Budget 2025: Real Estate Sector Awaits Tax Incentives for Affordable Housing
The real estate industry is eager for the upcoming Budget 2025, with a focus on tax incentives and reforms to boost affordable housing. Key demands include reducing GST rates, increasing tax deductions, and simplifying land acquisition processes.
Real EstateAffordable HousingBudget 2025Tax IncentivesGstReal Estate NewsJan 30, 2025
The sector's expectations are high, particularly in the area of affordable housing.
Developers and industry leaders are advocating for a range of tax incentives and policy reforms to streamline transactions and reduce costs.
Developers are urging the government to exempt Goods and Services Tax (GST) on joint venture (JV) agreements to streamline transactions and reduce tax burdens in real estate collaborations.
This move could significantly lower the cost of joint ventures and encourage more such partnerships.
Another key demand is the reduction in GST rates on essential construction materials such as steel and cement.
Arun Shukla, president and director of JK Lakshmi Cement, emphasized the importance of this reduction.
“Lowering the GST on cement from 28% to 18% would make housing more affordable and reduce input costs for developers,” he said.
Pramod Khairnar Patil, president of CREDAI Maharashtra, highlighted the need to revise the definitions of affordable housing to reflect current market dynamics.
“The government has not updated the price and size definitions of affordable housing to match market realities.
We propose an enhancement to better reflect current market conditions,” he said.
He also called for increasing 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.
Aashish Puravankara, managing director of Puravankara, echoed Patil’s demands.
“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.
Industry leaders are also pushing for the reinstatement of input tax credits (ITC) under the GST regime and the extension of tax holidays for affordable housing projects.
Anshul Singhal, managing director of Welspun One, stressed the importance of fostering green building incentives and reducing construction costs through innovative public-private partnerships.
“These interventions can position India as a preferred investment destination in the real estate sector,” he said.
Rajat Kapur, managing director of The Executive Centre North India, UAE & KSA, 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 added.
Deepak Patkar, CEO and MD of SMFG India Home Finance Co., highlighted 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.
Saurabh Runwal, director of Runwal Realty, called for liquidity-enhancing policy measures, including reducing long-term capital gains taxes and streamlining REIT regulations.
“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, emphasized 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, stressed 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.
These demands reflect the industry's commitment to making housing more accessible and affordable, while also fostering sustainable and innovative practices.
The upcoming Budget 2025 is seen as a critical opportunity to address these issues and spur growth in the real estate sector.
Frequently Asked Questions
What are the key demands of the real estate industry for Budget 2025?
The key demands include exempting GST on joint venture agreements, reducing GST rates on construction materials, raising the home loan tax deduction limit, and extending tax holidays for affordable housing projects.
Why is there a need to revise the definitions of affordable housing?
The current definitions do not reflect current market dynamics. Revising them will better align the affordable housing segment with market realities and make housing more accessible.
How can reducing GST on cement benefit the real estate sector?
Reducing the GST on cement from 28% to 18% would lower input costs for developers and make housing more affordable for homebuyers.
What role do green building incentives play in the real estate sector?
Green building incentives can encourage sustainable practices, reduce environmental impact, and align the sector with climate goals. They can also make projects more attractive to investors and homebuyers.
Why is liquidity and credit access important for developers?
Increased liquidity and easier credit access at competitive terms can help developers complete projects on time and reduce the overall cost of housing. This, in turn, makes homeownership more accessible for a broader segment of the population.
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