The Indian government's Next-Gen GST Reforms are set to be implemented from today, i.e. September 22, 2025, following approval from the GST Council led by Finance Minister Nirmala Sitharaman. These reforms aim to simplify India's tax framework, moving from a four-rate system of 5%, 12%, 18%, and 28% to a primarily two-rate system: 5% (merit rate) and 18% (standard rate), along with a 40% special rate for sin and luxury goods.
A Game-Changer for Real Estate
The reforms are expected to significantly boost the residential, retail, and office real estate sectors. By reducing GST on key construction materials such as cement, construction costs are projected to fall by 3-5%, enhancing project viability, increasing housing demand and attracting more institutional investment.
GST Tax Structure for Real Estate
Under-construction residential properties:
- Affordable housing: 1% GST (excluding input tax credit)
- Non-affordable housing: 5% GST (excluding input tax credit)
Commercial properties: 12% GST (plus input tax credit)
Exempt categories:
- Ready-to-move-in homes with completion certificates
- Resale properties
- Sale of land
Impact on Homebuyers
Lower GST on construction materials is expected to reduce construction costs by 3-5%, potentially lowering home prices by 1-1.5%, particularly in affordable and mid-segment housing. This makes homeownership more attainable for a larger population, boosting buyer confidence.
Impact on Developers and Builders
Developers will benefit from reduced GST rates and Input Tax Credit (ITC), which allows them to claim credit for taxes paid on construction materials like cement, steel, tiles and services including architecture and engineering. The ITC reduces total tax burdens, safeguards margins and ensures cost savings are passed on to buyers without affecting profitability.
By replacing multiple state-level taxes with a centralized GST system, the reforms enhance transparency, reduce tax evasion and strengthen investor confidence. The organized real estate sector benefits from streamlined compliance, accurate invoicing, and a more predictable tax framework.
Conclusion
The simplified two-slab GST system under GST 2.0 is expected to transform India's real estate market, making housing more affordable while boosting transparency and market stability. Lower GST rates on construction materials will decrease property prices, benefit buyers and create a more accessible and profitable environment for developers.
With these reforms, India's real estate sector is poised for growth, increased investment and renewed buyer confidence.
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