Festive season, GST rate cuts set stage for housing demand revival: Mohit Goel of Omaxe

The recent GST rate cuts on cement and key construction materials are poised to ease input costs for developers by 2–4%, creating room for competitive pricing and improved project viability.

According to Mohit Goel, Managing Director of Omaxe Ltd, the timing aligns perfectly with the festive season, which typically drives a 15–20% surge in housing enquiries.

This combination of lower costs, stable interest rates, and seasonal demand is expected to set the stage for a revival in housing demand, particularly in the affordable and mid-market segments. Edited Excerpts –

Q) What kind of impact do you see post-GST rate rationalisation as the council cuts rates on cement and materials?

A) The GST rate rationalisation sets the stage for the next phase of housing demand. With tax on cement trimmed to 18 per cent and on materials like marble and granite to 5 per cent, input costs, which typically make up 50 to 60 per cent of a project’s total construction expense. It will ease meaningfully over the coming quarters.

This will allow future procurement cycles to be more cost-efficient and gives developers room to plan pricing more competitively in the under-construction segment. Looking ahead, the timing could not be better.

The festive season traditionally drives a 15–20 per cent uptick in enquiries across most markets, and a lower cost base combined with stable interest rates creates the right conditions to bring new inventory to market.

Over the next two to three quarters, we expect this clarity to support faster decision-making for both buyers and developers, strengthen project pipelines and keep affordability within reach even as demand continues to shift towards quality, lifestyle-driven housing.

Q) How quickly are developers likely to reflect these cost savings in pricing for homebuyers — especially in ongoing projects still under older contracts?

A) It will always be our objective to pass on cost benefits to homebuyers as soon as we practically can. For projects already in the pipeline, pricing is linked to existing contracts and procurement cycles, so the full effect of the GST cut will flow in gradually.

As new tenders are issued and fresh material orders placed, we expect the lower rates to reflect within one to two quarters. In ongoing projects under older fixed contracts, the immediate impact is likely to improve margins first and then be shared with buyers as inventory clears.

Broadly, visible adjustments in market pricing should emerge over the next three to nine months, depending on project stage and contract structures.

Q) With GST on cement cut from 28% to 18%, and on materials like marble, granite, and bricks reduced from 12% to 5%, how much can average construction costs realistically drop?
A) In the last few years we have all seen construction material prices move up sharply, and in most projects materials account for close to 50 to 60 per cent of the total cost.

The GST cuts on cement, marble, granite and similar inputs are a meaningful step in easing that pressure, but the overall impact will be measured.

Realistically, the impact on the total construction cost is likely to range between 2 to 4 per cent once the new rates flow through contracts and supply chains.

It is important to remember that cement and finishing materials are just one layer of the cost stack. Labour, steel, fittings, site overheads and logistics still make up a large portion of spend and have also moved up.

So while the tax change will not transform pricing overnight, it definitely improves project viability and gives some headroom to maintain affordability in the under-construction segment.

Q) Which housing segments are likely to benefit the most?
A) The immediate beneficiaries will be affordable and mid-market housing where margins are tight and material cost sensitivities are highest. Lower input taxes on cement and finishing materials directly improve viability for mid-segment developers and make homes more accessible to first-time buyers.

Premium and luxury segments will also benefit, but to a lesser degree because a larger share of their cost base lies in high-end finishes and imported fittings which may not see the same rate cuts. At Omaxe we expect this reform to reinforce our focus on balanced portfolios.

We are also looking at accelerating launches and improving pricing traction in our mid-market and tier-2 town projects while continuing to deliver high-quality offerings across segments.

Q) When will the new GST rates realistically start reflecting in new tender negotiations and developer cost models?
A) For new tenders and upcoming procurement, the revised GST rates are likely to flow into supplier bids almost immediately after notification.

Most contractors and vendors typically adjust their quotes within one or two billing cycles, so the effect on tender pricing should be visible over the next 30 to 90 days.

Across the industry, cost models and budgets are generally refreshed in monthly or quarterly reviews, which means the new tax structure will be factored into planning quite quickly.

Q) Could these rate cuts invigorate new project launches and accelerate housing supply in key urban markets?
A) Yes, tax rationalisation improves project economics by an estimated 2–4 per cent and lowers execution risk for cost-sensitive segments, which can encourage a steady uptick in new launches.

Residential launches in India grew 27 per cent year-on-year in 2023, and tier-2 cities already account for 30–35 per cent of housing demand nationwide.

Lower GST, combined with stable interest rates and the festive buying season, provides a strong backdrop for fresh supply in both tier-1 and high-growth tier-2 markets.

Launch momentum will still depend on land pipelines and approvals, so growth will be measured rather than abrupt.

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