Budget 2025: Will FM Bring GST Rationalisation, Revise Affordable Housing Price For Residential Property? 

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2025-26 on February 1, 2025, the realty sector is eagerly waiting for announcements to get a boost for residential properties. While Speaking with Outlook Money experts said that they are expecting ease of GST rationalisation, the revival of the 100 per cent tax exemption under Section 80-IBA for affordable housing projects, and streamlining of the input tax credit mechanism.

The luxury residential property market witness exponential growth in 2024 especially in Tier I cities like Mumbai, Hyderabad, Bengaluru and Delhi, as per Knight Frank India data.

However, Niranjan Hiranandani, MD of Hiranandani Group & Chairman at NAREDCO, argued that the affordable housing segment is currently experiencing negative growth. We urge an escalated flow of funds to reinvigorate this crucial sector, thereby promoting inclusivity and sustainable urban development.

"The reintroduction of the Credit Linked Subsidy Scheme would provide vital support to first-time homebuyers, as well as those in the EWS and LIG categories, enabling them to access homeownership more easily," said,  Abhishikta Munjal, Chief Risk Officer, IIFL Home Finance.

"To support homebuyers, we advocate increasing the tax deduction limit on home loan interest payments from Rs 2 lakh to Rs 5 lakh, making home purchases more affordable and stimulating market demand," Hiranandani opined.

"Steps like reducing GST on under-construction properties, enhancing tax incentives for homebuyers, and increasing allocation for affordable housing schemes will stimulate demand and investment," Saransh Trehan, Managing Director, Trehan Group said.

Revision Of Affordable Housing Price Limit in Metro Cities

"Revising the affordable housing price limit in metro cities from Rs 45 lakh to Rs 65 lakh would allow a larger segment of buyers to access government incentives, thereby driving residential demand. Additionally, increasing tax benefits for first-time homebuyers, such as higher deductions on home loan interest, would support aspirations for homeownership while contributing to the growth of the sector," said, Sudhir Pai, CEO, of Magicbricks.

Shri Saket Mohta, MD, Merlin Group, said, "Revise the definition to reflect rising prices, increase the cap from Rs 45 lakh to Rs 80 lakh.

G Hari Babu, National President, NAREDCO advocated for revising the affordable housing price cap from Rs 45 lakhs to Rs 60 lakhs.

Revival of Section 80-IBA Incentives

"Policy reforms such as reintroducing Section 80IBA incentives and removing MAT provisions are essential to reviving affordable housing development. Buyers will benefit from measures like restoring the interest subvention under PMAY for loans up to Rs 6 lakhs and offering fixed interest rates of 5 per cent for loans up to Rs 25 lakhs," said, Babu.

Echoing Babu, Mohta expected a revival of “the 100 per cent tax exemption under Section 80-IBA for affordable housing projects."

GST Rationalisation

Nitesh Kumar, MD & CEO of Emami Realty, outlined several key expectations that could significantly impact the real estate sector. Among his primary concerns is the rationalization of GST rates for real estate projects, particularly for affordable housing, to make homeownership more affordable and stimulate demand. 

"Current GST on services to Seniors is same 18 per cent like any other services. Since Seniors have paid all taxes throughout their life and their current earnings are limited to interest earned from deposits or depend on Pension, GST has to be minimal between 2 to 5 per cent," said, Anantharam Varayur, Co-Founder of Manasum Senior Living.

"Simplifying GST rates and streamlining input tax credit mechanisms will help make housing more accessible and affordable for buyers," said, Dhruv Agarwala, Group CEO, Housing.com & PropTiger.com.

Vimalendra Singh, Chief Business Officer (Residential), Mahindra Lifespace Developers Ltd, said, "The real estate sector is optimistic about measures to reduce construction costs and enhance affordability. A reduction in GST on cement and allowing input tax credits for under-construction properties would drive growth. Increasing the home loan tax exemption limit would benefit middle-income buyers, especially with rising urban housing prices. Infrastructure investments remain a priority, and enhanced connectivity in smaller cities could unlock new development opportunities. These measures would strengthen the sector and support sustainable growth."

"Steps like reducing GST on under-construction properties, enhancing tax incentives for homebuyers, and increasing allocation for affordable housing schemes will stimulate demand and investment," said Saransh Trehan, Managing Director, Trehan Group.

Simplification of tax regime for NRI home-buyers

Venkatesh Gopalakrishnan, Director Group Promoter’s Office, MD - Shapoorji Pallonji Real Estate (SPRE), said, "For first-time homebuyers, enhanced tax deductions on home loan interest and principal repayments, along with increased subsidies under Pradhan Mantri Awas Yojana (PMAY), are expected to significantly lower the cost of homeownership. These measures could provide a substantial boost to housing demand, especially among lower and middle-income groups, who are most affected by current market conditions. In terms of property tax provisions, the simplification of tax compliance, particularly for Non-Resident Indians (NRIs), and the potential introduction of uniform property tax rates across states could enhance transparency and reduce discrepancies. These steps would streamline the property tax system, making it more investor-friendly and attractive to both domestic and international buyers."

Incentivise Affordable Housing And Tax Deduction

"The government should prioritise fiscal incentives for affordable and mid-segment housing, including tax benefits for developers and buyers and enhanced funding under PMAY," said, Mohit Goel, Managing Director, Omaxe Ltd.

"Incentivizing green building practices and recognizing the second-home market under affordable housing with tax benefits could further energize the residential space," said, Sanjay Dutt, MD and CEO, of Tata Realty and Infrastructure Ltd.

"The reintroduction of the Credit Linked Subsidy Scheme would provide vital support to first-time homebuyers, as well as those in the EWS and LIG categories, enabling them to access homeownership more easily," said,  Abhishikta Munjal, Chief Risk Officer, IIFL Home Finance.

"On the residential front, the real estate sector is looking forward to increased tax deduction limits on home loans, adjustments to PMAY thresholds to reflect current property prices and streamlined approvals for affordable housing projects. Such reforms will be pivotal in driving Gujarat’s real estate growth and contributing to India’s $5 trillion economy vision," said, Shekhar.G. Patel, Managing Director & CEO, of Ganesh Housing Corporation Limited.

"The luxury housing market, driven by evolving buyer preferences, would benefit from targeted initiatives such as reduced stamp duties and easier financing options," said, Vikas Garg, Joint Managing Director, of Ganga Realty.