States have also supported the changes to be made by the central government regarding GST. Under this, it has been agreed to keep only 2 slabs in GST. Which includes 5 percent and 18 percent tax. Apart from this, a tax of 40 percent will remain further on Sin products. After improvement in GST, many things will be cheaper. Its effect will also be seen on the real estate sector. This is likely to make cement and steel cheap. But the price of houses can increase. EMI of expensive home may increase.
In recent times, different GST rates are applicable on different construction materials on real estate projects. For example, 28% tax is levied on cement and paint and 18% tax on steel, tiles, sanitaryware. These directly affect the cost of different rates project and prices of homes. Experts say that if these rates are made uniform, then the cost of developers can be reduced significantly.
Rising costs, low profits
Construction costs have increased a lot in the last few years. Between 2019 and 2024, this cost increased by 40%, out of which 27.3% increased in just three years. The cost of grade A projects in Tier-1 cities was Rs 2,200 per sq ft in 2021, which increased to Rs 2,800 in 2024. In such a situation, tax exemption on things like cement and steel can provide some relief.
In the Business Today report, TRG Group MD Pawan Sharma said that the demand for affordable houses has increased, but the removal of ITC burden the cost of the projects. Especially due to the price of materials like cement and steel. He said that over time this increased cost reaches the buyers. If partial ITC is re -implemented, both buyers and developers will benefit.
Challenges of luxury houses
The uniform GST system will not give the same benefit to all types of homes. Luxury projects, which are dependent on expensive materials, if 40% tax comes into the slab, their cost may increase. AIL Developer MD Sandeep Aggarwal said that the implementation of 18% tax slab on cement and steel will reduce the cost. This can reduce the tax burden by 10-20%, which can improve the prices of homes in big and small cities. But 40% tax can be harmful for luxury homes. He said that in markets like Goa, where lifestyle houses are increasing, simple GST slabs can increase transparency and attract investment. At the same time, an expert said that luxury projects are dependent on expensive and imported materials. If these 40% tax falls in the tax slab, the cost will increase a lot. Nevertheless, he believes that the strong demand for luxury houses in NCR will support the increase.