The 56th meeting of the Goods and Services Tax (GST) Council has approved key reforms that were originally announced by Prime Minister Shri Narendra Modi in his Independence Day address on 15th August 2025. These reforms are being viewed as landmark measures in India’s indirect taxation framework. They are designed to reduce the tax burden on essential goods and services, simplify compliance requirements for businesses, and promote overall economic growth by stimulating consumption.
Among the various sectors, real estate has emerged as one of the primary beneficiaries of the new GST rate rationalisation. The reduction of GST on construction inputs such as cement, marbles, and granite is expected to translate into cost savings for developers and affordability gains for homebuyers. Industry stakeholders believe that this move could trigger a positive chain reaction in the housing sector, especially in the run-up to the festive season, which traditionally witnesses strong property demand.
Key Changes in GST Rates
The most notable revisions include the reduction of GST on cement and marbles from 28% to 18%, and on granite blocks from 12% to 5%. As cement and stone-based products constitute a significant share of construction input costs, the reform is expected to ease the financial burden on developers and improve the pricing dynamics of housing projects. The reduction of these rates has been positioned as a major relief for the common man, given the direct linkage between input costs and the final price of housing units.
Real Estate experts across the real estate sector have welcomed the move, emphasising its potential to spur housing demand and improve affordability.
Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd., welcomed the announcement. “We wholeheartedly welcome the GST Council’s move on rate rationalisation ahead of the festive season. By reducing the tax burden, the move comes as a major relief for the common man. The housing sector, particularly, stands to benefit from GST reduction on input materials like cement from 28% to 18% and granite blocks from 12% to 5%, as this will ultimately reduce home prices for consumers and create sustainable demand across segments,” he said. He added, “This reform gives a major push to the housing sector making homeownership more accessible for a wider population.”
Industry watchers note that the festive season has historically been a period of high property registrations and launches. The reduction in tax rates, therefore, could directly translate into stronger buyer sentiment, allowing developers to bring projects to market at more competitive prices.
Mr. Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, pointed to the broader tax landscape. “The GST Council’s decision to approve the implementation of next-generation GST reforms is a crucial step towards simplifying India’s tax structure and boosting economic growth. For real estate, these reforms are particularly significant as they will directly benefit from reduced taxes on raw materials like cement and marble blocks, lowering the cost of constructing homes, ensuring easier compliance for developers, and improving overall affordability for homebuyers.”
Adding to this, Mr. Sumit Agarwal, Director, Ashtech Group, noted the dual benefits for both housing and infrastructure. “The government’s move to reduce GST on cement, marble, and other key inputs will significantly reduce construction costs in both real estate and infrastructure. This is a significant step that is expected to not only ease the burden on developers but also stimulate demand and give a strong boost to the industry as a whole.”
The linkage between real estate and infrastructure is important since the two sectors share common supply chains. A drop in input costs can, therefore, ripple across highways, metro rail, and housing projects alike, creating wider economic momentum.
Mr. Vikas Bhasin, Managing Director, Saya Group, however, pointed out that material costs form only part of the picture. “We welcome the government’s decision on broad GST rate rationalization, which will benefit the public at large. The reduction of GST on cement is also a positive step and will help ease construction costs. However, it is important to note that construction materials account for only about 25–30% of the overall cost of real estate projects, and cement is just one of the many inputs. Therefore, the impact of this move on end prices will be limited.”
Analysts echo this assessment, cautioning that while GST cuts will provide relief, other cost drivers such as land acquisition, financing, and regulatory clearances continue to play a larger role in final housing prices. The overall affordability impact, therefore, will depend on how developers pass on savings.
Mr. Deepak Kumar Jain, Founder and CEO of TaxManager.in, focused on the labour-driven nature of construction. “Real estate, being one of the most labour-intensive sectors, is expected to gain significantly from the reduction of GST rates—from 28% to 18%—on key construction materials such as cement, tiles, and other inputs. This move will help lower overall construction costs to some extent. It is also expected that developers will pass on these benefits to homebuyers by reducing property prices, which have risen sharply over the past few years.”
Mr. Abhishek Raj, Founder & CEO, Jenika Ventures, observed that the new system addresses one of the sector’s long-standing demands for clarity. “The forthcoming introduction of the Next-Gen GST is a step in the direction of greater transparency and ease of business in real estate taxation. The simplification of tax slabs to 5% and 18% rationalizes a fragmented system and is expected to ease compliance across the board. One of the biggest pluses for the sector is the reduction of tax on primary building materials like cement and steel, earlier taxed at 28% and 18%, respectively. The move will increase the viability of projects and give developers greater choices at prices, particularly for housing projects in urban locations. But the lack of input tax credit (ITC) is still an unbeatable hurdle. For work in progress, where cost minimization is such a critical aspect, disallowance of ITC disqualifies the very intention of reduced input taxes from being realized. A more balanced approach, i.e., the return of partial ITC, would have transformed this reform from a change in compliance to an actually revolutionary policy for the real estate industry.”
