With Finance Minister Nirmala Sitharaman all set to table the Union Budget 2025 in Lok Sabha on February 1, the real estate segment is betting on industry status for the sector, incentives for affordable housing and sops for sustainable development. The real estate industry is hoping for transformative measures in the form of incentives and regulatory push to fuel infrastructure and economic development in tier-II cities. This, according to Colliers India, can help real estate directionally in achieving the ambitious target of reaching $1 trillion by 2030. “Budget 2025 is expected to build cornerstones and drive the next phase of elevated growth in Indian real estate. Policy introduction to enhance India’s competitiveness on the global stage is likely to be a focus area. In fact, strong commitment in addressing both immediate and long-term challenges in a rapidly evolving economic landscape will continue to provide a growth blueprint for the next few years,” stated a report by Colliers.
The industry saw a strong momentum throughout the last year with 2024 marking the third consecutive year of record office leasing at 66.4 million sqft across the six top cities, up 14 per cent YoY, Colliers said. Further, residential sales as well as industrial & warehousing space take-up were also close to all-time high. Institutional investments in Indian real estate too touched $6.5 billion inflows in 2024, marking a 22 per cent increase from the previous year. Colliers maintained that all real estate asset classes are expected to perform well in 2025 as well, supported by the budgetary announcements.
Badal Yagnik, Chief Executive Officer, Colliers India, said, “Accordance of ‘industry’ status to real estate has been a longstanding ask, and experts will be keenly monitoring related developments in the upcoming budget. Infrastructure augmentation is likely to remain at the focal point of long-term growth vision. Significant improvement in transit-oriented-development and logistics efficiency is particularly desirable for equitable growth dispersion. Additionally, seamless integration and coordinated efforts from various government & regulatory bodies and private sector will be pivotal in the ongoing transformation of smaller cities and emerging growth centers into sizeable economic corridors of the future.”
Residential real estate to be the key focus area
Homebuyers and developers are looking forward to further impetus from the government in the upcoming Budget. Colliers maintained that targeted measures can buoy homebuyer sentiment, providing a demand-side boost and simultaneously alleviate pressing developer concerns, providing a supply-side boost. Expectations center on affordability, policy support, and enhancing access to housing finance.
Expectations on demand side
– Separate & higher deduction for housing loan principal repayment (up to Rs 500,000), currently capped at Rs 150,000 under section 80C. Limit on tax deduction on interest paid can be increased from the current Rs 2 lakh to about Rs 4-5 lakh in case of let-out property.
– Revival of the Credit Linked Subsidy Scheme (CLSS) for first-time homebuyers is expected from the budget.
– Reintroduction of tax holidays for affordable housing projects under Section 80IBA can help financially weaker homebuyers to a significant extent. Moreover, standardization and increasing affordable housing thresholds is long due, given that 2017 criteria are yet to be updated and reflect the overall rise in housing prices across major cities of the country.
– Extension of tax benefits for first time homebuyers in applicable affordable housing projects. Current capping of Rs 150,000 and loan sanction timeline till March 2022 can be expanded to provide a thrust to housing for the masses.
– Tax exemption on rental income to boost housing demand especially amongst investors.
Expectations on supply side
– GST reduction on key construction raw materials such as cement, steel & aluminium, and rationalization of rates for under-construction properties will help in controlling project costs.
– Increased fund allocation for stressed projects through the SWAMIH fund can improve liquidity in stressed residential developments.
– Provision of tax-based incentives, relaxation in development charges and other supportive policy measures can provide a thrust to developers and institutional investors in the senior living segment.
Investments in infrastructure and manufacturing capabilities
Colliers said that investments in infrastructure and manufacturing capabilities will remain pivotal to sustained economic growth and dispersion of equitable growth centers across the country. In terms of key expectations, it said…
– Prioritization of national highway expansions, development of multi-modal logistics parks & regional airports and improvement of infrastructure related to logistics is expected to continue.
– Through viability gap funding and supportive regulations, the government is expected to incentivize private sector participation and enable scaling up of manufacturing capabilities across the country.
– Upskilling programs in MSMEs and heavy manufacturing as it can provide a boost to employment opportunities in key clusters and nodal cities.
– Rationalization of import-export tariffs as they can expedite India’s integration into the global supply chain. GST rationalization for MSMEs in the initial years of establishment can further improve local competitiveness.
– Easier access to credit, financial support, and policies designed to modernize MSME operations through increased digital adoption can percolate down and spur real estate growth in Tier II & III cities of the country.
Sustainability adoption
Another key focus will be on sustainability adoption which, Colliers said, can be incentivized in energy generation, transmission, storage and public as well as private transportation. Here are key expectations on this front…
– Incentivising investment in green bonds and renewable energy business can fast-track realization of national carbon emission and net-zero goals.
– Government directive to automotive players for a certain share of compulsory EV manufacturing can facilitate greater EV adoption.
– Dedicated EV manufacturing corridors can be created along existing auto manufacturing clusters. Public Private Partnerships can fast-track the development of holistic EV infrastructure.
– Tax breaks and GST concessions for green buildings can encourage real estate developers to reduce carbon footprint across segments.
Vimal Nadar, Senior Director, Research, Colliers India, said, “Simplification of tax regimes across individuals & corporates will continue to bring in efficiencies, drive entrepreneurial capital and retail investment across sectors including real estate. Retail investor participation in real estate derivatives such as REITs and SM REITs can be enhanced through introduction of separate tax deductions. Gradual uniformity in treatment of capital gain instruments can spur growth in real estate specific investments. Moreover, reduction of excess compliance and adoption of a single-window clearance mechanism for new businesses can boost institutional investor participation in alternate real estate segments such as data centers, senior living, coliving, life sciences, etc.”
In conclusion, Colliers said, the upcoming Budget can offer directional guidance for accelerated urbanization to support sustainable growth, faster industrialization to drive economic development, and better infrastructure to facilitate urban as well as rural expansion.