04, 2025
The industry lauds this as a landmark reform, providing much-needed relief during the festive season. The steep tax reduction is anticipated to lower overall construction costs and ease financial pressures, creating a more efficient and investor-friendly environment. This move is expected to stimulate demand and contribute to overall economic growth and development.
Leading developer Niranjan Hiranandani, chairman of the Hiranandani Group and Naredco, expressed his delight over the GST rationalization. He stated that this strategic boost will enhance purchasing power, stimulate consumption, and help contain inflation, potentially propelling the economy beyond an 8% growth rate. Hiranandani emphasized that this reform underscores the resilience of the Indian economy and strengthens confidence in the growth trajectory.
For the realty and infrastructure sectors, the tax cut on critical materials like cement and steel is a significant step forward. Hiranandani highlighted that reduced construction costs can be passed on to homebuyers, making homes more accessible and supporting the government's vision of 'Housing for All.' This is a win-win situation for developers, consumers, and the broader national growth story.
Anurag Mathur, CEO of Savills, a global real estate service provider, noted that the revised GST rates will lower construction costs, improve affordability, and stimulate demand, particularly in the mid- and affordable housing segments. He mentioned that the reduction in GST on cement and ready-mix concrete from 28% to 18%, and on bricks, tiles, and sand from 18% to 5%, will significantly bring down overall construction costs. This reduction is expected to lower the GST burden by about 20% across various segments of housing, commercial, industrial, and warehousing.
Samantak Das, chief economist at JLL India, explained that developers do not always fully benefit from input tax credits, and the high GST rate on cement adds to the final apartment cost. The impact of the rate reduction to 18% will vary across different segments of the real estate market. The cost reduction on ongoing projects may range from 1% to 1.5%, considering various types of residential projects and effective cement cost reductions. Das noted that while the reduction may not drastically slash home prices, it will likely improve demand in the affordable and mid-segment housing markets. Premium and luxury properties may see marginal improvements in affordability, but developers can reinvest savings in construction to enhance quality and amenities.
Vimal Nadar, a senior director at Colliers India, highlighted that the reduction in GST on cement to 18% will significantly rehaul project cost structures. Residential real estate, particularly new homebuyers, will benefit as developers are likely to pass on the cost reduction in the form of lower housing prices. This move can also improve developers' profitability margins, enhancing the financial health of the real estate sector.
Neeraj Akhoury, president of the Cement Manufacturers Association and managing director of Shree Cement, stated that the association has long sought this reduction. Lowering the rate to 18% corrects a longstanding anomaly and ensures parity with other core materials. This move will enhance the competitiveness of the cement industry and align India with global best practices, boosting consumption of this essential building material towards significant infrastructure and affordable housing projects.
Ramani Sastri, chairman of Sterling Developers, emphasized that the rationalized GST regime holds promise for individual households seeking security and stability through homeownership. This progressive step will benefit the economy at large, making housing a driver of sustainable growth. Lincoln Bennet Rodrigues, founder chairman of Bennet & Bernard, noted that the reduction will reduce construction costs and align India with global standards, supporting industries that significantly contribute to economic growth.
Manas Mehrotra, founder of 315Work Avenue, a coworking player, explained that these tax cuts will help coworking operators plan growth more efficiently and expand further. The upfront outflow of GST has historically placed pressure on working capital, and these cuts will support quicker scaling and enhance the value proposition for clients.
Piyush Bothra, cofounder of Square Yards, stated that the tax rate cut is a major boost for the realty sector, making projects more viable and streamlining tax compliance. For the residential segment, this is likely to translate into tangible benefits for homebuyers as developers pass on the savings over the coming months.
Shrinivas Rao of Vestian noted that the tax cuts will strengthen the realty sector by reshaping demand-supply dynamics. Lower GST on construction materials is expected to enhance housing affordability by reducing input costs, while lower taxes on other goods could improve disposable income, stimulating real estate demand. However, the overall impact may remain limited if these savings are not adequately passed on to end-consumers.
Overall, the reduction in GST rates on construction materials is a significant step towards enhancing affordability and stimulating demand in the real estate sector. This move is expected to have a positive impact on the broader economy, making housing more accessible and contributing to sustainable growth.
Frequently Asked Questions
What is the impact of the GST reduction on construction materials?
The GST reduction from 28% to 18% on construction materials like cement and steel will lower overall construction costs, improve affordability, and stimulate demand, particularly in the mid- and affordable housing segments.
How will homebuyers benefit from the GST reduction?
Homebuyers are likely to benefit from reduced housing prices as developers pass on the savings from lower construction costs. This will make homes more accessible, especially in the affordable and mid-segment markets.
What is the significance of the GST reduction for the real estate sector?
The GST reduction is a significant reform that enhances the financial health of the real estate sector by reducing costs and easing financial pressures. It also aligns India with global best practices and supports sustainable growth.
How will the GST reduction affect the coworking industry?
The GST reduction will help coworking operators plan growth more efficiently and expand further. The upfront outflow of GST has historically placed pressure on working capital, and these cuts will support quicker scaling and enhance the value proposition for clients.
What is the expected impact on the economy from the GST reduction?
The GST reduction is expected to enhance purchasing power, stimulate consumption, and help contain inflation. It will also boost the competitiveness of the cement industry and align India with global practices, contributing to overall economic growth.
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