New Delhi | September 06, 2025: The demand for Goods and Services Tax (GST) reforms in real estate has been growing since the tax regime was first introduced. While almost every industry sought rationalisation, the housing sector has been among the most vocal. Now, with the government considering GST cuts and restoration of Input Tax Credit (ITC), optimism in real estate is soaring. For millions of homebuyers, this could be the turning point that makes their dream of owning a house more affordable.

At present, key construction materials such as cement, steel, tiles, and sanitary fittings attract GST rates ranging from 18 to 28 percent. Developers pay these taxes but are denied ITC, which inflates the overall project cost by nearly 6–8 percent. This additional burden is eventually passed on to buyers, making homes several lakhs costlier. As a result, affordability has been compromised and housing demand has slowed down in many markets.

Industry experts emphasise that real estate is not just one sector but the backbone of India’s economy, linked to over 200 ancillary industries and generating millions of jobs. Rationalising GST and reinstating ITC is therefore being hailed as a historic step that could cut home prices, revive demand, and boost employment and investment.

How Much Can Buyers Save?

  • Cement (Current GST 28%): A 5–10% reduction could lower construction costs by 2–3%.
  • Steel (Current GST 18%): A 5% cut can reduce project costs by 1.5–2%.
  • Overall impact: Total project costs could drop by 6–8%.
  • Direct saving for buyers:
  • A 2BHK flat priced at 50–60 lakh could become cheaper by 3–5 lakh.
  • Larger homes and villas could see savings of 6–8 lakh.
  • Sales boost: Demand is projected to rise by 15–20%.

Multiplier Effect Across NCR and India

Dinesh Gupta, President, CREDAI Western UP, says:
“GST reforms will have a multiplier effect across the real estate market. A 5–10% reduction in cement (28%) and steel (18%), combined with restoration of ITC, can reduce project costs by up to 8%. For a 2BHK apartment, this means direct savings of 3–5 lakh, while larger homes can save up to 8 lakh. Our analysis shows that such reforms could increase sales by 15–20% and bring the NCR as well as the national housing market back on track.”

Rising Costs and the ITC Problem

Suresh Garg, CMD, Nirala World, highlights:
“Builders pay GST on materials such as cement (28%) and steel (18%), but are denied ITC. This inflates project costs by 6–8%. If the government reduces GST and restores ITC, home prices could fall by nearly 10%, giving direct relief to buyers.”

Vikas Pundir, CMD, SKB Group, adds:
“The proposed GST reforms will be a game-changer for real estate. Lower taxes on construction materials will reduce project costs by 3–5%, especially benefiting the affordable housing segment. A simplified tax structure will also build buyer confidence and encourage first-time homeowners.”

Lower Prices Will Drive Sales

Shailendra Sharma, Chairman, Renox Group, observes:
“The recent move to reduce GST by up to 10% on key raw materials such as cement is very encouraging. This will prove to be a long-term positive for the sector. Lower taxation will ease the burden on homebuyers, accelerate sales, and allow developers to control prices while increasing supply.”

Not Just Tax Cuts, ITC Restoration is Key

Lt. Col. Ashwini Nagpal (Retd.), COO, Diligent Builders, stresses:
“Reducing GST on critical materials such as cement to 18% is welcome, but the real boost will come from restoring ITC. Without credit, a large part of costs remains locked, keeping property prices artificially high. If ITC is allowed, the sector will operate with greater efficiency and pass the benefits directly to buyers.”

Luxury Housing May Face a Challenge

While GST cuts benefit mass housing, the proposed 40% GST rate on high-end interiors could hurt the ultra-luxury segment, particularly in Gurgaon.

Gaurav Sobti, Founder, Homegram, warns:
“The proposed 40% GST on ultra-luxury interiors is a major concern. Currently, high-quality interiors already attract 28% GST, and a 12% hike could add nearly 12 lakh to the cost of a 5 crore apartment with 1 crore spent on interiors. This may weaken demand as buyers face higher costs, and developers may be forced to compromise on quality or sell bare-shell units. However, reducing GST on cement from 28% to 18% and implementing a two-slab tax structure could offset some of this burden, simplify compliance, and ensure long-term stability.”

The Bottom Line

With GST rationalisation and ITC restoration on the horizon, real estate could witness one of its most significant policy-driven turnarounds in recent years. From affordable housing to premium projects, buyers are set to gain through lower prices and greater transparency, while developers expect faster sales and improved liquidity. If implemented effectively, GST reforms could put the Indian housing market firmly back on a growth trajectory.