With the government all set to initiate big GST rate reforms, marking the second major fiscal stimulus in FY26 after personal income tax cuts, the real estate industry sees it as a major boost both for homebuyers as well as developers. As the government puts more disposable income in the hands of customers, termed as Diwali gift by Prime Minister Narendra Modi, it's set to spur demand across the sectors, including real estate, feel experts.

"It would lower the prices of key inputs like cement and steel, bringing the overall construction cost down. Developers can then channel the funds into improving project delivery time. For homebuyers, this is likely to bring down the prices of homes as developers pass on the benefits to the buyers, especially in the affordable and mid-budget segments. Over a longer period, it has the potential to stimulate stronger end-user activity and deepen housing penetration in Tier II and III cities," Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, told Fortune India.

He also sees a rationalised and simplified GST framework improving investor confidence, and bringing in more money into the sector while enabling developers to build more future-ready assets.

After years of deliberation, the Centre has decided to undertake the much-needed rationalisation of GST rates, reducing the number of slabs from four to just two, with a special 40% rate, which will largely apply to “luxury” or “sin” products. Around 99% of items are currently taxed at 12%, which could be moved to a 5%, and around 90% of goods in the 28% bracket may shift to an 18% slab. With this rationalisation in rates, key goods related to the real estate sector, specifically cement, steel, and other construction materials, would benefit.

Real estate stakeholders say GST 2.0 will provide benefits to homebuyers with greater affordability and transparency in transactions. "By reducing tax burdens on key construction materials and simplifying compliance, the change can ease cost pressures on developers while creating opportunities for more competitive pricing," said Robin Mangla, President of M3M India. Such measures not only boost confidence among both developers and buyers but also strengthen the foundation for long-term stability and growth in the housing market, adds Mangla.

Calling it an "impactful reform", Parvinder Singh, CEO of Trident Realty, says the simplification of GST slabs eases the overall tax load. "This reform is expected to make quality housing more accessible while energising demand across key urban markets."

Boon for homebuyers

The industry players feel the new GST regime could spur new supply and boost demand from homebuyers. The lower construction costs will increase people's purchasing power, thus making property ownership a more attractive proposition. "A clearer, two-slab GST structure will also provide buyers with greater transparency about their overall tax liability, improving trust and confidence in the sector. Overall, the move can provide the momentum needed to boost demand, spur new supply, and strengthen housing accessibility across segments," says Aman Sarin, Director and CEO of listed player Anant Raj.

India is seeing a huge dip in the supply and sales of homes below ₹50 lakh. In H1 2025, sales of homes costing up to ₹50 lakh were recorded at 37,796 units, lower by 18% YoY and by 43% since H1 2024. The primary challenge for this category has been the declining supply of new homes. The industry players feel for homebuyers, the reform offers a dual advantage, more competitive price points as well as added value.

Anant Raj's Sarin says homebuyers will directly benefit from the lower construction costs, which will translate into reduced property prices and improved affordability. Sudeep Bhatt, Director of Strategy at Whiteland Corporation, says a reduced GST rate in the Indian economy is a powerful lever to stimulate consumption. "For buyers, this makes homes more accessible, since it means directly increasing their purchasing power and making property ownership a more attractive proposition."

By easing the tax burden on key inputs such as cement and steel, this move will help developers manage construction costs more effectively, feels Manik Malik, CEO, BPTP. "For homebuyers, the reform offers a dual advantage, more competitive price points as well as added value, since developers can reinvest savings into further enhanced design, sustainable features, and modern amenities."

Boost to GDP

The government has incurred revenue losses on both the direct tax side through income tax cuts and it will incur losses on the indirect tax side through GST 2.0 adjustments. However, such measures lead to greater household purchasing power. The measures introduced in FY26 have yielded a measurable uplift in household demand. "The income tax rate cut, which led to a revenue loss of ₹1 lakh crore to the government, has effectively enhanced household disposable incomes as it translated into an additional ₹3.33 lakh crore of consumer spending," SBI Research said in its recent analysis of GST 2.0.

The GST 2.0 regime, while also involving an average revenue loss of ₹85000 crore to the government, could boost consumption by ₹1.98 lakh crore, says the think tank. With this, the total impact of these two measures could boost consumption by ₹5.31 lakh crore, which is around 1.6% of GDP, says SBI.

Will the consumer benefit?

So, the ultimate question is whether the consumer will be the real beneficiary of these savings or if there will be any shift. Ambit Capital, in its latest research note, says the government is a significant customer of cement, which purchases it as a raw material for its infrastructure projects. "Since the government will be losing GST revenue by reducing the GST, it’s unlikely that it would be pleased if companies don’t pass on the benefit to customers."

In construction, cement is a basic and essential raw material, followed by paint and sanitary fittings. "These major construction items are currently taxed under the 28% GST slab, which together are likely to provide around ₹35/sq. ft. of cost relief to consumers if the GST rate is reduced to 18%," says YES Securities.