The Union Budget 2025 and its Benefits for Homebuyers and Real Estate Investors

The Union Budget 2025 was a pivotal turning point for the real estate sector in India. Firstly, it recognised the sector’s contribution to the country’s economic growth. The rise in demand for housing and infrastructural expansion has led to significant urban development, encouraging the government to introduce measures that will ensure affordability, increase investor confidence, and solve long-pending issues like stalled projects. 

The budget presented a balanced approach to the real estate sector. The Union Budget 2025’s impact aims to benefit homebuyers, investors and developers alike. Here is how they will help the stakeholders: 

• Homebuyers: Tax Deductions and Affordability Schemes for Housing
• Real Estate Investors: Favourable Capital Gains Tax structures and better rental taxations 
• Developers: New infrastructure projects and government funds to accelerate housing construction

Tax Benefits for Homebuyers 

Tax Deductions: 

Under Section 24(b) of the Income Tax Act, the government has increased the deduction limits on home loan interest, encouraging home ownership. The aim is to reduce the financial burden on homebuyers by decreasing the taxable income. 

• First-time homebuyer benefits include a deduction of Rs 3.5 lakhs per annum 
• Other additional benefits under Section 80 EEA also include Rs 2 lakhs, if you avail a loan under a government-approved affordable housing scheme 

Tax Exemptions on Multiple Properties: 

In step, with the new real estate market trends of 2025, the government introduced tax benefits for up to 2 self-occupied properties. Earlier, there were tax exemptions for only single self-occupied homes and additional properties were taxed on notional rent. 

Housing Affordability and Government Initiatives

The Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund to complete stalled projects: 

Under Union Budget 2025, the government launched SWAMIH, 

The initiative aims to: 

• Provide last-minute funding for stalled projects 
• Ensure the timely delivery of homes to buyers 
• Increase liquidity in the real estate sector to benefit developers and buyers 

Interest Subsidies: 

Government schemes for homebuyers like the Pradhan Mantri Awas Yojana (PMAY), have expanded interest subsidies on home loans: 

• Extended Credit-Linked Subsidy Scheme (CLSS) for low and middle-income groups is a major step in affordable housing in Budget 2025
• Interest subsidies of up to Rs 2.5 lakhs on home loans reduce EMI costs significantly 
• Improved eligibility criteria include a larger group of home buyers in cities 

Impact on Real Estate Investors

The schemes introduced during the budget benefit both sets of real estate investors. The ones who invest for capital appreciation and those who invest for rental purposes.

Benefits for long-term investors:

• Restructured capital gains tax system ensure long-lasting real estate investments 
• Lower tax rates for long-term capital gains on property sales encourage long-term holdings 
• Higher indexation benefits reduce tax liability on profits earned from property appreciation 
• Introducing Special Provisions for reinvestment in real estate or infrastructure projects to avail tax exemptions under Section 54 of the Income Tax Act

Rental Income Taxation Advantages:

• High standard deductions on rental income; close to 30% – 40% 
• Tax exemptions on rental income from affordable housing units, which will further encourage investment in real estate in 2025
• Streamlined TDS provisions on rental payments to ensure compliance. 

Infrastructural Developments and Its Influence on Real Estate

The Urban Challenge Fund: Rs 1 lakh Cr. for City Development

This fund has been introduced for the following reasons: 

• Infrastructural growth in emerging cities
  • Supporting smart city developments, road expansion and metro connectivity projects 
  • Increasing real estate values in Tier 2 and 3 cities by improving urban infrastructure 
  • Attracting private sector investments in new real estate hubs 
• Public-Private Partnership (PPP) for growth of infrastructure:
  • PPP-led housing projects to reduce the financial burdens on developers
  • Integrated township and commercial hubs benefiting from joint public-private investments
  • Fast-tracked approvals for infrastructure-linked real estate developments

Ease of Doing Business for Developers and Investors

Regulatory Reforms: Streamlining Approvals and Reducing Red Tape

This year, the budget introduced regulatory reforms to simplify the real estate development process and create a more business-friendly environment. Here are the key measures introduced: 

• Single Window Clearance System: A faster approval process for real estate projects to reduce delays and administrative obstacles 
• Digitizing land records: Better clarity in land ownership, to make transactions smoother and reduce legal disputes 
• Simplified GST on real estate: Rational GST structures for under-construction properties to prevent sudden increases in costs and confusion 
• Faster Environmental Clearances: Revised mechanisms to ensure environmental clearances are done quickly without compromising sustainability norms 

These initiatives aim for faster execution of projects, reduce costs for developers and encourage investment in the sector. 

Investment Friendliness Index (IFI): Enhancing Real Estate Investment Climate:

To attract more domestic and foreign investments, the government also introduced an Investment Friendly Index for real estate, which: 

• Rank states and cities based on the ease of real estate investment. This will be done by analysing factors like approval timelines, infrastructure developments and legal transparency. 
• Encourage healthy competition among states to improve real estate regulations and investor confidence. 
• Provide insights to institutional investors and REITs (Real Estate Investment Trusts), making India’s real estate market more appealing for global capital inflows 

With the IFI, India is setting course to become a top real estate investment destination; home to a structured and investor-friendly ecosystem. 

