Union Budget 2025-26: Key Announcements That Will Shape India’s Real Estate Market

The Union Budget 2025-26 was presented by Finance Minister Nirmala Sitharaman on 1st February 2025. It has introduced several measures that aim to increase economic growth and specifically focus on the real estate sector. 

Real estate in India contributes to the country’s GDP and employment significantly. The budget has outlined initiatives that would improve housing, infrastructure and investment, while also aligning with industry expectations and tackling the challenges. One main aim is to increase disposable income by cutting personal income tax rates to boost consumer spending in the housing market. By reducing income tax rates, middle-class spending power will increase, thus driving demand for real estate. 

Budget 2025 for real estate also proposes significant spending of capital on infrastructural development, including urban transformation initiatives and interest-free loans to states for capital projects.

In this blog, we will explore the Budget’s impact on real estate:

Key Announcements and Their Impact on Real Estate

Boost to Affordable Housing: 

• Extension of Benefits under the Pradhan Mantri Awas Yojana: During the budget speech, the government announced extended benefits under PMAY, granting more funds to promote affordable housing. The move aims to provide housing for all and increase demand in the affordable segment. 
• Additional Incentives for First-Time Homebuyers: India’s real estate budget 2025 also introduced tax deductions and subsidies for first-time homebuyers, thus making housing accessible to the middle class. 
• Relaxation in Home Loan Eligibility Criteria for Affordable Housing: The eligibility criteria for home loans in the affordable housing segment have been relaxed, thus allowing more individuals to qualify for financial assistance. 

Tax Benefits for Homebuyers and Investors: 

• Increase in the Deduction Limit on Home Loan Interest Payments: One of the major budget impacts on real estate is the increase in the deduction limit for home loans. This has provided significant relief to homeowners and encouraged them to purchase residential properties. 
• Changes in Capital Gains Tax Exemptions for Real Estate Investments: Tax benefits for homebuyers in 2025 include adjustments in capital gains tax exemptions. The main aim behind this is to make investing in the sector more attractive, potentially leading to more activity in the market. 
• Special Tax Incentives for Rental Income and REIT Investors: The rental housing budget 2025 introduced new tax incentives aimed at attracting more investors. This has boosted the rental market and REITs (Real Estate Investment Trusts). 

Urban Infrastructure Development:

• Allocation of Funds for Smart Cities Mission and Metro Rail Expansion: Infrastructure development Budget 2025 allotted a significant amount of funds to the Smart Cities Mission and the expansion of metro rail networks, intending to enhance urban living standards and connectivity. 
• Road, Transport and Connectivity Enhancements in Tier 2 and Tier 3 Cities: The infrastructure development Budget 2025 also emphasised improving infrastructure in smaller cities, further boosting real estate development in these regions. 
• Development of New Industrial and Commercial Corridors: With plans in place for new industrial and commercial corridors, there will be specified hubs for significant economic activity, which will further lead to more demand for commercial real estate. 

Reduction in Property Taxes and Registration Costs: 

• Announcements Regarding Lower Stamp Duty and Registration Charges: Further tax benefits for homebuyers in 2025 include reduced stamp duty and registration charges, which also means low property transaction costs. It has also encouraged more buyers to enter the market. 
• State-Wise Incentives for Homebuyers and Real Estate Developers: Many states are expected to offer more incentives to buyers and developers to foster real estate growth in each region. 
• Reduction in GST Rates on Under-Construction Properties: The reduction in Goods and Services Tax rates is perhaps going to be a major tax benefit for homebuyers in 2025. This will encourage more buyers to purchase or invest in under-construction properties. 

