The Indian real estate sector, after a remarkable recovery in 2024 with residential demand peaking at an 11-year high and office leasing activity surpassing 53.3 million square feet, anticipates crucial reforms in the Union Budget 2025-26. Finance Minister Nirmala Sitharaman is set to present the budget on February 1, 2025, amidst rising challenges such as increasing construction costs, affordability concerns, and the sector's demand for long-pending incentives.
Key Expectations from the Budget 2025
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Reduction in GST on Cement: Industry stakeholders have called for a reduction in GST on cement and an allowance for input tax credits on under-construction properties. Such measures would help reduce construction costs and increase affordability for both developers and buyers.
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Higher Tax Exemptions for Homebuyers: The sector is pressing for a significant increase in the home loan tax exemption limit from the current ₹2 lakh to ₹5 lakh. This move would provide relief to middle-income homebuyers amidst rising property prices in urban centers.
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Affordable Housing Reforms: With affordable housing sales declining sharply from 38% in 2019 to 18% in 2024, experts suggest revising the definition of affordable housing. A restructured size and price limit tailored to metro city dynamics could revive this segment. Additionally, the reintroduction of the Credit-Linked Subsidy Scheme (CLSS) is on the wish list.
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Infrastructure Status for Real Estate: Granting "infrastructure" status to the real estate sector remains a critical demand. This reform could streamline regulatory approvals, attract foreign investments, and improve financing options for developers.
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Tax Benefits for REITs: Real Estate Investment Trusts (REITs) have gained traction, but stakeholders urge the government to exempt dividend income from double taxation. Such a move would enhance liquidity and encourage retail and institutional participation.
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Ease of Doing Business and Sustainability: Industry players advocate for simplified regulations, single-window clearance systems, and incentives for green building initiatives. This focus on sustainability aligns with global trends and supports long-term, eco-friendly urban development.
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Coworking Sector Incentives: The coworking segment, which has shown significant growth, seeks competitive institutional financing and infrastructure development in non-metro cities. A push towards enhanced connectivity and policy support could unlock its full potential.
Industry Voices
- Mahindra Lifespace Developers emphasizes the need for affordability measures and increased infrastructure investments to unlock growth in smaller cities.
- Savills India highlights the importance of aligning tax reforms with inflationary pressures to stabilize the sector.
- Sterling Developers reiterates the need for interest subsidies for first-time homebuyers and tax reliefs to boost housing demand.
- 315Work Avenue stresses improving institutional financing and easing operational processes for coworking spaces.
The real estate sector remains optimistic that the Union Budget 2025 will address its pressing demands to ensure sustained growth. From tax reforms to policy incentives, the upcoming announcements could set the stage for a stronger and more inclusive real estate ecosystem in India.
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