What Budget 2025 means for homebuyers: More money in hand, sweetener on self-occupied properties to boost real estate

To boost disposable income and increase affordability for middle-class homebuyers, the Finance Minister announced on February 1 that there would be no income tax payable up to ?12 lakh - i.e., up to ?12.75 lakh including standard deductions - under the new regime. This is expected to enhance spending power and drive housing demand and investments in the real estate sector, say real estate experts.

"The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment," Finance Minister Nirmala Sitharaman said in her Budget speech on February 1.

Reacting to the Budget 2025 proposals, Arvind Nandan, Managing Director, Research & Consulting, Savills India, said that by ensuring a more streamlined approach to taxation, the government has strengthened household purchasing power, potentially driving demand for both primary and secondary housing markets.

Govt announces SWAMIH Fund-2 to complete 1 lakh homes in stalled projects

The increased allocation to the new SWAMIH Fund 2 of ?15,000 crores for an additional 1 lakh units in Budget 2025 aims to provide relief to thousands of homebuyers whose real estate projects have been delayed.

The completion of 50,000 dwelling units under the existing SWAMIH scheme, with another 40,000 in the pipeline, highlights the government’s strong push towards resolving the housing crisis, experts said.

The expansion of the SWAMIH-2 Investment Fund improves the supply of ready homes for first-time buyers, stabilizes the market, and maybe even makes housing affordable. Overall, the fund instils confidence in the real estate sector, assists homebuyers, and activates the completion of the stuck projects, resulting in the sector's revival, said Ramendra Verma, Partner and Government Consulting Leader, Grant Thornton Bharat.

According to PropEquity, close to 2000 housing projects across 42 cities comprising 5.08 lakh units have been stalled. 1,636 projects totalling 4,31,946 units in 14 tier I cities and 345 projects totalling 76,256 units in 28 tier II cities have been stalled.

Govt proposes hike in threshold for TDS on rent to ?6 lakh from current ?2.4 lakh annual limit.

Real estate experts say raising the annual TDS limit on rent from ?2.40 lakh to ?6 lakh will also significantly benefit small taxpayers and landlords, easing compliance burdens.

Investors can now claim Nil valuation for two self-occupied properties instead of just one

Investors can now claim a Nil valuation for two self-occupied properties instead of one, a positive move for residential real estate investment.

“The simplified TDS on rent decreases the compliance burden and enhances liquidity for landlords, which will positively impact the rental housing market, especially in metro cities. Previously, homeowners could claim only one self-occupied property as tax-free; now, they can claim two - thereby removing taxation on notional rental income from a second home,” explained Anuj Puri, chairman, Anarock.

This step minimizes tax pressures, promotes homeownership, and facilitates real estate investment, especially in second homes and Tier 2 and 3 cities. Middle-class homebuyers, landlords, and investors can now benefit from reduced tax liabilities, better affordability, and fewer compliance hassles. By simplifying financial constraints and tax rules, the budget has made property ownership and rental housing more accessible, he said.

Shishir Baijal, chairman and managing director of Knight Frank India, said that the government's investor-friendly approach is apparent in the move to remove the erstwhile tax on deemed rent for two self-occupied properties compared to one earlier.

He welcomed the amendment allowing taxpayers to claim the annual value of two self-occupied properties as nil, exempting them from notional rental income tax. Previously, homeowners could claim tax exemption only on one self-occupied property, while additional properties were subject to tax, even if they were not rented out. This progressive reform provides significant tax relief, encourages homeownership, and acknowledges the evolving housing needs of Indian families, he said.

Govt to set up ?1 lakh crore Urban Challenge Fund to ramp up urban infrastructure

The establishment of an urban development fund will enhance infrastructure, unlock real estate potential, and transform cities into major growth hubs, experts said.

The ?1 lakh crore Urban Challenge Fund and incentivized urban reforms will enhance governance, municipal services, and city planning, key enablers for sustained commercial growth, said Ramesh Nair, CEO| Mindspace Business Parks REIT.

Support for Global Capability Centres (GCCs)

A national guidance framework will be introduced to help states attract and promote GCCs, strengthening India’s position as a global business hub.

Given India’s rising economic influence, this move is expected to fuel office space demand in major metros like Bengaluru, Mumbai, Hyderabad, Pune, and Chennai, as well as Tier-II and Tier-III cities, said Puri.

Budget 2025 and affordable housing

Budget 2025 did not include any policies for affordable housing. Experts say a national policy towards rental housing would have boosted the housing programme.

G Hari Babu, National President of NAREDCO said that the Budget 2025 could have also addressed some crucial areas, particularly the affordable housing segment. Rising home loan interest rates and the outdated definition of affordable housing have created barriers for many potential homeowners. The government should prioritize revisions to the current housing cap, which has been stagnant for nearly eight years, making it difficult for developers to deliver affordable homes within the set limits.