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GST rate cuts: Is building on your own plot more affordable than buying an apartment in a gated society? Find out
Lower GST on cement, granite, and tiles makes self-built homes slightly cheaper, but the benefit must be weighed against higher tax on composite contracts
In its 56th meeting, the GST Council rolled out a new two-slab structure of 5% and 18%, terming it a Diwali bonanza for consumers. With rates on cement, marble, granite, fly ash bricks, and boards lowered, construction material costs are set to ease, potentially reducing home prices if developers pass on the benefit. But how much will individual homebuilders really save? And will building on an owned plot turn out cheaper than buying an apartment in a housing society? Let’s find out.
GST overhaul brings direct savings for homebuilders
The recent GST reforms have addressed the long standing demand of the real-estate and infrastructure sector to reduce the rate of cement taxed at 28% which was punitive for the sector. "Reduction of the rate of cement from 28% to 18% will help in reducing cost of construction and give a boost to the sector,” says Shashank Shekhar, Partner, DMD Advocates, a legal consultant.
Supposing 100 bags of 50 kg each costing ₹1,000 per bag is required for construction of a house. Up to September 21, 2025, a household would be spending ₹28,000 as GST on purchase of cement. However, after the new rates come into force, the same household would be spending only ₹18,000 towards cement. So it is a direct saving of ₹10,000. Similarly, GST rates have also been brought down for a few other building materials such as marble and granite blocks from 12% to 5% offering direct savings to households.
To put this into perspective, consider a person planning to build a single-storey, 1,000 sq ft home on a 300 sq yard plot in a Tier-2 city. The project includes basic construction materials, cement, steel, tiles, bricks, and boards, as well as interior materials like modular kitchens and wardrobes.
"Cement would be around 16 per cent of the cost. Bricks maybe 4 per cent, granite about 0.5 per cent, and boards for false ceiling about 1 per cent. So, if the total project cost is ₹30 lakh, then on cement the saving comes to around 80,000, on bricks 1.2 lakh, on granite about ₹15,000, and on boards about ₹30,000. That adds up to a total saving of about ₹59,550. So overall, the saving is roughly 2 per cent of the total cost, around ₹60,000 on a ₹30 lakh project,” explains Vivek Jalan, partner, Tax Connect Advisory Services.
Understanding composite contracts
Composite contracts that include both materials and labour for personal-use homes now attract 18% GST, compared with 5% for properties sold by developers, since these are considered works contracts. Pure labour services, however, remain GST-exempt when used for a single residential unit intended for personal use.
As we have seen for a ₹30 lakh home you are constructing on your own, the reduction in GST on materials could save around 2% of the total cost, or roughly ₹70,000. However, the actual benefit depends on the contract type. Since GST on works contract services has increased from 12% to 18%, if a significant portion of the project, say ₹18 lakh, is part of a composite contract that includes both materials and labour, the 6% increase could add ₹1,08,000. This would wipe out the potential savings, say experts.
On the other hand, pure labour services for a single residential unit remain GST-exempt. If you buy materials yourself and only hire contractors for labour, you can enjoy full savings on reduced GST for construction materials, they explain.
However, for interiors, like a ₹3 lakh modular kitchen installed by a single vendor, GST may be higher as it counts as a works contract, reducing the net benefit.
Therefore, for constructing a 1,000 sq ft home on a plot, construction costs range from ₹15 lakh to ₹25 lakh, excluding land. GST savings are proportionally similar but modest. While ₹70,000 may help with finishes or reduce loan dependence, families should look at separating material procumbent and labour to maximise benefits, experts say.
Are the GST rate cuts on construction materials significant?
The total savings on a ₹30 lakh home still work out to roughly 2%, or around ₹70,000. While this may seem modest, it does help ease some financial pressure, though many families might have expected greater relief given the overall cost of construction.
For comparison, the cost of constructing a 1,000 sq ft home in a city like Greater Noida can vary between ₹2,800 and ₹3,500 per sq ft, depending on material quality, labour charges, and interiors. This means the total construction cost could range from ₹28 lakh to ₹35 lakh, making the GST-related savings proportionally similar but not transformative.
In short, while the GST cuts offer some relief, especially on raw materials, families planning to build their own homes should weigh the benefits against the higher GST on composite contracts and consider that the total impact may only be a small fraction of the total project cost.
“This gain is partially offset by the increase in GST on works contract services from 12% to 18%,” says Rahul Singh, senior manager, Taxmann, a tax and corporate advisor.
Overall, the GST cuts give homeowners some breathing room. “If suppliers pass on the benefit, it will be easier to manage costs without compromising on quality. This not only reduces financial stress but also makes building a dream home more achievable,” says Rohit Asthana, president of sales and marketing at Ultratech Texture Paints.
Therefore, for families who have saved for years or are taking a home loan, this relief can help with better finishes, essential appliances, or slightly reducing the loan burden. While welcome, the reduction is not that substantial and may be smaller than many homeowners expected, say experts.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
