New Delhi: The upcoming GST reforms in real estate, effective from September 22, 2025, are set to create a significant positive impact across India’s residential, commercial, and retail property markets, according to Anuj Puri, Chairman of ANAROCK Group.
The reduced GST rates on construction inputs such as cement are expected to cut project costs by 3–5%. This relief will be crucial for developers in the affordable housing segment, which has seen its share of sales shrink from 38% in 2019 to 18% in 2024.
New supply also fell sharply from 40% in 2019 to just 12% in the first half of 2025. If developers transfer these savings to homebuyers, demand in the affordable and mid-income categories could see a major revival.
The revamped tax system simplifies the earlier five-slab structure into two main slabs—5% and 18%—along with a 40% tax on luxury and sin goods. This new clarity in taxation is expected to improve consumer confidence, particularly encouraging first-time buyers in tier-II and tier-III cities.
Also Read: Real Estate Micro Markets See Up to 139 Per Cent Capital Growth and 81 Per Cent Rental Surge
Neeraj Akhoury, President, Cement Manufacturers’ Association and Managing Director, Shree Cement Limited, said “For a long time, cement has been taxed at one of the highest rates among essential building materials compared to sectors such as steel and several other construction input materials. Lowering the rate to 18% corrects this long standing anomaly and ensures parity with other core materials.”
“Moreover, a reduction in GST stands to enhance the competitiveness of the Indian Cement Industry by creating a fair game with global peers. Given that Cement is a foundational input material for infrastructure and housing, treating it more fairly in the tax structure is consistent with global practices and will likely boost consumption of this key building material towards augmenting considerable infrastructure, including affordable housing,” he stated.
GST Reforms in Real Estate to Impact Commercial Property Leasing
Commercial properties currently attract 12% GST with Input Tax Credit (ITC). However, the removal of ITC for property leasing will raise operational costs and rental prices.
Additionally, the Reverse Charge Mechanism (RCM), requiring tenants of unregistered suppliers to pay 18% GST directly, will add compliance responsibilities for businesses leasing office spaces.
Retail Real Estate to Gain from Lower GST on Materials and Logistics
Retail real estate is set to benefit from reduced GST on building materials, cutting input costs and making projects more viable. Shopping centres and retail complexes may offer competitive rental rates as a result.
Also Read: Paranjape Schemes Raises INR 150 Crore from WSB for Strategic Land Acquisition in Pune
Furthermore, GST rationalization is expected to reduce logistics costs, streamline supply chains, and support retail operations. Despite these benefits, rental income from commercial retail spaces will continue to attract 18% GST.
Sector-Wide Benefits of GST Reforms in Real Estate
The GST reforms in real estate bring enhanced transparency, ease of compliance, and reduced administrative challenges for developers. These changes are likely to attract greater institutional investment, accelerate housing supply, and ensure timely project completions.
A major highlight of GST reforms in real estate is the boost to affordable housing, a segment critical to India’s urban development. With a shortage of nearly 1 crore budget homes projected to rise to 2.5 crore by 2030, lower construction costs and simplified taxation will make homeownership more attainable for middle-class families.
Manish Jain, President, CREDAI Pune stated, “At CREDAI Pune, we have long advocated for the reduction of the 28% GST on cement, which constitutes around a large portion of construction costs. After years of persistent efforts, we appreciate the Government’s decision to lower it to 18%, which should reduce input costs by approximately 2-3%, provided the cement companies pass on this benefit immediately to the sector. This relief is especially critical given that material costs have surged 40-50% since COVID-19, severely impacting project feasibility. Beyond cement, reduced GST rates on granite, marble, bricks, wood products, and renewable energy devices will support affordability and sustainability across luxury and affordable housing. The reduction of GST on these products from 12–18% will put more money in the hands of buyers and help them fulfil their dream of affordable housing in Pune. Coupled with lower interest rates, this move will further boost growth in the real estate sector.
The operationalization of the GST Appellate Tribunal and expedited refunds will enhance liquidity, enable faster dispute resolution and provide greater certainty for developers. These measures offer a forward-looking framework that promotes transparency, cost-efficiency and ultimately benefits homebuyers with more competitive pricing. CREDAI Pune applauds this decisive step toward a more robust, growth-oriented and sustainable real estate sector.”
