Buying or building a home in India may soon cost less. The government is working on a proposal to simplify and reduce GST rates on key construction materials—a step that could significantly lower the overall cost of housing projects.
Why Are Home Prices So High Right Now?
Currently, construction materials fall under different GST slabs, which directly impacts the cost of homes. For example:
- Cement and Paint are taxed at 28%
- Steel and Tiles attract 18%
This uneven taxation raises project expenses, and developers almost always pass on these costs to buyers. If a uniform and reduced GST rate is introduced, builders’ expenses could decline, directly making homes more affordable for end buyers.
Impact on Affordable and Middle-Class Housing
Affordable housing projects already benefit from a low GST rate of just 1%. While this may not change much, the introduction of Input Tax Credit (ITC) could help builders save more, which may trickle down to buyers as slightly reduced costs.
The bigger impact would be felt by the middle-class segment, which has been under immense pressure due to rising inflation, construction cost hikes, and heavy home loan EMIs. A reduction in material taxes could offer considerable relief, making homeownership more accessible.
Luxury projects, however, might not benefit the same way. If premium fittings and imported building materials are taxed at higher slabs like 40%, developers may either increase prices or absorb the hit on profits.
Conclusion
With construction costs rising nearly 40% between 2019 and 2024—27% in just the last three years—any tax relief on essentials like steel and cement would be a welcome move. For the majority of homebuyers, especially the middle class, lower GST on construction materials could be a real game-changer, reducing overall home prices and easing EMI pressures.
However, the luxury housing market might face a tougher road, as higher taxes on premium materials could offset the benefits.
In short, a revised GST framework could make homeownership a far more achievable dream for millions of Indians.
