Budget 2025 Boosts Real Estate: Key Proposals to Enhance Affordability and Drive Housing Demand

In a move set to boost disposable income and affordability for middle-class homebuyers, Finance Minister Nirmala Sitharaman’s Budget 2025 proposal introduces several measures aimed at stimulating the real estate sector. One of the most significant announcements was the increase in the income tax exemption limit to ₹12 lakh, which, with standard deductions, raises the limit to ₹12.75 lakh under the new tax regime. This initiative is expected to leave more money in the hands of middle-class consumers, thereby driving demand and investments in the housing market.

“The new tax structure will significantly reduce the tax burden on the middle class, boosting household consumption, savings, and investment,” said Finance Minister Sitharaman during her Budget speech.

Real estate experts, including Arvind Nandan, Managing Director of Savills India, welcomed the proposal, highlighting that the streamlined taxation structure strengthens household purchasing power, which could lead to a surge in demand for both primary and secondary housing markets.

SWAMIH Fund-2 to Address Stalled Projects and Boost Housing Supply

The government also announced the allocation of ₹15,000 crore to the new SWAMIH Fund-2, aiming to complete 1 lakh stalled housing units. This fund will provide much-needed relief to thousands of homebuyers affected by delays in real estate projects.

The ongoing success of the SWAMIH scheme, with 50,000 units completed and another 40,000 in progress, underscores the government’s commitment to resolving the housing crisis, experts say. The expanded SWAMIH Fund-2 will help stabilize the market by completing stalled projects and making homes more accessible to first-time buyers.

Ramendra Verma, Partner and Government Consulting Leader at Grant Thornton Bharat, noted that the fund instills confidence in the real estate sector, supports homebuyers, and contributes to the completion of delayed projects, playing a key role in the market’s recovery.

According to PropEquity, nearly 2,000 housing projects across 42 cities, totaling 5.08 lakh units, have been stalled. The SWAMIH Fund-2 aims to address this issue and bring much-needed relief to homebuyers in these projects.

Tax Benefits for Renters and Homeowners

The Budget 2025 proposal also includes a significant increase in the threshold for TDS (Tax Deducted at Source) on rent, raising it from ₹2.4 lakh to ₹6 lakh annually. This adjustment is expected to benefit small taxpayers and landlords, easing their tax burden and improving liquidity in the rental housing market, particularly in metro cities.

Additionally, investors will now be able to claim a Nil valuation for two self-occupied properties, up from just one previously. This measure removes the tax on notional rental income from a second home, providing substantial tax relief and promoting homeownership.

Anuj Puri, Chairman of Anarock, explained, “The new rule allows homeowners to claim two self-occupied properties as tax-free, which reduces tax pressure and simplifies real estate investment, particularly in second homes and smaller cities.”

Shishir Baijal, Chairman and Managing Director of Knight Frank India, praised the government’s investor-friendly approach, calling the decision to eliminate tax on deemed rent for two self-occupied properties a progressive reform. He believes this will significantly ease the financial burden on homeowners and encourage homeownership across the country.

Urban Infrastructure Fund to Unlock Real Estate Potential

In another key announcement, the government unveiled a ₹1 lakh crore Urban Challenge Fund aimed at ramping up urban infrastructure. This fund will enhance the infrastructure in cities, making them major growth hubs and further unlocking the potential of the real estate market.

Experts predict that the establishment of this Urban Challenge Fund will transform urban landscapes, improve livability, and drive further investment in the housing sector.

These Budget proposals collectively aim to increase affordability, simplify tax structures, and boost infrastructure, creating a more attractive environment for homebuyers, landlords, and real estate investors.