GST Council’s Tax Cut on Cement and Materials to Lower Real Estate Costs by Up to 4.5%

New Delhi, Sept 2025 – The rationalisation of Goods and Services Tax (GST) rates on key construction materials is expected to ease pressure on India’s real estate sector by lowering overall building costs by 3.5–4.5 per cent, according to a report released on Friday.

A study by Crisil Intelligence said the move, led by the GST Council, could improve project viability, support developer margins, and—if benefits are shared—enhance affordability for homebuyers.

Cement at 18% Slab to Drive Major Savings

The government’s decision to reduce GST on cement from 28 per cent to 18 per cent is expected to deliver the most substantial savings. Cement accounts for nearly 25–30 per cent of a project’s raw material costs. “The cut is likely to improve developer margins and bring down project costs significantly,” the report stated.

Steel, another core input, remains taxed at 18 per cent with no change. However, tax on marble and travertine blocks, granite blocks, and sand lime bricks has been reduced from 12 per cent to 5 per cent. These materials are widely used in mid-range and premium housing projects, where the impact is expected to be notable.

3.5–4.5% Reduction in Costs

Crisil’s analysis suggests that the 10 percentage point cut in GST on cement alone could generate 3.0–3.5 per cent savings in overall construction costs. The additional reduction on marble, granite, and related inputs may contribute another 0.5–1.0 per cent, taking total savings up to 4.5 per cent.

Since construction materials typically account for 50–60 per cent of a project’s overall cost, the revised tax structure is expected to boost both margins and affordability.

Stability in Property Taxation

While the material-side reforms are expected to ease cost burdens, the report pointed out that GST rates on property transactions remain unchanged, providing stability in taxation. Affordable housing continues to attract 1 per cent GST, under-construction properties 5 per cent, and completed properties remain exempt.

Industry analysts believe the rate cuts will not only improve developers’ financial health but could also accelerate project launches and deliveries. If savings are passed on, prospective buyers may benefit from more competitive home prices, giving further momentum to the housing sector.

Crisil concluded that the GST rationalisation marks a “welcome relief” for real estate at a time when developers are balancing rising input costs with sustained demand for housing.