With the Union Budget 2025-26 just weeks away, the real estate sector is calling for bold reforms to reignite growth and address pressing challenges. After a subdued second half of 2024, owing to general and state elections and lackluster GDP performance, industry leaders are urging the government to introduce measures that could revive demand, bolster affordable housing, and improve urban infrastructure.
Affordable housing, once a cornerstone of India’s real estate growth, has seen a sharp decline in both demand and supply post-pandemic. According to ANAROCK data, affordable housing’s share of total housing sales dropped to just 18% in 2024, a steep fall from 38% in 2019. Similarly, the share of new affordable housing launches in the top seven cities fell to 16% in 2024 from nearly 40% in 2019.
Anuj Puri, Chairman of ANAROCK Group, emphasizes the need for targeted government interventions. “Reintroducing the Credit-Linked Subsidy Scheme (CLSS) under PMAY and reinstating the 100% tax holiday under Section 80-IBA could significantly boost affordable housing. Additionally, revising the price cap for affordable homes to ₹85 lakh in Mumbai and ₹60-65 lakh in other metros would better reflect market realities and enable more buyers to access benefits,” says Puri.
The release of centrally controlled land for affordable housing projects is another recommendation gaining traction. Agencies like the Indian Railways, Port Trusts, and the Department of Heavy Industries could allocate land for such initiatives, addressing the urban land shortage.
One of the most anticipated measures is the enhancement of tax benefits for homebuyers. Dr. Niranjan Hiranandani, Chairman of NAREDCO, has called for an increase in the home loan interest deduction limit from ₹2 lakh to ₹5 lakh.
“This step would make homeownership more affordable, especially for first-time buyers, and drive demand in the housing sector,” he states.
Developers are also advocating for a “single-window clearance system” to streamline project approvals and reduce delays. Ramani Sastri, Chairman & MD of Sterling Developers, suggests reducing GST on under-construction properties and key materials like cement and steel.
“There is a strong case for interest subsidy for first-time homebuyers as this will boost sales in the real estate sector. We also urge the government to implement tax reliefs in terms of reduction in GST rate along with an input tax credit on under-construction properties. We would also like to see announcements to enhance ease of doing business for the developers to create an overall positive climate for real estate investment,” Shastri said.
This would lower construction costs, making homes more affordable for buyers while boosting demand across the sector, he added.
Rental housing is another critical area of focus. Industry leaders recommend revising notional income taxation for properties held as stock-in-trade and incentivizing investments in rental housing.
Similarly, the coworking sector, represented by voices like Manas Mehrotra, Founder of 315Work Avenue, seeks lower GST rates for small-scale clients and input tax credits for construction services. Mehrotra highlights that “such reforms would boost the sector’s growth in non-metro cities, aligning with the hybrid work model’s rising demand.”
The real estate sector has long advocated for the granting of infrastructure status to housing, citing its transformative potential for the industry.
“Recognizing housing as infrastructure will unlock new avenues for investment and development, positioning the housing sector as a cornerstone of national infrastructure,” said Dr. Dr Niranjan Hiranandani.
Reforms to the capital gains tax rules pertaining to the purchase of multiple houses should be implemented. This will encourage homeownership, leading to increased housing demand and greater economic stability, said Hiranandani.
The real estate sector is integral to India’s economic growth, contributing significantly to GDP and employment. As Puri points out, “With the right stimulus, affordable housing and the overall residential segment could regain their 2023 highs in sales and launches, propelling the sector forward in 2025.”
With expectations of reforms spanning tax reliefs, infrastructure investment, and affordable housing incentives, the sector looks to the upcoming budget to unlock its full potential. If addressed, these measures could help fulfill the government’s vision of “Housing for All” while driving economic progress.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.