Union Budget: Real Estate industry expectations and recommendations

Expectations and recommendations of the real estate industry from the Indian Union Budget 2025-26

As the Union Budget 2025-26 draws near, all eyes are on the real estate sector—a cornerstone of India’s economy and a bellwether of its growth. From addressing housing shortages to revamping urban infrastructure, this year’s budget is expected to bring transformative reforms. So, what exactly does the real estate industry hope for this year? Let us explore.

Why is the real estate sector crucial to India’s economy?

Real estate isn’t just about bricks and mortar; it’s the backbone of India’s urban dreams. With over 8% contribution to the GDP and direct employment to millions, this sector fuels industries like steel, cement, and logistics. Isn’t it high time it got the attention it deserves?

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What is the current state of the real estate industry?

The Indian real estate sector stands at a crossroads. While strides have been made, some promises remain unfulfilled, casting a shadow over the ambitious vision of "Housing for All by 2022." The program aimed to deliver 20 million homes, but bottlenecks like funding gaps, slow project execution, and pandemic-induced delays derailed its progress.

Adding to the mix is the sluggish development of the Smart Cities Mission. With only a handful of projects meeting deadlines, the dream of smart, sustainable urban centers feels more like a distant reality. For many, the question remains: are these setbacks indicative of larger systemic issues?

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Industry status: A long-pending demand?

Why hasn’t the real estate sector been granted industry status? This query has been on the lips of developers for decades. Without this recognition, the sector struggles with higher borrowing costs, fragmented regulations, and limited access to institutional credit. Compare this to industries like manufacturing, which enjoy streamlined benefits, and the disparity becomes glaring.

Granting industry status could revolutionise the landscape, enabling developers to access low-interest loans and fostering investor confidence. The ripple effect? Affordable housing could become a reality rather than just a vision.

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Can tax reforms drive housing affordability?

Ask any homebuyer or developer, and they’ll tell you: tax reforms are the game-changers. Increasing the Section 24(b) deduction limit from ₹2 lakh to ₹5 lakh for home loan interest could offer a significant respite, especially in metro cities where property prices are skyrocketing.

Moreover, extending the Section 80-IBA benefits for affordable housing until 2029 would prioritize budget-friendly projects. A targeted reduction in GST on key materials like paint, sanitary ware, and ceramics could further reduce construction costs, directly benefiting homebuyers.

Navin Makhija – Managing Director, The Wadhwa Group

"The real estate sector anticipates critical reforms from the Union Budget 2025-26 that can accelerate growth and further strengthen its contribution to India’s economic progress. The following measures would not only enhance affordability but also bring renewed momentum to the housing sector:

To boost homeownership across income segments, we urge the government to allow interest payments on home loans to be set off against individual income tax liabilities. This move will significantly reduce the financial burden on homebuyers and serve as a strong incentive for prospective buyers, ultimately stimulating demand in the residential real estate market.

Reviving the 80-IB tax benefit for developers undertaking affordable housing projects is crucial. This provision will incentivize developers to launch more affordable housing projects, aligning with the government's vision of 'Housing for All.' The benefit will also ensure increased supply in this category, meeting the ever-growing demand for budget-friendly homes.

To make housing affordable, an interest subsidy for developers of affordable housing projects would be a welcome step. This will enable developers to access funding at lower costs, reducing the overall cost of projects. This benefit will be passed on to end-users, making homeownership more accessible to economically weaker sections and middle-income groups.

The real estate sector is a cornerstone of economic growth and employment generation. We hope the Union Budget 2025-26 addresses these expectations and introduces reforms that empower both homebuyers and developers while contributing to the overall growth of the economy."

How can GST rationalization benefit buyers and developers?

The current GST structure for real estate can feel like a labyrinth. Buyers of under-construction properties often face higher costs due to the absence of input tax credits. A simplified, uniform GST rate with input tax credit restoration could alleviate this burden.

Imagine this: a homebuyer opting for an under-construction property pays less GST, encouraging demand and boosting developer cash flow. Doesn’t that sound like a win-win?

Rohan Khatau, Director, CCI Projects Private Limited

"With the Union Budget 2025-26 around the corner, the real estate sector is keenly anticipating measures that will bolster growth and address critical challenges. Here are a few key expectations from the government to ensure sustainable progress and greater housing accessibility:

Enhanced tax benefits for homebuyers

We urge the government to consider increasing the tax exemption limit on home loan interest under Section 24(b). Enhancing these benefits will significantly improve affordability for first-time homebuyers, especially in urban and semi-urban regions, where property prices remain high.

GST Rationalization

A unified and lower GST rate for under-construction properties will provide much-needed relief to homebuyers while encouraging demand in this segment. Currently, multiple tax layers create confusion and deter potential buyers.

