The most anticipated Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, focused primarily on tax reforms, infrastructure development and economic growth. With a clear focus on boosting economic growth and infrastructure, Union Budget 2025 has emerged as a game changer for home buyers, offering multiple tax benefits and incentives. The Modi Govt 3.0 latest move to ease tax burdens, aid in boosting affordable housing, and strong emphasis on urban development and investment brought several impacts on the real estate sector.
While no direct changes were announced regarding property tax or home loan advantages, various initiatives aim to promote urban development and housing. The real estate industry reacted with a mixed feeling to the announcement of the Union Budget 2025. The real estate stakeholders believe the budget indirectly boosted the real estate sector. However, the industry seeks better reforms.
According to Anuj Puri, Chairman, ANAROCK Group, the budget prioritised economic expansion, infrastructure, MSMEs, and middle-class welfare, providing significant relief to the middle class while encouraging rural spending to unlock India’s economic potential. Additionally, Puri stated that the budget delivers direct and indirect benefits to the real estate sector and serves as a growth catalyst. He explained that the budget is solid and growth-oriented, focusing on economic development and encouraging higher consumption.
“The Union Budget focused on economic expansion, infrastructure development, MSMEs, futuristic cities, and middle- class welfare and brought substantial relief for the middle class. It also aims to stimulate rural consumption - an essential step toward unlocking India’s economic potential. From a real estate perspective, the budget delivers both direct and indirect benefits, acting as a catalyst for growth. The budget remains strong and growth-oriented, focusing on economic development and enhanced consumption,” said Anuj Puri.
While emphasising the Union Budget’s impact on the real estate sector, Badal Yagnik, Chief Executive Officer, Colliers India, said, “The Union Budget 2025-26 has continued to further the goal of ‘Viksit Bharat’ and ‘Sabka Vikas’ through transformative reforms across six key domains including urban & real estate development, power & mining sectors, financial services and taxation as well regulatory reforms.
Balanced regional growth across tier I & II cities will be driven by engines such as agriculture, MSMEs, investments and exports.” Yagnik also pointed to increased disposable income as a key driver for real estate investments, particularly in residential properties and financial instruments like REITs.
Dr Niranjan Hiranandani, Chairman, NAREDCO & Hiranandani Group, summarized the Budget FY26 as a forward-thinking document that lays a comprehensive foundation for growth, though certain areas like long-term investment and affordable housing require further attention to fully realize the vision of a prosperous and developed Bharat. However, it is worth noting that the budget has not taken significant action towards uplifting affordable housing, a segment crucial for inclusive growth and economic stability, he said.
“Central to this budget is its unwavering focus on infrastructure enhancements. Notably, it incentivizes the purchase of a second flat, encouraging real estate investments. Moreover, the introduction of SWAMIH Fund 2.0 seeks to alleviate the burden on constrained homebuyers by delivering stalled projects, while the hike in TDS on rentals up to `6 lakhs promises to bolster rental investments. By expediting mergers and acquisitions, the budget aims to initiate new real estate projects under innovative business models.
Additionally, addressing the skill gap through the establishment of new centers of excellence will help bridge the widening talent chasm. However, the concern over inadequate long-term investment allocation remains a hindrance for achieving the ambitious Viksit Bharat growth targets.
The middle class, a crucial driver of demand, stands to benefit immensely from tax incentives that translate their aspirations for an improved quality of life into tangible home-buying prospects. This is expected to generate a positive demand curve in the real estate sector. The budget also shines a spotlight on labour- intensive sectors to ensure that quality, productivity, and competitiveness are enhanced, positioning India as a formidable global player. A strategic highlight is the finance minister’s announcement of a `1 lakh crore Urban Challenge Fund. This fund aims to address land and development obstacles, foster robust social infrastructure in key urban centers, and drive infrastructure development across urban corridors. The focus on new airports, shipping ports, and inland waterways is set to transform India into a competitive logistics hub, reducing product costs and boosting economic efficiency.”
KEY PROVISIONS FOR REAL ESTATE
Income Tax Reform
The highlight of the Union Budget 2025 was certainly the zero tax for the individual earning up to Rs 12 Lakh annually (Rs 12.75 Lakh for salaried employees), who will pay no personal income tax. This will boost home investment savings, further strengthening the demand for affordable housing.
Additionally, the new income tax bill brings a balanced approach, keeping nearly 50 per cent of the current provisions intact while introducing key personal tax reforms. It aims to simplify things by streamlining the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) systems, adjusting rates and thresholds to make them more efficient. This makes the process smoother and more direct for taxpayers, with a focus on reducing complexity and making the tax process easier.
