The government implemented only two slabs of 5% and 18% in GST 2.0. With the announcement of Narendra Modi, the real estate sector will get cost relief and home buyers will get the benefit of cheaper prices.
GST 2.0 new rates: The government has made a big change in GST and announced GST 2.0. Now instead of different rates, there will be only two slabs – 5% and 18%. Prime Minister Narendra Modi made this announcement before Diwali. Its purpose is to simplify the process of paying tax and reduce expenses in every sector. This decision can prove to be very beneficial for the real estate sector, which is troubled by expensive input costs and decreasing demand.
At present, GST i.e. Goods and Services Tax is levied in four main rates – 5%, 12%, 18% and 28%. This also includes materials used in construction. For example, 28% GST is levied on cement. At the same time, 12% or 18% GST is levied on steel, paint and electrical fittings. In the new system, the government wants to simplify these rates. Experts say that about 99% of goods with 12% tax can be brought into the 5% slab, and about 90% of goods with 28% tax can be shifted to the 18% slab. This will reduce the tax burden and the cost of construction can also be reduced.
Impact on real estate
The direct benefit of reduced construction cost can reach home buyers. If developers pass on these savings to customers, homes will become more affordable. Affordable housing will get the biggest benefit, as they already attract only 1% concessional GST (without input tax credit). A reduction in raw material prices will make such projects even more viable. At the same time, prices may also come down in mid-segment and luxury projects, which attract 5% GST on the sale of under-construction homes, if builders pass on this relief to customers. Real estate organizations like CREDAI say that this reform can increase the pace of completion of stalled projects and launch of new projects. Its maximum impact will be seen in tier-2 and tier-3 cities, where cost sensitivity is very high.
What do real estate experts say
Rakesh Malhotra, Founder & President, Prime Developments, says, “The recent announcement by the government to split GST into two slabs – 5% and 18% – is a major change for the real estate sector. This progressive move significantly reduces the input tax cost of the developer, making housing projects more affordable. The lower tax slabs will reduce the financial burden on buyers, boost demand and accelerate inventory clearance. This simplified tax structure increases transparency and encourages investment, leading to a robust real estate market. This reform signals a positive outlook, promoting development and affordability in line with the vision of ‘Housing for All’. It is an important step towards reviving the industry and accelerating economic growth.”
Yashank Wasan, Managing Director, Royal Green Realty, said, “The government’s proposal to limit GST to only two rates of 5% and 18% is a very good move for the real estate sector. This will simplify the rules and developers will get the benefit of lower taxes, which will also help home buyers get homes at affordable rates. The reduction in the total cost of the project will increase demand, strengthen buyer confidence and boost housing sales. This is an encouraging reform that reflects the government’s intention to make housing more accessible while promoting growth in the real estate market.”
Sumit Ranjan, COO, Roots Developers, said, “The government’s decision to simplify GST into two slabs is a much-needed and welcome move for the real estate sector. This will bring clarity to the rules, reduce the compliance burden and most importantly, reduce the cost of projects. The input tax relief to developers will reduce the overall cost of the project, making housing more affordable for home buyers and strengthening their purchasing power. This will directly impact the rapid sale of inventory and give a positive boost to the entire sector. This decision is a strong message of policy support, which will further strengthen the trust among both developers and buyers. Overall, this is a meaningful step towards a healthier and more transparent real estate market.”
Manik Malik, CEO, BPTP, said, “The proposal to simplify GST into two slabs is a progressive and long-awaited move that brings clarity and stability to the tax structure. While developers like us, who operate through large EPC and MEP contractors, will continue to bear the burden of 18% GST on contract services, the broader market benefits – in terms of improved liquidity, streamlined compliance and improved investor and homebuyer sentiment – are undeniable. A rational tax regime builds confidence and demand in the long run. In this sense, this reform is not limited to taxes alone, but signals a further strengthening of the foundation for sustainable growth of real estate.”
Also, the 18% rate applicable on specific construction inputs and services ensures that the quality and pace of development is not affected. Developers, being margin conscious, will adapt to the new rate structure to remain competitive in a market where buyers are extremely price sensitive. The dual slab system also sends a strong signal of policy stability, which the real estate sector has been seeking for a long time.
Impact on homebuyers
From a homebuyer’s perspective, the most immediate benefit is a sense of clarity and a reduction in transaction burden. When the tax system is simplified, home pricing becomes affordable and hesitant buyers are encouraged to move ahead. For example, a reduction in tax burden on affordable housing projects directly aligns with the aspirations of first-time homebuyers and the government’s ambitious “Housing for All” mission. Lower overall project costs mean developers can pass on these savings to customers, making entry-level homes more attractive.
In the long term, this improvement could start a positive cycle. The rising demand will encourage developers to complete stalled projects, revive new launches and attract institutional investors back to residential real estate. With clarity on GST, the industry can now focus more on timely delivery and customer-centric innovation rather than wasting energy on tax-related complications.
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