IGI Logo

The Union Budget 2025 is expected to offer critical support to the real estate sector, addressing key challenges and leveraging opportunities for growth. As one of India’s largest and most vital industries, real estate contributes significantly to the nation’s GDP and employment. The government is likely to introduce measures to boost affordability, ease of doing business, and sustainability within the sector, while ensuring the creation of a robust housing ecosystem.

Affordable Housing Initiatives

The real estate sector's top priority for Budget 2025 is likely to be the revival of affordable housing. India continues to face a massive housing shortage, especially for the economically weaker sections (EWS) and lower-middle class. The government is expected to extend tax benefits under Section 80-IBA, which provides a tax holiday for developers constructing affordable housing projects. Moreover, the price cap for affordable housing, currently set at Rs.45 lakh, may be revised to reflect market realities, especially in metro cities and Tier 1 locations. This revision would encourage more developers to focus on affordable housing, which aligns with the government’s vision of ‘Housing for All.’

The introduction of subsidies or lower interest rates on home loans is also anticipated, which would make homeownership more accessible to the middle class and the underserved segments. With the increasing cost of construction and raw materials, the extension of incentives and support for affordable housing will stimulate demand and ease the financial burdens on both developers and buyers.

Tax Reforms and Relief

A major demand from the real estate sector is the reduction in taxes, particularly the Goods and Services Tax (GST) on residential properties. Currently, GST on under-construction properties is 5% without input tax credit, which many developers argue increases the overall cost of homes. Reducing this rate or offering tax exemptions on key raw materials like steel and cement could help developers lower costs and pass on the benefits to buyers.

There is also a strong demand for increasing the limit for tax deduction on home loan interest under Section 24(b) from Rs.2 lakh to Rs.5 lakh. This reform would encourage more people to invest in residential properties and help them manage the burden of home loan repayments more effectively. Additionally, changes in the capital gains tax structure for real estate transactions may be introduced to reduce the burden on investors and facilitate smoother transactions.

Industry Status and Easier Financing

The real estate sector has long requested the grant of "industry status," which would make it easier for developers to access low-cost financing and raise funds. If the government grants industry status to real estate, developers would benefit from lower interest rates on loans, better credit facilities, and easier access to institutional funding. This is particularly important for the growth of commercial real estate and large-scale infrastructure projects. Moreover, such a move would help in the formalization of the sector, encouraging more transparency and reducing the reliance on informal financing channels.

Sustainability and Green Building Incentives

With increasing concerns about climate change, sustainability is likely to be a key focus for Budget 2025. Developers may be incentivized to adopt green building practices and environmentally friendly technologies. Proposals may include providing tax deductions or rebates for those using sustainable materials, implementing energy-efficient solutions, and reducing the carbon footprint of buildings. Encouraging green real estate development will not only help developers meet international standards but also create eco-friendly cities for a growing population.

Infrastructure Development

The government is expected to announce continued investments in infrastructure, such as roadways, metro projects, and public transport networks, all of which will directly benefit the real estate sector. By improving connectivity, especially in Tier 2 and Tier 3 cities, the government will unlock new areas for real estate development. The establishment of smart cities, urban renewal projects, and logistics hubs will boost demand for residential and commercial properties, fostering growth in the real estate market.

Above views are of the author and not of the website kindly read disclaimer