Impact of 5% and 18% GST slabs on home affordability for buyers

Will the New 5% and 18% GST Slab Make Homes More Affordable for Buyers?

The Government of India has announced its plan to simplify the GST structure by reducing it to just two slabs that are 5% and 18%, with a separate 40% slab for luxury goods. This reform, expected to roll out by Diwali 2025, has created a buzz in the real estate sector, as it could significantly impact the property price.

Currently, construction material attracts GST rates on cement at 28%, steel at 18%, paint at 28%, and tiles and sanitaryware at 18%. Since construction costs make up a big part of housing prices, lowering them can make homes affordable.

What Does it Mean for the Homebuyer?

Industrial experts believe the move will further boost the tax regime by reducing the cost, which turns into a benefit to the homebuyers.

Delhi NCR Real Estate Market Outlook

As the Delhi-NCR real estate market has already witnessed a positive impact from the simplification of GST past in 2019. Where the under-construction home was reduced by 12% with ITC and 5% without ITC (Input Tax Credit), a professional real estate business owner from NCR witnessed sales of over 38,200 housing units in H1 2024, marking 25% YoY growth. Considering the absence of ITC continues to challenge developers and may affect long-term affordability.

Affordability vs. Luxury Housing

The impact of the GST proposal slab will affect differently across the segments:

  • Affordable Housing: As the government reduced the cost price to up to 20%, setting a major boost to homebuyers in the 1- and 2-tier market.
  • Luxury Housing: On the opposite side, 40% slab on high-end material pushes the construction cost. As noted, the luxury housing market, like Gurugram, could rise in expenses despite strong demand.

Final Takeaways

The proposed GST has the potential to make homeownership more achievable, especially in terms of affordability, which basically depends on these two factors:

  • If the developers provide the tax benefits to the buyers
  • How governments act on 40% slabs

As far as today’s conclusion, the whole real estate industry is watching closely the approach of the government decision for the coming festival season. The new GST structure could bring relief to both classes.

Sugam Homes, the best real estate company in Kolkata, believes in transparent and affordable property buying. As further the GST reform unfolds will continue to guide you with the latest insight on your investment decision.

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