Cement GST rate cut expected to spur festive season demand, cut construction costs

The Union government announcing a cut to the goods and services tax (GST) rate for cement to 18 percent from 28 percent is expected to provide a boost to demand ahead of the festive season, as well as cut costs for developers and infrastructure players.

While cement demand, as well as pricing, recovered in the first quarter of the ongoing fiscal, analysts said that a further boost in demand is needed for cement makers to maintain margins after a frenetic round of mergers and acquisitions, particularly among the top four players. According to a report by ICRA, cement demand increased by around 8 percent across the industry to 120 million tonne.

For FY26, market estimates see cement demand growing by 6-7 percent to around 480 million tonne, with strong real estate demand negated by sluggish demand in infrastructure. Despite strong spending in the infrastructure segment by the Union government, many state governments lag on capital expenditure projects.

In real estate, developers are expected to reap some benefits in terms of construction costs, with Yes Securities, in a recent report, seeing a reduction of costs by around Rs 12 per square foot in urban areas. The brokerage assumed a reduction in GST to 18 percent for its report.