Sustainable and Green Housing Initiatives

Incentives for Eco-Friendly Developments: 

The government is focusing on the ‘green real estate’ initiative, introducing financial and policy incentives so that developers like Raymond Realty can embrace more sustainable practices in their construction. Here are the important measures: 

• Tax Rebates for Green Building Certifications: Developers who choose IGBC (Indian Green Building Council) or GRIHA (Green Rating for Integrated Habitat Assessment) certification will be eligible for tax benefits 

• Subsidised Interest Rates for Sustainable Projects: Residential projects like Ten X Habitat – Thane, as well as commercial projects that have used sustainable construction practices, will qualify for lower interest rates on loans 

• Mandatory Solar Panel and Rainwater Harvesting Compliance: New housing projects that cover more than a certain area have to integrate these features to avail incentives 
  
• Special Fund for Net-Zero Buildings: This government-backed fund supports projects designed with a smaller carbon footprint 

Impact on Property Valuation: 

Adopting sustainability initiatives will help increase property valuation by: 

• Increasing long-term savings with lower energy and water bills 
• Attracting environmentally conscious buyers who prefer eco-friendly living 
• Improving resale value, as sustainable properties are expected to be more desirable in the future. 

Green housing incentives are set to become a normal practice in the Indian real estate market. 

Digital Transformation in Real Estate

Adoption of PropTech: Enhancing Transparency and Efficiency: 

The Indian real estate sector is becoming more digital, with the government supporting ‘Property Technology’ or PropTech: 

• AI and Blockchain-Based Property Registration to reduce chances of fraud with secure and tamper-proof transactions and streamlined ownership verification 

• Virtual Property Tours and Augmented Reality (AR) Showcasing to allow potential buyers to explore properties remotely and improve accessibility 

• Government-supported Smart Rental Platforms to make rental agreements easier, automate payments and decrease chances for disputes 

• AI-Driven Market Analytics to allow investors and buyers make informed decisions using predictive analytics and real-time market trends 

Government Support for Digital Infrastructure:

• 5G-enabled Smart Cities to help improve connectivity and real estate services 
• Unified Digital Land Registry to ensure transparent land transactions 
• Online Dispute Resolution Platforms to reduce litigation time for property disputes 

These digital incentives won’t impact stamp duty and registration charges but will foster trust and efficiency in the real estate market. 

Regional Implications of the Budget

Tier-II and Tier-III Cities: Growth Opportunities. 

One of the most significant impacts of the Union Budget is the major boost it will provide to smaller cities by encouraging investment in major infrastructure developments and enhancing housing affordability by: 

• Expansion of Metro and Expressway Connectivity for improved real estate prospects in cities like Lucknow, Indore and Coimbatore 
• Higher FDI in real estate to attract more builders to build projects in emerging cities 
• Smart City Expansion, to create more business hubs outside metros and drive housing demand 

Metropolitan Areas: Stronger Real Estate Dynamics

The budget aims to cater to the housing demand and encourage investment in major metropolitan cities through: 

• Higher Floor Space Index Allowance to allow more high-rises and mixed-use developments. This also ensures there is more investment in real estate in 2025
• REIT and InvIT Enhancements to make commercial real estate more attractive for investors 
• Luxury Housing Tax Adjustments to benefit buyers of premium properties 

These provisions in small and big cities will lead to more real estate growth to be further backed by policy support and infrastructure expansion. 

FAQs

1. How can the Union Budget help home buyers?
   The Union Budget 2025 helps homebuyers by increasing the tax deductions on home loans of up to Rs 3.5 lakhs, interest subsidies for first-time buyers and incentives for affordable housing projects. 
   
2. What is the impact of budget on real estate?
   Boosting housing affordability and developer liquidity, enhancing investor confidence through tax and regulatory reforms and giving stronger support to infrastructural expansion. 

3. What is the future of real estate in India in 2025?
   There will be more growth in Tier-II and Tier-III cities due to urbanisation, along with the expansion of PropTech and digital real estate services. There will also be stronger investment prospects because of revised tax structures. 

4. What are the new tax benefits for owning multiple properties?
   Tax exemptions on up to two self-occupied homes, as well as increased deductions on rental income taxation are the main benefits for homebuyers who own up to two self-occupied homes. 

5. What incentives are available for sustainable real estate developments?
   Sustainable real estate developments will see incentives like tax rebates for green-certified buildings, subsidised loan interests as well as incentives for solar energy and rainwater harvesting. 

6. How does the budget promote digital transformation in the real estate sector?
   Technological advancements like AI and blockchain will be used for property registration. More developers are adopting Virtual Reality property tours, and digital rental agreements as well as dispute resolution platforms. 

Conclusion

The Union Budget 2025’s impact has led to the introduction of significant reforms and incentives for the real estate sector, which will benefit: 

1. Homebuyers through tax deductions, housing affordability and interest subsidies
2. Developers, by streamlining regulation, making business easier through reforms and government-backed funding
3. Real Estate Investors from revised capital gains tax structures, rental income tax benefits and incentives linked to sustainability 

In the future, these government schemes will be highly beneficial for India’s real estate sector. The expansion of smart cities and digital solutions, increasing housing supply and affordability for buyers will combine with sustainable and green housing. All of these will. make real estate a key driver of economic growth in India, providing more opportunities for homebuyers, investors and developers. 

References: 

https://www.indiabudget.gov.in/doc/memo.pdf

https://pib.gov.in/PressReleasePage.aspx?PRID=2098352&utm

https://www.india.gov.in/spotlight/union-budget-2025-2026

Disclaimer: 

The information provided in this article is generic and is shared for informational purposes only. We recommend you obtain specific professional advice before you take any action. Raymond Realty does not claim that the information given in this article is completely true and accurate.