Union Budget 2025-26 – Key Takeaways for Real Estate Sector

Last Updated on, February 5th, 2025

On 1st February 2025, Finance Minister Nirmala Sitharaman presented the Union budget 2025-26. This is the record eighth budget presented by the Finance Minister. With India’s GDP growth forecasted at 6.3-6.8% and a fiscal deficit target of 4.4%, the budget aims to strengthen key sectors like real estate. 

The real estate sector is one of the key drivers of economic growth and employment. By 2047, it is expected to contribute 15.5% to the GDP from an existing share of 7.3%. Here are some key highlights for the real estate sector:

1. Increase in Annual Limit for TDS on Rent

The annual threshold for Tax deducted at source (TDS) will be increased from ₹2.4 lakh to ₹6 lakh. This move will reduce the tax burden on homeowners with lower rental income.

2. Allocation of ₹1 Lakh Crore for Urban Challenge Fund

The allocation of a whopping ₹1 Lakh Crore to the Urban Challenge Fund will boost the development of urban and semi-urban areas. Out of ₹1 Lakh crore, ₹10,000 crore has been earmarked for FY 2025-26. 

This fund will cover up to 25% of the cost for bankable projects, with the requirement that at least 50% of the cost be financed through bonds, bank loans, and Public-Private Partnerships (PPPs). The purpose of this initiative is to transform urban cities into growth hubs. 

3. National Framework for Global Capability Centres (GCC)

The Central Government will focus on developing a national framework that will help states promote Global Capability Centres in Tier-2 cities. This will lead to economic growth in smaller and emerging cities like Navi Mumbai, Nashik, Indore and various other tier-2 and tier-3 cities.

4. Support for State Infrastructure Development

The government has proposed an outlay of 1.5 lakh crore for interest-free loans to states over 50 years. These loans are intended to support capital expenditure in infrastructure development, helping states boost their economic growth and enhance public infrastructure.

5. Tax Relief for Residential Property Investors

The Government has relaxed the tax rules for self-occupied properties. Taxpayers can now claim tax benefits for two self-occupied houses, a major change from the previous rule that allowed relief for only one property.

6. SWAMIH Fund 2.0

As of January 2025, the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund has delivered 50,000 homes in stalled housing projects. Additionally, another 40,000 homes will be delivered in 2025, easing the financial burden on middle-class families juggling both home loan EMIs and rental payments.

The Central Government announced the allocation of ₹15,000 crore to the SWAMIG Fund 2.0 to complete 1L stalled housing units. This will strengthen the affordable, mid-income housing market and drive real estate growth. 

7. Zero Tax on Income Of Upto 12L

Last but not least, the tax relief for individuals earning less than 12 lakhs per annum is the most celebrated move. This significant tax relief not only increases the disposable income of middle-class families but also boosts their purchasing power. This consumer spending can also drive the demand in the real estate sector. 


This budget is a game-changer for the middle class,” remarked Mr Mayur Shah, MD of Marathon Group. “The government’s tax reliefs are designed to boost consumption, which can also benefit the real estate sector. Not only will this drive demand in affordable and mid-income housing markets, but other key measures like extending tax benefits to second homes and committing to the completion of 1 lakh stalled residential units will surely boost homebuyers’ confidence. These initiatives reflect a thoughtful approach to economic growth that directly benefits both consumers and the industry.

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