State-Level Charges May Offset GST Benefits in Real Estate, Industry Leaders Caution

Real estate industry stakeholders have expressed concerns that rising state-level charges could potentially neutralize the positive impact of recent GST rationalization measures on construction materials, despite significant reductions in taxes on cement, steel, marble, and bricks being implemented in Bengaluru during September 2025.

GST 2.0 Reforms Show Promise for Construction Sector

The latest GST reforms in Indian real estate have brought substantial relief to the construction industry. Industry experts report that cement GST has been reduced from 28% to 18%, with similar reductions applied to other key building materials. These changes are expected to lower overall construction expenses by approximately 5%, which could translate to a 2-4% reduction in affordable housing prices and 2-3% decrease in mid-segment project costs.

Market analysts suggest that these reforms are positioned to boost buyer sentiment and stimulate festive-quarter demand, particularly benefiting tier-2 cities and metropolitan markets. The GST impact on under-construction properties is expected to be particularly significant for homebuyers.

State-Level Cost Escalations Create Offsetting Pressure

However, industry bodies have highlighted concerning trends in state-level charges that threaten to diminish these benefits. Officials report that stamp duty rates have increased from 5% to 6%, with additional cesses being imposed concurrently. Registration fees have experienced a substantial doubling, now standing at 2% of property value.

Guidance Value Adjustments Add Financial Burden

Property transaction costs have been further impacted by guidance value hikes ranging from 30-50%, with additional revisions being considered by state authorities. These adjustments have created a significant cost burden for property buyers and developers alike.

Administrative Delays Compound Industry Challenges

The ongoing delays in resolving the e-khata system, which serves as a crucial component for legal property documentation, have reportedly slowed business operations by as much as 25%. This administrative bottleneck has created additional uncertainties for both developers and buyers in the market.

Comprehensive Cost Impact Analysis

Industry Outlook Remains Cautiously Optimistic

Representatives from Credai-Karnataka and other developer associations acknowledge that GST 2.0 reforms possess the potential to reduce housing prices and reinvigorate market demand. However, they emphasize that the combined impact of state charges and regulatory inefficiencies could potentially cancel these advantages.

Industry experts suggest that retail buyers may not experience substantial relief unless state policies are properly aligned with central GST reforms. Many market observers anticipate that tangible benefits will only become apparent by early 2026, provided that central and state reform initiatives work in coordination. This aligns with broader discussions about capital gains tax optimization strategies that property investors are considering.

The situation reflects the complex interplay between federal and state taxation policies in India's real estate sector, where buyers must navigate multiple layers of charges and fees. For those interested in understanding the broader tax implications, our guide on capital gains tax compliance provides valuable insights.