The reduction in Goods and Services Tax on items such as cement, steel, marble, granite blocks, which are used in construction and housing sector has been received with tepid enthusiasm by the builder community, which feels that the government should have addressed the issue of input tax credit and provided incentives to boost affordable housing.
Real estate developers said there will be some impact in terms of cost reductions that will be passed on to customers, but it will be marginal. It is expected to have a positive impact mostly on the mid-income segment and to some extent on the premium segment.
“There is going to be some impact of this certainly, and it is going to be positive in terms of the cost incidence, but the incidence of this is going to be limited… calculations will have to be made but I suspect that it will be in the range of 1-3 per cent of overall product value,” said Vivek Rathi, National Director, Research at Knight Frank India.
The question of how much of the lowered input costs will be passed on to the customer would depend on a number of factors, including the reduction in prices by the raw material suppliers, the demand-supply dynamics and the overall product value perspective.
Unlike other products, real estate is not an MRP-driven product, Rathi pointed out.
“The cost has to be passed on because there is an anti-profiteering clause that comes with it,” said a spokesperson for Noida-based County Group, adding that it is likely to come into effect around Diwali, or when new contracts with suppliers are done.
The demand for housing is expected to flow from the savings from reduction in the tax rates on FMCG and household products, leaving more disposable money in the hands of customers.
Real estate body, The Confederation of Real Estate Developers’ Associations of India, made it clear that the GST rate rationalisation was not enough for the sector. “Some of our representations were not considered. We were expecting an increase in the threshold limit of apartment value for affordable housing which has not come through,” said Mehul Doshi, President Elect, Credai Chennai.
“Since apartments are subject to 5 per cent GST without ITC benefit, in effect there is double taxation for the home buyers. We were expecting some rationalisation on the above which has also not come through,” he added.
There is no GST on ready-to-move flats and 5 per cent on under-construction houses, but with no ITC.
Yet another office bearer, W. S. Habib, President, CREDAI Tamil Nadu, urged cement makers not to absorb the benefit from tax cuts through price increases.
“The spirit of the change is to reduce costs — those savings must flow through the supply chain, ultimately reaching homebuyers,” he said.
Published on September 4, 2025