As India gears up for the Union Budget 2025, the real estate sector is in the spotlight, with investors, developers, and homebuyers eagerly anticipating key announcements related to home loan tax deductions and affordable housing incentives. Market experts predict that this year’s budget may bring significant policy revisions, particularly in redefining affordable housing price caps, reintroducing Credit-Linked Subsidy Scheme (CLSS), and granting industry status to the real estate sector.
With rising construction costs and growing demand for residential properties, particularly in metropolitan cities, stakeholders argue that the current affordable housing price cap of ₹45 lakh is outdated. They seek revisions to align with real market conditions, potentially raising the cap to ₹75-80 lakh. Furthermore, experts are advocating for an increase in home loan interest deduction limits, currently set at ₹2 lakh per annum, to improve housing affordability and stimulate demand.
Let’s take a closer look at key expectations and their potential impact on the real estate market.
Affordable Housing Price Cap: Need for Revision
The Indian government defines affordable housing as units priced below ₹45 lakh, a benchmark that many argue is unrealistic in metropolitan areas such as Mumbai, Delhi, Bangalore, and Hyderabad. Given rising land acquisition and construction costs, analysts suggest increasing this cap to ₹75-80 lakh, making it more aligned with market realities.
Why the Price Cap Needs an Update?
| City | Average Cost of Affordable Housing (₹ Lakh) | Current Affordable Housing Cap (₹ Lakh) | Proposed Revision (₹ Lakh) |
| Mumbai | 80-120 | 45 | 75-80 |
| Delhi | 70-90 | 45 | 70-75 |
| Bangalore | 65-85 | 45 | 70-75 |
| Hyderabad | 60-80 | 45 | 65-75 |
| Chennai | 55-75 | 45 | 60-70 |
Market experts believe that a higher threshold for affordable housing will not only enable more buyers to avail government subsidies but will also boost demand for mid-range residential properties.
Amnish Aggarwal, Director at PL Capital, stated, “The affordable housing segment is struggling due to outdated pricing benchmarks. A revision is crucial to make it viable for developers and accessible to homebuyers.”
Home Loan Interest Deduction: Industry Demands Higher Exemptions
Another key expectation from Budget 2025 is an increase in the tax deduction limit on home loan interest payments, currently capped at ₹2 lakh per annum under Section 24(b) of the Income Tax Act. Many industry leaders argue that this amount is insufficient given the rising home prices and higher loan EMIs.
Proposed Changes in Tax Deduction
| Current Tax Deduction (₹ Lakh per annum) | Proposed Tax Deduction (₹ Lakh per annum) |
| ₹2 Lakh | ₹3-5 Lakh |
Sauvik Banerjjee, MD & CEO of Ziki, emphasized the need for this revision: “Housing affordability has been impacted by inflation and interest rates. Increasing the deduction limit to ₹3-5 lakh would ease the burden on homebuyers and encourage higher homeownership rates.”
Experts believe that enhancing tax incentives will make home loans more attractive and drive residential sales in both affordable and mid-segment housing categories.
Reintroduction of Credit-Linked Subsidy Scheme (CLSS)
The Credit-Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY) was discontinued in March 2022, leaving many homebuyers without access to subsidized loans. Given its success in boosting affordable housing, there is a strong demand for its revival in Budget 2025.
Under the CLSS, homebuyers in the Economically Weaker Section (EWS) and Low-Income Group (LIG) were eligible for interest subsidies of up to 6.5%, significantly reducing their borrowing costs.
Ravi Singh, Senior VP at Religare Broking, stated, “Reintroducing CLSS can stimulate the affordable housing segment and help achieve the government’s ‘Housing for All’ vision.”
Industry Status for Real Estate: A Long-Pending Demand
Another long-standing demand from the real estate sector is to grant it ‘industry’ status, which would open up access to:
- Cheaper credit facilities from banks and financial institutions
- Better regulatory frameworks
- Government subsidies for sustainable and affordable housing projects
Ajay Garg, CEO of SMC Global Securities, believes industry status would bring much-needed transparency and financial stability to the sector. “With an industry tag, real estate firms can access funds at lower costs, making projects more viable and affordable.”
While the government has acknowledged the importance of the sector, it has yet to take this decisive step.
Foreign Investments and Commercial Real Estate Incentives
Analysts also expect foreign investment-friendly policies in the commercial real estate sector. Relaxing FDI norms and introducing tax incentives could attract global investors to India’s booming co-working spaces, data centers, and warehousing projects.
Manish Chowdhury, Head of Research at StoxBox, stated, “We anticipate Budget 2025 to introduce measures simplifying FDI regulations, making commercial real estate an attractive investment avenue for global players.”
Top Real Estate Stocks to Watch Post-Budget 2025
With the potential announcements in the upcoming budget, investors are closely monitoring real estate stocks for opportunities. Here are some of the top picks:
| Company | Segment Focus | Potential Budget Impact |
| Oberoi Realty Ltd | Luxury & Mid-Segment Housing | Demand Surge |
| PNB Housing Finance Ltd | Housing Finance | Higher Loan Disbursements |
| AAVAS Financiers Ltd | Affordable Housing Loans | Beneficiary of CLSS Revival |
| DLF Ltd | Commercial & Residential | FDI & Industry Status Gains |
| Godrej Properties Ltd | Green & Smart Housing | Sustainable Housing Incentives |
Final Thoughts
The Union Budget 2025 is expected to be a landmark moment for the Indian real estate sector. If the government implements tax incentives, affordable housing price cap revisions, and CLSS reintroduction, it could revitalize the industry and benefit homebuyers, developers, and investors alike.
While the final announcements remain uncertain, the real estate industry remains hopeful that the government will address these pressing issues and create a more conducive environment for growth.
