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Key Points

The government's GST rationalization has significantly reduced taxes on key construction materials. Cement rates dropped from 28% to 18%, while marble and granite saw cuts from 12% to 5%. These changes are expected to lower overall construction costs by 3.5-4.5% across the real estate sector. The stability in property GST rates ensures no confusion for homebuyers while improving project viability for developers.

Key Points: GST Reforms Cut Construction Costs 4.5% for Real Estate Sector

  • Cement GST slashed from 28% to 18% for 3-3.5% cost savings
  • Marble and granite rates cut from 12% to 5% for premium projects
  • Property GST rates remain unchanged ensuring market stability
  • Construction materials account for 50-60% of total project costs
3 min read

Construction cost for real estate sector to decline by 3.5-4.5% because of GST reforms: Report

New GST cuts on cement, marble, and granite reduce construction costs by 3.5-4.5%, improving developer margins and homebuyer affordability according to Crisil report.

"The construction cost is estimated to decline by 3.5-4.5 per cent - Crisil Intelligence Report"

New Delhi, September 5

Rationalisation of tax rates on construction material is expected to cut the construction cost for the real estate sector by 3.5 to 4.5 per cent, according to a report by Crisil Intelligence. The government has announced to cut GST rates on cement, marble, granite, sand, bricks, etc substantially, which is likely to reduce construction costs for builders.

"The construction cost is estimated to decline by 3.5-4.5 per cent. This will improve project viability, support developer margins, and (if partially passed on) enhance the affordability of home-buyers," noted the report

The report noted that the rates applicable to affordable housing (1 per cent), under-construction properties (5 per cent) and completed properties (exempt) remain unchanged. The status quo offers stability for both developers and homebuyers.

In the construction materials segment, GST on cement has been cut from 28 per cent to 18 per cent. Lowering the GST on cement and other inputs directly reduces project costs. Developers may choose to pass on part of this benefit to buyers, improving affordability.

"Cement, being one of the most critical cost elements accounting for 25-30 per cent of raw material expenses, the cut is expected to improve developer margins and lower project costs," the report noted.

GST on steel remains unchanged at 18 per cent, and hence the impact is nil. GST on marble and travertine blocks, granite blocks, sand lime bricks/ stone inlay work has been reduced from 12 per cent to 5 per cent, offering relief particularly to mid-range and premium projects, where these materials are widely used.

The report stated that, "The reduction is also expected to improve developer margins and lower project costs. Construction materials typically account for 50-60 per cent of the overall construction cost for builders."

An improved margin outlook may encourage developers to launch new projects, particularly in affordable and mid-income segments.

The 10 per cent reduction in GST on cement is estimated to result in a 3.0- 3.5 per cent savings on overall construction costs, and the rate revision on marble, granite and related inputs is an additional 0.5-1.0 per cent, depending on the project segment and material mix.

Assessing the sectoral impact, the report points to stability for buyers. "With no change in property GST rates, buyer sentiment remains unaffected, avoiding confusion or deferment of purchase decisions," it said.

However, the impact is likely to vary across affordable, mid-income and premium housing categories. "Also, whether developers will pass on the benefits to customers will bear watching," the report concluded.

- ANI

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Reader Comments

P
Priya S
This is a welcome move by the government. Construction costs in India have been rising steadily, making it difficult for middle-class families to buy homes. A 3.5-4.5% reduction might seem small but it adds up when you're buying a flat worth ₹50-60 lakhs.
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Aditya G
Good step but I'm skeptical about whether developers will actually reduce prices. They might just increase their profit margins. The government should monitor this closely to ensure benefits reach homebuyers.
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Sarah B
As someone working in the real estate sector, this is a much-needed relief. Cement prices have been a major pain point. The 10% GST reduction on cement alone will significantly improve project viability, especially for affordable housing projects.
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Karthik V
The stability in property GST rates is equally important. Constant changes create confusion among buyers. At least now we have clarity on tax structure while the input costs are reducing. 👍
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Meera T
Hope this encourages more developers to launch new projects in the affordable segment. There's such a huge demand for budget homes in tier 2 and tier 3 cities. This could be a game-changer for the housing sector!
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Robert G
While the GST reduction is positive, I wish they had also reduced rates on steel. Steel is

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