The real estate and construction industry in India has been one of the most heavily impacted sectors under the Goods and Services Tax (GST) regime since its implementation in 2017. For years, developers, contractors, and homebuyers have been voicing concerns about high tax slabs on essential construction materials, which not only pushed up the cost of housing but also slowed down infrastructure projects.
The government’s recent rationalisation of new GST rates marks a crucial turning point. By lowering the GST on critical inputs like cement, marble, granite, and job work for bricks, the construction ecosystem is set to witness reduced costs, improved demand, and a boost in employment generation.
This blog will take a detailed look at the new GST rates, their direct and indirect impact on real estate and infrastructure, and why this move is being celebrated as a transformative step for India’s growth story.
Why GST Rationalisation Matters for Real Estate
Real estate contributes nearly 7% to India’s GDP and is the second-largest employment-generating sector after agriculture. Yet, the industry has struggled with price pressures, high input costs, and complex tax structures.
Before GST, construction materials attracted multiple indirect taxes including excise duty, VAT, and entry tax. With GST, many materials fell into the highest tax slab of 28%, which heavily inflated overall project costs.
The new GST rates are designed to ease these burdens:
Lower tax slabs reduce construction costs.
Affordability improves for homebuyers, especially in the affordable housing segment.
Infrastructure projects under government schemes become more cost-effective.
Higher demand spurs manufacturing, logistics, and allied industries.
GST Rationalisation for Cement
Cement is one of the most critical construction materials, accounting for 15–20% of total building costs and nearly 11% of overall construction expenses. Earlier taxed at 28% GST, cement prices were often cited as one of the biggest obstacles to affordable housing.
New GST Rate for Cement
Previous GST rate: 28%
New GST rate: 18%
Impact of Reduced GST on Cement
- Lower Construction Costs
The reduction directly lowers input costs for builders, translating into reduced overall project expenses. For homebuyers, this means affordable flats and houses, particularly in the mid-income and affordable housing segments. - Boost to Housing Schemes
Affordable housing projects under the Pradhan Mantri Awas Yojana (Urban and Grameen) will see significant cost benefits, enabling faster construction and delivery. - Job Creation Across Industries
The cement industry is highly employment-intensive. From mining and manufacturing to logistics and distribution, every stage supports youth employment. Lower GST will increase demand, boosting jobs in cement plants, ancillary industries, and transport sectors. - Infrastructure Push
Major road, metro, and smart city projects will also benefit, enabling the government to stretch budgets further and deliver more infrastructure at lower costs.
GST Rationalisation for Marble and Granite Blocks
India is among the world’s largest producers of natural stones, with states like Rajasthan, Gujarat, Karnataka, and Andhra Pradesh leading production. These stones are vital for flooring, tiling, cladding, and interior finishing in residential and commercial projects.
New GST Rate for Marble and Granite Blocks
Previous GST rate: 12%
New GST rate: 5%
Impact of Reduced GST on Marble and Granite
- Affordable Interiors for Young Buyers
With the rise of millennial and Gen-Z homebuyers, the demand for stylish yet affordable interiors has grown. Lower GST ensures tiles, flooring, and decorative finishes are within reach. - Boost to Domestic Competitiveness
Imported natural stones often undercut local producers. By reducing GST, Indian marble and granite manufacturers become more competitive, strengthening the domestic industry. - Sustaining Employment in Mining and Processing
The marble and granite industry employs lakhs of workers in extraction, cutting, polishing, and logistics. Rationalised GST ensures demand remains strong, safeguarding jobs, especially in rural and semi-urban belts.
GST Rationalisation for Job Work in Bricks
Bricks are the backbone of India’s rural and semi-urban housing sector. MSMEs that run brick kilns often operate on thin margins and struggle with compliance.
New GST Rate for Brick Job Work
Previous GST rate: 12%
New GST rate: 5%
Impact of Reduced GST on Brick Job Work
- Rural Housing Becomes Cheaper
Lower costs per unit directly benefit small developers and rural households constructing homes. - Support for MSMEs
Brick kilns, often run as family-owned businesses, will benefit from reduced compliance burden and improved demand. - Boost to Affordable Housing
The government’s push for Housing for All aligns with this cut, ensuring cost efficiency in rural and semi-urban projects.
New GST Rates and the Wider Real Estate Sector
Apart from materials, the new GST rates have significant implications for the entire real estate value chain.
Impact on Developers
- Reduced costs of construction inputs mean developers can price projects more competitively.
- Cash flow pressures reduce, improving project delivery timelines.
- Lower costs make it easier to comply with affordable housing definitions under GST (properties with carpet area ≤60 sq. m and value ≤₹45 lakh).
Impact on Homebuyers
- Affordable housing will see maximum benefits, as developers pass on cost savings.
- Interior finishes (tiles, flooring, marble, granite) become cheaper.
- Reduction in overall property prices can help more first-time buyers enter the market.
Impact on Government Schemes
- Pradhan Mantri Awas Yojana, Smart Cities Mission, and large infrastructure projects will see cost advantages.
- Public-private partnerships in housing and infrastructure can deliver more within the same budget allocation.
Impact on Employment and Economy
- The real estate sector already employs nearly 50 million people. Increased demand will boost jobs in construction, logistics, manufacturing, and services.
- Ancillary industries like paints, steel, tiles, and sanitaryware will also gain.
Challenges and Considerations
While the new GST rates are a step in the right direction, certain challenges remain:
- Input Tax Credit (ITC): Developers of residential projects often face blocked ITC, raising costs despite GST cuts.
- Land and Stamp Duty Exclusion: Land continues to be outside the GST regime, and stamp duty varies across states, keeping property prices elevated.
- Compliance Burden for MSMEs: Smaller manufacturers and brick kiln owners may still face hurdles in GST filing and compliance.
- Passing on Benefits to Buyers: Strict monitoring is needed to ensure developers pass cost reductions to homebuyers.
Conclusion
The new GST rates are a landmark reform for India’s construction and real estate sector. With reduced GST on cement, marble, granite, and job work for bricks, the government has directly addressed long-standing demands of builders and homebuyers alike.
For the real estate industry, this move is not just about lowering tax rates – it is about unlocking growth, boosting housing affordability, creating jobs, and strengthening infrastructure development. For homebuyers, it signals a future where owning a home is not just a dream but an achievable reality.
As India moves towards becoming a $5 trillion economy, reforms like GST rationalisation will continue to play a critical role in shaping the nation’s housing and infrastructure landscape.
