Did Budget 2025 give a roadmap for realty growth?

Though a number of expectations of realty players from the Union Budget 2025 remained unulfilled this year too, there was surely some silver lining for the sector that is in dire need of a policy push to stay on course for growth. Some of the Budget proposals that can act as a game-changer for real estate are: significant allocations for infrastructure sector, urbanisation and tax reforms announced by the Finance Minister. Here’s a look at some key proposals that will impact the growth of real estate sector in FY 2025-26:

Budgetary provision for SWAMIH Fund

The Finance Minister made a budgetary provision for second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund of Rs 15,000 crore to help in the completion of one lakh dwelling units.

According to developers, SWAMIH Fund 2 is a welcome step and will definitely help in completion of a number of stalled projects, thereby meeting the housing demand and enhance liquidity in the real estate sector.

Tax-free second homes

The change announced in Budget 2025 allowing taxpayers to claim the annual value of two self-occupied properties as zero will provide significant tax relief to home owners. The step will also reduce compliance burden and encourage homeownership by making it more affordable for middle-class families, without having to pay income tax on notional rental values of self-occupied homes.

Budget 2025 eliminates all conditions by allowing two properties to be considered self-occupied, thereby removing the tax liability on notional rental income.

Previously, tax benefits were conditional, making it complex for homeowners to avail of the exemption.

Higher TDS threshold on rent

Budget 2025 has increased the TDS deduction threshold on rent from Rs 2.4 lakh to Rs 6 lakh per annum. This change reduces the paperwork and compliance burden on tenants while ensuring a higher immediate cash flow for landlords.

Interest free loans for states

The real estate sector stands to benefit from the increased capital expenditure on infrastructure, particularly interest-free loans to states.

The Finance Minister, in her budget speech, stated that Rs 1.5 lakh crore will be provided in the form of 50-year interest-free loans to states for infrastructure projects. This is expected to accelerate urban transformation, boost connectivity, and generate employment, thereby indirectly fueling real estate demand.

New asset monetisation plan

The Finance Minister further announced the launch of a new asset monetisation plan for the 2025-30 period, aimed at generating Rs 10 lakh crore to fund new infrastructure projects.

Building on the success of the first plan introduced in 2021, this initiative will help reinvest capital to drive the country’s infrastructure growth. For example, the government’s concentrated efforts on infrastructure development promises to significantly enhance housing demand and benefit around 250 ancillary industries, generating numerous job opportunities and bolstering overall economic growth.

India Infrastructure Fund

The establishment of the India Infrastructure Fund and emphasis on Public-Private partnership for infrastructure in the Budget is also a game-changer for the real estate industry. The establishment of an Urban Challenge Fund of Rs 1 lakh crore will fuel the ongoing momentum in rebuilding urban infrastructure and drive greater demand for real estate in the urban and semi-urban areas,” said Ramani Sastri- Chairman & MD, Sterling Developers.

Gurpal Singh Chawla, Managing Director, TREVOC, believes this emphasis on infrastructure is a positive signal for long-term growth. "The budget effectively balances development priorities with financial stability. The emphasis on infrastructure growth, including the Rs 1 lakh crore Urban Challenge Fund, lays a strong foundation for long-term progress."

Global capacity centre

The push for Global Capacity Centres in tier 2 cities will boost overall real estate investment in these areas, making them prime locations for future company expansions, thereby giving a massive boost.

The government’s announcement of a Rs 10,000 crore Fund of Funds for Startups (FFS) is poised to significantly bolster India’s startup ecosystem, as essential hubs for innovation. The announcement of a committee to review and recommend new reforms to enhance the ease of doing business will significantly streamline regulations, improve efficiency, and attract investments.

Cities as growth hubs

The Union Budget 2025 has laid strong focus to drive India’s infrastructure growth, with significant investment which will push both residential and commercial real estate demand.

The focus on making cities growth hubs will impart a massive fillip to the commercial real estate sector.

“With corporates & MNCs keen on setting up and expanding office establishments in the high-growth metros, coworking sector will benefit hugely from this initiative, thereby expanding presence across the country,” said Manas Mehrotra, Founder, 315Work Avenue, a leading coworking firm

While the government’s thrust on capital expenditure, tax reliefs, and liquidity enhancement has instilled confidence, industry leaders are keen to see how these measures translate into on-ground impact.

Tax Reforms Boosting Affordability and Investments

One of the most significant takeaways from the Budget this year is the increase in the tax rebate under the new tax regime. Individuals earning up to Rs 12 lakh per annum (Rs 12.75 lakh for salaried employees) will pay no personal income tax.

The increase in the income tax exemption limit will significantly boost disposable income, enhancing purchasing power and potentially increasing housing demand and also encourage savings to create an asset.

“In recent years, savings rates have been declining. For a country like India, where a robust social security system is lacking, the extra money in the hands of the middle class—resulting from lower tax rates—will be crucial in building financial security. We anticipate that both new investors and existing savers will increasingly turn to avenues such as Mutual Funds to grow their wealth,” said Vishranth Suresh, Co-Founder and CEO, AssetPlus.

Industry speak

Budgets are about choices, and this one strikes a fine balance-between growth and discipline, consumption and investment. By putting more money in the hands of the middle class, the government has recognised demand as India’s economic engine. Infrastructure investments will expand urban corridors, unlocking real estate opportunities. The focus now is on swift execution to turn intent into impact. —Ashwinder R Singh, Vice-Chairman & CEO, BCD Group

The Budget’s focus on tax relief and infrastructure development provides a significant boost to the real estate sector. The relaxation of tax burdens, such as exempting two self-occupied properties from taxation and raising the rental income threshold offers financial relief to homeowners and investors alike. Additionally, increased infrastructure spending will enhance connectivity and drive real estate growth, making investments more attractive and ensuring long-term sectoral stability. —Prateek Mittal, Executive Director, Sushma Group

The Budget’s focus on infrastructure development, including the Rs 1 lakh crore Urban Challenge Fund, will catalyse real estate expansion. The continued push for Public-Private Partnerships strengthens long-term commercial growth. Additionally, tax slab revisions enhancing middle-class purchasing power will create greater investment opportunities in the sector, ensuring a balanced approach to economic growth and urban transformation. —Mukul Bansal, Managing Director, Motiaz

The tax reforms, including the exemption of income tax up to Rs 12 lakh, directly enhance affordability for homebuyers. The push for infrastructure growth, coupled with financial incentives like higher TDS limits on rental income, fosters a strong investment climate. These strategic moves boost market confidence, making homeownership more accessible while fueling long-term real estate sector growth. —Tejpreet Singh, Managing Director, Gillco Group