Cut in GST rates may bring down housing prices marginally

Developers believe their cost of construction to come down by 2-3%.

Bengaluru: The proposed GST reforms are likely to bring modest reduction in housing prices. For affordable housing, which is currently taxed at 1 per cent, the reduction would be limited though lower input costs - especially if input tax credits (ITC) are restored – can lower prices by up to 2-4 per cent. In the mid-segment, a GST reduction from 5 per cent to 3 per cent could cut prices by 2–3 per cent, according to experts and industry executives.

“In the luxury homes segment, we could at best expect nuanced changes because while input costs may reduce, the luxury items used in such projects may be subject to the highest 40 per cent rate, thus reducing the potential for price reductions,” said Prashant Thakur, Executive Director & Head - Research & Advisory, ANAROCK Group.

The expectation of a reduction in GST on cement, steel, tiles and other key construction materials is both welcome and positive. Cement in particular has long been a focus of industry requests, said Pankaj Bajaj, CFO, Assetz.

“While the impact on overall construction costs may only reduce marginally by 2–3 per cent — not enough to materially bring down home prices — it will ease the working capital burden of contractors and developers, and act as a morale booster that could also spur infrastructure development. For home buyers, GST on housing sales is already at 5 per cent and 1 per cent, and therefore no further reduction is expected in this category, he said.

That said, the wider impact of rationalising GST lies in its ability to add to disposable incomes, particularly when seen alongside recent RBI rate cuts and easing inflation. Better affordability will naturally translate into higher housing demand and a broader economic multiplier effect, Bajaj added.

“As for near-term buyer sentiment, this quarter is seasonally softer due to Shraddh (Pitru Paksh), with demand traditionally picking up from Navratri through Diwali. The timing of the government’s expected reforms aligns well with the festive cycle. We don’t expect buyers to delay purchases purely in anticipation of GST clarity—most homebuyers prefer securing their desired unit and location now rather than risk losing out and settling for a less preferred option later,” he said.

Anil R G, Managing Director, Concorde, said, significant cost reduction will happen as GST on cement at present is 28 per cent, steel is 18 per cent and all major raw materials are around 18 per cent. Any reduction will hedge in balancing raw material price inflation and also help in better product delivery.

The overall price impact might not be significant as raw material inflation has been over 10 per cent Y-o-Y in the last 3 years, nevertheless the overall price benefit might be significantly less in the short-term, but will definitely help in stabilising prices to a home buyer in the medium and long run, he said.

Priyanka Raju, Director, Kalyani Developers believes the GST rate cut will help bring greater stability to construction costs and provide developers with more flexibility in project planning. In the long run, such reforms strengthen the overall ecosystem and create an environment that supports both developers and homebuyers.

Any rationalisation of GST on raw materials would bring more stability to input costs and positively influence affordability, particularly in the mid and affordable housing categories where homebuyers are more cost-sensitive, she added.

Mallanna Sasalu, CEO-South, Puravankara Limited, said, “A cut in GST on cement (currently 28 per cent) and steel (18 per cent) directly lowers construction costs by 1.5-2 per cent, though the exact impact will vary by project scale, location, and segment. Even this moderation helps developers create more value for homebuyers and supports affordability.

Most purchase decisions are driven by long-term needs, not short-term tax changes. With low interest rates, rising incomes, and strong end-user demand, sales momentum is likely to continue—GST cuts will only add further confidence, he added.

Kishore Reddy, CMD, Mana Projects, said since cement and steel form the core of construction, a cut in cement duties alone could reduce construction costs by around ₹40–₹50 per sq. ft. While GST rates on steel and other inputs remain unchanged, their impact on overall cost savings is relatively limited compared to cement.

However, he believes the overall effect on apartment pricing is minimal. With major cost components such as land, approvals, labour, and amenities remaining unchanged, no significant price reduction is expected across affordable, mid-segment, or luxury housing. Instead, the benefit will largely help developers manage construction expenses more efficiently and maintain financial stability in project execution.

Jayant B Manmadkar, CFO, Brigade Enterprises Ltd, said these raw materials constitute a significant portion of the overall construction cost, and the proposed reduction from 28 per cent to 18 per cent in GST can lower input cost expenses.

The resultant cost efficiency will therefore enhance project viability and allows developers to execute projects efficiently, especially in under-construction projects. Such measures certainly enable developers to be more competitive, thereby making homes more accessible across segments.

“The benefit is expected to be anywhere between 1 per cent -3 per cent for customers, depending upon the segment of the project and specifications. The advantage for buyers could be either in terms of better specifications or better price, depending upon market conditions and the expectation of customers for the particular product in respective markets,” he said.