The GST Reality Check: Why Housing Prices in India Haven’t Dropped
GST reform trimmed 3–5% off construction costs.
Yet housing prices haven’t dropped, and developers still face the same hurdles.
The reason is clear: the heaviest tax burdens remain.
◇ Steel (18% GST): Structural costs still at peak rates
◇ Sand (5% + surcharges): Environmental charges keep prices high.
◇ Roofing, Glass, Plumbing, Electricals (18% GST): Core essentials taxed like luxuries
For millions of middle class families, every 1% cost reduction makes the dream of homeownership a practical reality.
True affordability also means stronger local economies, more construction jobs, and thriving neighborhoods in Tier-2 and Tier-3 cities.
The result? A headline reform with little impact on real affordability.
What Real Reform Would Look Like
The single most impactful change would be to reintroduce and streamline the Input Tax Credit (ITC) mechanism for all approved affordable housing projects.
The government’s effort to simplify the tax for homebuyers with a low 1% rate unintentionally created a complex 'tax-on-tax' issue.
The current framework allows developers to pay a low GST on the final sale but denies them the credit for the GST paid on high value materials.
This turns a tax into a direct cost of construction that is passed on to the buyer.
Restoring full ITC would:
◇ Directly reduce costs by eliminating this hidden tax burden.
◇ Promote transparent supply chains as builders source from GST-registered suppliers.
◇ Lead to a tangible reduction in housing prices, turning affordability into reality, not just aspiration.
This systemic change, restoring ITC for affordable housing, could be further strengthened with a unified online platform for B2B construction material transactions. Such a platform would ensure direct GST application and provide a transparent audit trail.
Add single window clearances, public private partnerships, stronger subsidies, and greater use of prefab and green technology to the mix. Together, these measures could reduce costs by 10–15%.
For buyers, builders, and policymakers, smarter GST rules mean more stability, more choices, and a future where housing truly brings dignity and security.
🎯 Your Turn:
If you could change one GST rule, which reform would make the biggest difference for affordable housing in India?
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