GST on cement, steel cut to 18%: Construction costs to come down by 5%

Real estate developers hope affordable housing prices will fall.

Bengaluru: Real estate developers have welcomed the GST Council’s move to cut GST on cement and other materials and expressed hope that it will boost the confidence of home buyers.

It is expected that the reduction in GST on cement from 28 per cent to 18 per cent will directly reduce construction costs, and make housing more affordable.

Reduced GST on construction materials like cement can reduce construction costs by as much as 3-5 per cent. Developers, especially those engaged in creating affordable housing, will get major relief in terms of cash flows and margins, ANAROCK Research said.

According to its research, the affordable housing category (below Rs 40 lakh) has seen its share of total sales decline from 38 per cent in 2019 to just 18 per cent in 2024.

The share of new supply dropped even more dramatically from 40 per cent in 2019 to just 12 per cent in H1 2025. The reduced construction costs, if passed on to homebuyers, can boost demand in these segments, said Anuj Puri, Chairman, ANAROCK Group.

The GST reforms are especially positive news for affordable housing. India currently has a shortfall of nearly 1 crore budget homes in urban markets, and this number could rise to 2.5 crore by 2030 without focused interventions. These GST reforms bring lower construction costs and improved ease of compliance, which can go a long way towards reversing this trend making homeownership more accessible to middle-class families, Puri added.

The reduction of GST on critical construction materials like cement and steel from 28 per cent to 18 per cent is a landmark reform. This will significantly ease input costs, improve project viability, and accelerate infrastructure development across the country, said Niranjan Hiranandani, Chairman, Hiranandani and NAREDCO.

“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. This rationalisation is not just a boost for developers - it is a win-win for consumers, the housing sector, and India’s long-term growth story,” he said.

"The reduction in GST on cement is a significant step towards making homeownership more accessible and stimulating growth in the real estate sector. By lowering construction costs, this move will have a positive ripple effect on the entire industry. We anticipate that this move will particularly benefit the mid-market and mid-market premium housing segments, where demand is high and price sensitivity is key,” said 1Murali Malayappan, Chairman & MD, Shriram Properties Ltd.

Ashish Puravankara, MD, Puravankara Limited, said overall construction costs are expected to come down by around 1-1.5 per cent, though the exact impact will vary depending on project scale, location, and segment.

“The reduction in GST on cement is a progressive reform that will benefit not only real estate but the economy at large. For developers, this creates an opportunity to deliver greater value to homebuyers while also enhancing project viability, improving cash flows, and offering more flexibility in planning and execution. In turn, this supports timely delivery and helps reinforce buyer confidence,” he said.

The reduction in GST on cement will directly reduce construction costs, and make housing more affordable, said Priyanka Raju, Director, Kalyani Developers.

“We believe this decision will have a positive impact on the entire value chain of the real estate industry, stimulating demand and driving growth. We are optimistic that this move will benefit both the mid-income and premium housing segments, both of which are primary drivers for the sector,” she said.

“It will also improve margins for developers, especially for mid housing projects. From a customer perspective, they can expect competitive pricing from developers, which will boost buying sentiment,” said Anil R.G., Managing Director, Concorde.

Vimal Nadar, Senior Director & Head of Research, Colliers India, said the slashing of GST on cement will play a critical role in rehauling project cost structures as cement forms a major value component in the overall cost of construction. The timing of this rollout is appropriate, with the festive season in the offing and the real estate sector is already reaping the benefits of favourable interest rates.

Piyush Bothra, Co-Founder and CFO, Square Yards, said the move towards a simplified two-slab structure will also streamline compliance, making processes smoother and faster. For the residential segment, this is likely to translate into tangible benefits for homebuyers as developers pass on the savings over the coming months. While the impact may take some time to reflect, it could provide much-needed relief in the backdrop of rising property prices and add to overall affordability.

Shrinivas Rao, CEO, Vestian, said, “The recent reduction in GST rates is poised to strengthen the real estate sector by reshaping demand–supply dynamics. Lower GST on construction materials is expected to enhance housing affordability by reducing input costs, while reduced GST on other goods could improve disposable income, thereby stimulating real estate demand.”

Aashit Verma, Founder of Hanto Workspace, said "The GST Council’s decision to reduce tax rates on critical building materials including cement and marble, granite, sand-lime bricks is a game-changer for construction economics.”

On the commercial side, rationalisation will reduce capex load, which can accelerate the pace of Grade-A office, retail, and hospitality developments. Importantly, this GST slash will help expedite project deliveries by nearly 30%, giving the sector a much-needed push at a time when speed to market is critical, he said.

Venkatesh Gopalakrishnan, MD, Shapoorji Pallonji Real Estate (SPRE) also expects the construction costs to go down by as much as 5 per cent with the reduction in GST on cement and other essential construction materials. “This offers scope for improved margins, as well as better pricing for end-users.