Homes to get cheaper? CREDAI says will pass on GST cut benefits to buyers

CREDAI

The Confederation of Real Estate Developers’ Association of India (CREDAI), the country's apex builders’ body, has said it will pass on the goods and services rate (GST) cuts on cement and other construction materials to the customers.

The overhaul of the GST regime has certainly boosted the confidence of the homebuyers, it said.

“The GST rate rationalisation has certainly created a feel-good factor among consumers,” CREDAI chairman Boman Irani told Moneycontrol on the sidelines of CREDAI NATCON in Singapore on September 11.

The developers’ body is still evaluating how much of the cost savings can be passed on to buyers, he said.

“We will pass on whatever benefit is available to the homebuyers but it will also depend on what benefit we get from the cement and other construction material manufacturers. The extent of any price drop will depend on how much construction input costs, like steel and cement, fall and how quickly those savings move through the supply chain,” he said.

On September 3, the GST council revised the rates on key construction materials — including cement, steel, tiles, and other finishing inputs, lowering some of the costs for the real estate sector.

The changes were part of the GST 2.0 which has done away with a four-slab structure, making way for a primarily two rates of  5 percent and 18 percent. A special 40 percent rate will apply to the so-called sin goods, when the new system comes in effect from September 22.

This GST cut on inputs is part of a broader strategy to boost housing demand and improve affordability in the face of rising inflation and supply-side challenges.

If the GST on cement is reduced by 10 percent, a bag priced at Rs 350 could become cheaper by around Rs 30, CREDAI president Shekhar Patel, said.

“But the key question is how much of this reduction will effectively translate into real savings within the construction sector. So, we will have to see and calculate it and whatever the benefit will be it will be passed on to the customer,” Patel said.

CREDAI said while the GST reductions on inputs like cement and steel are a positive step, the market for these materials remains highly concentrated, with a few dominant suppliers.

Despite the rate cut, high stamp duty remains a major cause of concern and puts a big burden on homebuyers. “Stamp duty is outside our purview and it requires serious attention from state governments. Even when other costs are brought down, stamp duty continues to place a significant burden on homebuyers,” Irani said.

The impact of GST cuts and cost reductions will likely vary from region to region and may benefit tier 2 and 3 cities more.

Tier 2 and 3 cities, where construction costs are often higher than land costs, are likely to see a more noticeable benefit. In metro cities like Mumbai, where land costs far exceed construction expenses, the overall impact may be limited, he said.