As Budget 2025 draws near, everyone will watch the government’s policy roadmap, especially in the real estate sector. With real estate accounting for nearly 7% of India’s GDP, it is a major employer and contributor to its economy. It is therefore essential to the economic structure of the nation. Budget 2025 expectations indicate that the rapid growth of infrastructure and urbanization will propel the industry to a $1 trillion market size by 2030.

Developers, investors, and homebuyers are among the stakeholders with high expectations for the Union Budget 2025–26, which is expected to be released on February 1, 2025. To provide growth with a much-needed boost, the industry is searching for tax breaks, incentives for affordable housing, and regulatory changes.

Let’s examine the Budget 2025 real estate expectations in more detail, including how they stack up against the previous year’s budget and potential effects on the market.

A Quick Look Back: Budget 2024 Expectations vs. Reality

The real estate industry made several significant requests in last year’s budget:

• Industry Status for Real Estate: Real estate has long pushed for “industry status” to enhance financing alternatives and lower-interest credit availability.

• Tax Benefits for Homebuyers: To promote homeownership, there was a call to raise the deduction for home loan interest under Section 24(b) from ₹2 lakh to ₹5 lakh.

• Boost of Affordable Housing: Developers requested an extension of the Credit Linked Subsidy Scheme (CLSS) and tax exemptions under Section 80-IBA.

• Stamp Duty Relief: It was anticipated that a decrease in stamp duty, which presently ranges between 5 and 7% in the majority of states, would lessen the financial strain on homebuyers.

• Simplified Goods and Services Tax (GST) on Real Estate: The industry aimed to rationalize and clarify the GST on both residential and commercial properties.

• Single-Window Clearance System: Realtors pushed for a more efficient, digital approval process because approval delays have been a recurring problem.

What Happened Instead?

The government continued to prioritize infrastructure development, but some important demands, such as expanding tax deductions or granting industry status, went unfulfilled. 
However, the PM Awas Yojana (PMAY), which allocated ₹79,000 crore to increase affordable housing, brought about a renewed push for urban development. Additionally, the industry saw a rise in infrastructure spending, which helped real estate indirectly.

High borrowing costs and little tax relief remained obstacles for developers and homebuyers despite certain encouraging policies. The industry now anticipates more robust policy support in Budget 2025.

Budget 2025 Expectations for Real Estate

The industry is anticipating a more forceful stance this year. What real estate participants can anticipate is as follows:

Industry Status for Real Estate

Industry status is still highly sought after. If put into practice, it would increase the viability of real estate development by opening up better financing options, lowering borrowing costs, and luring institutional investments. Since real estate makes up 7% of India’s GDP, developers would be able to access structured financing at reduced interest rates if it were granted official industry status, just like other recognized industries.

More employment opportunities, more affordable housing developments, and improved economic stability could result from this. Furthermore, because industry status would reassure investors of a more organized and regulated sector, it could promote foreign direct investment (FDI).

Real estate gains from industry recognition in nations like the US and the UK, which promotes strong growth and improved financing options. India could strengthen its commercial and residential real estate sectors by adopting this model. 

Increased Tax Benefits for Homebuyers

Homebuyers are seeking more relief due to inflation and rising real estate costs. The industry anticipates that the tax deduction limits for home loan interest under Section 24(b) will rise from ₹2 lakh to ₹5 lakh. 

Furthermore, there is a call to raise the Section 80C principal repayment rebate from ₹1.5 lakh to ₹3 lakh. If approved, this measure could greatly increase the affordability of homes, particularly for middle-class purchasers. 

Reduction in Stamp Duty

One of the main expectations for this year is a decrease in stamp duty rates. The current 5-7% tax on real estate transactions in many states raises the total cost of homeownership considerably. 

This financial burden might be lessened by a central incentive or subsidy to offset stamp duty costs. A one to two percent reduction in stamp duty could encourage more homebuyers to participate, increasing the volume of transactions in all cities. 

Extension of Affordable Housing Incentives

The government should reinstate the Credit Linked Subsidy Scheme (CLSS) for first-time homebuyers and extend tax holidays under Section 80-IBA, according to real estate developers. Given that more than 25 million housing units are expected to be needed by 2030, there is still a severe housing shortage in urban areas. 

Urban living could become more accessible and the supply of affordable homes could increase as a result of such incentives. 

GST Rationalization

It is believed that the current GST structure on real estate transactions is convoluted and uneven. Particularly for under-construction properties, which currently have a 5% GST rate without input tax credit (ITC), developers are advocating for a unified and lower GST rate. 

Businesses and investors are also left in the dark about the taxation of rental housing and commercial leasing. Clarity and investor confidence in the real estate industry could be increased by a clearly defined GST policy.

Single-Window Clearance for Faster Approvals

A digital single-window clearance system for project approvals could help buyers by lowering developer costs, improving ease of doing business, and reducing project delays. Timelines for projects are greatly delayed by the current approval process, which can take six to twenty-four months. 

Efficiency and transparency in the industry could be achieved through a digital-first strategy that tracks approvals in real-time.

Infrastructure and Housing Development Fun

To support township projects and affordable housing, the industry anticipates an increase in funding for housing and infrastructure development. It can speed up urbanization and close the housing supply-demand gap if a distinct fund dedicated to real estate is established. 

The government’s emphasis on metro expansion and urbanization may also play a significant role in boosting demand for real estate in Tier 2 and Tier 3 cities. 

Rental Housing and REIT Growth

More investors may come if rental housing is promoted with tax breaks and incentives. Co-living and student housing are examples of institutional rental housing that is expanding, and the industry anticipates policy support. 

The financial ecosystem of real estate can be further strengthened by policies that facilitate Real Estate Investment Trusts (REITs) by lowering taxes and regulations.

Support for Sustainable and Green Buildings

As sustainability gains more attention, developers anticipate incentives for green building initiatives. Better financing options for environmentally sustainable housing, tax breaks for green projects, and subsidies for solar and rainwater harvesting systems are all examples of this. 

A significant component of Budget 2025’s long-term strategy is anticipated to be sustainable infrastructure. 

Also Read: Transfer of Property Act: Key to Secure Real Estate Deals

The Bigger Picture: Real Estate’s Role in India’s Economic Growth

Although the particular requirements of the real estate industry from tax breaks to changes in regulations—are important, they also fit into a bigger picture of India’s economic future. Real estate continues to be a vital component of economic growth, driving urbanization, infrastructure expansion, and job creation in addition to making a substantial GDP contribution. 

The government can stimulate more affordable housing, improve the stability of the investment climate, and open up new opportunities for millions of citizens by attending to the needs of the sector. 

The policies outlined in Budget 2025 are anticipated to have a lasting impact on the economy as a whole, not just real estate players.

What’s Ahead

The growing significance of real estate in India’s economy is reflected in the expectations surrounding Budget 2025. Given the industry’s pivotal role in generating GDP and employment, government policies have the potential to foster sustainable growth and a stronger housing market. The budget offers a chance to address the issues that have long beset the industry, from tax breaks to infrastructure expenditures. 

Budget 2025 may serve as the impetus for a more approachable, reasonably priced, and prosperous real estate market as the sector looks to the future. 

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