The recent Goods and Services Tax (GST) Council meeting has brought welcome news for prospective homebuyers, particularly with the festive season around the corner. The council's decision to rationalize tax rates on key construction materials is poised to significantly impact the real estate sector, potentially leading to substantial savings for those looking to purchase a new home. Effective September 22, 2025, the revised GST rates promise to reduce construction costs, boost housing demand, and make homeownership more accessible.
Impact of GST Reductions
The GST Council has approved a significant reduction in tax rates for essential construction materials. Cement, a primary component in construction, will see its GST rate slashed from 28% to 18%. Similarly, the GST on granite and marble blocks has been reduced from 12% to 5%. These revisions are expected to substantially lower input costs for developers, improve project viability, and accelerate housing delivery, especially in the affordable and mid-income segments. Stone-based products like sand-lime bricks and stone inlay articles will also be taxed at a reduced rate of 5%.
Potential Savings for Homebuyers
Industry experts estimate that the GST rate cut on cement and other building materials could reduce overall construction costs by approximately 3% to 5%. This reduction could translate into savings of 1% to 1.5% for homebuyers, depending on the project stage. While upfront price cuts may be limited, a cost reduction of 2% to 3% can result in savings of ₹1 to ₹3 lakh, which can be used to reduce upfront payments or lower loan requirements. This is particularly beneficial for mid-income buyers when combined with festive offers and flexible payment plans.
Boost to Affordable Housing
The affordable housing segment is expected to benefit significantly from the GST reforms. According to Anarock Research, the share of affordable housing in total sales has declined from 38% in 2019 to just 18% in 2024. The reduced construction costs, if passed on to homebuyers, can boost demand in this segment. Developers engaged in creating affordable housing will experience major relief in terms of cash flows and margins.
Overall Economic Impact
Beyond real estate, industry bodies anticipate a ripple effect across the economy. The rationalization of GST on construction materials will not only strengthen housing but also accelerate infrastructure projects, creating a multiplier effect on GDP growth. The reforms are expected to enhance purchasing power, stimulate consumption, and help contain inflation.
Considerations and Expectations
While the GST cuts are a positive step, the actual impact on home prices will depend on several factors. Developers are likely to pass on a significant portion of these savings to buyers through price adjustments, flexible payment plans, or attractive festive offers rather than immediate flat price cuts. The benefit of lower material costs may not reflect immediately, as most developers are bound by existing contracts. However, for new project launches, the benefits of the GST reductions will begin to reflect more directly.
GST 2.0: A Simplified Tax Structure
These revisions are part of a larger reform aimed at simplifying the GST structure. India is transitioning from multiple GST slabs to just two primary slabs of 5% and 18%. This simplified structure will reduce confusion in billing and procurement, making it easier for contractors and suppliers to comply with tax regulations.
Conclusion
The GST cut on building materials is a welcome move for homebuyers, offering potential savings and boosting affordability, especially during the festive season. The real estate sector is optimistic that these reforms will stimulate demand, encourage developers to launch new projects, and contribute to the overall economic growth of the country. While the extent to which developers pass on the benefits to homebuyers remains to be seen, the revised GST rates undoubtedly create a more favorable environment for those looking to invest in their dream homes.
