Buying or building a house may soon become cheaper. The government is working on a plan to simplify and rationalize GST rates on construction materials-a move that could directly reduce the overall cost of homes.
Why Home Prices Are High Now
At present, different GST slabs apply to key building materials:
- Cement & Paint – taxed at 28%
- Steel & Tiles – taxed at 18%
This varied taxation inflates the project cost, which eventually gets passed on to homebuyers. If the government introduces a uniform and lower GST slab, builders’ costs will decline, and buyers could benefit through reduced prices.
Affordable Housing: Minimal Impact, But Still a Plus
Currently, affordable homes attract just 1% GST. Though this rate won’t change much, introducing Input Tax Credit (ITC) could still lower builders’ costs further, making housing slightly cheaper even in this segment.
Relief From Soaring Construction Costs
Between 2019 and 2024, construction costs shot up by nearly 40%, with a 27% rise in just the last three years. Lower taxes on essentials like cement and steel could bring much-needed relief to both developers and buyers.
Who Benefits the Most?
- Middle Class – Staring at rising inflation and high EMIs, the middle-income segment will be the biggest beneficiary. Lower tax means lower cost and reduced EMI burden.
- Luxury Homes – This segment may face a setback. If high-end fittings and imported materials fall under a 40% tax slab, builders might either raise prices or cut into profits.
The Bottom Line
For most Indians, especially the middle class, the new GST rule could turn out to be a game-changer in making housing more affordable. However, the luxury segment might see the opposite effect.