The fact that we are in the midst of a geopolitical crisis alongside an inflationary environment is of course doing damage to the economy. But real estate experts remain optimistic with the staunch belief that the economy can bounce back and they are ready to address the pertinent issues. As Union Minister Nirmala Sitharaman gears up for her presentation of the budget set during the fiscal year of 2025-26, it is high time that the real estate sector receives the much-needed reforms.

“We focus on catering to the affordable housing segment and the current market conditions in the country are making it impossible to do so,” says RPS Group Director Aman Gupta, “We have observed a surge of over 30-40% in the development costs in metropolitan cities over the past two years. This means that the pre-existing benchmarks for housing are no longer viable.”

It is quite evident that housing prices are on the rise which is becoming increasingly disconcerting, especially given the fact that the input costs coupled with the price of land are on the rise. Fortunately, experts have come forward with a plausible solution in the form of a tier-wise pricing system where the region alongside the construction costs are also kept in mind.

The sector is also advocating for an increase in the tax deduction limit on the interest of home loans. “If the tax deduction limit on home loan interest of Rs 2,00,000 is increased to Rs 5,00,000, it would be a welcome relief to home buyers especially in the medium income group. This will increase the demand for housing and the increased cost of borrowing may be offset,” Anurag Goel, Director, Goel Ganga Developments states.

The other includes the grant of an industry status to the real estate sector, a demand that has been made for a long time. This is a structural change that can liberalize the industry offering institutional financing and better organization of rule of engagement. LC Mittal, Director, Motia Builders Group, stresses, “The industry status would be enormous because developers would be able to secure finance at lower rates than the current level, which could bring house prices down by 8-10% per unit. This will be helpful in the case of above-the-line affordable housing projects.”

The sector is also exploring initiatives to improve its self-liquidating capacity and ease the approval of projects. Some of the key proposals include:

1. Implementing a one stop clearance unit to minimize the time it takes to secure approval
2. Fine-tuning GST for properties that are still under development
3. Making it longer for affordable housing schemes not to pay tax
4. Establishing dedicated schemes to fund projects that are under strain
5. Offering taxation breaks for environmentally friendly building initiatives

The revitalization of the rental housing market through tax benefits and the introduction of residential REITs are additional aspects that will also be addressed. This industry also looks forward to some tax breaks towards the promotion of further sustainable development and green building initiatives.

These issues are important and alongside recent encouraging trends in the market, the next budget gives a platform. The real estate market is under significant stress, but it has been remarkably resilient, with real estate transactions in key metropolitan areas hitting the highest in 2024. Targeted policy measures could complement these trends and simultaneously address the issue of ensuring housing affordability across diverse income brackets.

Industry participants believe that such reforms are necessary not only with regard to the real estate market but also with regard to the economy as a whole since this market sector has a significant impact on GDP and employment opportunities. The multiplier effect from real estate economics on related sectors is one of the top economic boosters there is.

The Indian real estate market is still in its nascent stages as newer changes in market trends and customer preferences alongside the shift in the balanced approach towards the supply and the demand of the budgetary expectations. The goal still is to build a stronger, cleaner, and more organized real market in the hope to cater for the problem of housing amongst the greater population while also ensuring the economic objectives of the nation are achieved.

Given the expectations for the outcome, with the latest government initiative ‘housing for all’ in India and the vision to set an economy of $5trillion, the factors for these expectations will prove to be vital in shaping the future growth of the sector, mainly by 2025 and alongside it for the subsequent years.