Support for Affordable Housing

The extension and expansion of benefits under the Pradhan Mantri Awas Yojana (PMAY) will be crucial to bridging the housing gap. The introduction of new subsidies and incentives for developers focusing on affordable housing will accelerate the mission of ‘Housing for All.’

Focus on Rental Housing

With urbanization on the rise, promoting rental housing schemes will create a more structured rental market. This move will cater to a diverse population, including millennials and migrating professionals.

Single-Window Clearance mechanism

Simplifying project approvals through a single-window clearance system will expedite project execution, reduce costs, and enhance investor confidence. It is a much-needed reform to drive efficiency across the sector.

Increased Budget Allocation for Infrastructure Development

Investment in infrastructure projects like metro connectivity, highways, and urban transport networks directly impacts real estate demand. Enhanced connectivity to peripheries will unlock their potential as emerging growth corridors.

Industry Status for the Real Estate sector

Granting industry status to the real estate sector will open avenues for lower borrowing costs and improved access to institutional credit. This will strengthen developers' ability to deliver quality projects on time.

The real estate sector plays a pivotal role in driving economic growth and creating employment. Progressive and pragmatic measures in this year’s budget can act as a catalyst, fostering confidence among stakeholders and contributing significantly to India’s vision of becoming a $5 trillion economy."

What role does sustainable development play?

Green is not just a buzzword—it is a necessity. With India committed to carbon neutrality by 2070, the real estate sector must align itself with sustainable goals. The government could incentivize eco-friendly practices by offering tax rebates for green certifications and renewable energy integration in buildings.

Consider the potential of solar panels or rainwater harvesting systems becoming standard in housing projects. These aren’t just environmentally sound—they’re cost-effective in the long run. The question is, will this year’s budget take bold steps toward a greener tomorrow?

Vikas Sutaria, Founder, Iraah Lifespaces

"As we approach the Union Budget 2025-26, the real estate sector remains optimistic about receiving the much-needed impetus to drive growth, affordability, and sustainability. It deserves focused attention to address its long-standing challenges and unlock its full potential. Key Expectations include:

Incentivising homebuyers through Tax Reforms

We urge the government to revisit the tax deduction limits under Section 80C and 24(b) of the Income Tax Act. An upward revision of the deduction limit for home loan principal repayment and interest on housing loans will significantly improve housing affordability and encourage homeownership, particularly in Tier II and Tier III cities.

Infrastructure-led growth

• Increased investments in infrastructure development, such as highways, metro networks, and urban connectivity projects, will complement the real estate sector by enhancing the livability of emerging growth corridors.

Special focus on second homes and luxury housing

Locations like Alibaug and Lonavala are witnessing increased demand for second homes and luxury villas. Tailored policies for investments in these high-potential segments will support the rising aspirations of affluent buyers.

The Union Budget 2025-26 has the opportunity to lay a foundation for a balanced and inclusive real estate sector."

Can infrastructure investments unlock new growth corridors?

Infrastructure is the backbone of real estate development. Think about it—what drives property demand in peripheral areas? Connectivity. The Union Budget 2025-26 must focus on projects like metro expansions, highways, and urban transportation networks. These investments create new growth corridors and make affordable housing in suburban areas more accessible.

Take, for instance, metro expansions in cities like Bengaluru and Mumbai. These projects have turned once-overlooked areas into real estate hotspots. By continuing to fund such initiatives, the government can stimulate growth not just in Tier I cities but in Tier II and III regions too.

Dhaval Ajmera, Director, Ajmera Realty Infra India

"The real estate industry looks forward to the next budget with high expectations for supportive measures to sustain growth. Key demands include deductions for first-time homebuyers, rationalized stamp duties, broader tax reforms, and reinstating the focus on an updated affordable housing definition. Providing tax clarity for SM REITs and incentivizing fractional ownership structures are critical steps to boost investment.

Reducing LTCG rates on property from 20% to 10% and lowering GST rates on under-construction properties and raw materials would ease financial pressures on developers and homebuyers alike.

Infrastructure projects like the Coastal Road, Metro expansion, and Navi Mumbai International Airport are set to decongest traffic, creating new residential and commercial hubs and driving property demand in the area. Such policies to develop infrastructure can foster favorable conditions and boost the real estate sector, enhancing investment potential in metropolitan areas.

Lastly, incentives for green and sustainable real estate initiatives and subsidies for affordable housing are highly anticipated to stimulate growth and support economic stability." 

Is single-window clearance the need of the hour?

Developers often face delays due to cumbersome approval processes. Picture this: a project stuck in red tape for months, driving up costs and delaying delivery. A single-window clearance mechanism could solve this by streamlining project approvals and ensuring time-bound execution.

