Why GST Cuts Won't Immediately Lower Home Prices
The new Goods and Services Tax (GST) regime has raised hopes for affordable housing, but experts warn that homebuyers may need to wait several months before seeing any real price benefits. The complexity of the real estate industry and the fact that land costs are not covered by GST make the impact less straightforward.
GstReal EstateHome PricesConstruction CostsLand CostsReal Estate NewsSep 23, 2025
Land cost not covered by GST
Industry experts have noted that nearly half the cost of a residential project is due to land, which is not covered by GST. The rest of the construction costs, including materials such as cement, steel, tiles, and other inputs, are taxed at different rates. This makes the effect of the new regime on real estate prices less straightforward.
Developers reassessing project budgets
Developers are now reassessing their project budgets and tax liabilities in light of the new GST rules. This includes determining how input tax credits and revised rates will affect their overall cost structures. Anshuman Magazine, Chairman & CEO at CBRE India, said that while input prices for developers are likely to go down due to GST reforms, it may take some time before these benefits reach homebuyers.
Positive sentiment among buyers
Magazine also noted that the overall GST cuts are likely to create a positive sentiment among buyers and could have a ripple effect on real estate, especially retail and industrial & logistics. GST on cement has been reduced from 28% to 18%, along with certain other building materials such as granite and marble blocks.
Prospective homebuyers should temper expectations
Pradeep Aggarwal, founder & Chairman of Signature Global (India) Ltd., said that if cement and marble companies pass on their benefits to developers, the cost of construction would definitely come down. This could eventually lead to relief for homebuyers. However, market observers suggest that prospective homebuyers should temper their expectations for now as it may be premature to expect immediate price drops in this sector under the new GST regime.
Frequently Asked Questions
What is the Goods and Services Tax (GST) regime?
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It aims to simplify the tax structure and reduce the overall tax burden on businesses and consumers.
Why might home prices not drop immediately under the new GST regime?
The new GST regime has reduced taxes on construction materials like cement, but nearly half the cost of a residential project is due to land, which is not covered by GST. This makes the impact on home prices less straightforward, and developers need time to reassess their project budgets.
How are developers responding to the new GST rules?
Developers are reassessing their project budgets and tax liabilities to determine how input tax credits and revised rates will affect their overall cost structures. This process may take several months before the benefits are passed on to homebuyers.
What sectors might benefit from the GST cuts?
The positive sentiment created by GST cuts is likely to benefit various sectors, including retail, industrial, and logistics. Homebuyers may also eventually see some relief, but it may take time.
What should prospective homebuyers do in the meantime?
Prospective homebuyers should temper their expectations for now. While the new GST regime is expected to bring some benefits, it may be premature to expect immediate price drops in the real estate sector.
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