Top News

The central government’s proposal to simplify the Goods and Services Tax (GST) structure has sparked discussions across industries, especially in the real estate sector. With plans to introduce a two-slab system—5% and 18%, along with a special 40% rate for luxury and “sin” goods—the move is expected to reduce the input cost burden for developers. If implemented by Diwali as anticipated, these reforms could significantly influence property prices and home affordability.

Current Scenario: High Construction Costs Due to Multiple GST Slabs

At present, the real estate sector faces varied GST rates on essential construction materials:

• Cement: 28%

• Steel: 18%

• Paint: 28%

• Tiles & Sanitaryware: 18%

These high rates directly increase input costs for developers, which eventually impacts the final price of homes. The proposed simplification of GST slabs aims to bring relief by reducing complexity and making compliance easier.

Will Home Prices Drop After GST Reforms?

Industry experts believe that this reform could benefit both developers and homebuyers. Simplifying the tax structure would lower developers’ overall costs, which could then be passed on to buyers.

Yashank Vasan, Managing Director of Royal Green Realty, says:
“Reducing GST to two primary slabs—5% and 18%—is a positive step for the real estate sector. It will ease compliance and lower the tax burden for developers, enabling them to offer homes at more competitive prices.”

Similarly, the Founder and President of Prime Developments adds that lowering tax slabs will reduce input tax costs, making housing projects more affordable. “Lower GST rates will reduce the financial burden on buyers, stimulate demand, and accelerate inventory clearance. Both developers and buyers stand to gain from this move,” he notes.

Transparency and ITC Benefits

Deepak Kumar Jain, Founder and CEO of Taxmanager.in, highlights another crucial benefit: increased transparency.
“When the government combines lower GST rates with input tax credit (ITC) benefits, homebuyers will see a direct cost reduction. Currently, under-construction projects taxed at 5% offer no ITC benefits, while those under the 18% bracket rarely pass on credits to customers. The proposed changes could bridge this gap and make the sector more transparent,” he explains.

Lessons from the NCR Market

The Delhi-NCR housing market provides a real-world example of how GST reforms can boost buyer confidence. In 2019, when GST on under-construction properties was reduced to 5%, sales improved in key markets like Noida, Gurugram, and Ghaziabad. However, industry leaders emphasize the need for partial restoration of ITC to maintain developers’ margins while ensuring affordability for buyers.

Possible Impact on Affordable and Luxury Segments

Experts predict that affordable and mid-segment housing will benefit the most from these reforms. A reduction in input tax could bring 10–20% relief on total project costs, making homes more affordable in metro cities and Tier-2 markets.

However, luxury housing may see a different trend. With the proposed 40% GST rate on luxury products, construction costs for high-end projects using imported materials and premium finishes could rise. Fortunately, this impact is likely to remain confined to the luxury segment, leaving affordable housing unaffected.

Why GST Reforms Are Crucial for Buyers

Vikas Bhasin, MD of Saya Group, stresses that GST simplification is essential for reducing the tax burden on buyers:
“Currently, GST combined with stamp duty and registration charges adds 13–14% to property prices, creating significant financial stress for homebuyers. Reducing GST will make housing more affordable, restore buyer confidence, and boost sales in the primary market.”

Pradeep Aggarwal, Founder and Chairman of Signature Global, agrees:
“These reforms will reduce input costs, improve cash flows for developers, and bring down property prices. A clear, long-term tax policy will allow developers to plan confidently and support sustainable growth in the housing sector.”

Bottom Line

If the proposed GST reforms are implemented, the real estate sector could experience a much-needed boost. Affordable housing will likely see the greatest benefits, making homes cheaper and more accessible for middle-class buyers. Developers will enjoy reduced costs, improved liquidity, and increased transparency, while buyers can look forward to lower prices and greater trust in the sector.

However, the luxury segment may face higher costs due to the special tax slab for premium goods. Still, for the broader market, the move promises affordability, transparency, and renewed demand—marking a significant step toward revitalizing India’s housing marke