By reducing compliance burdens and clarifying land titles, this reform could attract domestic and foreign investment. Efficiency here isn’t just a developer’s dream—it’s a necessity for growth.

Can REITs and rental housing reshape the market?

Real Estate Investment Trusts (REITs) have brought liquidity to Indian real estate. However, they are still underutilized. Offering tax incentives and making REITs more accessible to retail investors could deepen their market penetration.

On the other hand, rental housing has untapped potential. With urban migration on the rise, affordable rental housing complexes could cater to millions. What is needed? Policy support and tax benefits to make rental housing a viable option for both developers and tenants. The model tenancy law is still in limbo. 

Insights from industry experts

Here are some key insights from industry leaders:

• Mr. Prashant Sharma, President, NAREDCO Maharashtra:
  “Granting industry status to real estate is a game-changer. It will unlock institutional funding, reduce borrowing costs, and support affordable housing initiatives.”

• Ms. Shraddha Kedia-Agarwal, Director, Transcon Developers:
  “Tax incentives for green projects will not only make real estate sustainable but also attract environmentally conscious buyers.”

• Mr. Kuldeep Jain, Founder & CEO, Build Capital:
  “Rationalizing GST rates for under-construction properties can bring clarity and relief to both developers and buyers, stimulating the sector’s growth.”

These perspectives highlight a unified call for reforms that address affordability, sustainability, and efficiency.

How can tax incentives boost home ownership?

Homeownership remains a distant dream for many due to high costs and taxes. Rationalizing stamp duties, which can go as high as 8-9% in some states, could make a significant difference. Additionally, increasing tax exemptions under Sections 80C and 24(b) would reduce the financial burden on first-time homebuyers.

Imagine a young couple in Delhi, currently paying exorbitant EMIs, finding relief through increased deductions. Such changes could spark a home-buying boom.

Abhishek Jain, COO, Satellite Developers Private Limited (SDPL) shares,

"The Union Budget 2025-26 presents an excellent opportunity to catalyze growth in the real estate sector, which is a key contributor to India's economic progress and employment generation. We have high expectations from this year's budget, as the government continues to emphasize housing and infrastructure development.

Enhancing the tax deduction limit under Section 80C and Section 24(b) for home loan principal and interest repayment can significantly boost affordability and demand in the residential sector. This step is crucial to enable middle-class homebuyers to make their dream of owning a home a reality.

As urbanization accelerates, the need for affordable rental housing is more pronounced. The introduction of tax benefits for individuals and corporates investing in rental housing can support the government’s Rental Housing Scheme and promote organized housing options.

The announcement of funds for mega infrastructure projects such as metro expansions, high-speed rail corridors, and urban transport systems can enhance connectivity and unlock new real estate growth corridors. This will benefit peripheral and emerging micro-markets, attracting more investment.

To attract more institutional investments, we urge the government to introduce further tax benefits and incentives for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This will provide a strong capital flow into commercial and infrastructure projects.

The real estate sector plays a pivotal role in achieving the vision of a $5 trillion economy, and we hope the Union Budget 2025-26 will reflect a forward-looking approach that addresses key challenges and accelerates sectoral growth."

What should be done to promote PropTech adoption?

Technology is revolutionizing real estate, from AI-driven property listings to blockchain-enabled title verification. Yet, the sector has only scratched the surface. Allocating funds for PropTech innovations and offering incentives for tech adoption could bridge gaps in efficiency and transparency.

For example, virtual reality tours are reshaping the home-buying experience, but widespread adoption remains limited. A government-backed initiative could make such technologies accessible to all.

Govind Krishnan Muthukumar, Managing Director & Co-founder, Tridhaatu Realty

"The real estate sector anticipates bold measures from the Union Budget to sustain its growth momentum while addressing challenges that impact both developers and homebuyers. The following key areas demand the government’s attention:

· Increasing the tax deduction limit for housing loan interest under Section 24(b) would provide significant relief to homebuyers and stimulate demand. This move is critical to support the mid-income and affordable housing segments, which form the backbone of the sector.

· Reinstating the tax holiday under Section 80-IBA for affordable housing projects and increasing the income ceiling for beneficiaries under PMAY-U would enhance housing accessibility for economically weaker sections and low-income groups.

· Introducing a single-window clearance system for project approvals can expedite timelines and reduce carrying costs for developers. This will lead to faster project deliveries, benefiting both developers and end-users.

· Allocating higher funds for urban infrastructure along with metro, rail and road networks will unlock the potential for both residential and commercial developments.

We urge the government to introduce progressive policies that not only boost housing demand but also create a sustainable and transparent ecosystem for all stakeholders in the real estate sector. These steps can transform India’s urban landscape while contributing significantly to the nation's GDP."

