Residential
How the New GST Cuts Impact Real Estate This Year ?
December 04, 2025
India’s real estate market has traditionally been one of the most dynamic yet complicated. This investment space has periodically dealt with fluctuating property prices. Before the introduction of GST, it was also struggling with multiple tax layers. The market isn’t easy to navigate.
The introduction of GST 2.0 is being seen as a game-changer that could potentially redefine how developers, homebuyers and investors approach the market. In this blog, we will explore the details and intricacies of the new GST and see how to effortlessly navigate through the ups and downs of real estate after the GST rate cut.
Introduction
When GST was initially launched, it brought with it uniformity and freedom from the intricacies of VAT, service tax, excise duty, and the like. But the real estate sector continued to face challenges. For instance, developers and buyers were grappling with the lack of input tax credits.
GST 2.0 came into effect on Monday, the 22nd of September. The intention of the revision was to plug and close the loopholes that were introduced in the earlier version of the Goods and Services Tax Act. The new and updated GST has simplified the prevailing multi-slab tax structure into a simple two-rate system of 5% and 18%. There is an exception with sin and luxury goods coming in at 40%, but overall, it is intended to make tax filing easier. The effects of the new GST will also be seen in real estate, but market experts have cautioned homebuyers to wait before the new pricing comes into effect.
In this blog, we will explore the influence of GST on property prices in India, the costs to the developer and the overall buyer demand in the market.
What Has Changed Under the New GST Regime?
Under the new GST revisions, the standardised tax rates have seen a reduction in the cost of raw materials. GST 2.0 does away with the overlaps that were earlier used to keep project costs inflated. These reductions are expected to work like a domino effect and eventually bring down the costs incurred during the construction phase. It will encourage developers to provide more incentives to their customers.
Key Tax Rate Revisions
The cut down of GST on major construction materials will boost the real estate sector. According to experts in the industry, since the cost of key construction materials like cement, ready-mix concrete, bricks, tiles, sand, paint, granite and marble has gone down, it is in turn expected to lower the cost of the project for developers by 3 to 5%. However, the taxation on steel, which is a key construction material, remains unchanged.
Overall, the changes are expected to lower the cost of homes and infrastructure projects, making home ownership more affordable.
GST 2.0 vs Old GST Rates: Quick Comparison Table
| Essential construction material | Old GST | New GST |
|---|---|---|
| Cement | 28% | 18% |
| Ready-mix concrete | 28% | 18% |
| Steel | 18% | 18% |
| Marble and travertine blocks | 12% | 5% |
| Granite block | 12% | 5% |
| Sand-lime bricks | 12% | 5% |
| Bricks | 18% | 5% |
| Tiles | 18% | 5% |
| Sand | 18% | 5% |
| Paint | 28% | 18% |
| Varnish | 28% | 18% |
| Bamboo flooring/joinery | 12% | 5% |
| Packing cases and pallet wood | 12% | 5% |
How GST Cuts Affect Developers
The building costs alone contribute to almost 60% of a developer’s overall expenses. With revisions in the new GST for essential materials, it will bring down the project cost significantly. Many developers, like the Brigade Group, are set on plans to pass on a part of these savings to homebuyers too.
With the revised GST, experts say that construction costs are expected to decline by 3.4 to 4.5%, which is projected as a possible saving of around ₹1,000 per square metre. Particularly, GST’s reduction in cement for real estate in 2025 is expected to lead to a 3 to 3.5% saving in additional construction costs. The new rates of marble and granite would also lead to an additional 0.5 to 1% of savings, but these costs depend on which segment the project falls under.
The lower input costs are expected to improve the project’s viability and margins greatly, with the expectation that developers are going to launch new projects under this competitive pricing. The larger profit margins are also going to give room for discounts from the developer and flexible payment plans for the buyer.
Impact on Homebuyers
Lower Property Prices (But Gradual)
For first-time homebuyers, this is good news. Becoming a homeowner is likely to become more attainable as the pricing for mid-segment homes is expected to be impacted greatly. The affordable housing market is also likely to benefit the most from GST 2.0. With the reduction in taxation on inputs and better project execution timelines, developers may invest heavily in these two segments. Investors might also find that investing in more affordable housing will be more attractive in the long term, as the end-user demand within these categories may increase. If buyers were previously reluctant to purchase, they may now be able to find homes comfortably in their budget.
Check out our Blog on Home Buyer’s Checklist before buying a flat in India
Boost in Homeownership and Demand
Buyers are likely to see a lot of discounts in the upcoming months. Even with a modest 2 or 3% reduction in construction costs, buyers can potentially save up to ₹1 to ₹3 lakhs. This reduces the upfront payments and lowers the loan requirements, especially if it is combined with the upcoming festive offers. More first-time buyers would be able to purchase real estate after the GST rate cut. Moreover, it is likely that lower upfront costs would lead to more flexibility in EMIs and payment plans.
Sector-Wise Impact of GST Cuts
Residential Real Estate
- The market is going to see quite a few first-time buyers.
- The demand for mid-segment properties is expected to grow.
- Affordable housing is going to become more attractive to investors.
Commercial Real Estate
- The lower costs of construction would likely see improved ROI.
- Rental prices may see a reduction, especially in office spaces.
Industrial and Warehousing
- An enhanced cost efficiency would most likely lead to more expansion projects.
Potential Challenges and Limitations
An important thing to note is that nearly half of the cost of a residential project is attributed to the land. Yet, land still remains outside the purview of GST, which means that a major component stays unchanged.
Secondly, simplified rules of input tax credit eliminate the financial bottlenecks that constrained the developer’s cash flow previously. Since they are now better placed to finance projects on a faster timeline, it can increase investor confidence, which would likely reduce delays.
Further, the effects of GST 2.0 probably won’t be seen instantly. Experts say that the market may take around 6 months to respond to the change. Until the GST cuts' impact on real estate is visible, it is difficult to draw conclusions.
Tips for Buyers: How to Make the Most of GST 2.0
- Prioritise and focus on new projects and launches to be able to maximise their price benefits.
- Watch out for the festive season pricing and ongoing developer discounts to get the best deals on your new home.
- Compare your total costs and savings (make sure to consider stamp duty, repo rate cuts, GST, etc).
- Consult with your developers about the input tax savings and pricing policies.
Expert Opinions and Industry Reactions
The National President of NAREDCO has called GST 2.0 a “welcome and progressive step.” He also said that the GST reforms will bring significant benefits to real estate, an advantage that could be passed down to the customers directly. This would make homes and commercial projects much more affordable.
According to the realtor’s body CREDAI, this decision will increase people’s purchasing power and boost the demand for residential properties in the festive season.
From the developer’s side, there seems to be a strong sentiment of optimism for Q4 sales in 2025. Investors also seem positive about growth in both the residential and commercial sectors.
Conclusion
The revised GST on construction materials is likely to bring down the construction costs for developers. In a slow but gradual domino effect, the buyers of residential and commercial segments are going to find that, because of GST, property prices in India have reduced. GST 2.0’s real estate effect is going to be the strongest in the affordable and mid-segment housing markets. During this transitional period, buyers must look out for discounts, offers and competitive pricing being rolled out in the next 6 months. Watch out for the new project launches to benefit the most from GST 2.0.
References
https://www.pib.gov.in/PressNoteDetails.aspx?id=155151&NoteId=155151&ModuleId=3
https://theprint.in/brandit/how-gst-2-0-is-changing-real-estate-investments-in-india/2773487/
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