India’s biggest tax reform since 2017 is here, and its impact on real estate could be transformative. The GST Council’s recent overhaul has collapsed the old four-slab structure into just two rates, 5 and 18 per cent, while keeping a 40 per cent bracket for luxury and sin goods. More importantly, building materials that form the backbone of every project are now significantly cheaper. Cement, previously taxed at 28 per cent, will be charged at 18 per cent, while granite, marble, bricks and tiles have been reduced from 12 to 5 per cent.
For developers and homebuyers alike, this is not a technical tweak, it is a reset. Construction costs, which have climbed steadily in the past five years, are expected to fall by 3-5 per cent. That could translate into a meaningful 2-4 per cent reduction in home prices in the affordable and mid-income segments, provided the savings are passed through. At a time when rising interest rates and inflation have stretched household budgets, this cost relief could reignite demand in the very segment that has been slowing.
Affordable housing, once the engine of India’s residential growth story, has steadily lost momentum. Its share of total sales has dropped from nearly 40 per cent in 2019 to less than 20 per cent in 2024, and new supply has shrunk even faster. By cutting taxes on core inputs, GST 2.0 has given developers the flexibility to revive projects in this critical category. For millions of first-time buyers, this could make the difference between postponing a purchase and booking a home during the festive quarter.
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The reforms also arrive at a moment of high seasonal activity. The October-December period traditionally accounts for a surge in launches and transactions, as developers align new offerings with the festive calendar. With input costs lower and a simpler tax structure in place, the market is primed for stronger absorption. Developers now have the option to sharpen pricing, enhance payment plans, or add value through better specifications without eroding margins.
Commercial real estate stands to gain as well. Lower material costs improve the economics of large office parks, logistics hubs and mixed-use developments. Combined with the transparency of a two-slab GST regime, this enhances India’s attractiveness to global investors who prize compliance clarity as much as rental yields.
Yet, the benefits will not be automatic. State-level duties, stamp duty, registration charges, rising guidance values, still inflate the final cost to buyers. In many markets, these local levies add 7-8 per cent to transaction values, threatening to blunt the advantage of lower GST. Unless state governments align their tax structures with the spirit of reform, much of the consumer gain may be diluted.
The direction, however, is unmistakably positive. GST 2.0 removes a long-standing pain point for the real estate sector and gives both developers and buyers fresh momentum. If implemented in letter and spirit, it can help rebalance the market between ready-to-move and under-construction homes, revive affordable housing supply, and maintain India’s status as one of the world’s most attractive property markets.
Real estate contributes nearly 7 per cent to India’s GDP and employs over 60 million people. With GST 2.0, the government has signaled its intent to treat this sector as a cornerstone of growth. The next few quarters will determine whether the reform translates into cheaper homes, faster absorption, and stronger investment inflowsor whether it remains another missed opportunity.
(The article is written by Aayush Puri, Head – ANAROCK CP & ANACITY)
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