Budget 2025 opens new doors to real estate demand

Finance Minister Nirmala Sitharaman presented the 8^th consecutive Union Budget on Saturday, February 1, 2025. She began her speech by highlighting the four key engines of Budget 2025: Agriculture, MSMEs, Investment and Exports. These sectors are expected to play a crucial role in achieving the nation’s goal of becoming Viksit Bharat.

Budget 2025 and the real estate sector

For the real estate sector, Budget 2025 focused on several impactful measures. A central theme of Budget 2025, especially with regards to real estate, is liquidity, which will empower the common man with more disposable income. This increased liquidity is likely to boost investments in real estate—an asset class that many view as secure and aspirational.

Budget 2025: No income tax upto Rs 12 lakh

One of the key takeaways was the increase in the tax relief threshold from Rs 7 lakh to Rs 12 lakh. This move will provide people with more disposable income, creating more opportunities for investment in real estate. According to Dhruv Agarwala, group CEO of Housing.com & PropTiger.com, “The Union Budget 2025 introduces transformative measures aimed at strengthening the real estate sector and making homeownership more accessible. The significant tax relief for the middle class—exempting individuals earning up to Rs 12 lakh under the new tax regime—is a pivotal step. By easing the tax burden and enhancing disposable income, this move is set to boost household consumption, savings and investments, thereby fuelling housing demand and overall economic growth.”

(Note: Housing.com readers will need to check the Income Tax bill to get the fine details, which will be released next week.)

Budget 2025: SWAMIH Fund 2

In her budget speech, Sitharaman highlighted the progress made under the Special Window for Affordable and Mid-Income Housing (SWAMIH), noting that 50,000 housing units in distressed housing projects have been completed and handed over to homebuyers. She also mentioned that 40,000 more units are expected to be completed by 2025, providing much-needed relief to middle-class families who are paying both EMIs on loans for apartments and rent for their current homes.

As part of Budget 2025, Sitharaman proposed the creation of SWAMIH Fund 2, a blended finance facility that will involve contributions from the government, banks and private investors. This Rs 15,000 crore fund aims to expedite the completion of another 1 lakh units.

“The government’s renewed focus on resolving stalled projects is reinforced through the Rs 15,000 crore SWAMIH Fund 2.0, targeting the completion of 1 lakh housing units. With the fund already facilitating the delivery of over 50,000 homes and another 40,000 units expected by 2025, this initiative will play a vital role in restoring buyer confidence and improving liquidity in the sector.

Furthermore, the enhanced infrastructure outlay—spanning rural connectivity and new airport expansions—will unlock real estate potential in emerging regions. Improved connectivity not only enhances accessibility but also serves as a catalyst for residential and commercial growth in high-potential markets.

With these strategic interventions, Budget 2025 lays a strong foundation for sustainable growth, reinforcing homeownership aspirations and contributing to India’s broader economic momentum,” Agarwala added.

Ashwin N Sheth, chairman and managing director, Ashwin Sheth Group, said, “The government’s unwavering focus on resolving stressed housing projects and boosting infrastructure development is a welcome move for the real estate sector. The completion of 50,000 housing units, with another 40,000 set to be delivered by 2025, will provide much-needed relief to homebuyers while easing financial pressures on middle-class families. The launch of SWAMIH Fund II, with Rs 15,000 crore blended finance facility, will further accelerate the completion of 1 lakh units, ensuring liquidity and project completion.”

He added that the special focus on urban infrastructure development will certainly boost real estate. A dedicated push for skilling initiatives in construction, real estate and hospitality will equip the workforce with industry-relevant expertise, creating employment opportunities and strengthening India’s urban landscape. These forward-looking measures will reinforce confidence among homebuyers, investors, and industry stakeholders, paving the way for sustained economic growth.

