Indian Budget 2025: Key Announcements Impacting Real Estate

Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 with a particular emphasis on economic development, infrastructure development, and investor-friendly policies. Real estate, being one of the key drivers of the Indian economy, has been given high priority, with proposals to enhance affordability, liquidity, and transparency. The sector contributes 7% to India's GDP and is expected to reach a size of $1 trillion in 2030. With a vision of achieving a $7 trillion economy as envisioned by the government, the real estate industry will be among the primary generators of employment opportunities, urbanization, and the growth of infrastructure.

Additional Fiscal Incentives for Home Buyers

The government has also tried to increase the affordability of houses by increasing tax benefits and reducing the financial burden on potential homeowners. All these modifications will spur homeownership as well as push demand for houses.

• The threshold of income tax exemption has been increased to ₹12 lakh per year, making people capable of saving more and spending money on purchasing houses.
• Deduction of interest has been provided on house loans for two houses owned by themselves, thus encouraging investment in the second house.
• The TDS exemption limit on rental income has increased from ₹2.4 lakh to ₹6 lakh per year, reducing tax burdens for landlords and boosting the rental housing market.

Relief for Affordable Housing

Affordable housing is the priority area of the government, with extra funds and policies to provide it to the lower-income groups. The steps will lead to faster completion of the pending projects and lower the cost of homeownership.

• ₹15,000 crore has been provided under the SWAMIH Fund for restarting pending housing projects and completing them in a timely manner.
• The fund will enable developers to complete pending projects, rewarding homebuyers who have been waiting for possession.
• Interest subvention on housing loans to economically weaker sections and low-income groups will aid housing affordability.

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Infrastructure and Urban Development

Infrastructure investment has a direct impact on demand for real estate, particularly in rapidly developing urban cities. The budget's capital expenditure focus will improve connectivity and spur real estate development in some of the regions.

• ₹15.5 lakh crore will be invested in capital expenditure, which will once again boost infrastructure and urbanization.
• Metro rail network expansion and national highways will improve connectivity and drive growth in real estate in new locations.
• ₹1 lakh crore has been pledged under the Urban Challenge Fund to allow cities to raise capital through municipal bonds and public-private partnerships.
• ₹1.5 lakh crore interest-free 50-year loans will be provided to state governments in order to build infrastructure, thus contributing to further growth in real estate.

Commercial Real Estate Development

Commercial real estate is expanding rapidly with the expansion of Global Capability Centers (GCCs). Investment in office buildings, IT parks, and business infrastructure is being promoted by the government.

• The GCCs count will rise to more than 2,100 by 2030, thus the demand for commercial office space.
• Tax relief for encouraging the development of business parks and corporate campuses in new cities has been mooted in the budget.
• Decentralized growth of businesses will be supported through special policies, leading to real estate development in Tier 2 and Tier 3 cities.

Hospitality and Tourism 

The real estate business has a strong positive correlation with hospitality and tourism growth. Pro-tourism policies are included in the forthcoming budget that will create greater demand for resorts, hotels, and rentals.

• There will be 50 new tourism sites that will create hospitality infrastructure investment in real estate.
• A streamlined e-visa process will attract greater foreign tourists, which will boost the rental property and hotel business.
• MUDRA homestay business loans will encourage small business entrepreneurs to invest in hospitality real estate.

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Encouraging Real Estate Investments through REITs

Real Estate Investment Trusts or REITs, have emerged as a prominent investment vehicle in India. The government is restructuring to simplify REIT taxation and improve the liquidity of commercial real estate.

• Taxation of REITs has been simplified to attract more investors, encouraging participation in commercial real estate.
• The new tax system will allow institutional and retail investors to invest in high-ticket real estate developments.
• REITs will allow small investors to benefit from commercial real estate ownership, promoting market accessibility.

Cutting Construction Costs

Huge construction costs have been a developer's and consumer's nightmare. The government has implemented policies to cut material costs and increase cost-effectiveness in real estate development.

• GST on generic building materials like cement and steel has been reduced, trimming overall project costs.
• Developers will be able to claim input tax credits, reducing the cost burden and making housing projects more affordable.
• These changes will boost new developments and make residential and commercial property more affordable.

Improving Transparency in Property Transactions

Property sales are usually affected by legal and regulatory issues. The government is making digital changes to enhance transparency, eliminate fraud, and simplify property deals.

• Land records will be completely digitized to simplify property deals and avoid disputes over ownership.
• There will be a blockchain platform brought in for property verification to offer additional security and confidence in property deals.

Improving the Rental Housing Market

Rental housing is the backbone of the real estate industry, especially in urban areas. The budget is giving incentives for the development of the rental sector and providing subsidized housing.

• The limit of TDS on the receipt of rent has been raised, reducing the cost of compliance with tax by landlords.
• Fiscal incentives will assist in long-term investment in rental housing, expanding the spectrum of quality housing options.

A Well-Balanced Budget for Real Estate

The Union Budget 2025-26 aims for long-term growth, affordability, and transparency in the real estate sector. Consumers are to be benefited by tax exemptions, promotion of affordable housing, and infrastructure enhancement. Developers shall incur a lesser cost and superior liquidity, resulting in fresh launches. Investors are to be benefited through REIT reforms and e-land records to provide a simpler and more secure purchase and sale of property. Overall policies laid out in this budget constitute a strong framework for real estate development, which will aid economic growth and a better investment environment.