Real Estate's vision for Union Budget 2025: A focus on affordability and demand  

The real estate sector has experienced rapid growth driven by urbanization, infrastructural development, and the rising aspirations of individuals. Contributing 8-9% to the country’s GDP, the sector plays a pivotal role in the economy. The Union Budget of 2025 is expected to introduce reforms and incentives aimed at addressing existing challenges and propelling the sector to even greater heights.

 1. Homeownership

For most Indians, the ideal dream remains to own a home. Though the urban housing market is on an upward growth trajectory, for most Indians these properties are unaffordable. Stiff interest rates and slashing of tax benefits have made it difficult for people to buy homes. 

The most eagerly awaited reforms in the upcoming budget would be improving tax benefits for home loan borrowers. The present maximum deduction available under Section 24(b) is ₹2 lakh per annum on interest from home loans. Since 2014, there has been no increase in the amount, whereas property prices are rising and so is the quantum of home loans. For example, an interest component of about ₹4.2 lakh a year is carried by a ₹50 lakh home loan for the first few years. With the existing deduction limit, the tax relief afforded is very marginal and does nothing to ease the burden on a homebuyer. According to this example, it is a matter of grave seriousness to raise the existing ₹2 lakh limit of this deduction to ₹4 lakh.

2. Escalating construction costs

Another rising issue is the rising construction cost, which acts as a barrier for affordable housing. Increase in the cost of land acquisition, growing input costs of steel and cement, and the shortage of labor have made construction cost expensive and thereby raised the prices of houses mostly in the urban centers. Now, the Union Budget can undoubtedly come up with some supply-side measures. For example, simplification of GST on construction materials can help developers build quality homes with a reasonable price. The incentives for using green and sustainable building materials will reduce long-term operational costs, hence making a housing ecosystem more sustainable and cost-effective.

3. Taxation Reforms

Taxation reforms significantly impact the trends in the real estate sector and house buying patterns. In the present tax regime, interest paid on home loans is deductible under Section 24(b) and principal repayment is deductible under Section 80C. However, the ₹2 lakh limit for interest payments, coupled with the inclusion of statutory contributions like Provident Fund (PF) in the 80C limit, has made these deductions inadequate for most borrowers.

One possible reform could be increasing the interest deduction limit from ₹2 lakh to ₹4 lakh. Another option is to allow separate tax deductions for home loan principal repayments under Section 80C, instead of including them in the previous 80C limits. Providing tax exemptions to the people on the home loan interest which individuals would receive for choosing a new taxation regime, available under section 115BAC, further alleviate the burdens imposed on them through borrowing to homeownership.

4. Infrastructure Planning

Infrastructure improvements have been a major growth factor for India's real estate market, especially for emerging cities and towns. With continuous urbanization growth, infrastructure development planning is now more critical in the housing market.

The Union Budget may have more investments into infrastructure development including road connectivity and upgradation of public transport system and utility services in tier-II and tier-III cities in the next Budget. These developments would not only make housing more accessible in these regions but also encourage developers to focus on affordable housing projects outside the overcrowded metro cities.

The promotion of smart cities, with integrated solutions for water, waste management, and energy, could also spur demand for real estate in emerging urban areas. This could alleviate the burden on major metropolitan regions while boosting the overall economy.

5. Green Spaces

A great cause for concern in today's Indian real estate market, especially in metropolitan cities, has been eco-friendliness as the speedy sprawl of both residential and commercial developments has encroached the open spaces. Thus, the much-awaited budget would focus on increasing greenery development and maintaining those green areas so that they help in keeping up a healthier life and living with minimum pollution.

More environmentally responsible housing will probably result from this engagement of developers through the incorporation of green spaces and energy-saving designs in their respective projects. Through tax rebates on sustainable construction practices and also integrating green technologies like solar panels and rainwater harvesting systems into residential complexes, tax rebates would encourage developers to apply more eco-friendly measures while developing a quality-of-life aspect in residents.

With the real estate sector taking a prime spot in the economy of the country, Union Budget 2025 has all the promises to bring to the table some reforms that could solve the issues the sector already faces and lead it into its future. The budget will be able to provide the much-needed impetus for homeownership and sustainable growth in the real estate sector through measures like enhanced tax benefits for homebuyers, cost-reducing initiatives for developers, better infrastructure planning, and promoting green spaces. Through such alignment, policy decisions with the changing needs of the housing market will enable the government to fulfill the dreams of millions of Indians of owning a home while fostering long-term economic prosperity.

The author is Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO-Maharashtra