The recently implemented GST cuts for building materials are not enough, says the
Confederation of Real Estate Developers’ Associations of India (CREDAI).
Sourcing Hardware spoke with CREDAI president Shekhar Patel in early October to
understand the association’s recommendations to the government and how the developer
community has responded to the rate revisions that came into effect on September 22,
2025.
CREDAI, the apex body of private real estate developers, believes that further rationalisation of GST on building materials can strengthen economic growth and make the
government’s Housing for All mission more attainable.
According to Patel, the absence of input tax credit (ITC) in residential housing continues to
increase project costs, while taxation on development rights such as TDR, FSI, and joint
development agreements adds another layer of complexity. He explains how the sector
could benefit if CREDAI’s proposals are implemented in full.
Q. Did CREDAI formally request the government to implement GST cuts for building materials? If yes, what was the response?
Yes. We had formally submitted a representation to the Ministry of Finance seeking
rationalisation of GST on building materials. Our submission highlighted that reducing GST
rates would ease the cost burden on the housing sector, make homes more accessible to the common man, and support broader economic growth.
Key proposals include: a single GST rate of 1 per cent without ITC on all residential
apartments, exemption of GST on affordable housing, removal of price-based caps for
affordable housing definitions, exemption of GST on TDR, FSI, JDA, and redevelopment
projects to prevent double taxation, and reductions on key construction inputs—cement
(from 28 per cent to 18 per cent), marble (12 per cent to 5 per cent), and steel/works
contracts (18 per cent to 5 per cent). These measures, Patel says, would boost housing
activity and generate multiplier effects across allied industries.
Q. What is the most pressing GST-related concern among your member developers?
The primary concern is the non-availability of ITC on residential projects, which raises
project costs by an estimated 5–7 per cent. With GST on major inputs such as cement and
steel at 18 per cent — and no credit allowed — the tax outflow becomes part of the cost
structure.
Patel notes that extending ITC and simplifying the GST framework would significantly
improve project viability and encourage faster delivery of housing projects.
Q. How do you foresee GST cuts for building materials affecting employment and
economic activity?
A rationalised GST regime could be a strong growth driver for India’s construction sector. A
reduction of 3–5 per cent in input costs would restore viability, particularly in the
affordable housing segment, leading to an estimated 10–15 per cent rise in new project
launches.
Such growth, Patel adds, could create 5–7 million jobs across trades such as masonry,
plumbing, electrical, and finishing works. The resulting multiplier effect would lift real
estate’s contribution to GDP — currently around 8–9 per cent — and stimulate inclusive
growth in urban and semi-urban areas.
Q. Should GST on building materials differ for affordable and luxury housing?
Yes. A differentiated GST structure is essential to improve affordability for the mass housing segment. Since developers cannot claim ITC on residential projects, the existing rates directly influence construction costs and final home prices.
CREDAI has therefore urged the government to rationalise GST for affordable housing to
stimulate demand and reduce costs, while retaining the current structure for luxury housing to maintain fiscal balance.
Q. How has the lack of ITC affected cost structures post-GST implementation?
The unavailability of ITC has added approximately 5–7 per cent to the total cost of
residential projects. With high GST rates on core inputs such as cement, steel, and works
contracts, developers bear the full tax incidence, which narrows margins and impacts
pricing.
This, Patel observes, has especially affected affordable and redevelopment projects, where
tight margins make additional costs harder to absorb.
Q. Beyond GST reductions, what other reforms could maximise impact?
Complementary measures are needed alongside GST cuts. These include restoring ITC for
residential projects to directly lower costs and make housing more affordable, and
exempting GST on development rights such as TDR, FSI, and JDAs — transactions that
effectively represent land sales.
Patel also suggests revisiting the definition of affordable housing, as inflation has nearly
doubled since it was last revised eight years ago. Combined with a lower GST slab for
affordable-housing inputs and stronger digital checks to ensure compliance, these steps
would help ensure that the benefits reach homebuyers and contribute to sustainable sector
growth.
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