GST Cuts Reshape Real Estate with Mixed Impact on Developers

Mixed Reactions as GST Cuts Offer Marginal Relief to Real Estate Sector

Navi Mumbai: The recent cuts in Goods and Services Tax (GST) rates for the real estate and construction sector have drawn mixed responses from developers. While some builders believe that effective planning and accounting could help lower the prices of budget homes, others argue that the reduction in construction material costs is minimal and will only have a negligible impact.

At the 56th GST Council meeting, key changes were announced that will directly affect the sector. Tax reductions on major construction materials are expected to bring down project costs, while higher tax rates on certain services may create new challenges for developers.

The GST on Construction materials such as cement, bricks, marble, travertine, granite blocks, and sand-lime bricks has been reduced from 28% to 18%. This is expected to slightly ease overall construction expenses.

"Lower material costs will benefit homebuyers, but the hike in service tax rates means developers must carefully plan—especially for budget housing. Overall, this is a positive move toward transparency, efficiency, and affordability," said Prakash Baviskar, Chairman and Managing Director of Baviskar Group and President of NAINA Builder Association.

However, GST on infrastructure components like gardens, roads, clubhouses, and other amenities has risen from 12% to 18%. "Builders must maintain separate accounting for infrastructure and building construction to ensure the benefits reach the buyers," Baviskar added.

On the other hand, Jigar Trivedi, President of the Builders Association of Navi Mumbai (BANM), remarked that construction material costs form only a small fraction of total project expenses. Hence, the reduction would not significantly impact homebuyers or the industry directly.

Instead, he suggested the broader GST cuts across various sectors could indirectly help real estate.

"Lower GST on commodities will allow households to save more, which could eventually encourage greater investment in the real estate market," Trivedi explained.

Key Provisions

• GST Reduction on Construction Materials
  Cement: GST reduced from 28% to 18%.
  Bricks, marble, travertine, granite blocks, and sand-lime bricks: GST reduced from 12% to 5%.
  This will directly reduce overall project construction costs.
• GST Increase on Works Contract Services
  GST on specified government projects and subcontractor services increased from 12% to 18%.
  This may lead to increased costs for large-scale infrastructure and public projects.
• Simplified GST Rate Structure
  • Two main slabs will now apply: 5% and 18%.
  • A special rate of 40% will continue to apply to specified luxury/sin goods.
  • Effective from 22nd September 2025.
• Establishment of GSTAT
  The Goods and Services Tax Appellate Tribunal (GSTAT) will begin accepting appeals by the end of September 2025.
  Hearings are scheduled to commence from December 2025, with backlog appeals permitted until 30th June 2026.