Budget 2025 Proposals: Boosting Home Loan Deductions and Real Estate Development
The Union Budget 2025 is expected to introduce significant reforms in home loan deductions and real estate development. These changes aim to make homeownership more accessible, boost affordable housing, and stimulate overall growth in the sector.
Budget 2025Home LoansReal EstateAffordable HousingTax DeductionsReal Estate NewsJan 10, 2025
Industry leaders are hopeful about reforms that will address long-standing challenges and foster growth and affordability.
Here’s a closer look at the expectations and insights shared by industry experts.
Increasing Tax Deductions on Home Loans
One of the most anticipated changes is an increase in the tax deduction limit for housing loan interest under Section 24(b) of the Income Tax Act.
Currently capped at ₹2 lakh, there are widespread calls to raise this limit to ₹3–5 lakh.
Rajat Khandelwal, Group CEO at Tribeca Developers, emphasizes, “This will make homeownership more accessible and encourage individuals to invest in residential properties.” An increase in these limits would provide much-needed relief to middle-income homebuyers, enabling them to combat rising property prices and loan interest rates.
Affordable Housing A Renewed Focus
Sumit Sharma, Founder of Radian Finserv, highlights the need for enhanced support for affordable housing, which has seen a decline post-pandemic.
He notes, “Affordable housing's share in the market dropped from 38% in 2019 to 21% in the first half of 2024.
Increasing incentives for first-time homebuyers and providing better financing options could reverse this trend.” Additional measures like interest subsidies and streamlined access to capital for non-banking financial companies (NBFCs) catering to underserved segments are also on the wish list.
Industry Status for Real Estate
Recognizing real estate as an “industry” is a long-standing demand of developers.
Tejas Patil, Founder of Arbour Investments, explains, “This move could streamline access to institutional finance, reduce borrowing costs, and attract domestic and foreign investments.” Industry status would also simplify regulatory approvals, allowing developers to deliver projects more efficiently and affordably.
Reviving the Credit Linked Subsidy Scheme (CLSS)
Rajat Khandelwal also stresses the revival of the Credit Linked Subsidy Scheme (CLSS) for first-time homebuyers.
This initiative could act as a catalyst for the housing sector, providing targeted support to lower-income segments while boosting demand in the mid-range housing market.
GST Reforms and Infrastructure Investments
Mohit Agarwal, Business Head at Conscient, points out the need for reforms in GST rates and regulations.
He suggests reducing the GST on cement from 28% to 18% and allowing input tax credits for under-construction properties.
These changes would benefit both developers and buyers by reducing overall costs.
Infrastructure investments remain a priority for the sector.
Increased allocations for urban renewal projects and enhanced connectivity in Tier 2 and Tier 3 cities could unlock new opportunities for development and growth.
Pushpamitra Das, Founder & Director, JUSTO, emphasizes that infrastructure status would enable easier financing and bolster growth across the sector.
Affordable Housing and Rental Reforms
Experts anticipate increased allocations under the Pradhan Mantri Awas Yojana (PMAY) and tax incentives for first-time homebuyers to revive this segment.
Das stresses tax benefits for owners and tenants, alongside support for co-living spaces and other rental housing models.
Demand from the Hospitality Sector
The hospitality sector, closely linked to real estate, is also pushing for reforms.
Ritwik Khare, Founder and CEO of ELIVAAS, notes, “Comprehensive tax coverage across segments can alleviate financial pressures and make tourism more attractive, fostering both domestic and international travel.” The hospitality industry, currently valued at $24 billion, is poised for growth fueled by increasing disposable incomes and tourism infrastructure developments.
Khare emphasizes the importance of government investments in emerging destinations like Ayodhya and Lakshadweep, which are expected to become popular hotspots in 2025.
He adds, “The sector needs policies that support ventures such as holiday homes and villas, as well as education and training to build a skilled workforce.”
Frequently Asked Questions
What is the expected increase in the tax deduction limit for housing loan interest under Section 24(b)?
The Union Budget 2025 is expected to increase the tax deduction limit for housing loan interest under Section 24(b) of the Income Tax Act from the current ₹2 lakh to ₹3–5 lakh.
Why is there a decline in the share of affordable housing in the market?
The share of affordable housing in the market has dropped from 38% in 2019 to 21% in the first half of 2024, primarily due to the post-pandemic economic challenges and a lack of incentives for first-time homebuyers.
What are the benefits of recognizing real estate as an 'industry'?
Recognizing real estate as an 'industry' can streamline access to institutional finance, reduce borrowing costs, and attract domestic and foreign investments. It would also simplify regulatory approvals, making project delivery more efficient and affordable.
What reforms are suggested for the GST rates and regulations in the real estate sector?
Industry experts suggest reducing the GST on cement from 28% to 18% and allowing input tax credits for under-construction properties. These changes would benefit both developers and buyers by reducing overall costs.
How can the hospitality sector benefit from the Union Budget 2025?
The hospitality sector can benefit from comprehensive tax coverage across segments, which can alleviate financial pressures and make tourism more attractive. Government investments in emerging destinations like Ayodhya and Lakshadweep can also boost the sector's growth.
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