Since September 22, 2025, news of lower Goods and Services Tax rates under GST 2.0 has sparked economic buzz. Top fast-moving consumer goods companies, car makers, and electronics stores have started offering lower prices on items to draw in shoppers. These cuts in GST rates are seen as a boost for bigger savings and more spending, which should drive growth through local markets.
With that in mind, the real estate field adds about 7.8 percent to India’s GDP. It ranks just behind farming and tech in creating jobs. So, it’s worth looking at how these lower GST rates affect housing and property. GST works as a tax based on where goods end up. It applies at every step of production and hits all added value. This tax aims to clean up indirect taxes across India. It covers items and services sold inside the country for local use. Since GST taxes the end price of things made at home, it matches the full retail cost.
GST counts as an indirect tax that sellers collect from buyers and send to the government. It acts as one big cover for all such taxes. Before GST, many separate taxes hit goods and services made in India. The goal was a single set of rates from the center that every state would use. It taxes each part of making something, including value added and where it goes. As a product moves along the supply chain, GST gets added at each stop. Buyers end up paying this full amount in the final price.
The idea of taxing at the destination means the item gets charged where it’s used. In real estate, investors and home buyers pay GST on properties still being built. GST took over from old taxes like VAT and service tax that buyers once faced. Under GST, affordable under-construction homes with the Credit Linked Subsidy Scheme carried an 8 percent rate. Other under-construction units sat at 12 percent. Works contracts and mixed supplies for work hit 18 percent. Supplies to government or public use, plus affordable work mixes, came in at 12 percent. Ready-to-move homes with completion certificates skipped GST. So did resale homes and land sales. Starting April 1, 2019, under-construction homes under 45 lakh rupees dropped from 8 to 1 percent GST. This helped affordable buyers save on costs. Luxury units faced 5 percent with no way to claim tax credits on inputs.
To lift the under-construction housing market from its slowdown, the government cut GST rates and lowered the cap on interest deductions for home loans. The GST setup also cuts 33 percent off the contract value for land costs. From September 22, 2025, most building services stay at 18 percent for business projects and mixed contracts with materials and labor. Non-affordable housing gets a flat 5 percent rate without input tax credits. Affordable parts hold at 1 percent, also without credits. GST 2.0 brings down rates on main building supplies too. Cement and ready-mix concrete now face 18 percent, down from 28 percent.
Bricks, tiles, and sand drop to 5 percent from 18 percent. Paints and varnishes fall to 18 percent from 28 percent. Real estate pros say these changes should trim building costs by 3 to 5 percent. That could shave 1 to 1.5 percent off home prices, or about 1,000 rupees per square meter. This assumes builders pass savings to buyers for better deals and reach. For home buyers, it adds up like this:
Lower 1 percent rates on affordable units and 8 percent on others stay the same, so costs feel steady.
Cheaper everyday goods and food leave people with extra cash to spend.
With home prices easing, buyers can push for smaller loans and flexible payments. This might spark more buys in low- and middle-income areas.
Cuts in marble, granite, and stone could trim costs for high-end homes. Still, overall demand hinges on loan access, buyer trust, and nearby roads and services.
Building trust through fair play and clear rules is vital for buyer confidence. The 2016 Real Estate Regulation and Development Act has set up legal safeguards for buyers. Developers can help with honest pricing, clear bills, tough rules against hoarding gains, and online checks. These steps could turn the good vibes from GST 2.0 into real pushes for more home buys and new builds that lift the economy. One more tax tweak to aid affordability would be bringing back input tax credits.
Right now, builders can’t claim credits on inputs, so they add those costs straight to buyer prices. This doubles the tax load on homes. Restoring credits would cut that extra hit and make projects cheaper. For openness, focus on clear records, honest supply lines, and builders using only registered GST vendors. To build stronger trust, make sure price drops are real, not just show. Builders gaining from lower costs must weigh fair prices against their need for profits. When buyers see true affordability, demand for homes will rise. That will push developers to start fresh projects. The main point is this: GST 2.0’s positive feel must become fact. Buyers need to see and feel their real savings from the new tax setup. That will grow trust in housing and in the government’s tax changes.