The Union Budget 2025 brings forward significant changes aimed at reshaping India’s real estate landscape. With a focus on tax incentives, rental market improvements, and infrastructure expansion, these initiatives are designed to boost affordability, ease regulatory processes, and restart delayed projects. Together, they aim to build a stronger, more resilient environment for both homebuyers and investors. Below are some of the major reforms introduced in this budget.
Tax Reforms Enhancing Affordability
No Income Tax for Earnings Up to ₹12 Lakh: Under the new tax framework, individuals earning up to ₹12 lakh annually (₹12.75 lakh for salaried employees) are now exempt from paying income tax. This change is expected to increase disposable income, encouraging greater demand for affordable housing and enabling individuals to save more on EMIs.
Simplified Tax Regime: The streamlined tax structure is anticipated to enhance consumers’ purchasing power, while also fostering increased investment in both the equity and real estate markets.
Reforms in Rental Housing
Tax Exemption for Two Self-Occupied Properties: Homeowners can now declare ‘nil annual value’ for two self-occupied properties, thereby eliminating tax on presumed rental income. For instance, an individual with properties in both Delhi and Mumbai can save a significant amount annually under this provision.
Raised TDS Threshold on Rent: The threshold for Tax Deducted at Source (TDS) on rental income has been increased from ₹2.4 lakh to ₹6 lakh annually. This measure aims to simplify tax compliance for landlords, while also improving cash flow for both tenants and property owners.
SWAMIH Fund 2: Restarting Stalled Housing Projects
₹15,000 Crore Allocation: The Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund 2 has been allocated ₹15,000 crore, targeting the completion of 1 lakh delayed housing units. This builds upon the success of the initial fund, which helped deliver 50,000 homes.
Impact: This initiative will provide relief to homebuyers burdened with EMIs on stalled projects, while also covering rental expenses. An additional 40,000 units are expected to be completed by the end of FY25.
Blended Finance Model: The fund integrates government backing, private sector investments, and contributions from banks to speed up project completion.
Infrastructure and Urban Development
₹1 Lakh Crore Urban Challenge Fund: This fund is designed to transform urban areas into growth hubs, covering 25% of the cost of projects like urban redevelopment and sanitation improvements. The remaining funds will be sourced through bonds, loans, and Public-Private Partnerships (PPPs).
Anticipated Results: The initiative is set to enhance infrastructure in Tier 2 and Tier 3 cities, boost property values, and improve overall livability.
Real Estate Financing Measures
Extended Investment Window for Sovereign Funds: Sovereign wealth and pension funds are now allowed to invest in India’s infrastructure and real estate sectors until March 2030, a move aimed at attracting global capital for large-scale development projects.
SWAMIH’s Blended Finance Strategy: By merging public and private investments, this approach aims to increase liquidity in the market and provide financial stability for real estate ventures.
Conclusion
The Union Budget 2025 addresses key challenges in the real estate sector by introducing tax benefits, rental reforms, and targeted funding initiatives. These measures are designed to increase disposable income, simplify compliance requirements, and stimulate growth in affordable housing and urban development. Collectively, they are set to benefit homebuyers, investors, and developers, reinforcing real estate as a driving force behind India’s economic growth.