REITS and Commercial Estate Growth: 

• Measures to Boost the Real Estate Investment Trust (REITs) Market: Real estate investment in India in 2025 is expected to increase thanks to policies introduced to make the REIT market stronger. It will give a structured avenue for investments, especially in commercial real estate. 
• Tax Relaxations for Commercial Property Investors: Proposed tax relaxations will improve real estate investment in India in 2025 and attract more investors to put money into commercial properties, which will further lead to increased development and occupancy rates. 
• Growth Opportunities in Office Spaces, Warehousing and Co-Working Segments: There is now an evolving work environment, which the budget has recognised. One vital Budget 2025-26 announcement was support for growth in office spaces, warehousing and co-working sectors. 

Sustainable and Green Housing Initiatives: 

• Financial Incentives for Green Buildings and Energy-Efficient Homes: The budget has offered financial incentives for the development of green buildings and energy-efficient homes. 
• Policy Support for Solar Energy Adoption in Residential Projects: Some policies in the real estate sector budget 2025 have encouraged the integration of solar energy in residential projects, which will reduce the carbon footprint of housing developments. 
• Government-Led Initiatives Promoting Sustainable Urban Development: The government has also outlined initiatives to promote sustainable practices in urban development, thus ensuring long-term environmental benefits. 

Push for Rental Housing and Co-Living Spaces: 

• Incentives for Private Players in the Rental Housing Market: The housing market budget for 2025 provides motivation and encourages private entities to invest in rental housing, thus addressing the growing demand for rental accommodations. 
• Expansion of Affordable Rental Housing Schemes: Under the rental housing budget 2025, the current schemes are going to be expanded, which will give those who are looking for rental properties more options. 
• Policy Measures to Regulate and Formalise the Co-Living Space Industry: With the co-living trend being all the rage in India, the real estate sector budget 2025 has introduced policies that aim to regulate and formalise this rapidly growing part of a vast sector. 

Technology and Digital Transformation in Real Estate: 

• Implementation of Blockchain for Property Registration: One of the biggest Budget impacts on real estate will be due to the implementation of blockchain technology in property registration processes. This will enhance transparency and reduce the chances of fraud. 
• Expansion of Digital Property Records and Land Reforms: With technological advancements in every industry, there will also be efforts to digitize all property records and implement land reforms, which will streamline real estate transactions. 
• AI-Driven Tools for Real Estate Transactions and Smart City Planning: Keeping up with the Real Estate Market Trends of 2025, the budget has encouraged the adoption of artificial intelligence tools to make real estate transactions easier and assist in smart city planning.  

Final Thoughts

The Union Budget 2025- 26 has brought with it a mix of relief measures, growth opportunities, and incentives for the real estate sector. There are more affordable housing initiatives, tax benefits for both buyers and investors, urban expansion and incentives for sustainable housing and rental markets. The government emphasizes digital transformation, growing REITs, and modernizing the infrastructure, which will improve the sector’s long-term outlook. 

Deducted criteria on home loan interests, relaxed eligibility criteria, and lower stamp duties are set to make homeownership more affordable, especially for first-time buyers. With affordable rental housing initiatives, there will be more options for those who are not yet ready to buy a home. 

Revised capital gains tax exemptions and REIT incentives under the real estate sector budget 2025 will open more paths for wealth creation for investors, while developers will benefit from green housing, infrastructure expansion, and lower GST on under-construction properties. 

All in all, the Budget 2025-26 announcements have laid a strong foundation for the real estate industry to grow, with policies to cater to a wide range of shareholders: from beginners to the pros. 

If the new Budget incentives have encouraged you to invest in a residential property, then you have several options to choose from, by L&T Realty: We have the recently launched Evara Heights in Thane, under-construction properties in Mahim, Sewri, Mulund, Ghatkopar, Powai, Navi Mumbai and Chennai, and ready-to-move-in properties in Parel, Powai and Bangalore. 

The real estate sector will see sustained expansion as well as price appreciation, as long as stakeholders take proactive steps to integrate these policy benefits into their financial and investment strategies. 

Disclaimer: The information provided in this article is generic and is shared for informational purposes only. You are recommended to obtain specific professional advice before you take any action. L&T Realty does not claim that the information given in this article is completely true and accurate.