Another section of the industry has emphasised the compliance-related benefits of the reform. By merging the previous 12% and 28% slabs into two clearer categories, developers expect a smoother tax environment and reduced chances of litigation or disputes over classification. Mr. Pawan Sharma, Managing Director, TRG Group, underlined this aspect, noting that the simplification brings transparency. “The GST simplification is definitely a step in the right direction for the real estate sector. Merging the earlier 12% and 28% slabs into a simpler 5% and 18% structure streamlines compliance and brings more transparency to taxation, benefitting developers as well as buyers. But the root cause of high input costs remains, particularly the absence of input tax credit (ITC). Raw materials like cement and steel, which are critical to construction, remain highly taxed without putting pressure on project economics. It disproportionately affects affordable and mid-income housing, where the margins are thin and there is little room for price flexibility. While the reforms will alleviate some pain on compliance and procurement, the long-term financial viability of the segments would be substantially enhanced by an overall integrative approach, with, if feasible, the reversion to partial ITC. This would ensure affordability and the financial viability of developers along urban growth corridors.”
The introduction of a 40% GST slab on luxury inputs such as imported fittings and specialised finishes has sparked debate among high-end developers. While the move seeks to distinguish between essential and discretionary spending, the potential impact on project costs is significant. Mr. Viren Mehta, Founder & Director, ElitePro Infra, noted that luxury housing will need to adapt strategically. “The new GST reforms are a major step towards a more structured and transparent tax regime. For the luxury residential segment, the introduction of a 40% GST slab for high-end inputs like high-end fittings, imported materials, and specialized services does raise cost considerations, which can potentially add to the cost of construction by 8–12%. Yet this also presents a chance for the industry to transform. The appeal for high-end housing continues to hold strong, particularly in cities, where customers are more looking for well-designed, high-value properties. Builders and advisers will now have to react with more differentiated, cutting-edge offerings that emphasize thoughtful design, quality construction, and effective cost control. Though the upper tax slab is an attempt to distinguish necessity from luxury consumption, it also spurs innovation in luxury development. By means of prudent planning and adaptive approaches, the segment can maintain its growth track without compromising on quality or consumer expectations.”
For mid-income and affordable housing, developers have been quick to acknowledge that reduced GST on cement and stone-based products provides tangible relief. Yet they also caution that without parallel reforms in approvals and financing, the benefits will remain partial. Mr. Sandeep Aggarwal, Chairperson & Managing Director, AIL Developer, welcomed the rate rationalisation but flagged the concerns surrounding luxury projects. “Recently, the GST council's decision to streamline all the taxes to 5%-18% is a great move by the government, as it provides relief to the real estate sector. The reduction of GST on key materials like cement to 18% is particularly encouraging, as it will help in lowering construction costs and enhance affordability for mid-income and housing buyers in metros and tier-II cities while stimulating stronger participation in the housing market. Concurrently, the suggested 40% GST on certain high-end imported fittings and interiors for luxury projects is a cause of concern. Although these products account for a smaller percentage of overall project cost, they form an integral part of luxury housing, where imported finishes and specialized services are a norm. The additional tax charge could constrict margins and, if transferred, affect buyer mood in this space. Additionally, an easing transition model through phased implementation or conditional reliefs would allow for on-ground accommodations of the policy intent. Overall, the reform is a welcome step in the right direction, and with supportive measures such as simplified approvals and affordable financing, it can be made to mean significant value for developers as well as homebuyers.”
Broader Implications
The real estate sector contributes significantly to India’s GDP and employment generation, making it a critical focus area for fiscal and policy reforms. With construction activity heavily dependent on material costs, the revised GST slabs are expected to enhance project viability, accelerate execution timelines, and attract fresh investments in both affordable and mid-segment housing projects.
Moreover, the timing of the reform is considered strategic, aligning with the festive season when property transactions typically peak. Developers are expected to leverage the rate cuts to launch new projects, offer competitive pricing, and extend festive discounts to attract buyers. Industry experts believe that the reforms could also indirectly benefit allied industries such as cement manufacturing, logistics, and steel production by stimulating demand.
While stakeholders acknowledge that input costs form only a part of the overall project expenditure, the broader sentiment is that GST rationalisation will inject much-needed momentum into the sector. Over time, improved affordability and stronger housing demand could strengthen the sector’s contribution to economic growth, while ensuring the government’s long-term goal of expanding homeownership remains on track.
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