Budget 2025: Real Estate Set for a Surge with Tax Incentives
MUMBAI: The real estate sector is celebrating the 2025 budget, which includes significant tax incentives for homeowners and investors, particularly in affordable and rental housing.
Real EstateTax IncentivesBudget 2025Rental HousingAffordable HousingReal Estate MumbaiFeb 02, 2025
The finance ministry has proposed three key measures to boost the housing sector and rental housing, alongside offering tax benefits.
The budget has massively increased the income tax exemption limit to Rs 12 lakh per annum under the new tax regime.
This move is expected to encourage people to invest in real estate, especially in housing.
The second measure allows homeowners to mark two homes as self-occupied, provided one is not rented out, and claim nil valuation.
This is a big boost for rental housing.
The third measure more than doubles the income tax cap on rental income to Rs 6 lakh from the current Rs 2.4 lakh, providing a significant leg-up to both homeowners and tenants.
These measures are seen as significant tax reliefs, especially for those who own second homes and receive rental income.
According to tax experts, they will open up new opportunities in rental housing.
Allowing homeowners to declare two houses as 'self-occupied' with nil value is considered the biggest tax relief, as it will provide further impetus to rental housing.
Anuj Puri, chairman of Anarock Group, highlights that investors can now claim 'nil valuation' for two self-occupied properties, instead of just one.
This is a big positive move for residential realty investment.
Higher income tax exemption caps will also boost fresh home investments.
The simplified TDS on rent will decrease the compliance burden and enhance liquidity for landlords, positively impacting the rental housing market, especially in metros.
Previously, homeowners could claim only one self-occupied property as tax-free.
Now, they can claim two, thus removing taxation on notional rental income from a second home.
This minimizes tax pressures, promotes homeownership, and facilitates real estate investment, especially in second homes and big cities.
Middle-class homebuyers, landlords, and investors can now benefit from reduced tax liabilities, better affordability, and fewer compliance hassles.
By simplifying financial constraints and tax rules, the budget has made property ownership and rental housing more accessible, giving a significant boost to the real estate sector and housing demand.
Abhilash Pillai, a partner at Cyril Amarchand Mangaldas, notes that exempting rent up to Rs 6 lakh from TDS will greatly benefit tenants, who account for 40 percent of residential rentals.
The move will ease the financial burden on middle-class families, who often struggle with high rental costs and additional deductions.
It will also encourage more investor-owners to rent out properties without worrying about paying tax, boosting the residential realty market by improving supply and affordability.
Pradeep Aggarwal, founder-chairman of Signature Global, calls the income tax relief a masterstroke of direct tax reforms.
The exemption in income up to Rs 12 lakh will significantly boost disposable income, increasing affordability for homebuyers and driving real estate demand.
Boman Irani, national president of Credai, states that the higher income tax exemption of up to Rs 12 lakh, coupled with increasing the TDS threshold on rent from Rs 2.4 lakh to Rs 6 lakh, will significantly boost housing demand and overall consumption.
Sandeep Chhillar, chairman of Landmark Group, sees the higher income tax rebates as a great encouragement for first-time homebuyers.
Santosh Agarwal, executive director of Alphacorp, believes that no income tax up to Rs 12 lakh under the new tax regime will help people get closer to their dream of owning a house.
Tribhuwan Adhikari, chief executive of LIC Housing Finance, feels that the budget announcements on tax exemptions will make it easier for the middle class, especially salaried individuals, to plan for homeownership, positively impacting the demand for affordable housing.
Bhavesh Kothari of Property First says the budget has given significant impetus to the real estate sector, especially for the middle class.
The expansion of the Swamih fund is a crucial step towards stalled housing projects, delivering 100,000 homes, and providing much-needed liquidity in the affordable and mid-income housing segment.
Madhusudan G of Sumadhura Group believes that the income tax relaxation will boost housing demand by increasing liquidity.
The removal of restrictions on owning two self-occupied properties without tax implications and the higher TDS exemption threshold on rental income will spur fresh residential investments.
Adarsh Narahari of Primus Senior Living commends the doubling of the TDS threshold on interest income for senior citizens from Rs 50,000 to Rs 1 lakh, easing their financial burden.
However, he suggests that a well-thought-out reverse mortgage policy could have been a game-changer, unlocking liquidity for the elderly.
Frequently Asked Questions
What is the new income tax exemption limit under the new tax regime in Budget 2025?
The new income tax exemption limit under the new tax regime in Budget 2025 is Rs 12 lakh per annum.
How many self-occupied properties can homeowners now claim tax-free?
Homeowners can now claim tax-free status for two self-occupied properties, provided one is not rented out.
What is the new income tax cap on rental income for the next fiscal year?
The new income tax cap on rental income for the next fiscal year is Rs 6 lakh, up from Rs 2.4 lakh.
Who will benefit most from the increased TDS threshold on rental income?
The increased TDS threshold on rental income will benefit tenants, who account for 40 percent of residential rentals, by easing their financial burden and encouraging more investor-owners to rent out properties.
How will the budget impact first-time homebuyers?
The budget's higher income tax rebates will significantly benefit first-time homebuyers by increasing their disposable income and making homeownership more affordable.
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