Will New 5% and 18% GST Slabs Make Homes Cheaper?

The government is planning to simplify GST into just 2 slabs – 5% and 18% – for most goods, while luxury and “sin” goods could attract a higher 40% rate. The new system could be rolled out by Diwali 2025.

Currently, construction materials face different GST rates — cement 28%, steel 18%, paint 28%, tiles and sanitaryware 18%. These taxes directly increase project costs and, in turn, property prices.

How It Helps Homebuyers

As per news reports, lower GST rates will cut developers’ costs, making homes cheaper if the savings are passed on.

• Lower GST will reduce input costs in real estate, helping property become affordable, especially in tier-2 cities like Ludhiana.
• Developers’ margins will improve, but buyers must also get the benefits. Passing on savings will build trust and boost festive demand.

NCR Market Outlook

• As per news reports, GST has already helped NCR by unifying taxes. A 2019 rate cut to 5% improved buyer confidence.
   
  • In H1 2024, NCR sold over 38,200 units (25% YoY growth).
  • But the lack of Input Tax Credit (ITC) is still hurting developers.

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Affordable vs Luxury Housing

• Input cost reduction of 10–20% could make metro and tier-2 housing cheaper.
• Luxury projects may become more expensive if premium imported materials fall under the 40% tax slab.

Conclusion

The proposed GST reform is likely to benefit affordable housing buyers, with lower construction costs potentially reducing prices. However, luxury housing may get costlier due to the 40% slab. Ultimately, the real impact will depend on whether developers pass on tax savings to homebuyers.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.