This budget demonstrates a change of gear by relying more on private sector and domestic consumption to boost growth, while the government continues to tread on the path of fiscal consolidation.
In a strategic move the government rather than investing in infrastructure that has long gestation period, decided to put more money in the pockets of the middle-class to drive demand and consumption and give the desired fillip to the economy.
In addition, the Reserve Bank of India also reduced the repo rate by 25 basis points in February, which will complement the budget’s measures to boost consumption.
The downward revision in PMAY urban allocation and flat in rural allocation is negative on sentiment for affordable housing lenders & buyers. The Budget puts the onus to drive the economy on the middle class through consumption rather than government led capital expenditure.
Three Significant Boosts For Housing. The three significant boosts for housing sector in the budget come in the form of measures for second homes, rental housing and tax rebates.
1 In a major relief to millions of taxpayers, the government has raised income tax exemption limits to Rs 12 lakh per annum under the new tax regime, which will encourage people to invest housing in particular, especially first-time homebuyers.
2 The budget also allows homeowners to mark two homes as self-occupied (provided one is not rented out, and claim nil valuation). This is specifically beneficial for professionals working in other cities than hometown.
3 The second boost is to rental housing by increasing the annual TDS limit on rental income from Rs 2.4 lakh to Rs 6 lakh that will benefit rental market players. This move would encourage more stakeholders towards rental housing, address the housing shortage.
Three Significant Let-Downs For Housing. The Budget 2025 failed to address some crucial areas, from affordable housing segment, & reducing home loan rates to tax benefits for homebuyers and developers.
1 Raising the Section 24(b) tax deduction limit from Rs 2 lakh to Rs 3 lakh could have provided much-needed incentive to the potential home buyers. With RBI repo rate cut, the hope is that banks will lower home loan interest rates that can boost the housing sector. Also, the income criteria for affordable homes remains unchanged in the budget.
2 Also left unmet was the demand for reintroducing Credit linked subsidy scheme (CLSS) under PMAY (Pradhan Mantri Awas Yojana). The interest subsidies to first-time homebuyers under this scheme could have enhanced housing affordability for lower-income groups.
3 Another area of disappointment has been the maintaining of 18% Goods and Services Tax (GST) on under-construction properties and affordable housing. Any reduction could help lower overall costs for homebuyers.
WINNERS & LOSERS
The Middle-Class: The revised tax structure eases the tax burden, particularly with salaried individuals benefiting from an exemption limit of Rs 12.75 lakh, including standard deductions. This measure is aimed at reducing the tax burden on the middle class and stimulate higher consumer spending.
Agriculture: Budget has made extensive announcements for agriculture from facilitating credit for 17 million farmers and launching a six-year self-reliance mission for pulses to bolstering agriculture in these BJP-ruled states.
Manufacturing & Startups: The budget aims to position India as a global hub for toy manufacturing, along with targeted measures for small and medium enterprises and other incentives to enhance domestic production. In addition, Startups will receive a Rs 100 billion fund to support new ventures and entrepreneurship.
Youth & Education: Budget scores at human capital development through establishment of National Centres of Excellence for Skilling, Centres of Excellence in Artificial Intelligence and increasing capacity in engineering & medical colleges. This will ensure more skilled workforce across sectors increasing employability.
GCCs: The formulation of a national framework to guide states in promoting Global Capability Centres (GCCs) in emerging tier II cities is sure to unlock the potential of tier II cities, enhancing their infrastructure, as well as attracting global businesses to these cities.
We expect money saved with the tax cut to come back to the economy in the form of consumption, savings, or investments. Whether citizens save or consume these funds, both outcomes benefit the economy, savings strengthen bank liquidity, while consumption benefits spread across industries. Tuhin Kanta Pandey, Finance and Revenue Secretary
Corporate India: Large industries and multinational corporations saw limited direct benefits, with no major corporate tax cuts or regulatory relaxations to boost competitiveness. Furthermore, no corresponding benefit to deduction of NPS contribution is available for self-employed professionals/ businessmen opting for presumptive taxation, even if they contribute to NPS for their retirement planning purposes in the new tax regime.
Railways: Indian Railways, which had a separate Budget until 2016, could not find any significant mention in this year’s Budget, despite expectations for major investments in modernization and new routes. It received an allocation of Rs 2.55 lakh crore for FY26 against Rs 2.62 lakh crore in the previous year.
Infrastructure: The government’s planned capital spending for the current fiscal has been reduced, while capital expenditure allocation increased by less than 1% compared to last year, dampening sentiment in the Infrastructure sector.
PMAY: The government’s 34% cut in FY26 budget allocation for the urban affordable housing sector and a marginal uptick in allocation for PM Awas Yojana - rural for FY26 at Rs 54,832 crore from Rs 54,500 in FY25 has been a major downer.
Climate Action: The budget provides a token acknowledgement of climate action, failing to provide adequate funds and support to climate adaptation, which happens To find critical mention in the Economic Survey 2025. While some segments gained in this budget such as the middle-class tax payers, state of Bihar, agriculture, MSMEs, startups, education sector, and maritime, a few other segments did not get the deseing attention including, railways, infrastructure, climate adaptation financing, defence, Oil & refinery, affordable housing, healthcare and corporate businesses.
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