Budget 2025: Real Estate Industry Awaits Tax Incentives for Affordable Housing
The real estate industry is eagerly awaiting the 2025 budget, with key demands including tax benefits, a broader definition of affordable housing, and reduced GST rates.
Real EstateBudget 2025Tax IncentivesAffordable HousingGstReal EstateJan 30, 2025
The real estate sector is urging the government to introduce several measures to enhance affordability and streamline transactions.
Developers are pushing for the exemption of goods and services tax (GST) on joint venture (JV) agreements to reduce tax burdens in real estate collaborations.
They also want a reduction in GST rates on key construction materials like steel and cement to lower input costs.
Pramod Khairnar Patil, president of CREDAI Maharashtra, emphasized the need to revive and extend Section 80-IBA benefits, which offer a 100% tax exemption on profits from affordable housing projects.
'The government has not revised the price and size definitions of affordable housing as per market dynamics.
We propose an enhancement to reflect current realities,' he said.
He also advocated for raising the tax deduction limit for housing loan interest under Section 24(b) from Rs 2 lakh to Rs 5 lakh to make homeownership more accessible.
Additionally, he suggested allowing FDI in Limited Liability Partnerships (LLPs) to improve the ease of doing business in real estate.
Aashish Puravankara, managing director of Puravankara, echoed the demand for tax relief.
'A tax deduction of up to Rs 5 lakh on home loan principal and interest under Sections 80C and 24(b) would provide significant relief to homebuyers and boost housing demand.
Additionally, redefining affordable housing by raising the price cap from Rs 45 lakh to Rs 80 lakh would better reflect market realities,' he stated.
He also called for reinstating the input tax credit (ITC) under the GST regime to support the sector.
Arun Shukla, president and director of JK Lakshmi Cement, stressed the need to reduce GST on cement from 28% to 18% to make housing more affordable.
'We urge the government to focus on expediting project approvals, releasing funds promptly, and introducing incentives for green manufacturing to enhance competitiveness,' he added.
Anshul Singhal, managing director of Welspun One, highlighted the importance of simplifying land acquisition and encouraging sustainability.
'Key interventions such as fostering green building incentives and reducing construction costs via innovative public-private partnerships can position India as a preferred investment destination,' he said.
He also emphasized the role of Alternative Investment Funds (AIFs) in real estate financing and called for expanding tax benefits in this segment.
Additionally, he suggested extending the scope of Section 72A of the Finance Act to classify real estate as a capital-intensive sector to attract more investment.
Rajat Kapur, managing director North India, UAE & KSA, The Executive Centre, pointed out that simplifying processes for Global Capability Centres (GCCs) to set up offices in India would enhance the country’s position as a global business hub.
'Streamlining investment procedures and enhancing urban infrastructure will empower businesses to drive growth and innovation,' he said.
Deepak Patkar, CEO & MD of SMFG India Home Finance Co., stressed the need for increased liquidity and credit access for developers.
'Developers must be incentivized through supportive measures like easier credit access at competitive terms and faster land and allied approvals to ensure timely project completion,' he noted.
Nitesh Kumar, managing director & CEO of Emami Realty, pointed out that an increase in the price cap for affordable housing and extended home loan tax benefits would help improve accessibility and affordability.
Rakesh Reddy, director of Aparna Constructions, urged the government to introduce financial incentives for green and sustainable building practices.
'Tax rebates or grants for projects that prioritize renewable energy, water conservation, and energy efficiency would align the real estate sector with India’s commitment to climate goals,' he said.
Saurabh Runwal, director of Runwal Realty, called for liquidity-enhancing policy measures.
'This includes reducing long-term capital gains taxes, streamlining REIT regulations, and increasing interest rebates for housing loans.
With land costs making up 70-80% of expenses in major metros, these reforms will directly impact the affordability and scalability of residential projects,' he explained.
Shashank Paranjape, managing director of Paranjape Schemes Construction, highlighted the need for reforms in stamp duty and simplified GST regulations for under-construction properties to make transactions smoother and more cost-effective.
Ajay Agrawal, managing director of BramhaCorp, emphasized that industry stakeholders expect increased tax incentives for affordable housing, policies to simplify land acquisition, and measures to promote green building practices.
Abhishikta Munjal, chief risk officer of IIFL Home Finance, underscored the importance of extending the tax holiday for affordable housing projects under Section 80-IBA and granting broader infrastructure status to real estate to encourage large-scale development.
Frequently Asked Questions
What are the key demands from the real estate industry in the 2025 budget?
The key demands include tax benefits, a broader definition of affordable housing, reduced GST rates on construction materials, and increased home loan tax deduction limits.
Why is the exemption of GST on joint venture agreements important for the real estate sector?
Exempting GST on joint venture agreements would streamline transactions and reduce tax burdens in real estate collaborations, making it easier for developers to partner and reduce costs.
What is the proposed increase in the price cap for affordable housing?
The industry is proposing to raise the price cap for affordable housing from Rs 45 lakh to Rs 80 lakh to better reflect current market realities.
How can green building incentives impact the real estate sector?
Green building incentives can encourage sustainable practices, reduce environmental impact, and align the real estate sector with India’s climate goals, making projects more attractive to investors and buyers.
What are the suggestions for improving liquidity in the real estate sector?
Suggestions include reducing long-term capital gains taxes, streamlining REIT regulations, and increasing interest rebates for housing loans to enhance liquidity and support developers.
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