Budget 2025: Govt’s push for infra with focus on PPP, key outlay for states

The finance minister has proposed an outlay of Rs 1.5 lakh crore for the 50-year interest-free loans to states for capital expenditure and incentives for reforms.

February 1, 2025: Termed as the people’s budget by Prime Minister Narendra Modi with major tax reliefs, the Union Budget 2025-26 was presented by Finance Minister Nirmala Sitharaman today with key announcements to boost infrastructure development in the country. The government has emphasised the need for public-private partnerships (PPPs) and proposed key support for states to enhance infrastructure. The finance minister proposed to cut the capital expenditure target to Rs 10.18 lakh crore from Rs 11.11 lakh crore for the fiscal year 2025-26. There have been no major announcements for the railway sector, with the capex for Indian Railways set at Rs 2.52 lakh crore for 2025-26. The government has also announced plans to boost urban development in cities with key allocations for this fiscal.

 

Public-Private Partnership in Infrastructure

The government has proposed that each infrastructure-related ministry would prepare a 3-year pipeline of projects to be implemented in PPP mode. The finance minister said that states would also be encouraged to do so and asked for support from the IIPDF (India Infrastructure Project Development Fund) scheme to prepare PPP proposals.

The government has allocated a budget of Rs 2,873.33 crore to the Ministry of Road Transport and Highways for 2025-26.

During the Budget 2025 announcement, the finance minister said that access to relevant data and maps from the PM Gati Shakti portal will be provided to further PPPs and support the private sector in project planning. The PM Gati Shakti is a national master plan launched in October 2021 aimed at improving infrastructure and connectivity in the country.

 

Capex outlay for states

The finance minister has proposed an outlay of Rs 1.5 lakh crore for the 50-year interest-free loans to states for capital expenditure and incentives for reforms.

 

Support for tier-2 cities with a national framework for GCC

The government has planned to formulate a national framework as guidance to states for promoting Global Capability Centres (GCCs) in emerging tier-2 cities. This is aimed at offering measures for boosting the availability of talent and infrastructure and building bylaw reforms and mechanisms for collaboration with industry.

 

Push for tourism sector to boost economic development

Finance Minister Nirmala Sitharaman has announced that top 50 tourist destination sites in India will be developed in partnership with states through a challenge mode. Land for building key infrastructure will have to be provided by states. The government will promote medical tourism and heal in India in partnership with the private sector along with capacity building and easier visa norms, she said. The move is aimed to boost regional economic development and create job opportunities.

 

Modified UDAN Scheme and push for airport development

The finance minister announced a modified UDAN scheme (Ude Desh ka Aam Naagrik scheme) to boost regional connectivity to 120 new destinations and carry four crore passengers in the next 10 years. The finance minister said the UDAN scheme has enabled 1.5 crore middle-class people to achieve speedier travel. Under the UDAN scheme, 88 airports have been connected and 619 routes have been operationalised. The government will support helipads and smaller airports in hilly, aspirational and northeast region districts through this scheme.

As per reports, the allocation for the UDAN scheme is Rs 540 crore, which is a 32% decrease compared to Rs 800 crore allocated last year.

The government plans to facilitate greenfield airports in Bihar to fulfil the state’s future needs. These will be in addition to expanding the capacity of Patna airport and a brownfield airport in Bihta.  

Warehousing facility for air cargo

The government will facilitate the upgradation of infrastructure and warehousing for air cargo, including high-value perishable horticulture produce

 

National Geospatial Mission

The government has planned to initiate a National Geospatial Mission for the development of foundational geospatial infrastructure and data. Through the PM Gati Shakti scheme, the mission will facilitate the modernisation of land records, urban planning and design of infrastructure projects.

 

Urban Challenge Fund

The government will set up an Urban Challenge Fund of Rs 1 lakh crore to implement the proposals for ‘cities as growth hubs’, ‘creative redevelopment of cities’ and ‘water and sanitation’ announced in the July Budget in 2024. The fund will finance up to 25% of the cost of bankable projects with a stipulation that at least 50% of the cost is funded from bonds, bank loans and PPPs. The FM announced an allocation Rs 10,000 crore for 2025-26.

 

Industry reactions on Union Budget 2025-26

According to industry experts, the Union Budget 2025-26 shows a balanced approach by the government with focus on infrastructure and urban development. Jayesh Rajpurohit, Co-Founder and CEO of Brick & Bolt, said “The Union Budget 2025-26 offers a strong push to this ongoing momentum, with a balanced focus on developing infrastructure, encouraging tech adoption and urban planning and development across rural and tier 2 towns.” He further added “Modernising the land records and leveraging tech-enabled solutions in Urban Planning under the National Geospatial Mission, is a welcome initiative and will accelerate the industry’s shift towards data-driven decision-making. Further, access to geospatial data will help streamline approvals, optimise infrastructure design, bring transparency to the process, and ensure sustainable development. Additionally, the announcement for Rs 1.5 lakh crore allocation for states to boost capital expenditure is a significant step in boosting the state-driven infrastructure projects, thereby driving the growth of housing and commercial real estate and improving connectivity.”

The expansion of the UDAN scheme to 120 new destinations will be a big boost to regional real estate markets and can help drive the demand for housing and commercial spaces in emerging hubs. The Finance Minister’s focus on developing the Public Private Partnership models for infrastructure and real estate development will also help open new opportunities for private-sector collaboration in shaping India’s next phase of urban growth, he added.

Anshuman Magazine, chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “The Union Budget 2025-26 is a significant step towards accelerating growth and inclusive development, which is targeted at maintaining economic growth, upgrading infrastructure, facilitating ease of doing business, strengthening social schemes and the healthcare segment while addressing MSMEs.”

“The capex allocation and Rs 1.5 lakh crore in interest-free loans for states will be a booster for building a future-ready economy that thrives on both physical and digital infrastructure. Investments of Rs 1 lakh crore in the Urban Infrastructure Development Fund and enhanced PLI scheme for toy manufacturing will ignite urban transformation, create thousands of jobs, and empower local industries. The vision of ‘Cities as Growth Hubs’ and the ‘Creative Redevelopment of Cities’ will boost economic growth and uplift urban living, making cities dynamic, thriving places to live and work. The framework for setting up GCCs in tier 2 cities is a brilliant move to reduce migration pressures while promoting local development.”

“The designation of 50 cities as global hubs for tourism, spirituality, and medical services is projected to uplift regional economies substantially. This initiative will create new avenues for growth, generate employment, and prioritize local infrastructure development”, he added.

 

Housing.com News Viewpoint

The Union Budget 2025 tabled by Finance Minister Nirmala Sitharaman has been welcomed by the people belonging to middle-class households owing to the big announcement on income tax cuts. Proposals have also been made to give a push to the MSMEs, agriculture, education and tourism sectors. There has been an emphasis on creating new opportunities to boost the rural economy and enabling employment-led development in the country. The key highlight of the government’s plans for infrastructure development is the emphasis on providing support for states and focusing on PPP, which is necessary for enhancing the efficiency of projects and facilitating economic growth.

 

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com

 

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