Two-Slab GST Plan to Reduce Home Costs and Revitalize the Real Estate Sector
Experts believe that the proposed two-slab GST system will simplify tax rules, reduce costs for developers, and make homes more affordable for buyers.
GstReal EstateHomebuyersDevelopersTax ReformReal Estate NewsAug 25, 2025
Market observers say that the proposed simplification will benefit developers by reducing their tax burden. This, in turn, will enable them to offer homes at cheaper rates, making it more attractive for potential buyers. Anshuman Magazine, Chairperson and CEO (India, SE Asia, and Middle East & Africa) at CBRE, noted that the construction industry has been advocating for lower GST rates on key inputs like cement. He believes that simplifying and reducing these rates will have a positive impact on the sector.
For the commercial property segment, a reduction in GST rates could provide much-needed relief. At a time when looming tariffs on Indian exports are making investors cautious, this move could help sustain momentum in the sector. Magazine added that the uncertainty around global trade policies has slowed down decision-making, with many manufacturers and investors deferring large commitments. Lowering the tax burden on construction inputs can provide a significant boost and a cushion against market volatility.
Currently, different GST rates are applicable to various construction materials in the real estate sector. For instance, cement is taxed at 28 percent, steel at 18 percent, paint at 28 percent, and tiles and sanitary ware at 18 percent. These input costs directly affect the total project cost and, consequently, the price of homes. Prime Minister Narendra Modi announced in his 79th Independence Day address on August 15 that the government would roll out next-generation GST reforms by Diwali, including a major reduction in tax rates.
Pradeep Aggarwal, Founder and Chairman of Signature Global (India) Ltd, believes that the housing sector will benefit significantly from these reforms. Moving to a two-slab structure will simplify GST compliance for real estate developers, rationalize input costs, improve cash flows, and ultimately reduce the cost of homes for buyers. Long-term clarity on tax rates will enable the sector to plan projects with greater confidence, catering better to the evolving needs of homebuyers. These reforms are expected to strengthen industry sentiment and support sustained growth in the housing market.
Subhashendra Kumar, CFO of Trehan Iris, echoed similar sentiments, stating that the rationalization of taxation is expected to lower overall project costs, enabling developers to offer more competitive pricing to homebuyers. Aman Sharma, Founder and Managing Director of Aarize Group, added that reducing tax burdens on key construction materials and simplifying compliance will pave the way for greater efficiency, cost optimization, and benefits for homebuyers. This should lead to stronger demand, improved market stability, and a healthier growth cycle, setting the stage for a more vibrant and sustainable future for India’s housing market.
Vikas Bhasin, MD of Saya Group, noted that the sector anticipates that these reforms may also address a long-standing concern for homebuyers—the GST levied on under-construction properties. Currently, buyers not only pay GST but are also subject to substantial state-level levies in the form of stamp duty and registration fees, which can be as high as 8 percent of the property value in many states. When combined, GST, stamp duty, and registration charges can increase the cost of a property by 13–14 percent, placing a significant financial burden on homebuyers. A reduction in GST on under-construction homes would provide much-needed relief, making housing more affordable and boosting sentiment in the real estate sector. Such a move could also stimulate sales in the primary market, benefiting both developers and the broader economy.
Frequently Asked Questions
What is the proposed GST rate structure for the real estate sector?
The proposed GST rate structure for the real estate sector includes only two slabs: 5 percent and 18 percent.
How will the two-slab GST system benefit developers?
The two-slab GST system will simplify tax rules and reduce input costs, leading to lower overall project costs and improved cash flows for developers.
What impact will this have on homebuyers?
Homebuyers are expected to benefit from lower home prices due to reduced input costs and simplified tax compliance for developers.
Will there be any changes to GST on under-construction properties?
The sector anticipates that the reforms may address the GST levied on under-construction properties, potentially reducing the overall cost burden for homebuyers.
How does the current GST structure affect the cost of homes?
Currently, different GST rates on construction materials like cement, steel, and paint directly affect the total project cost, which in turn influences the price of homes.
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