GST Cut on Key Construction Materials: Impact on Build Costs and Home Buyers

India has announced a GST Cut on Key Construction Materials, aiming to boost affordability and growth in the housing market. Most notably, cutting GST on cement to 18% (from 28%) and placing several stones/bricks at 5%—and this combined blog explains what changed and how it will impact the real estate industry and the construction process for buildings and villas. The changes are part of a two-slab rationalisation and are slated to take effect from September 22, 2025, with the potential to lower overall build costs by roughly 1–5% as savings flow through supply chains and contracts. 

What changed

·         GST has been simplified into two primary slabs—5% and 18%—with construction inputs reclassified to reduce tax incidence, cut disputes, and streamline input tax credits across projects

·         The headline move is bringing cement down to 18% (from 28%) and moving several stone/brick inputs to 5%, directly targeting high-weight items in project bills of materials. 

Effective date

·         The revised rates apply from September 22, 2025, aligning with the broader rate rationalisation timeline announced alongside the two-slab framework. 

·         Contractors and suppliers are expected to plan procurement, invoicing, and ITC reconciliation around the effective date to capture the full benefit within ongoing contracts. 

Materials impacted

·         Cement: 28% → 18%, easing one of the largest input tax burdens for real estate and infrastructure.

·          Stones/bricks: Multiple categories guided to 5%, reducing core masonry and finishing costs across residential and commercial builds. 

·         Ready-mix concrete: Industry coverage indicates alignment at 18%, reinforcing relief for structural works and slab casting cycles. 

Energy and upstream effects

·         Reporting in the documents highlights the removal of the ₹400/tonne compensation cess on coal alongside moving coal to 18% GST, which can reduce overall energy-related tax incidence for energy-intensive cement production and downstream construction. 

·         Lower friction in upstream energy taxation can stabilise ex-factory cement prices as new rates and input tax credits settle in after September 22, aiding smoother procurement transitions.

 Quick cost math

·         A reduction from 28% to 18% GST implies the tax-inclusive price of cement falls approximately by $ (1.28 - 1.18)/1.28 = 7.8125% $, assuming the ex-tax base remains unchanged

·         Broker and channel checks referenced in the documents suggest a potential reduction of roughly ₹25–30 per cement bag as markets adjust to the new rate, improving both retail and project-side procurement economics.

Impact on homebuyers

·         If developers pass on input tax savings, entry-level and mid-segment homes could gain price headroom, improving affordability and buyer sentiment during the festive cycle and beyond.

·          Affordable housing—which has seen a declining share since 2019—may revive as lower input costs ease margins and enable sharper ticket sizes in sub-₹40 lakh projects. 

Impact on developers and infra

·         Lower GST on inputs supports margins and cash flows, enabling faster launches and smoother execution, particularly in cost-sensitive segments and during the festive demand window.

·          Some reports included in the documents also mention relief on other critical inputs (e.g., steel references at 18%), which—if reflected in procurement baskets—would further strengthen capex math for developers and infrastructure players. 

Real estate impact

  Price headroom: Developers gain flexibility to hold prices or enhance

specifications; where pass-through occurs, overall apartment and villa pricing could ease by around 1–5% depending on the material mix and project stage.

·          Demand uplift: Lower effective input taxes can ease viability in the mid and affordable segments, improving absorption as inventory gets re-invoiced under the new regime.

    Construction process impact

·         Procurement and scheduling: Expect tender repricing, delivery re-timing, and leaner dealer inventories before go-live, with invoicing optimised post–September 22 to book the lower rate.

·          ITC and compliance: The two-slab regime reduces classification disputes and friction in input tax credit flows, helping accelerate project cycles and smooth working capital.

Segment-wise effects

·         Residential apartments: Mid-market and mid-premium projects benefit most from input relief, while ultra-premium segments may see modest end-price changes but better scope for quality upgrades within target budgets. 

·         Villas and plotted housing: Material-heavy builds (cement, stone, tiles) see direct gains, translating into improved bill-of-materials economics and potential specification upgrades without breaching cost ceilings. 

Comparison table

Item	Old GST	New GST	Why it matters
Cement	28%	18%	High-weight input; ~  tax-inclusive relief if the base price is constant, aiding structural cost reduction
Ready-mix concrete	28%	18%	Aligns concrete supply with cement relief, easing slab and structural works timelines
Bricks/tiles/sand	12–18% ranges	5%	Cuts core masonry and finishing costs across residential builds
Marble/travertine/granite blocks (uncut)	12%	5%	Reduces stone finishes and cladding costs, common in mid-to-premium projects
Coal and allied fuels	5%	18% with cess removal interactions	Upstream energy tax changes can indirectly support stable cement pricing and downstream economics

What stakeholders should do?

·         Developers and contractors: Reprice BOQs, align GRNs and invoicing to post–September 22, and update ERP tax codes and ITC reconciliations to promptly lock in benefits.

·          Homebuyers and channel partners: Track festive-season pricing and offers as new-invoice inventory hits the market and input tax savings are gradually passed through. 

Bottom line

·         The GST shift to 18% on cement and 5% on several stones/bricks is a decisive relief that can trim construction costs by roughly 1–5% in practice, with the new rates effective from September 22, 2025.

·          Mid and affordable housing could see the clearest boost, as lower input taxes support sharper pricing, faster execution cycles, and improved buyer sentiment through the festive season and beyond.