India’s real estate market stands at an interesting crossroads. Demand for affordable homes priced under ₹50 lakh has slowed, while premium and luxury housing sales continue to grow steadily.
The government’s recent GST 2.0 reform, which reduces GST slabs from four to just two—5% and 18%—along with a separate 40% demerit slab, is expected to reduce construction costs significantly.
Experts believe that if developers pass on these savings, home prices could fall by 8-9%.
Arvind Nandan, Managing Director (Research and Consulting) at Savills India, says, “If developers pass on benefits, a 7-8% price reduction is quite realistic. Any reduction above 5% will meaningfully impact total home costs.”
Affordable Housing Demand Faces Challenges
The housing market has behaved peculiarly over the past two years. Post-pandemic in 2021-22, residential sales hit a record, but affordable and mid-segment housing demand dropped by 10-11% since then.
Conversely, premium and luxury units above ₹5 crore continue to show strength.
Nandan explains, “Around 80-85% of the residential real estate market comprises affordable homes, but growth there has slowed. Meanwhile, premium properties are growing steadily. This premiumisation trend is pushing prices up in major cities.”
Experts anticipate that the effects of GST 2.0 will become clearer during the festive season.
“Navratri and Diwali are traditionally auspicious times for real estate. Developers will have little choice but to pass on input cost reductions to buyers,” Nandan notes.
However, high land costs within cities mean large-scale affordable housing projects will not materialise immediately.
While the GST reforms will spur mid-income housing, affordable homes in big cities remain challenging without a reduction in land prices.
Stability in Warehousing and GCC Sectors
While residential real estate sees fluctuations, office and commercial sectors remain stable, buoyed by the service industry.
Co-working spaces, which declined during the pandemic, are rapidly rebounding, now accounting for over 20% of the market.
India has also become a global hub for Capability Centres (GCC), with cities like Bengaluru, Hyderabad, and Chennai supplying two-thirds of demand.
Nandan emphasises, “India is not just a low-cost labour hub; its high-skilled talent pool is unmatched globally.”
The warehousing and logistics sector is also booming, powered by e-commerce, third-party logistics, and manufacturing. The first half of 2025 saw record demand, and the year is set to be historic.
The GST 2.0 reform could be decisive for real estate, helping developers clear unsold inventories and offering buyers price relief.
Yet, without a drop in land costs, affordable housing remains a distant goal. Mid-income segment growth and festive season demand together are expected to drive market momentum.
Nandan concludes, “Real estate is a long-cycle product. Existing stock must be cleared first before we see accelerated growth.”
This GST overhaul marks a significant step towards a more dynamic and accessible housing market in India, blending tax efficiency with growing consumer demand.
Also Read: India’s Pharma Sector Gets A Boost With GST Cuts On Life-Saving Drugs
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