Budget 2025: Increase in rental TDS threshold

In Budget 2025, the finance minister proposed an increase in the rental tax deducted at source (TDS) threshold for individuals with two self-occupied properties. Currently, taxpayers can claim the annual value of self-occupied properties as nil only under certain conditions. To ease compliance, the government now proposes to allow the benefit of two self-occupied properties without any conditions.

Finance minister Nirmala Sitharaman announced an increase in the threshold for TDS on rent from Rs 2.40 lakh per annum to Rs 6 lakh per annum. With this change, the monthly limit for TDS deduction increases from Rs 20,000 to Rs 50,000. With this move, transactions liable to TDS will reduce and this will help small tax payers who get small payments.

Kaushal Agarwal, co-founder and director, The Guardians Real Estate Advisory, said, “The Union Budget 2025 brings a significant relief for homeowners by allowing tax benefits on two self-occupied properties instead of just one. Earlier, individuals had to pay tax on the notional rental income of a second home, adding to their financial burden. This change simplifies tax compliance and recognises the need for housing flexibility, especially for families with homes in different cities for work, investment or personal reasons.”

Ashish Puravankara, managing director, Puravankara said, “The rationalisation of income tax slabs, raising the exemption limit to Rs 12 lakh, revision of tax structure up to Rs 24 lakh, and increasing rental TDS thresholds will boost disposable income. The tax exemption on notional rent for a second self-occupied home is a significant relief, encouraging investment in real estate. Coupled with a higher standard deduction, these measures will drive housing demand, particularly in the affordable and mid-segment categories.”

Added Dhaval Ajmera, director Ajmera Realty & Infra India, “Key reforms like TDS and TCS simplification increase in the TDS limit on rent and the allowance of two self-occupied properties instead of one will leave more money in the hands of the consumer, thereby boosting consumption.”

Budget 2025: Pradhan Mantri Awas Yojana (PMAY)

Launched in August 2024, PMAY U 2.0 has a five-year implementation period starting in September 2024. Under this scheme, one crore houses are set to be constructed in urban areas by 2029.

Finance Minister Nirmala Sitharaman proposed Rs 19,794 crore for Pradhan Mantri Awas Yojana-Urban (PMAY) in 2025-26. This marks a 36% increase in funding from the revised estimate of Rs 13,670 crore in the 2024-25 Budget. However, according to the Expenditure Profile 2025-26 shared by the ministry of finance, the amount is lower than the Rs 30,171 crore originally budgeted for FY25.

For PMAY Gramin, the government has allotted Rs 54,832 crore for 2025-26. In FY25, the budgeted estimate for the rural housing scheme was Rs 54,500 crore.

“The Union Budget 2025-26 presents a compelling vision for India’s infrastructure and housing sector, the substantial increase in PMAY-Urban funding by 36% to Rs 19,794 crore demonstrates the government’s unwavering commitment to affordable housing, creating significant opportunities for building materials and solutions providers,” said Aparna Reddy, executive director, Aparna Enterprises.

Budget 2025: Areas missing in action

Despite a few strong measures, the real estate sector did not receive many of the SOPs it was hoping for, which could have further strengthened its standing as an asset class. Below are some areas the sector was hoping to see addressed in Budget 2025, which could have been game-changers:

• Rationalisation of stamp duties and GST: Real estate developers were keen on the rationalisation of stamp duties and GST. A unified tax system would be more user-friendly for both developers and buyers, helping avoid double taxation.
• Single window policy: Developers have been advocating for a single-window policy for over a decade. With this in place, acquiring permits for real estate projects would be streamlined, reducing time and money spent on compliance.
• Industry status: Although real estate is the second-largest employment provider, it has not been granted industry status. Conferring this status would help the sector access various incentives, which would be beneficial for its growth.

Housing.com POV

While the real estate sector may have wanted more, Budget 2025 has undoubtedly set a strong foundation for future growth. These initiatives are likely to open up demand in the sector, especially with the development of new cities, infrastructure projects, tourism, the completion of stalled projects, and tax benefits.