Budget 2025: What real estate sector seeks for homebuyers under Modi 3.0

Budget 2025 expectations: Sales volumes in India’s residential real estate market fell by 4% in 2024, with total units sold across seven major cities declining to 4,59,650, according to data from Anarock, a real estate consultancy firm. New housing supply also dipped, falling by 7% to 4,12,520 units during the same period. The declines have been attributed to high base effects, reduced launches, and rising property prices.

 

"As the Union Budget 2025-26 approaches, the real estate sector is looking to the Modi 3.0 government to introduce measures that can revive overall consumption," said Anuj Puri, chairman of Anarock Group. "With activity slowing in the latter half of 2024, the sector expects significant reforms to stimulate growth and affordability."

 

Affordability: a persistent challenge

 

Home affordability remains a pressing concern in India, with rising costs keeping ownership out of reach for many. Shishir Baijal, chairman and managing director of Knight Frank India, noted, “Owning a home is a primary aspiration for Indians, yet it remains an enormous challenge for a significant portion of the population. While initiatives like Pradhan Mantri Awas Yojana (PMAY 2.0) have provided some relief, the affordability gap persists, particularly in metropolitan cities.”

 

Baijal pointed out that existing schemes often fail to align with urban realities. “Under PMAY 2.0, beneficiaries receive a 4% interest subsidy on loans up to Rs 8 lakh, provided the house value is within Rs 35 lakh. However, in metro cities, this limit is often exceeded, excluding many potential beneficiaries. Increasing this threshold to Rs 50 lakh could make the scheme more effective.”  Watch Video How is the Indian Union Budget prepared?

 

Measures expected from the budget

 

Industry leaders have put forth a series of recommendations for the upcoming budget to address affordability, boost demand, and improve operational efficiencies:

 

1. Affordable housing  

Revising PMAY thresholds: Increasing the house value cap from Rs 35 lakh to Rs 50 lakh in metro cities.  

Tax deductions: Raising the tax rebate on home loan interest under Section 24(b) from Rs 2 lakh to Rs 5 lakh.  

Dedicated benefits under Section 80C: Introducing a separate annual deduction of Rs 1.5 lakh for home loan principal repayments.  

 

2. Encouraging rental housing  

Tax relief on rental income: A 100% exemption on rental income up to Rs 3 lakh for properties priced at Rs 50 lakh or below.  

Land allocation for rental housing: Utilising surplus government-owned land for high-density rental housing projects targeted at low-income groups.  

 

3. Improving tax efficiency for home purchases  

Extending timelines under Section 54: Increasing the completion deadline for under-construction properties to five years from the current three years to qualify for capital gains exemptions.  

Extending the purchase window: Allowing buyers two years to purchase a new property before selling an old one to claim long-term capital gains benefits.

 

Puri stressed the importance of addressing the availability of urban land. “Affordable housing requires focused attention, but the lack of urban land at reasonable prices remains a critical barrier. Releasing centrally controlled land—managed by agencies like the Indian Railways, Port Trusts, and the Department of Heavy Industries—could provide the much-needed land supply for affordable housing projects.”

 

Puri also called for the reinstatement of the Credit-Linked Subsidy Scheme for economically weaker sections (EWS) and lower-income groups (LIG). “The scheme was highly effective in incentivising first-time buyers and should be reintroduced, with expanded coverage to include loans for home improvements or new construction.” 

 

Call for wider reforms  

 

The real estate sector is also advocating for structural reforms to reduce costs and improve efficiency. “Granting industry status to real estate is a long-standing demand. It would help developers access institutional funding at lower interest rates, reducing costs for both developers and homebuyers,” said Gauri Jagtap, associate partner at King Stubb & Kasiva.  

 

Jagtap dwelled on the importance of sustainability. “Encouraging green buildings and energy-efficient homes through GST reductions or home loan interest rebates would support environmental goals while making sustainability more accessible to homebuyers,” she added.  

 

Sluggish sales in 2024  

 

The slowdown in real estate sales was pronounced in 2024, with top cities experiencing a 4% dip in housing sales to 4.46 lakh units, while new launches dropped by 7% to 4.13 lakh units. The decline was partly attributed to general and state elections during the year.  

 

Puri noted that affordable housing sales have seen a sharper decline. “The share of sales in the affordable housing segment has dropped from 48% in 2018 to less than 30% in 2024. This highlights the urgent need for targeted interventions to revive this segment.”  

 

Simplifying regulatory processes  

 

Experts have called for streamlining the regulatory process to make real estate projects more efficient. “A single-window clearance mechanism would reduce delays and costs, which are eventually borne by homebuyers,” said Soumya Banerjee, partner at AQUILAW. Banerjee also highlighted the importance of strengthening consumer protection under the Real Estate Regulatory Authority (RERA). “Real-time updates from developers on RERA portals could improve transparency and build buyer confidence.”