NEW DELHI — On February 1, Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26, focusing on economic growth, infrastructure development, and tax reforms, as published by The Economic Times.
While there were no direct changes to property taxes or home loan benefits, the budget introduced several initiatives that will positively impact the real estate sector. These measures emphasize urban infrastructure, housing, and investment.
Key Measures for the Real Estate Sector
SWAMIH Fund 2
The government’s successful Special Window for Affordable and Mid-Income Housing (SWAMIH) has completed 50,000 dwelling units in distressed housing projects. The government plans to complete an additional 40,000 units in 2025. Building on this success, the government will establish SWAMIH Fund 2 with an initial corpus of Rs 15,000 crore. The fund aims to expedite the completion of 100,000 more units, focusing on middle-class families who are paying both EMIs for incomplete apartments and rent for their current homes.
Tax Relief for Residential Property Investors
In a bid to ease the tax burden, the government proposed allowing taxpayers to claim the annual value of two self-occupied properties as nil, without having to meet specific conditions. This measure is aimed at alleviating the challenges faced by property investors.
Increased TDS Limit for Rent
The annual limit for TDS on rent will be increased from Rs 2.4 lakh to Rs 6 lakh, reducing the number of rental transactions subject to TDS. This change is designed to benefit small taxpayers receiving rental income below the new threshold.
Public-Private Partnership in Infrastructure Projects
The government has proposed a 3-year pipeline for infrastructure projects under the Public-Private Partnership (PPP) model. States will be encouraged to create their own PPP projects and can access support from the India Infrastructure Project Development Fund (IIPDF) to help prepare proposals.
Urban Reforms and the Urban Challenge Fund
The government will set up an Urban Challenge Fund with a corpus of Rs 1 lakh crore to finance urban infrastructure projects. These projects will focus on the themes of “Cities as Growth Hubs,” “Creative Redevelopment of Cities,” and “Water and Sanitation,” which were announced in the July Budget. The fund will finance up to 25% of bankable projects, with at least 50% of the cost covered by bonds, bank loans, or PPPs. An allocation of Rs 10,000 crore is proposed for the fund in 2025-26.
Promotion of Global Capability Centres (GCCs)
A national framework will be developed to promote Global Capability Centres (GCCs) in emerging tier 2 cities. This initiative will provide measures to enhance talent availability, infrastructure, building-byelaw reforms, and industry collaboration.
Support for State Infrastructure Development
The government has proposed an allocation of Rs 1.5 lakh crore for interest-free loans to states for capital expenditure. This move is designed to support infrastructure development across the country, indirectly benefiting the real estate sector.
Industry Reactions
Positive Responses
Several stakeholders in the real estate industry have welcomed the budget’s focus on middle-class affordability and urban development. Murali Malayappan, Chairman and Managing Director of Shriram Properties, emphasized that the increase in the zero-tax slab to Rs 12 lakh would lead to Rs 1 lakh crore in savings for the middle class. This additional disposable income is expected to drive demand, especially in the mid-market housing segment. Malayappan also supported the launch of SWAMIH Fund 2, which will help resolve stalled projects and provide a much-needed boost to the housing sector.
Tribhuwan Adhikari, MD and CEO of LIC Housing Finance, noted that the tax exemption for earnings up to Rs 12 lakh would make homeownership more accessible, especially for salaried individuals. He also praised initiatives like the Rs 1.5 lakh crore capex-linked loans to states and the expansion of the SWAMIH Fund, which will support affordable housing.
Mixed Responses
While many industry leaders welcomed the budget’s focus on urban infrastructure, some felt that crucial issues within the real estate sector had been overlooked. G Hari Babu, National President of NAREDCO, pointed out that the definition of affordable housing has not been updated for nearly eight years, making it difficult for developers to deliver affordable homes within the set limits.
He called for more substantial tax relief, especially for rental housing, and for reductions in home loan interest rates to support middle-class homebuyers.
Jagadish Nangineni, Managing Director of Sobha, echoed similar sentiments, stating that while urban infrastructure reforms were important, the budget failed to address the ongoing challenges in the affordable housing sector, including rising home loan interest rates.
Support for Flexi-Office Spaces and GCC Growth
Shesh Rao Paplikar, Founder and CEO of BHIVE Workspace, welcomed the government’s proposal to develop a national framework for Global Capability Centres (GCCs), which he believes will drive demand for flexible office spaces in tier 2 cities. Paplikar sees this initiative as an opportunity to increase the uptake of co-working spaces across the country, fueling commercial real estate growth in emerging cities.
Amit Kumar Sinha, MD and CEO of Mahindra Lifespace Developers, also praised the government’s focus on infrastructure-led growth and urban sector reforms. He believes the introduction of the Urban Challenge Fund and the incentivization of urban planning reforms will help create future-ready cities, fostering well-planned and sustainable urban ecosystems.
Concerns Over Missed Opportunities
Some industry leaders, such as Sushil Mohta, President of Credai West Bengal, expressed disappointment that the government had not addressed some of the most pressing concerns in the real estate sector. Mohta highlighted the lack of action on key demands, such as an update to the affordable housing cap, a revision to the home loan interest exemption limits, and the recognition of real estate as an industry.
Niranjan Hiranandani, Chairman of NAREDCO and Hiranandani Group, expressed optimism over the budget’s potential to drive demand in the real estate sector.
Hiranandani highlighted that the increased disposable income for middle-class families would spur demand for homes, especially in emerging growth corridors. He also noted that the reduction in home loan interest rates could further fuel the sustained demand for residential real estate.