As Finance Minister Nirmala Sitharaman prepares to unveil the Union Budget 2025 on February 1, the real estate domain harbors high hopes for significant breakthroughs. The sector ardently seeks formal industry status, enhancements for affordable housing initiatives, and provisions to foster sustainable development. With an eye on transformative policies, stakeholders are optimistic that fiscal interventions and regulatory support will invigorate infrastructure growth and economic dynamism in tier-II cities.
According to insights from Colliers India, such measures could propel the sector toward its ambitious goal of achieving a market valuation of $1 trillion by 2030. “Budget 2025 is poised to establish foundational elements to catalyze the next growth phase for Indian real estate. Policies designed to bolster India’s global competitiveness are anticipated to dominate the discourse. A resolute focus on addressing both immediate hurdles and long-term economic challenges can serve as a strategic roadmap for sustainable growth,” remarked a Colliers report.
A Year of Vigorous Momentum for Real Estate
The preceding year witnessed exceptional activity across the real estate spectrum, marking 2024 as the third consecutive year of record-breaking office leasing, with 66.4 million square feet transacted across six major cities—a 14% year-on-year escalation. Residential sales and industrial warehousing uptake also flirted with historic highs. Institutional investments reached $6.5 billion in 2024, representing a 22% uptick compared to the previous year. Colliers projects robust performance across all real estate segments in 2025, buoyed by anticipated budgetary declarations.
Badal Yagnik, CEO of Colliers India, commented, “The conferment of ‘industry’ status to real estate remains a pivotal demand. Enthusiasts will closely scrutinize relevant announcements in the upcoming budget. Infrastructure enhancement, particularly transit-oriented developments and logistical refinements, will be crucial for equitable growth distribution. Furthermore, cohesive collaboration among governmental bodies, regulators, and private entities will be indispensable for transforming smaller urban centers into flourishing economic corridors.”
Residential Real Estate: A Focal Point
Homebuyers and developers alike await governmental impetus to invigorate the housing sector. Colliers emphasized that well-calibrated measures could stimulate buyer sentiment, thus energizing demand, while simultaneously addressing developer concerns to bolster supply.
Demand-Side Anticipations
- Enhanced Housing Loan Deductions: A plea for an increased deduction limit on principal repayments, currently capped at ₹150,000 under Section 80C, up to ₹500,000. Similarly, raising the interest deduction ceiling from ₹2 lakh to ₹4–5 lakh for let-out properties could be transformative.
- Revival of CLSS: A revival of the Credit Linked Subsidy Scheme for first-time homebuyers could significantly benefit aspirants.
- Reintroduction of Tax Holidays: Affordable housing projects could benefit from tax exemptions under Section 80IBA, aiding financially weaker sections.
- Extension of First-Time Buyer Incentives: Expanding existing tax benefits, now capped at ₹150,000, alongside extending the sanction timeline, could spur affordable housing.
- Rental Income Exemptions: Tax waivers on rental income could stimulate investor interest in housing assets.
Supply-Side Recommendations
- GST Rationalization: Reduced tax rates on essential construction materials like cement, steel, and aluminum could ease construction costs.
- Stressed Project Funds: Enhanced allocations to the SWAMIH fund could resolve liquidity constraints in distressed residential developments.
- Tax-Based Incentives: Relief measures like relaxed development charges could attract developers and investors to senior living segments.
Infrastructure and Manufacturing: Cornerstones for Sustained Growth
Colliers asserts that investments in infrastructure and manufacturing will remain linchpins of economic expansion, fostering balanced growth across regions.
- Infrastructure Expansion: Continued emphasis on national highways, multimodal logistics hubs, and regional airports will remain vital.
- Manufacturing Incentives: Government-backed viability gap funding and regulatory easing could entice private sector investments.
- Skill Development Initiatives: Upskilling within MSMEs and heavy industries could bolster employment in key urban nodes.
- Trade Tariff Rationalization: Streamlined import-export duties could accelerate India’s integration into global supply chains.
- Credit Accessibility for MSMEs: Simplified financial policies and digital adoption could invigorate real estate markets in tier-II and tier-III cities.
Embracing Sustainability: A Mandate for the Future
A pivotal focus of Budget 2025 is likely to be the incentivization of sustainable practices across energy, transportation, and real estate domains.
- Green Bond Investments: Accelerating renewable energy projects through green bonds could expedite national carbon reduction objectives.
- EV Infrastructure: Mandating electric vehicle manufacturing quotas and creating dedicated EV manufacturing corridors can enhance adoption rates.
- Green Building Incentives: GST reductions and tax breaks for eco-friendly construction could encourage developers to adopt sustainable practices.
Vimal Nadar, Senior Director of Research at Colliers India, stated, “Simplified tax regimes can streamline processes, mobilize entrepreneurial investments, and boost retail investor participation in REITs and SM REITs. A gradual move toward uniform capital gain treatments and reduced compliance burdens could amplify institutional investments in emerging real estate verticals like data centers, senior living, and coliving.”
A Visionary Blueprint
The upcoming budget presents a unique opportunity to chart a progressive trajectory for urbanization, industrialization, and infrastructure enhancement. By addressing core challenges and seizing transformative opportunities, the government can pave the way for an equitable, sustainable, and prosperous future.
