Summary of this article
The reforms are especially positive news for affordable housing. India currently has a shortfall of nearly 1 crore budget homes in urban markets, and this number could rise to 2.5 crore by 2030 without focused interventions. These GST reforms bring lower construction costs and improved ease of compliance, which can go a long way towards reversing this trend, making homeownership more accessible to middle-class families.
The 56th GST Council meeting has ushered in one of the most transformative reforms for India's infrastructure and real estate sector. Industry leaders across the spectrum have welcomed the move, calling it a game-changer that not only strengthens the real estate market, but also aligns with the larger national vision of inclusive growth and "Housing for All."
With simplified tax slabs, reduced input costs, and enhanced clarity for homebuyers, the reforms are set to boost sentiment, attract investments, and unlock new momentum across residential, commercial, and retail real estate segments.
Commenting on this development, Varun Parmar, Partner, Economic Laws Practice, said the GST Council meeting has marked a significant step towards accelerating infrastructure development across the country and boosting the real estate sector by reducing the GST rate on cement from 28 per cent to 18 per cent. The move is expected to lower infrastructure cost, construction cost, making affordable housing more accessible.
"It is pertinent to note that real estate developers and works contractors typically use ready-mix concrete (RMC) for construction purposes, which is currently subject to GST at 18 per cent. With the proposed reduction in the tax rate on cement, the cost of RMC may also undergo a change. Real estate developers usually engage work contractors on a lump-sum basis. This change presents an opportunity to restructure existing or upcoming contracts with works contractors to optimise overall project costs," he said.
Further, it may be necessary to review ongoing long-term contracts to assess the potential for renegotiating pricing, taking into account the reduced tax burden on cement.
Anuj Puri, Chairman, ANAROCK Group, said reduced GST on construction materials like cement can reduce construction costs by as much as 3-5 per cent. Developers, especially those engages in creating affordable housing, will get major relief in terms of cash flows and margins.
The reduced GST on building materials will result in lower input costs for developers and help speed up the supply of retail real estate projects. Since shopping centres and retail complexes will now incur reduced construction costs, this may result in more competitive rental rates.
"The reforms are especially positive news for affordable housing. India currently has a shortfall of nearly 1 crore budget homes in urban markets, and this number could rise to 2.5 crore by 2030 without focused interventions. These GST reforms bring lower construction costs and improved ease of compliance, which can go a long way towards reversing this trend, making homeownership more accessible to middle-class families," added Puri.
Sunny Katyal, Co-Founder, Investors Clinic, said, "Reduction in GST rate on construction materials such as cement, sand and bricks, while on the one hand will propel real estate growth, it will also provide momentum to infrastructural development. Moreover, the reduction in GST on most goods will also have a multiplier effect and boost economic growth, which in turn will also benefit the real estate sector."
Moreover, a clearer, two-slab GST structure will also provide buyers with greater transparency about their overall tax liability, improving trust and confidence in the sector.
"Importantly, a simpler, lower-tax framework will help shift the sector further towards transparency, formalisation and affordability. For homebuyers, the benefits are even more direct. Lower construction costs will translate into reduced property prices and improved affordability. For developers, a lower GST rate will not only help in reducing input costs, but will also help in improving the viability of projects in the long run. Overall, this move can provide the momentum needed to boost demand, spur new supply, and strengthen housing accessibility across segments," said Aman Sarin, Director and CEO, Anant Raj Limited.
Rakesh Malhotra, Founder and Chairman, PRIME Developments, said, "Lower construction costs mean we can offer better housing options, especially during the festive season when aspirations soar. This reform not only boosts timely project and sales, but also brings us closer to the notion of 'Housing For All'. It's a heartfelt win for homebuyers and developers alike, promising vibrant growth and a brighter future."
