Real estate sector sees boost as GST on cement, key materials slashed

The government’s newly simplified Goods and Services Tax (GST) structure, which replaces the earlier five-slab system with two primary slabs of 5% and 18% alongside a 40% levy on luxury and ‘sin goods’, is expected to breathe fresh life into India’s housing market.

According to an analysis by real estate consultancy ANAROCK, the clarity brought by the new tax regime will not only strengthen consumer confidence but also make the financial implications of homebuying easier to understand. This is expected to encourage more first-time buyers and fence-sitters to enter the market, with tier-II and tier-III cities set to see the strongest impact.

Relief for Developers and Affordable Housing

A key outcome of the reform is the reduction in GST rates for construction materials such as cement, which has come down from 28% to 18%. “Reduced GST on construction materials like cement can reduce construction costs by as much as 3–5%. Developers, especially those engaged in creating affordable housing, will get major relief in terms of cash flows and margins,” said Anuj Puri, Chairman of ANAROCK Group.

ANAROCK Research highlights that the affordable housing segment, defined as units priced below ₹40 lakh, has seen its share of total housing sales decline sharply from 38% in 2019 to just 18% in 2024. The share of new supply fell even further—from 40% in 2019 to just 12% in the first half of 2025. Lower construction costs, if passed on to buyers, could help revive demand in this critical segment.

Developers also see the reform as improving project viability. “For developers, this relief lowers input costs and strengthens project viability. Industry voices estimate that overall construction costs could decline up to 5%. This offers scope for improved margins, as well as better pricing for end-users,” said Venkatesh Gopalakrishnan, Director Group Promoter’s Office and Managing Director, Shapoorji Pallonji Real Estate (SPRE).

He added that the move was timely, especially for the affordable and mid-income segments, where rising construction costs and margin pressures have been major challenges. The potential pass-through of savings, he noted, would encourage renewed demand and enable more accessible homeownership.

The apex body of real estate developers in the Mumbai Metropolitan Region (MMR), CREDAI-MCHI, also welcomed the tax rationalisation. It pointed out that while reductions such as cement (28% to 18%) and sand-lime bricks (12% to 5%) would provide some relief, the overall impact may remain modest as most developers source materials indirectly through vendors who already benefit from input tax credits.

“CREDAI-MCHI welcomes the government’s initiative to rationalise GST rates on key construction inputs like cement and sand-lime bricks. While the cost relief to developers and homebuyers is modest at this stage, this is a step in the right direction towards improving affordability and enhancing housing demand in MMR,” said Sukhraj Nahar, President of CREDAI-MCHI.

Nahar further urged the government to address the industry’s long-standing demand for retaining the 1% GST slab on affordable housing while rationalising the ₹45 lakh price cap, a move he said could significantly accelerate the Housing for All by 2030 mission.

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