Addressing regional disparities in housing development?

While metro cities see rapid development, Tier II and III cities often lag behind. Encouraging private investments and tailored policies for smaller towns can address these disparities. Incentives for developers entering untapped markets and improving urban infrastructure in these regions can spark balanced growth.

Can the budget attract Foreign Direct Investment (FDI)?

Foreign Direct Investment (FDI) has immense potential to propel India’s real estate sector to new heights. However, current regulatory bottlenecks and tax burdens deter many global investors. Simplifying FDI norms, offering tax breaks, and creating a transparent regulatory framework could make India a hotspot for real estate investment.

For instance, commercial real estate—especially tech parks and co-working spaces—has attracted significant FDI in recent years. Further reforms could accelerate investments, driving infrastructure growth and creating jobs. With India aiming to become a $5 trillion economy, global partnerships are essential.

How can sustainable development incentives transform real estate?

Sustainability isn’t just about going green—it’s about future-proofing. Real estate is one of the largest contributors to carbon emissions, and adopting eco-friendly practices is no longer optional. Tax incentives for green certifications, subsidies for renewable energy integration, and relaxed norms for environmentally conscious developers could usher in a new era.

Consider this: a developer installing solar panels, using rainwater harvesting systems, and sourcing sustainable materials would not only lower operational costs but also attract environmentally conscious buyers. The upcoming budget should make such initiatives mainstream, aligning with India’s net-zero targets.

How will regional housing markets benefit from infrastructure-led growth?

The mantra is simple: build the roads, and real estate will follow. Investment in mega infrastructure projects like metro rail expansions, multimodal transport systems, and expressways can unlock peripheral areas for real estate growth. For instance, the success of Gurgaon as a real estate hub is rooted in its proximity to Delhi and seamless connectivity via the Delhi-Gurgaon Expressway.

Imagine similar stories in smaller towns and cities. The budget can catalyze this transformation by allocating funds to high-impact projects and ensuring timely execution.

What role does technology play in revolutionising the sector?

Real estate has embraced technology slowly, but the shift is undeniable. From AI-powered property management to blockchain-based land registries, technology is rewriting the rules. However, adoption is inconsistent and often limited to high-end developers.

The Union Budget 2025-26 could earmark funds for PropTech innovation and provide grants for pilot projects in digital transformation. Imagine a future where homebuyers complete transactions securely through blockchain or where AI predicts the next real estate boom. These aren’t distant dreams—they’re possibilities waiting to be unlocked.

Is there a case for tailored policies for second homes and luxury villas?

With affluent buyers eyeing second homes in destinations like Alibaug, Lonavala, and Goa, the luxury housing market is thriving. Tailored policies could boost this segment, making it easier for developers to cater to niche demands. Tax benefits for investments in high-end properties or simplified regulations for vacation homes could unlock this untapped potential.

Additionally, these homes often serve as revenue-generating assets through rentals, offering a win-win for owners and local economies.

Insights from global best practices

• Singapore: Streamlined approval systems and transparent regulatory frameworks have turned Singapore into a global real estate hub. India can learn from its model of efficient urban planning and strong government oversight.
• Germany: Germany’s focus on affordable housing through public-private partnerships has ensured housing availability across income groups.
• The UAE: Tax-free zones and infrastructure investment have made Dubai a magnet for global real estate investors. Could India replicate this model for select urban corridors?

The Union Budget 2025-26 is a pivotal moment for Indian real estate. Addressing long-standing demands—industry status, tax reforms, GST rationalization, and infrastructure investments—can unlock unparalleled growth. With the right mix of policies, the sector could transform into a cornerstone of India’s economic aspirations, providing affordable housing, fostering innovation, and driving sustainability.

This budget will be about redefining urban India. Will it rise to the occasion?

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FAQs

1. What is the significance of the Union Budget for real estate?
   The budget sets the stage for policies that directly impact housing affordability, infrastructure development, and investor confidence.

2. How does GST impact real estate buyers?
   GST adds to the cost of under-construction properties. Simplifying rates and restoring input tax credits could lower these costs.

3. What are the benefits of granting industry status to real estate?
   It would provide developers with access to institutional credit at lower rates, reduce project costs, and boost affordability.

4. How can the government support sustainable housing?
   By offering tax incentives for green certifications, promoting eco-friendly materials, and subsidizing renewable energy integration.

5. What role does FDI play in Indian real estate?
   FDI brings capital, boosts infrastructure, and creates jobs, making it critical for long-term growth.

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About the Author

Tushar Mangl is an energy healer, Vastu expert, and author of Ardika. He writes on topics like real estate, personal finance, mental health, investments, and sustainable living, inspiring readers to create balanced lives.

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