Homes to Get Cheaper: CREDAI Commits to Passing on GST Cut Benefits

The Confederation of Real Estate Developers’ Association of India (CREDAI), the country's leading builders’ body, has announced its commitment to passing on the benefits of the recent Goods and Services Tax (GST) cuts on construction materials to homebuyers. This decision is expected to boost the real estate market and make homes more affordable for potential buyers.

The overhaul of the GST regime has certainly boosted the confidence of the homebuyers, according to CREDAI. “The GST rate rationalisation has certainly created a feel-good factor among consumers,” said CREDAI chairman Boman Irani during a recent interview on the sidelines of CREDAI NATCON in Singapore on September 11.

CREDAI is currently evaluating the extent of cost savings that can be passed on to buyers. “We will pass on whatever benefit is available to the homebuyers, but it will also depend on what benefit we get from the cement and other construction material manufacturers. The extent of any price drop will depend on how much construction input costs, like steel and cement, fall and how quickly those savings move through the supply chain,” Irani explained.

On September 3, the GST Council revised the rates on key construction materials, including cement, steel, tiles, and other finishing inputs, lowering some of the costs for the real estate sector. The changes were part of the GST 2.0, which has simplified the tax structure by primarily using two rates of 5 percent and 18 percent. A special 40 percent rate will apply to so-called sin goods, effective from September 22.

This GST cut on inputs is part of a broader strategy to boost housing demand and improve affordability in the face of rising inflation and supply-side challenges. If the GST on cement is reduced by 10 percent, a bag priced at Rs 350 could become cheaper by around Rs 30, according to CREDAI president Shekhar Patel. “But the key question is how much of this reduction will effectively translate into real savings within the construction sector. So, we will have to see and calculate it, and whatever the benefit will be, it will be passed on to the customer,” Patel added.

While the GST reductions on inputs like cement and steel are a positive step, the market for these materials remains highly concentrated, with a few dominant suppliers. Despite the rate cut, high stamp duty remains a major cause of concern and puts a significant burden on homebuyers. “Stamp duty is outside our purview and it requires serious attention from state governments. Even when other costs are brought down, stamp duty continues to place a significant burden on homebuyers,” Irani emphasized.

The impact of GST cuts and cost reductions will likely vary from region to region and may benefit tier 2 and 3 cities more. Tier 2 and 3 cities, where construction costs are often higher than land costs, are likely to see a more noticeable benefit. In metro cities like Mumbai, where land costs far exceed construction expenses, the overall impact may be limited, according to Irani.

Overall, the commitment from CREDAI to pass on GST cut benefits is a positive development for the real estate sector, particularly in improving affordability and boosting demand in the housing market.