Realty companies upbeat on GST reforms, expect better affordability

Lower costs to be passed on to consumers, move to drive demand

Real-estate firms have welcomed the Goods and Services Tax Council’s reforms, expecting better affordability for buyers, spurring demand, while lower input costs are likely to support developers and enhance project viability

 

The council has reduced the rate on cement from 28 per cent to 18 per cent, while the rate on sand lime bricks or stone-inlay work and granite blocks has been reduced to 5 per cent from 12 per cent.

 

Home prices may fall 1-1.5 per cent, depending on project type and cost savings on cement, said Samantak Das, chief economist, JLL.

 

Kamal Khetan, chairperson and managing director, Sunteck Realty, said: “The rate cut on cement and other construction materials is a landmark step that directly lowers the cost of construction. This reduction enables developers to maintain price stability and pass on the benefits to homebuyers through improved affordability. It will also support healthier project economics and encourage further investment into housing and urban infrastructure.”

 

 

Cement constitutes 4-5 per cent of the construction cost while the overall construction materials account for 25-30 per cent. The announced reforms may cut input costs for developers by about 10 per cent, according to Akash Pharande, managing director, Pharande Spaces.

 

Industry experts say the affordable and mid-income segments are likely to benefit the most from the government’s move.

 

“Affordable housing, in particular, stands to gain as reduced construction costs can be passed on to homebuyers, making homes more accessible while supporting the government’s Housing for All vision,” said  Niranjan Hiranandani, founder and chairperson of the Hiranandani group.

 

Pradeep Aggarwal, founder and chairperson, Signature Global (India), said the reforms were crucial, considering the upcoming festival season. “This (reforms) will ultimately reduce home prices for consumers and create sustainable demand across segments.” 

 

Mahendra Nagaraj, vice-president, M5 Mahendra group, stated the reforms directly translated into improved operating margins and enhanced flexibility in managing project budgets, creating room for smarter procurement, faster execution, and more competitive pricing, especially in price-sensitive urban markets.

 

The rationalisation is expected to increase savings, boost consumption, improve liquidity, and lift business sentiment. Lincoln Rodrigues, chairperson and founder, Bennet & Bernard, Goa, said since housing demand was closely linked to consumer confidence and long-term planning, higher household savings on essentials could create a favourable environment for real-estate investment, while reinforcing property’s appeal as a stable and rewarding asset class.

 

The move comes at a time when housing sales are witnessing a moderation across the top Indian cities. According to PropEquity, housing sales in India’s top nine cities in April-June fell below 100,000 for the first time since September-December 2021.

 

Sales fell 19 per cent year-on-year while supply went down 30 per cent.

 

However, Pharande said GST reforms might not provide a major relief to homebuyers, because lower cement prices and compliance costs would not offset tariff-driven hikes.

 

“With limited time before tariff impacts fully set in, many developers are clearing supplies before launching higher-priced projects. The current festival season, with its deals and discounts, offers serious buyers a timely opportunity,” he added.

 

Meanwhile, Vikas Bhasin, managing director, Saya Group, believes that the impact of this move on end prices will be limited as construction materials account for only about 25–30 per cent of the overall cost of real estate projects, and cement being just one of the many inputs.

Further, Rajul Bohra, partner, JSA, noted clarity was needed on input tax credit (ITC) for rental buildings.

 

Anuj Puri, chairperson, Anarock, added: “Commercial real estate attracts 12 per cent GST with ITC. But the removal of ITC on leasing means developers can’t offset project costs, raising expenses and rents. A retrospective amendment may worsen the impact. Further, under the reverse charge mechanism, tenants of unregistered landlords must pay 18 per cent GST on rentals, adding compliance burden.”