GST Rationalisation: Real Estate Sector Set for Major Boost
The Group of Ministers (GoM) has approved the Centre's proposal to simplify India's GST structure to two slabs: 5% and 18%. This reform is expected to have a transformative impact on the real estate sector, enhancing affordability, transparency, and buyer sentiment.
Gst RationalisationReal EstateHousing MarketTax ReformReraReal Estate NewsAug 25, 2025
Industry experts believe the reform could have a transformative effect on the housing market by improving pricing efficiency, transparency, and buyer sentiment. One leading real estate analyst called it a 'game-changing step', noting that a simplified tax regime can enhance affordability and encourage faster decision-making by buyers. Developers will continue to pay 18% GST on contract services, but lower input tax costs are expected to ease project expenses. Improved liquidity, streamlined compliance, and investor confidence are seen as natural outcomes of this structural reform.
By reducing project costs and enhancing affordability, the two-slab system will likely unlock pent-up demand and improve housing sales momentum, said a senior industry consultant. The revised GST framework could translate into direct savings for property buyers. Projects previously taxed at 12% may now fall under the 5% slab, potentially reducing the overall purchase cost by several percentage points, depending on the project size and location. This shift is expected to particularly benefit first-time homebuyers and middle-income families, making housing inventory more accessible and improving market liquidity.
Tax experts also emphasised that the reform will bring regulatory clarity under RERA (Real Estate Regulation and Development Act), helping developers, lenders, and buyers operate in a more transparent ecosystem. With the government targeting structural reforms across indirect taxation, analysts believe the simplified GST structure could boost demand in both residential and commercial real estate, strengthen investor sentiment, and accelerate inventory clearance.
The reform, if implemented effectively, is expected to act as a catalyst for the real estate sector, fostering affordability, transparency, and long-term growth.
Frequently Asked Questions
What is the new GST structure proposed by the Centre?
The new GST structure proposed by the Centre simplifies the tax slabs to just two: 5% and 18%, eliminating the existing 12% and 28% rates.
How will this reform affect the real estate sector?
The reform is expected to enhance affordability, improve transparency, and boost buyer sentiment in the real estate sector by reducing project costs and simplifying tax compliance.
What are the benefits for homebuyers under the new GST structure?
Homebuyers can benefit from direct savings as projects previously taxed at 12% may now fall under the 5% slab, reducing the overall purchase cost by several percentage points.
How will this reform impact developers?
Developers will continue to pay 18% GST on contract services, but lower input tax costs are expected to ease project expenses, improving liquidity and investor confidence.
What role does RERA play in this reform?
The reform will bring regulatory clarity under RERA (Real Estate Regulation and Development Act), helping developers, lenders, and buyers operate in a more transparent and efficient ecosystem.
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