Real estate market displays cautious optimism regarding reduced GST taxes on construction materials

Published on September 4, 2025

The Goods and Services Tax (GST) on items such as cement, steel, marble, and granite blocks has been reduced, a move that is expected to have a positive impact on the mid-income and premium segments of the housing market. However, questions remain about how much of the savings from this reduction will be passed on to homebuyers.

W. S. Habib, President of CREDAI Tamil Nadu, urged cement makers not to absorb the benefits from tax cuts through price increases. This appeal came as no specific companies have been identified in the search results as having chosen to implement the benefits from the VAT reduction on building materials through price changes rather than price increases.

The reduction is estimated to have an impact on the overall product value of housing in the range of 1-3%. Vivek Rathi, National Director of Research at Knight Frank India, stated that there will be some impact from the GST reduction, but it will be limited.

Mehul Doshi, President Elect of Credai Chennai, expressed disappointment that some of their representations were not considered, including an increase in the threshold limit of apartment value for affordable housing. Doshi also highlighted the double taxation for home buyers on apartments due to the 5% GST without ITC benefit.

The anti-profiteering clause associated with the GST reduction requires costs to be passed on to customers. A spokesperson for Noida-based County Group stated that the cost has to be passed on due to this clause. The question of how much of the lowered input costs will be passed on to customers depends on factors such as reduction in prices by raw material suppliers, demand-supply dynamics, and overall product value perspective.

The reduction in GST on FMCG and household products is expected to increase the demand for housing and leave more disposable income for customers. However, there is no mention of any impact or benefits of the GST reduction on tyres on road safety or consumers in this regard.

The Confederation of Real Estate Developers' Associations of India (CREDAI) stated that the GST rate rationalisation was not sufficient for the sector. This sentiment was echoed by Habib, who stated that the savings from the GST reduction must flow through the supply chain and ultimately reach homebuyers.

The anti-profiteering clause is likely to come into effect around Diwali or with new contracts with suppliers. As the industry adjusts to these changes, it remains to be seen how the GST reduction will impact the housing market in the long term.

It's important to note that real estate is not an MRP (Maximum Retail Price)-driven product. This means that the impact of the GST reduction may not be immediately apparent in the prices of properties. Instead, it may take time for the savings to be passed on to homebuyers.

In conclusion, while the GST rate reduction on building materials is a positive step for the housing market, there are still questions about how much of the savings will be passed on to homebuyers and the long-term impact of the anti-profiteering clause. As the industry continues to adapt, it will be interesting to see how these changes unfold in the coming months.