Two-Slab GST System Promises Relief for Real Estate Buyers and Developers
Simplified GST Structure to Ease Housing Costs- India’s new two-slab GST framework, replacing the earlier complex five-tier system, is expected to make property purchases easier to understand and more affordable. With slabs fixed at 5% and 18%—and luxury items at 40%—the clarity in tax rates is likely to boost transparency and improve consumer confidence in real estate transactions. Experts believe this move will encourage more first-time buyers to step into the housing market.
Construction Costs Set to Decline by 3–5%- One of the most immediate benefits of the reform is the reduction in GST rates on construction essentials like cement and bricks. Industry estimates suggest this could bring down construction expenses by up to 5%. Developers, particularly those engaged in affordable housing projects, stand to gain relief in cash flow and profit margins, while buyers may enjoy more competitive property prices.
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Affordable Housing Market Could Revive- The affordable housing segment has seen a sharp decline in recent years, with its share of sales dropping from 38% in 2019 to just 18% in 2024. Supply too has reduced significantly. Analysts argue that lower construction costs—if passed on to end-users—can revive demand in this segment, particularly in India’s tier-II and tier-III cities, where homeownership aspirations remain strong.
Developers Welcome Relief but See Modest Impact- Industry bodies such as CREDAI-MCHI acknowledge the benefits of reduced GST on materials like cement, sand-lime bricks, marble, and granite. However, they caution that the overall impact on project costs may be limited, as many materials are sourced indirectly through vendors who already claim input tax credits. Despite this, the reforms are expected to contribute positively to affordability and demand in the long run.
Path Towards Affordable Homeownership- While the immediate benefits for developers and buyers may be modest, the broader rationalisation of GST across sectors could increase disposable incomes and stimulate housing demand. Industry leaders remain hopeful that the government will take further steps, such as retaining the 1% GST slab on affordable housing and revising the ₹45 lakh price cap, to make housing more accessible and support the vision of “Housing for All by 2030.”
