GST Reduction on Construction Materials: A Boon for Real Estate, but Not for Homebuyers
The real estate sector in Mumbai has welcomed the GST Council's decision to reduce tax rates on key construction materials. However, industry experts and analysts suggest that the benefits will mainly boost developers' margins, rather than lowering home prices for end-users.
GstReal EstateConstruction MaterialsHome PricesDevelopersReal Estate NewsSep 05, 2025
At its meeting on Wednesday, the Council reduced GST on cement from 28% to 18% and on sand-lime bricks and stone inlay work from 12% to 5%. Cement, in particular, forms one of the largest cost components in housing projects.
While developers see the move as positive, analysts and industry bodies pointed out that the benefit for end-users would be negligible. With developers barred from availing GST input tax credits (ITC) on residential projects, the reduction will mostly shore up their margins rather than reduce apartment prices.
“The direct impact on overall construction costs will be marginal since ITC remains unavailable for residential projects. We also await clarity on affordable housing incentives, which are crucial for driving first-time homeownership in Mumbai Metropolitan Region (MMR),” said Rushi Mehta, secretary, CREDAI-MCHI.
According to Dr Samantak Das, chief economist and head of research (India) at JLL, the cost benefit would range between 1% and 1.5%, depending on the stage and nature of the project. “Prima facie, it may appear that there may not be a drastic slash in home prices,” he said, adding that the cascading effect of cement costs will vary across project categories.
Developers privately admit that the savings will likely be absorbed to meet rising operational expenses. “With sales plateauing and even dipping in recent months, the 2%-3% benefit will go towards maintaining working capital and overheads rather than cutting prices,” a Mumbai-based builder told Hindustan Times.
The question of why homebuyers never see such benefits was also raised publicly by chief minister Devendra Fadnavis at the ‘Change of Guard Ceremony 2025’ of CREDAI-MCHI in Mumbai on August 14. Addressing the new president Sukhraj Nahar and other developers, Fadnavis said: “In the last 10 years, we have done all the things you asked to make housing affordable. After those decisions, home prices have only gone up, never down. You asked for lower premiums, it was done. We built the Coastal Road and Atal Setu, hoping prices would drop, but instead they skyrocketed.”
Frequently Asked Questions
Why did the GST Council reduce tax rates on construction materials?
The GST Council reduced tax rates on key construction materials like cement and sand-lime bricks to lower construction costs and potentially make housing more affordable.
How will the GST reduction benefit real estate developers?
The reduction in GST will primarily boost developers' margins, as they are barred from availing GST input tax credits (ITC) on residential projects, allowing them to absorb the savings.
Will homebuyers see a significant reduction in home prices due to the GST cut?
No, the benefit for end-users will be negligible. The cost reduction will range between 1% and 1.5%, which is unlikely to significantly lower home prices.
What is the role of GST input tax credits (ITC) in residential projects?
Developers are not allowed to avail GST input tax credits (ITC) on residential projects, which means they cannot pass on the tax savings to homebuyers directly.
What are the concerns raised by Chief Minister Devendra Fadnavis?
Chief Minister Devendra Fadnavis raised concerns about the lack of reduction in home prices despite various measures taken to make housing more affordable, including lower premiums and infrastructure development.
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