SWAMIH Fund II
While discussing the Special Window for Affordable and Mid-Income Housing (SWAMIH) initiative, the finance minister stressed that around 50,000 home projects have been completed, offering much-needed relief to homeowners. The government further announced the SWAMIH Fund 2 of Rs 15,000 Crore blended finance scheme backed by government support, bank funding, and private investment. This new fund is set to speed up the completion of an additional 1 Lakh stalled residential units for families with long-awaited home possession. With 50,000 houses already finished, another 40,000 are expected to be completed in the 2025 financial year.
Nil Tax On Two Self-Occupied Properties
The Union Budget 2025 announcement is good news for all home buyers and investors, as an individual can now claim a nil valuation for two self-occupied properties. This is a positive shift for those investing in residential real estate. Additionally, the new simplified tax deduction at source (TDS) on rental income reduces the compliance burden for landlords, making it easier for them to manage their properties and boosting liquidity.
This change will benefit the rental housing market, especially in metro cities like Mumbai, Delhi and Kolkata. Previously, homeowners could only claim one self-occupied property taxfree; now, they can enjoy this benefit for two, eliminating the tax on notional rental income from a second home.
Urban Challenge Fund
The government plans to establish an Urban Challenge Fund of Rs 1 Lakh Crore to enhance infrastructure, transforming cities into economic hubs and unlocking real estate possibilities. This initiative will further support ‘Creative Redevelopment of Cities’ and improvements in ‘Water and Sanitation.’ It will cover up to 25 per cent of the cost for bankable projects, with the remaining 50 per cent to be financed through bonds, bank loans, and public-private partnerships (PPPs). For the 2025-26 fiscal year, Rs 10,000 Crore is earmarked to begin these transformative urban projects.
BOOST FOR REAL ESTATE BUT MORE REFORMS NEEDED
The real estate industry bodies shared the hits and misses of the budget and how it could have fared better by resolving some of the long-term challenges faced by the sector.
“The overall budget is focused on agriculture, industrial sector and middle-class individual tax players and also deploying funds for urban infrastructure. This will indirectly benefit the real estate sector though there are no direct announcements for this sector. PMAY urban 2.0 was recently declared but we were expecting some more incentives for the sector for the homebuyers, said Pramod Khairnar, President of CREDAI Maharashtra.
National President of NAREDCO, G Hari Babu, said, “Notably, the government has made a good move with SWAMIH Fund 2.0, with an additional Rs 15,000 crore earmarked for the completion of housing projects that were previously stuck due to financial distress. The decision to exempt income up to Rs 12 lakh from taxation under the new regime is a significant incentive for the middle-income group, making homeownership more accessible and encouraging investment in the housing sector. The government should prioritize revisions to the current housing cap, which has been stagnant for nearly eight years, making it difficult for developers to deliver affordable homes within the set limits. A more substantial focus on reducing home loan rates and offering tax benefits for affordable housing projects would help make homes more accessible to middle-class families. Reforms to the capital gains tax framework and the introduction of tax relief for rental housing would also ensure a more sustainable and equitable real estate market.”
Sushil Mohta, President of CREDAI West Bengal shared, “The Union Budget lays the groundwork for sustained economic growth, with several provisions impacting the real estate sector. However, the sector had anticipated additional measures, particularly in affordable housing. Key industry demands, such as higher home loan interest exemptions, a revision in the affordable housing definition based on dwelling unit size instead of a uniform Rs 45 lakh value, and industry status for real estate, remain unaddressed. These reforms could have significantly boosted housing affordability and investment inflows. While the announcements are positive, the sector remains hopeful for a Repo rate cut later this month, which could further improve homebuyer sentiment and drive growth.”
Ranjit Naiknavare, President of CREDAI Pune Metro termed the budget, over all, as a progressive and forward-looking budget, expected to support the real estate ecosystem and further drive housing demand. “The budget’s focus on strengthening the rural economy, supporting MSMEs and providing direct tax benefits to the middle class is a welcome move that will drive economic growth and increase disposable income. The government’s strong emphasis on urban development, including the creation of new funds and a renewed push for infrastructure through PPP projects, will enhance urban livability and drive long-term growth. However, the sector had anticipated further initiatives, such as GST reductions or additional income tax benefits, a higher cap on home loan interest exemptions and a revised definition of affordable housing based on minimum dwelling unit size. These measures could have provided additional momentum to the market and improved housing affordability.”
