Bengaluru: The latest GST slab rationalisation, largely seen as a step towards easing construction costs, has been welcomed by the realty sector in the state but optimism is tempered by a familiar reality: State-level duties and procedural hurdles that threaten to claw back much of the gain.While cheaper cement and steel are expected to reduce construction costs and push housing prices down, higher stamp duty and registration charges, new fees for occupancy and completion certificates (OC and CC), and the unresolved e-khata mess has left the sector wary. For developers, the biggest relief lies in a tax cut on cement — down from 28% to 18% — and other materials such as steel, marble, and bricks. The changes are expected to lower overall construction costs by around 5%, translating into a 2-4% drop in affordable housing prices and a 2–3% dip in mid-segment projects. Sector bodies like Credai-Karnataka say this should ease inflationary pressures and improve buyer sentiment, especially in smaller cities. But the gains are uneven. Affordable housing and infrastructure projects benefit, while commercial real estate faces a blow from the Union Budget 2025 amendment that disallows input tax credit on leased properties, with retrospective effect from 2017. Luxury housing too sees mixed results: Cheaper structural inputs but a steeper 40% tax on imported fittings. Developers warn that Karnataka’s policies risk cancelling out the reforms’ positives with Credai-Karnataka president Bhaskar Nagendrappa flagging rising state levies and the persistent e-khata logjam. He said the e-khata issue alone has slowed business by 25% in recent months. In June 2025, the state had increased stamp duty to 6% from 5%, while cess and surcharge were increased by 0.5% and 0.1%, respectively. On Sept 2, the govt doubled the registration fee to 2% from 1%. All these levies are a percentage of the guidance value — the minimum selling price of a property fixed by the govt. In Oct 2023, the govt had increased guidance value in the range of 30% to 50% depending on the locality. “While GST 2.0 brings substantial relief, the state’s policies are pulling in the opposite direction,” Nagendrappa said. “For instance, the state govt is now considering revising guidance value again, which will add to costs.” He said the sector will see net gains only if state-level bottlenecks are addressed. Industry voices remain guardedly optimistic. K Ravi of Bangalore Chamber of Industry and Commerce called the cement rate cut a boost for both housing and infrastructure, while Venkatesh Gopalakrishnan, director promoter’s office, MD of Shapoorji Pallonji Real Estate, said the move would “ease project costs for developers and improve affordability for homebuyers”. For now, the sector is banking on GST rationalisation to lift demand, even as it presses the state govt to ease local duties and fix procedural hurdles. The expectation is that visible results will emerge from early 2026 — provided state and Centre move in tandem.
