How GST Rate Cuts on Cement and Construction Materials Will Impact Homebuying
The GST Council's decision to reduce GST rates on cement and construction materials is expected to boost the real estate market, particularly in the affordable and mid-income segments, by lowering costs and improving affordability.
Gst Rate CutReal EstateHomebuyingConstruction MaterialsAffordable HousingReal Estate NewsSep 04, 2025
The real estate industry has termed the newly announced two-slab GST structure of 5% and 18% as a progressive move. This will rationalise the prevailing inverted duty structure, improve classification, simplify approvals and processing refunds. These measures are expected to cut costs at different tiers while enhancing the ease of doing business and driving consumption.
While the overall impact will unfold over time across various asset classes, this move undoubtedly contributes to a more sustainable and cost-efficient development environment, says Yateesh Wahaal, Director at M3M India. The industry players say the move signals the government’s commitment to supporting infrastructure growth and easing cost pressures in a high-input industry.
Venkatesh Gopalakrishnan, Director Group Promoter’s Office and MD of Shapoorji Pallonji Real Estate (SPRE), says the decision will significantly ease project costs for developers and boost affordability for homebuyers. For developers, this relief lowers input costs and strengthens project viability. Industry voices estimate that overall construction costs could decline up to 5%. This offers scope for improved margins, as well as better pricing for end-users. Gopalakrishnan noted that rising construction costs and pressure on margins have presented significant challenges to the sector, and the potential pass-through of savings will encourage renewed demand.
The industry opines that reforms announced for the construction sector will further encourage investment and enable companies to deliver better infrastructure at a more competitive value. S.K. Sayal, MD & CEO of Bharti Real Estate for the Commercial Real Estate, says this decision will bolster market confidence, stimulate demand in both commercial and premium housing segments, and contribute to the sustained development of the NCR real estate ecosystem.
The GST measures, as announced by the FM, will directly benefit small businesses, the common man, and the middle class. These measures align well with the current positive buyer sentiment, which is expected to increase after these measures, especially in the wake of the upcoming festive season. The move comes at a time when the country prepares for the festive season, and it augurs well for the sector and boosts demand. Manoj Gaur, CMD of Gaurs Group, says that coupled with the reduction in the repo rate, it will add to the affordability of real estate purchases. Most importantly, the move will also add to the pace of infrastructure growth, which will further enhance real estate development.
Some developers have already announced that they will pass on the benefits to end consumers. Mohit Goel, Managing Director of Omaxe Ltd., stated that with reduced input costs, the overall cost of construction will come down, and they are committed to ensuring that these benefits are passed on to their customers. This means that owning a home becomes more affordable without compromising on quality or design. The timing is ideal, as the festive season is traditionally when families make significant purchase decisions.
The industry experts agree with the developers' sentiments, saying that the move is expected to rehaul project cost structures as cement forms a major value component in the construction cost. Residential real estate, particularly new homebuyers, stand to gain as developers are likely to pass on the benefit of lower costs in the form of reduced housing prices. Developers’ profitability margins, too, can potentially improve, enhancing the overall financial health of the real estate sector, according to Vimal Nadar, Senior Director & Head of Research at Colliers India.
The construction materials make up to around 40-45% of total project costs, and the cut in GST rate is poised to bring meaningful savings for developers and, in turn, make homes more affordable for buyers, particularly in the mid-income and affordable housing segments, said Anshuman Magazine, Chairman & CEO of CBRE. For developers, the lower costs will free up capital, improve project viability, and enable quicker launches, creating a positive cycle of growth and investment. This reform is also likely to have a multiplier effect, boosting allied industries such as manufacturing, logistics, and employment.
Tax experts also say the rate cuts on cement to 18% should ease financial burdens for real estate developers and improve affordability but add that the impact on home prices will depend on several factors. Greater clarity is needed on input tax credit for buildings meant for rental use, and it will need to be seen whether benefits will be passed to homebuyers or not, opines Rajul Bohra, Partner at JSA Advocates & Solicitors.
The FM-led GST Council on Monday announced the rationalisation of the current four-tiered tax rate structure into a citizen-friendly ‘simple tax’ -- a two-rate structure with a standard rate of 18% and a merit rate of 5%; and a special de-merit rate of 40% for a select few goods and services. The move is hailed as a mega reform initiated by the Modi government, aimed at boosting demand and putting more disposable income in the hands of the middle class ahead of the upcoming festive season.
Frequently Asked Questions
What is the new GST rate for cement and construction materials?
The GST rate for cement has been reduced from 28% to 18%, and for other construction materials like sand and bricks, it has been reduced from 12% to 5%.
How will the GST rate cut impact homebuyers?
The GST rate cut is expected to lower construction costs, making homes more affordable for buyers, particularly in the mid-income and affordable housing segments.
What are the benefits for real estate developers?
Developers will benefit from lower input costs, which can improve their profit margins and project viability, allowing for quicker launches and better pricing for end-users.
How will this decision affect the overall real estate market?
The decision is expected to boost market confidence, stimulate demand in both commercial and premium housing segments, and contribute to the sustained development of the real estate ecosystem.
What is the expected impact on allied industries?
The reform is likely to have a multiplier effect, boosting allied industries such as manufacturing, logistics, and employment.
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