As the Union Budget 2025 approaches, stakeholders in India’s real estate sector are keenly anticipating reforms that could bolster growth, enhance affordability, and streamline operations. The sector, a significant contributor to the nation’s GDP, is poised for transformative changes that could redefine its landscape.
Tax Incentives: Easing the Financial Burden
One of the primary expectations is the introduction of enhanced tax incentives for homebuyers. Currently, under Section 24(b) of the Income Tax Act, the deduction on home loan interest is capped at ₹2 lakh. Industry experts suggest increasing this limit to ₹5 lakh to align with rising property prices and interest rates, thereby making homeownership more accessible to the middle class.
Additionally, a reduction in stamp duty is also anticipated as it is a significant component of property transaction costs. Lowering stamp duty rates can stimulate the property market by reducing the upfront financial burden on buyers. Furthermore, reinstating tax benefits for under-construction properties could incentivize investments in new developments, providing a much-needed boost to the construction sector.
GST Rationalization: Simplifying the Tax Regime
The current Goods and Services Tax (GST) structure imposes a 5% tax on under-construction properties without the benefit of input tax credits, leading to higher costs for both developers and buyers. A more rationalized GST system, possibly reintroducing input tax credits or reducing the GST rate, could make under-construction properties more attractive and financially viable.
Granting Industry Status: Unlocking Financial Avenues
Despite its substantial contribution to the economy, the real estate sector has long awaited recognition as an industry. Granting industry status would facilitate easier access to institutional financing and potentially lower borrowing costs. This move could lead to increased investments, improved project execution, and enhanced credibility for developers.
Infrastructure Development: Building the Future
Infrastructure development serves as a catalyst for real estate growth. The sector anticipates substantial budgetary allocations towards developing roads, highways, and public transportation systems. Such investments not only enhance connectivity but also open new corridors for real estate development, particularly in emerging Tier 2 and Tier 3 cities.
Streamlined Approvals: Enhancing Efficiency
The real estate development process in India is often marred by bureaucratic delays due to complex approval procedures. Implementing a single-window clearance system could significantly reduce project timelines, lower costs, and encourage timely delivery. Such reforms would benefit developers and instill greater confidence among investors and buyers.
Sustainability Incentives: Promoting Green Development
With growing awareness of environmental sustainability, there is a push for incentives that promote green construction practices. Tax benefits or subsidies for projects adhering to sustainable building standards could encourage developers to adopt eco-friendly methods, contributing to environmental conservation and offering long-term cost savings to occupants.
Attracting NRI Investors: Simplifying Investment Processes
Non-Resident Indians (NRIs) constitute a significant segment of real estate investors. Simplifying repatriation procedures and reducing taxes on property transactions could make the Indian real estate market more attractive to NRIs. Such measures would not only bring in foreign capital but also enhance the global standing of India’s real estate sector.
Conclusion
The Union Budget 2025 presents an opportunity to address longstanding challenges and implement reforms that could propel the real estate sector into a new era of growth and sustainability. By focusing on tax incentives, GST rationalization, industry status, infrastructure development, streamlined approvals, sustainability incentives, and NRI investment facilitation, the government can lay a robust foundation for the sector’s future. Such initiatives would not only benefit developers and investors but also fulfill the aspirations of countless individuals seeking to own a home in India.
