Recent GST cuts for building materials could be the boost India’s housing sector needs, says M5 Mahendra Group. According to vice president Mahendra Nagaraj, rationalising GST slabs—especially reducing rates by 8–10% on key inputs like cement and steel—would lower project costs, improve viability, and revive buyer confidence. While ongoing projects may not feel an immediate impact, Nagaraj believes that combining GST relief with input-tax credit restoration and faster approvals could accelerate project launches and make housing more affordable.
What impact would GST cuts for building materials have on your project costs and profit margins?
Since our current project is in its final stage of construction, a reduction in GST will not have an immediate impact on costs or margins. However, for upcoming projects, a lower GST rate would significantly reduce input costs and directly benefit project viability.
How much of the total construction cost is currently attributed to GST on building
materials like cement, steel, and tiles?
Around 60% of the construction cost is attributed to core materials like cement and steel.
Since we are also adopting MIVAN technology, the cost pressure is even more pronounced.
Would you pass on the benefits of a GST cut to homebuyers through reduced property prices?
Yes, we will definitely pass on the benefits. Any GST cuts for building materials will be
reflected in the prices offered to homebuyers, ensuring they directly gain from lower input
costs.
Do you believe the current GST structure is a significant deterrent to affordable housing development?
The revised GST structure can be a boon for new homebuyers and investors, especially in
the affordable housing segment. Rationalising tax rates will make housing more accessible
and encourage broader participation in the market.
What specific GST rates would you recommend for key construction materials to boost the sector?
We humbly recommend reducing the GST slab by about 8–10% on essential construction
materials. This would provide an immediate boost to the sector by lowering project costs.
Have high GST rates affected your decision-making regarding launching new projects or expanding existing ones?
Yes, high GST rates have definitely impacted project timelines. The high input costs make
new launches more capital-intensive, leading to delays in decision-making.
Are there materials where the GST rate seems especially misaligned with industry
expectations or cost realities?
At present, the GST on many construction materials is only partially aligned with industry
expectations. There is scope for further rationalisation to bring rates closer to cost realities.
If the government reduces GST on certain materials, how quickly do you believe the market would respond with increased activity?
We anticipate that within 60 to 90 days of a GST cut, the market will begin responding
positively. This would translate into quicker project launches, stronger investor sentiment,
and lower cost pressures.
What role can state governments play in advocating for lower GST rates on construction inputs?
State governments can play a vital role by presenting the case for reduced GST and
highlighting the positive impact it would have on both infrastructure development and
homebuyer sentiment. Their advocacy can add momentum to policy reform.
Do you think GST on building materials should be treated differently for affordable vs luxury housing projects?
The cost of input materials remains the same across both segments. However, luxury
housing already attracts higher GST on the sale of homes. Relief in input tax for affordable
projects would make more sense from a policy perspective.
How has the lack of input tax credit in residential construction impacted overall cost structures post-GST implementation?
The absence of input tax credit has inflated overall costs, as developers cannot offset GST
paid on raw materials against output tax. This has created additional financial burden,
reducing margins and limiting affordability.
If the government were to reduce GST on materials, what complementary reforms should accompany it for maximum impact?
Alongside a GST cut, reforms such as restoring input tax credit for residential construction,
faster approval mechanisms, and incentivising sustainable construction technologies would
maximise the positive impact. These measures would not only reduce project costs but also
encourage faster delivery and higher quality housing projects.
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