Affordable housing under new GST Rates from September 22

A cityscape showcasing residential buildings under construction with cranes, highlighting the theme of affordable housing growth under GST, featuring visuals of people on balconies and a sunset backdrop.


The Indian government’s “Next-Gen GST Reforms” will take effect on Monday, September 22, 2025. Approved by the GST Council under Finance Minister Nirmala Sitharaman, these changes aim to streamline India’s tax system by replacing the current four-rate structure (5%, 12%, 18%, 28%) with a simpler two-rate system: 5% for merit goods and 18% as the standard rate. A special 40% rate will continue to apply to sin and luxury goods.

Boost for Indian Real Estate

These reforms are expected to have a major impact on residential, retail, and office real estate. By lowering construction costs and simplifying compliance, the changes are likely to spur housing demand, increase project feasibility, and attract more institutional investment. With GST on essential construction inputs like cement being reduced, overall construction costs are projected to fall by 3–5%.

GST and Property Transactions

The GST impact will vary depending on the type of property:

  • Under-construction residential properties
    • Affordable housing: 1% GST (no input tax credit)
    • Non-affordable housing: 5% GST (no input tax credit)
  • Commercial properties: 12% GST (with input tax credit)
  • Exempt categories: Ready-to-move-in homes with a completion certificate, resale properties, and sale of land

Impact on Homebuyers and Developers

  • For homebuyers: With GST on materials like cement slashed from 28% to 18%, construction costs will drop by 3–5%. This could bring down home prices by 1–1.5%, especially in the affordable and mid-housing segments, making homeownership more accessible.
  • For developers: Lower GST on core construction materials will reduce overall project costs. At the same time, the availability of Input Tax Credit (ITC) on materials and services such as cement, steel, tiles, architecture, and engineering supports profitability and helps control prices for buyers.

Transparency and Investor Confidence

GST consolidates multiple state-level taxes into a single national framework. While it demands proper invoicing and reporting, it reduces tax evasion, promotes transparency, and strengthens the credibility of the organised real estate market. This has improved investor confidence and reduced dependence on cash transactions in the sector.

Conclusion

The move to a simplified two-slab GST structure is likely to transform India’s real estate sector. By cutting construction costs, stabilising compliance, and improving transparency, the reforms will make property more affordable and increase buyer confidence. Although challenges remain, this “GST 2.0” reform is expected to be a strong catalyst for sectoral growth, paving the way for a more transparent, affordable, and investor-friendly real estate market.