Real estate is one of the key pillars of India’s economy. From homebuyers and developers to investors and policymakers, everyone looks at the Budget for cues on how the industry will evolve in the coming year. The Union Budget plays a crucial role in setting the tone, influencing not just market sentiment but also the long-term trajectory of the sector.
In recent times, the government has actively focused on housing for all, urban expansion, and infrastructure development, making real estate a critical part of India’s growth story. The expectations from Union Budget 2025-26 were naturally high, as affordability, accessibility, and sustainability became major priorities. Some of the big questions include:
- Will it allocate funds to boost the overall growth of the real estate sector?
- Would it offer more relief to homebuyers?
- Will it push for better urban planning?
Now that the Budget is out, it’s time to break down what it means for the real estate sector.
Key Announcements Impacting Real Estate
- Simplified Taxation on Self-Occupied Property
- Higher TDS Threshold on Rental Income
- Revival of Stalled Housing Projects with SWAMIH Fund 2
- Urban Challenge Fund Paving the Way for Modern Cities
- PMAY-U 2.0 for Affordable Housing
- Tax Relief for the Middle Class
The Union Budget 2025 has simplified the taxation rules for self-occupied properties and brought relief to homeowners. Previously, only one self-occupied property could be claimed with an annual value of nil. Now, homeowners can claim up to two self-occupied properties as nil without any conditions. This change aims to reduce tax liability for individuals owning multiple homes and make it easier for them to maintain properties for personal use.
It is a thoughtful move, especially for those living in one city while owning property in another. This will encourage homeownership and ease the financial pressure on middle-class families.
In another notable change, the government raised the Tax Deducted at Source (TDS) threshold on rental income from ₹2.40 lakh per annum to ₹6 lakh. This means landlords receiving up to ₹50,000 in monthly rent will no longer be subject to TDS deductions. The revision can benefit individuals in the lower rental income bracket and reduce compliance requirements.
This move is expected to simplify tax filing processes while boosting the rental housing market, particularly in metro cities where rent often exceeds the earlier threshold.
One of the biggest challenges homebuyers face is project delays. This leaves many of them stuck paying both EMIs and rent while waiting for their dream homes. The government has recognised this concern and taken a major step by launching SWAMIH Fund 2. It is a ₹15,000 crore blended finance facility aimed at expediting the completion of stalled housing projects.
Building on the success of the first SWAMIH Fund, which has already delivered 50,000 homes, this new initiative is expected to unlock over 1 lakh housing units. Another 40,000 will be completed in 2025. The fund aims to ensure that financially stressed projects get the capital they need to move forward with contributions from the government, banks, and private investors.
This move can be a big win for homebuyers, particularly in the mid-income and affordable housing segments. It can provide relief to those stuck in delayed projects and boost confidence in the real estate developmentsector.
India is home to the world’s fastest-growing cities by GDP, including Surat, Agra, and Bengaluru, to name a few (Source 1). With that growth comes the need for better infrastructure, housing, and connectivity. Recognising this, the government has introduced the ₹1 lakh crore Urban Challenge Fund – a transformative initiative aimed at making urban centres more liveable, efficient, and future-ready.
This fund will provide financial support to state governments and urban local bodies to develop sustainable housing, improved public transport, smart city solutions, and better urban planning. The goal is to reduce congestion, enhance infrastructure, and improve the quality of life for city dwellers.
As urban areas become more structured and well-planned, demand for housing and commercial spaces may rise. This can create new opportunities for developers, investors, and homebuyers alike. The Urban Challenge Fund will also encourage Public-Private Partnerships (PPP) and large-scale infrastructure projects to make cities more inclusive and investment-friendly.
In a major step towards achieving the vision of Housing for All, the government has launched PMAY-U 2.0 (Pradhan Mantri Awas Yojana – Urban) with an aim to provide homes for one crore additional families.
Over 88 lakh homes have already been completed under the first phase of PMAY-U. This second phase builds on past success, ensuring affordable and quality housing for middle and lower-income groups in urban areas. The Finance Minister proposed Rs.19,784 crore for the second phase of this government scheme. The programme is expected to boost construction activity, generate employment, and strengthen the real estate sector, particularly in Tier 2 and 3 cities.
This initiative presents a big opportunity for developers. Private players can participate in creating well-planned, sustainable housing projects with government support.
One of the biggest takeaways from this year’s Union Budget is the income tax exemption for individuals earning up to ₹12 lakh annually. This move can give the middle class more disposable income and impact their spending power directly. They can save more or allocate higher budgets for home purchases, making homeownership a more realistic goal.
This tax relief can positively influence real estate demand, whether or not securing a bigger home loan. To put it into perspective, if an individual saves ₹10,000 per month thanks to the increased tax exemption, that adds up to ₹1,20,000 annually. This extra amount could be used to manage higher home loan EMIs. With this additional ₹1,20,000 in disposable income, a person’s home loan eligibility could increase by a substantial amount, depending on his/her existing financial profile.
This tax reform, coupled with schemes like PMAY-U 2.0, could reshape urban housing demand where salaried professionals form a significant buyer base.
Final Thoughts
The Union Budget 2025-26 has set the stage for a dynamic and inclusive real estate sector. The government has signalled its intent to create a future-ready housing market.
More money in people’s hands and stronger infrastructure mean that homeownership is no longer just a dream for many but an achievable goal. While challenges always remain, this budget reaffirms a growth-oriented vision. The road ahead looks promising, and it’s one worth building on.
FAQs:
- How can the budget benefit the real estate sector?
- What are the major income tax highlights from Budget 2025-26?
Budget 2025 can support the real estate sector by introducing tax incentives for homebuyers, reducing GST rates on under-construction properties, and streamlining stamp duties to make property transactions more affordable and efficient.
The Budget 2025-26 has increased the tax-free income threshold to ₹12 lakh, which effectively rises to ₹12.75 lakh when factoring in the standard deduction. The revised tax slabs under the new regime aim to lower overall tax liability, while the old tax regime remains unchanged. Taxpayers continue to have the flexibility to switch between the old and new regimes. Additionally, the deadline for filing updated Income Tax Returns (ITRs) has been extended to four years, providing more time for taxpayers to rectify and update their filings.
References:
https://www.statista.com/chart/16641/worlds-fastest-growing-cities-by-gdp-are-in-india/
https://housing.com/news/budget-opens-new-doors-to-real-estate-demand/
https://www.etnownews.com/real-estate/budget-2025-impact-on-real-estate-property-sector-decoded-what-it-means-for-realty-market-article-117822618
