Funds 2025: Actual property sector awaits tax incentives, stamp responsibility discount to spice up house affordability

The true property sector contributes 7 per cent to India’s gross home product (GDP).

The nation’s housing market has grown by 60 per cent since 2019, with premium housing main the pattern.

The business property sector is experiencing vital progress. With the rise of International Functionality Centres (GCCs), constant hiring traits, and a renewed emphasis on returning to the workplace, the demand for versatile and technology-enabled workplace areas is growing quickly.

The true property sector’s function is ready to change into extra essential within the nation’s financial enlargement, with a projected market dimension of $4.8 trillion by 2047, in accordance with a joint report by EY and Confederation of Actual Property Builders’ Associations of India (CREDAI) revealed in November 2024.

As Finance Minister Nirmala Sitharaman prepares to current the Union Funds for FY 2025-26 on February 1, stakeholders in India’s actual property sector are keenly awaiting coverage measures that would drive progress and deal with affordability challenges.

Right here’s what’s on the highest of the business’s Funds 2025 wishlist for the true property sector:

Addressing affordability and housing demand

Affordability stays a key concern for the true property sector. The share of gross sales within the sub-Rs 50 lakh section has declined from 48 per cent in 2018 to under 30 per cent in 2024, regardless of robust general demand.

Business leaders are advocating for adjustments to house mortgage tax advantages to enhance affordability.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, suggests elevating this to Rs 5 lakh to make house loans extra accessible. The present deduction for house mortgage curiosity funds beneath Part 24(b) of the Earnings Tax Act is capped at Rs 2 lakh. Many business consultants.

“At current, Part 80 C of the Earnings Tax Act doesn’t present for a targeted profit on housing which is the most important and most vital expense merchandise for many taxpayers throughout their lifetimes. A separate annual deduction of Rs 150,000 for principal compensation will enhance housing affordability and supply the much-needed fillip to go for house loans,” Baijal mentioned.

Decrease stamp responsibility and reinstating Credit score Linked Subsidy Scheme (CLSS) beneath Pradhan Mantri Awas Yojana (PMAY) may very well be anticipated to incentivise the consumers within the inexpensive section, Axis Securities mentioned in a current report.

Increasing advantages beneath PMAY 2.0

The Pradhan Mantri Awas Yojana (PMAY) 2.0 offers a 4 per cent curiosity subsidy on loans as much as INR 8 lakh, with a home worth cap of Rs 35 lakh. Nevertheless, actual property costs in main cities exceed this restrict, stopping many from benefiting.

Business leaders suggest growing the utmost home worth restrict from Rs 35 lakh to Rs 50 lakh in metropolitan areas. This adjustment would assist align coverage with market realities, enabling extra homebuyers to make the most of the scheme.

Making house purchases tax-efficient

Below Part 54 of the Earnings Tax Act, long-term capital beneficial properties from promoting an present home could be reinvested in a brand new property. Nevertheless, the exemption applies provided that the brand new property is accomplished inside three years of the sale. Given growing venture sizes and frequent delays, the business is advocating for an extension to 5 years.

Moreover, the rule requiring a homebuyer to buy a brand new property inside one yr earlier than or two years after promoting the outdated one is seen as restrictive. Stakeholders counsel extending the pre-purchase interval to 2 years, permitting house sellers extra flexibility to find the best property.

Encouraging inexperienced housing

Some business consultants are additionally hoping the funds will deal with inexperienced housing. Pranay Kumar, Government Director of Rudrabhishek Enterprises Restricted (REPL), has referred to as for a “concentrate on green-certified buildings and eco-friendly building by allocating funds for inexperienced financing schemes and energy-efficient housing. These measures will strengthen the true property sector, guarantee inexpensive housing entry, and assist India’s purpose of turning into a developed nation by 2047.”

Boosting rental housing by way of tax incentives

In a bid to advertise rental housing, Knight Frank has steered a 100 per cent tax exemption on rental revenue as much as Rs 3 lakh for homes priced under Rs 50 lakh.

Many properties on this value bracket stay unoccupied as house owners discover renting them unviable as a consequence of low yields. This measure would encourage property house owners to hire out vacant items, growing the rental provide.

To deal with housing shortages, consultants additionally suggest utilising government-owned surplus land– reminiscent of that owned by the railways and defence forces– for high-density rental housing. Below this mannequin, items could be rented at a 2 per cent yield on the rateable worth, restricted to eligible homebuyers and by no means bought within the open market.

Increasing SM REITs

The Small and Medium Actual Property Funding Trusts (SM REITs) framework, launched by SEBI in 2024, has enhanced transparency in actual property investments. Sudarshan Lodha, Co-founder of Strata Property Administration, emphasised that SM REITs might help stimulate workplace, retail, and industrial actual property progress whereas making investments extra accessible to retail traders.

Business leaders hope the funds will introduce tax incentives for SM REITs to additional encourage participation and liquidity within the sector. Elevated flexibility in tax laws might improve retail investor confidence and market participation.