Real Estate Sector Aims for Industry Status: Key Reforms for Union Budget 2025
The real estate sector is making a strong push for 'industry' status in the upcoming Union Budget 2025, aiming to drive investment, innovation, and economic growth. Grant Thornton Bharat’s survey highlights key reforms that could boost the sector and addr
Real EstateBudget 2025Industry StatusAffordable HousingReitsReal EstateJan 29, 2025
This push comes amid a backdrop of urban slowdown, rising fiscal deficits, and global uncertainties, with the sector aiming to drive investment, innovation, and economic growth.
India is on track to become the world's fourth-largest economy by 2026 and achieve the $5 trillion mark by 2028, the survey indicates.
Most respondents expect growth between 6-6.9 per cent in FY 2025-26, while a significant 22 per cent project even higher expansion of 7-7.9 per cent.
This reflects strong optimism about the country's economic trajectory.
Granting industry status to the housing sector is a priority, as it would enhance funding access, attract investment, and boost affordable housing.
This move would stimulate construction, create jobs, and drive economic growth, reinforcing the industry’s role in national development.
Shabala Shinde, partner and real estate industry leader at Grant Thornton Bharat, emphasized the need for the Union Budget 2025 to simplify GST on under-construction properties, rationalize stamp duties, and enhance tax incentives for affordable housing to boost demand.
Moreover, integrating the real estate sector with tokenisation through blockchain technology is seen as the way forward.
This requires fostering innovation and investment while establishing clear regulations for tokenising real estate transactions, records, and related processes.
Blockchain technology can enhance transparency and operational efficiency, making the sector more attractive to investors.
To address the rising demand for housing and increasing costs, the government should prioritize funding and incentives for rental development.
Expanding affordable rentals will benefit more people, attract private investment, and alleviate shortages, enhancing urban affordability and housing accessibility.
Real estate investment trusts (REITs) are also a focus area.
Proposals have been made to boost investment by exempting capital gains tax on share transfers in asset-holding special purpose vehicles (SPVs) to REITs.
However, direct asset transfers remain taxable and should also qualify for exemption to encourage sector growth.
Additionally, capital gains from specified listed securities held by REITs should be taxed at a rate of 12.5 per cent.
Grant Thornton's survey affirms that allowing charitable and religious institutions to invest in REITs and small and medium (SM) REITs can enhance portfolio diversification, mitigate risk, and boost returns.
This will help REITs raise funds efficiently, fostering competition and sector growth.
“The Union Budget 2025 must address these challenges to unlock housing accessibility, support long-term growth, and leverage real estate’s potential,” Shinde added.
Encouraging rental housing, REITs, and foreign direct investment (FDI) can improve liquidity and catalyze investments.
Strengthening urban infrastructure, smart cities, and digitized land records will further enhance transparency and operational efficiency.
To add to the list, proposals have been made to address inconsistencies by extending provisions to subsidiaries of listed REITs, ensuring equitable tax treatment and a fairer business environment.
Expanding tax neutrality to transfers between REITs and their SPVs will streamline reorganization, enhance operational efficiency, and support business growth, fostering a more competitive real estate market.
Frequently Asked Questions
Why is the real estate sector pushing for industry status?
The real estate sector is pushing for industry status to enhance funding access, attract investment, and boost affordable housing. This would stimulate construction, create jobs, and drive economic growth, reinforcing the industry’s role in national development.
What are the key reforms proposed in the Grant Thornton Bharat survey?
Key reforms include simplifying GST on under-construction properties, rationalizing stamp duties, and enhancing tax incentives for affordable housing. The survey also suggests integrating the real estate sector with blockchain technology and boosting investment in rental development.
How can blockchain technology benefit the real estate sector?
Blockchain technology can enhance transparency and operational efficiency in the real estate sector. It can be used to tokenize real estate transactions, records, and related processes, making the sector more attractive to investors.
What is the role of REITs in the real estate sector?
Real estate investment trusts (REITs) play a crucial role in the real estate sector by providing a platform for investment in real estate assets. Proposals to boost investment in REITs include exempting capital gains tax on share transfers and allowing charitable and religious institutions to invest in REITs.
What measures can the government take to address housing affordability?
The government can prioritize funding and incentives for rental development, expand affordable rentals, and enhance tax incentives for affordable housing. These measures will benefit more people, attract private investment, and alleviate housing shortages, enhancing urban affordability and housing accessibility.
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