As the 2025 Union Budget approaches, homebuyers across the country are holding their breath. Will it bring relief in home loan interest rates? Could tax benefits expand further for first-time buyers? Let’s explore the possibilities and how they might reshape the real estate landscape.
Key Real Estate Predictions for Budget 2025
The Budget 2025 boosts the real estate market with tax benefits, affordable housing schemes, GST reforms, and increased infrastructure investments.
1. Reduced Home Loan Interest Rates
- It is anticipated that the government will maintain or further reduce home loan interest rates in Budget 2025, enabling more buyers to confidently enter the real estate market.
2. Expansion of Government Schemes
- Pradhan Mantri Awas Yojana (PMAY): Likely to be extended with enhanced subsidies for middle-income groups (MIG) under the Credit Linked Subsidy Scheme (CLSS).
- New Rental Housing Scheme: Expected to be introduced, offering tax benefits to property owners who provide affordable rental housing.
3. Enhanced Tax Benefits
- Increase Section 24(b) Deduction: A rise in the home loan interest deduction limit from ₹2 lakh to ₹5 lakh is anticipated, lessening the financial burden on borrowers.
- Expand Section 80C: Predictions suggest the limit may go up from ₹1.5 lakh to ₹2.5 lakh, potentially with a dedicated sub-limit for home loan principal repayment.
- Reduce GST: Under-construction properties and affordable housing may see lower GST rates, thereby making home purchases more accessible.
4. Focus on Affordable Housing
- Increased budgetary allocations are expected for affordable housing, especially in tier 2 and tier 3 cities, improving infrastructure and connectivity for prospective homebuyers.
5. GST Reforms
- Cement GST Rate: A reduction from 28% to 18% is predicted, aimed at cutting construction costs and making homes more budget-friendly.
- Input Tax Credit: There may be a reintroduction of input tax credit on under-construction properties, which would benefit both developers and buyers.
6. Infrastructure Development
- Significant investments in roads, public transport, and urban renewal projects are likely to continue, boosting property values and spurring real estate growth in emerging cities.
7. Higher SWAMIH Allocation
- Increased funding (possibly up to ₹50,000 crore) under the Special Window for Affordable and Mid-Income Housing (SWAMIH).
- Priority given to completing stalled projects and unlocking capital tied up in delayed developments.
8. Revised Stamp Duty and GST Structure
- Extension of GST input tax credit benefits on property leasing and clearer rules on Transferable Development Rights (TDRs).
- Possible stamp duty reduction or advisory to state governments to lower rates to spur residential sales.
9. Recognition as an Industry
- Granting ‘industry’ status to real estate is a recurring request.
- This status can lower loan rates and borrowing costs, ultimately reducing overall project expenses.
- A formal industry classification would streamline financing options, making it easier for developers to access credit and channel savings to buyers in the form of more affordable homes.
10. Strengthening Affordable Housing
- Industry leaders recommend raising the affordable housing price cap (currently set at ₹45 lakh) in cities like Mumbai, where real estate costs are higher.
Suggested Read: Deciding The Ideal Property Budget
What Are the Key Benefits of the CLSS under PMAY?
As Budget 2025-26 approaches, there is optimism that the Credit Linked Subsidy Scheme (CLSS) for the Middle-Income Group (MIG) under PMAY will be reintroduced. Previously, eligible beneficiaries benefited from:
- Interest Subsidy: Up to ₹2.67 lakh per house.
- Eligible Groups: EWS, LIG, MIG-I, and MIG-II.
- Loan Sources: Banks, Housing Finance Companies, and similar institutions.
- Interest Subsidy Rates:
- 6.5% on loans up to ₹6 lakh for EWS/LIG (carpet area up to 60 sq/meter).
- 4% on loans up to ₹9 lakh for MIG-I (carpet area up to 160 sq/meter).
- 3% on loans up to ₹12 lakh for MIG-II (carpet area up to 200 sq/meter).
Suggested Read: Pradhan Mantri Awas Yojana (PMAY) Scheme Details
Tax Breaks and Incentives A Major Focus in the Upcoming Budget
The upcoming budget, the first full-year plan of the Modi 3.0 government, is expected to prioritize real estate and infrastructure as pivotal engines of economic expansion.
- Tax Rationalization: Need to reduce taxes and duties on homebuyers, which often exceed 12% of property value in many states.
- LTCG Tax Relief: Government should revisit long-term capital gains (LTCG) tax on real estate to provide relief.
- GST Reforms: Steps toward GST reforms for real estate to enhance its attractiveness as an investment.
- Increase in Tax Deduction Limit: Raise the Section 24(b) home loan interest deduction limit from ₹2 lakh to ₹5 lakh annually to support buyers in metropolitan cities with high property prices.
- Impact: These measures could boost demand, promote homeownership, and provide financial relief to homebuyers.
How Do Industry Status and Higher Budget Allocations Boost Real Estate?
Tejas Patil advocates for granting ‘Industry’ status to real estate to improve access to institutional finance, lower borrowing costs, and increase transparency.
- Real Estate Contribution to GDP: The sector currently contributes 7.3% to India’s GDP and is projected to reach 13% by 2025.
- Tax Exemption for Housing Loans: He suggests increasing the tax exemption limit on housing loans from ₹2 lakh to ₹3 lakh to make homeownership more affordable.
- GST Amendments: Patil calls for changes to GST regulations, including allowing input tax credit on under-construction properties to reduce costs for developers and buyers.
- GST Rate on Cement: He proposes reducing the GST rate on cement from 28% to 18% to lower construction costs and stimulate growth in the housing sector.
Suggested Read: A Guide to Profitable Real Estate Investments
Infrastructure Development and Private Investment Keys to Economic Success
In addition to fiscal policy changes, Patil urged the government to prioritise infrastructure developments:
- Infrastructure Development Focus: Patil emphasizes prioritizing infrastructure development in tier 2 and tier 3 cities to boost the residential real estate market.
- Urban Renewal and Connectivity: He advocates for increased budget allocations for urban renewal and connectivity projects to enhance growth.
- Private Investment: Patil calls for more private investment in real estate through Alternative Investment Funds (AIFs) to support sector growth.
- Tax Incentives for Investors: He suggests providing tax incentives for institutional investors to improve liquidity and support ambitious real estate projects.
Conclusion
The Budget 2025 is expected to be a game-changer for the housing sector, with proposed measures aimed at reducing homeownership costs and easing financial burdens. For middle-income groups in tier 2 and tier 3 cities, these reforms could be the key to achieving their homeownership dreams.
Frequently Asked Questions
The budget date for 2025 is February 1, 2025.
By 2030, ongoing urbanization, infrastructure development, and economic expansion will drive the Indian real estate sector’s upward growth. The market will focus on both affordable and luxury housing segments to meet the diverse needs of the population.
In 2025, India’s economy will grow at a rate of 6.4%, marking the slowest pace in four years. Global economic uncertainties and domestic challenges, including high inflation and a slowdown in consumption, will moderate the growth.
Over the next five years, technology, renewable energy, and healthcare will experience significant growth in India. Increased investment, innovation, and supportive government initiatives will drive the expansion of these industries.
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