Homebuyers may get a major relief this Diwali as the government plans to simplify the country’s GST structure. Announced by Prime Minister Narendra Modi on Independence Day, the current four GST slabs of 5%, 12%, 18%, and 28% are set to be reduced to two main slabs — 5% and 18% — with a new 40% slab for luxury and sin goods. The GST Council meeting in New Delhi on 3–4 September is expected to approve these changes.

Biggest Benefits for Real Estate

Experts suggest the real estate sector will gain the most from this reform. Taxes on construction materials like cement, steel, tiles, and paint are expected to drop, directly reducing flat prices. Currently, cement is taxed at 28% and steel, tiles, and paint at 18–28%. If these are moved to the 18% slab, flat costs could decrease by ₹150 per square foot, translating into savings of up to ₹1.5 lakh on a 1,000 sq. ft. apartment.

Current GST Structure in Real Estate

• Under-construction flats above ₹45 lakh: 5% GST

• Affordable housing up to ₹45 lakh: 1% GST

• Ready-to-move flats: No GST

• Building materials: Cement 28%, Steel 8%, Paint 28%, Tiles 18%

Input Tax Credit (ITC) Issue

Since 2019, developers have not been allowed to claim ITC on construction materials, meaning GST on building materials (18–28%) is directly added to flat prices. For instance, a 1,000 sq. ft. flat costing ₹25 lakh may carry an additional ₹5 lakh tax due to non-availability of ITC.

Potential Savings After GST Reform

Experts Weigh In

Real estate specialists believe the reform could provide direct relief of ₹1.5–7.5 lakh, especially benefiting mid-segment and affordable housing. Gaurav Sobti, founder of Homegram, explains that high GST on construction materials currently increases costs significantly. Reducing GST on cement and other essentials to 18% will directly lower construction expenses and make housing more affordable for buyers.