By CA Mohan Patel
Union Budget 2025-26: Comprehensive Analysis of Real Estate Sector Amendments, Impacts, and Benefits
The Union Budget 2025-26 introduces key reforms to stimulate growth in the real estate sector, focusing on affordable housing, tax benefits, infrastructure development, and investment incentives. These amendments aim to boost demand, attract investments, and promote housing affordability across India.
- Key Amendments & Announcements for the Real Estate Sector
- Income Tax Benefits & Housing Affordability
1️⃣ Personal Income Tax Reforms
- The tax-free income slab has been raised to ₹12 lakh per annum, while the 30% tax rate applies only to incomes above ₹24 lakh.
- This provides higher disposable income, enabling more homebuyers to invest in real estate.
2️⃣ Tax Exemptions for Multiple Self-Occupied Properties
- Previously, tax benefits were allowed only for one self-occupied house, but now homeowners can claim tax exemptions on two self-occupied properties. The new amendment removes these conditions, allowing taxpayers to claim the annual value of two self-occupied properties as nil without any restrictions.
- This will encourage homeownership and demand for second homes, benefiting residential real estate developers.
- Boost to Affordable & Rental Housing
4️⃣ Increased Funding for PMAY (Pradhan Mantri Awas Yojana)
- The government has allocated ₹90,000 crore for affordable housing projects under PMAY-U (Urban) and PMAY-G (Gramin).
- This will help meet housing demand in urban & rural areas and support real estate developers engaged in affordable housing.
5️⃣ Tax Benefits for Rental Housing
- Tenants are now required to deduct TDS only if the annual rent exceeds ₹6 lakh, which translates to a monthly rent of ₹50,000. This adjustment aims to reduce the compliance burden on small landlords and encourage investment in rental properties., encouraging more people to invest in rental housing projects.
- Real Estate Investment Trusts (REITs) investing in rental housing will also receive tax incentives, making rental properties a more attractive investment.
- Infrastructure Development & Market Expansion
6️⃣ Capital Expenditure for Infrastructure Development
- ₹11.2 trillion has been allocated for infrastructure projects, including metro expansions, roads, highways, and smart cities.
- This will directly boost the demand for commercial & residential real estate in areas with new connectivity.
7️⃣ Urban Development & Smart Cities Mission
- ₹1.5 lakh crore allocated for the Smart Cities Mission to improve urban infrastructure.
- This will drive demand for commercial and retail spaces in emerging smart city regions.
8️⃣ Single-Window Clearance for Real Estate Approvals
- It introduces measures aimed at improving urban development and infrastructure, which may lead to more efficient approval processes in the future, reducing delays for developers.
- This will improve ease of doing business for real estate companies and fast-track housing projects.
- Real Estate Investment & Foreign Direct Investment (FDI)
9️⃣ Relaxation in FDI Norms for Real Estate
- The existing FDI policy continues to permit up to 100% FDI under the automatic route in construction-development projects, which include housing, commercial premises, and townships, subject to certain conditions. These conditions encompass minimum area requirements, capitalization norms, and a lock-in period for investments..
- This will boost construction, urban development, and infrastructure projects.
- Impact of Budget 2025-26 on the Real Estate Sector
✅ 1. Higher Demand for Residential Housing
- Lower income tax & higher disposable income means more first-time homebuyers.
- Increased home loan deductions make housing loans more attractive.
✅ 2. Growth in Affordable & Rental Housing
- PMAY funding boost helps real estate developers in affordable housing projects.
- Tax exemptions on rental housing make investing in rental properties more profitable.
✅ 3. Faster Project Approvals & Developer Benefits
- Single-window clearance reduces project delays and helps real estate companies launch new projects faster.
- Tax incentives for construction firms lower development costs.
✅ 4. Infrastructure-Led Growth for Real Estate
- Massive capital expenditure in roads, metros, and smart cities will boost real estate demand in these regions.
- Higher FDI in real estate brings international investments into urban infrastructure.
✅ 5. Increased Institutional Investment & REITs Growth
- REITs & InvITs attract institutional and retail investors into commercial real estate & infrastructure projects.
- Higher FDI in real estate increases construction activity & foreign capital inflows.
- Sector-Specific Benefits for the Real Estate Industry
| Sector | Key Budget Announcements & Benefits |
| Residential Real Estate | ✅ ✅ Tax exemptions for two self-occupied homes encourage more property purchases. |
| Affordable Housing | ✅ ₹90,000 crore allocated for PMAY to boost low-cost housing. ✅ FDI relaxation in affordable housing encourages investment from global developers. |
| Rental Housing | ✅ Tax benefits ( increase in TDS limit ) for rental property owners to boost investments. |
| Commercial Real Estate | ✅ Higher FDI in real estate attracts international investments. |
| Infrastructure & Smart Cities | ✅ ₹1.5 lakh crore allocated for Smart Cities to develop urban infrastructure. ✅ ₹11.2 trillion capital expenditure for metro, highways, and commercial hubs. |
| Real Estate Investment Trusts (REITs) | ✅ More liquidity & investment opportunities in real estate-backed assets. |
- Conclusion: Why This Budget is a Game-Changer for Real Estate
The Union Budget 2025-26 has introduced progressive measures that will significantly boost the real estate sector by:
✅ Encouraging investments in rental housing through tax benefits & FDI incentives.
✅ Expanding real estate development with higher infrastructure spending & smart city projects.
✅ Attracting foreign investors & institutions with FDI relaxations.
With strong policy support, increased funding, and reduced tax burdens, the real estate sector is set for robust growth in 2025-26.