Industry Hopes for Tax Incentives in Budget 2025 for Affordable Housing
Real Estate Budget 2025: Industry leaders are urging the government for tax benefits, broader definitions of affordable housing, and reduced GST rates to boost housing affordability and accessibility.
Real EstateBudget 2025Affordable HousingTax IncentivesGstReal Estate MumbaiJan 30, 2025
Developers are advocating for a series of tax incentives and regulatory reforms aimed at making housing more affordable and accessible to a broader segment of the population.
These demands include exemptions, reduced GST rates, and enhanced tax benefits.
One of the key asks is the exemption of Goods and Services Tax (GST) on joint venture (JV) agreements.
This move is intended to streamline transactions and reduce the tax burden on real estate collaborations.
Additionally, there is a strong push to reduce the GST rates on essential construction materials such as steel and cement.
This reduction is crucial to lower input costs for developers and, in turn, make housing more affordable.
The industry is also seeking an increase in the home loan tax deduction limit, the reinstatement of input tax credits under GST, and extended tax holidays for affordable housing projects.
Pramod Khairnar Patil, President of CREDAI Maharashtra, emphasized the need to revive and extend Section 80-IBA benefits, which provide a 100% tax exemption on profits from affordable housing projects.
He stated, “The government has not revised the price and size definitions of affordable housing to reflect current market dynamics.
We propose an enhancement to align with these realities.” Patil also called 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.
He further suggested allowing Foreign Direct Investment (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.
He stated, “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.” Puravankara also called for redefining affordable housing by raising the price cap from Rs 45 lakh to Rs 80 lakh to better reflect market realities.
He emphasized the importance of 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.
Singhal also emphasized the role of Alternative Investment Funds (AIFs) in real estate financing and called for expanding tax benefits in this segment.
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 for North India, UAE, and KSA at 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 and 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 and 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 at 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 tax incentives requested by the real estate industry in Budget 2025?
The real estate industry is requesting exemptions on GST for joint venture agreements, a reduction in GST rates on construction materials like steel and cement, an increase in home loan tax deduction limits, reinstatement of input tax credits under GST, and extended tax holidays for affordable housing projects.
Why is there a need to redefine the price cap for affordable housing?
The current price cap for affordable housing does not reflect the current market dynamics. Industry leaders propose raising the price cap from Rs 45 lakh to Rs 80 lakh to better align with current market realities and make homeownership more accessible.
How can simplifying land acquisition processes benefit the real estate sector?
Simplifying land acquisition processes can reduce delays, lower costs, and make the development of housing projects more efficient. This can lead to more affordable and timely project completions.
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 real estate sector with India’s climate goals. Tax rebates or grants for projects focusing on renewable energy, water conservation, and energy efficiency can drive this change.
Why is liquidity important for real estate developers?
Liquidity is crucial for real estate developers as it ensures timely project completion and reduces the financial burden. Measures like easier credit access, competitive terms, and faster land approvals can enhance liquidity and support the sector.
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