GST 2025: Impact on Real Estate

Recent reforms to GST regime are aimed at simplifying tax slabs and reducing costs for both developers and buyers. For the real estate sector, particularly the affordable and mid-income housing segments, the changes are expected to make a meaningful difference. Here's what's new, what it means, and what to watch.

What's Changing

Reduced GST on Construction Materials

• Cement - The GST rate has been cut from 28% to 18%. 
• Marble, Granite Blocks, Sand-Lime Bricks - GST rates have dropped from 12% to 5%. 
• Bricks, Tiles, Stone Products - Many finishing and decorative materials are also moving to lower tax slabs.

These changes take affect from 22nd September 2025, per announcements from the GST Council.

Two Slab GST Structure

• The government is rationalising multiple GST slabs into a simpler structure: 5% and 18%. This reduces complexity, improves compliance, and removes cascading tax burdens.
• Essential materials and affordable-housing related products are expected to fall under the 5% slab, while most construction services and other materials will come under 18%.

Focus on Affordability

• With input costs going down (cement, marble, stone etc.), developers can reduce cost overruns and possibly lower ticket prices or improve finishes without raising base prices.
• The reforms are especially beneficial for mid-income and affordable housing segments. These segments see more sensitivity to input cost changes. Even a small percentage saving in material costs tends to cascade more significantly in their overall costs.

Likely Impact for Buyers & Developers

For Buyers

• Reduced Home Prices (Moderately): Because construction materials make up a substantial share of the cost, lowering GST on them can roughly reduce final unit prices by 2-5% in many mid-segment and affordable projects if developers pass savings on.
• Lower Upfront Cost for Self-Built Homes: Owners building homes on their own plot benefit directly by paying less GST on materials. This improves cost control.
• Better Spec & Quality for Same Price: Some price relief may go into upgraded finishes or better amenities instead of lowering cost, depending on competitive pressure among developers.

For Developers

• Improved Margins: Reduced tax burden on key inputs means more margin flexibility. This could help with cash flow and ability to invest in quality. 
• Faster Project Approvals & Launches: Simpler GST slabs reduce compliance burden and classification disputes, meaning fewer delays. Builders can plan procurement better, lock vendor rates earlier.
• Stronger Demand: Since many buyers hold back purchases waiting for better pricing or affordability, this reform (coupled with festival season etc.) could boost bookings.