Introduction
While auditing a real estate client, I was thinking that this year the Union Budget 2025 has introduced many important tax amendments as well as policy initiatives for simplifying the tax provisions in the emerging and rapidly growing real estate sector. These measures not only provide relief to home buyers but also investors who always ensure the regulatory oversight for maintaining market stability. However, you might have herd of concerns over a possible real estate bubble in areas inter alia like Delhi NCR and Mumbai, as well as the role of the Real Estate (Regulation and Development) Act (RERA), and overall economic effects in Indian economy.
Hence in this article I will discuss with you the same.
First of all, let’s discuss the relief for self-occupied properties in Budget
One of the good amendment related to this sector is related to the calculation of annual value for self-occupied properties. Previously, only one self-occupied property was considered to have a NIL annual value, and an additional property could only qualify for the same only if the taxpayer resided elsewhere due to work or business, else it was considered as deemed letout increasing income under the head house property.
But the Finance Bill 2025 have now expanded this provision, allowing taxpayers to own two self-occupied properties without additional tax under “Income from House Property,” regardless of the reason of non-occupation or anything else.
This amendment is proposed to benefit the homebuyers who wish to own multiple properties, particularly in metro cities where individuals may prefer to live closer to work or for investment purpose, while keeping another house to live. Families transitioning to smaller homes will also find it easier to sell a large property and buy two smaller ones while availing tax exemptions under Section 54. This provision may lead to increased demand in the mid-segment housing market, making dual-property ownership more efficient for the income tax purposes, that’s the reason this finance act is also called middle class budget.
Next one is the higher TDS threshold for rent payments
I already posted about the detailed TDS chart at TaxGuru, here want to emphasise on one point i.e. another significant amendment in Budget 2025 was to increase in the TDS (Tax Deducted at Source) threshold limit on rent payments.
Currently, rent payments to resident taxpayers (excluding individuals and Hindu Undivided Families) attracted the TDS if the annual rent exceeded INR 2,40,000, but through the Budget 2025 this threshold is now increased to INR 6,00,000 per financial year or INR 50,000 per month.
This revision will now reduce compliance burdens for small landlords and tenants, particularly in the affordable and mid-income housing sectors. Aligning the exemption limit with individual landlords will make transactions easier and encourage growth in rental housing investments. Also, the institutional investors in rental properties will also benefit from the reduced compliance requirements.
Focus on urban development and affordable housing
This Budget emphasizes the urban development as a crucial area for reform. A major highlight is the launch of SWAMIH Fund 2, that means, a Special Window for Affordable and Mid-Income Housing, with an allocation of INR 15,000 crores. This fund is backed by the government, private investors, as well as by banks which aims to help complete nearly 1 lakh stalled housing units.
This fund is proposed to provide financial assistance to stressed projects to ensure faster construction timelines which will also increase the confidence of buyers. Also, the developers in the affordable and mid-income housing sectors will benefit from improved financing options, creating a more stable market. The initiative also aligns with the government’s “Housing for all” vision and is expected to generate massive employment in the related industries such as construction, cement, home appliances as well as steel industry.
My concerns over a real estate bubble
With increasing liquidity, tax relaxations, and government-backed investments, the risk of a real estate bubble becomes a concern. A real estate bubble occurs when property prices rise sharply due to speculation rather than actual demand. This can eventually lead to a market crash.
Like for example you may see the property rates in Delhi NCR and Gurugram, they have just sky rocketed even with poor infrastructure
Several factors contribute to such a bubble, including excessive credit availability, investor speculation, an imbalance in supply and demand, and macroeconomic factors such as inflation and high-interest rates. To prevent this, strong regulatory oversight through RERA, monetary policy interventions by the Reserve Bank of India, and a focus on rental and affordable housing sectors are necessary to maintain stability.
The role of RERA in market regulation
The Real Estate (Regulation and Development) Act, 2016 (RERA) has played a crucial role in making real estate transactions more transparent and accountable. It mandates that projects be registered, ensures funds are not misused by requiring escrow accounts, promotes timely completion of projects, and provides an effective grievance redressal mechanism for homebuyers.
Despite these benefits, challenges remain, including delays in RERA dispute resolutions, non-registration of projects, and weak enforcement in some states. Strengthening RERA’s implementation will further enhance market confidence and ensure long-term sustainability in the sector.
Conclusion
The Budget 2025 presents a balanced mix of tax relief, urban development reforms, and policy-driven initiatives to boost the real estate sector. Measures like SWAMIH Fund 2, higher TDS exemptions, and relaxed self-occupied property tax rules will encourage growth. However, concerns regarding a potential real estate bubble cannot be ignored.
To ensure long-term stability, stronger enforcement of RERA, prudent fiscal policies, and sustainable development practices must be prioritized. As India transitions towards an urban-centric economy, these reforms will contribute to a well-regulated, transparent, and growth-driven real estate sector, benefiting both investors and homebuyers.
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Disclaimer: The information provided in this article is for general informational purposes only and should not be considered as professional financial, tax, or legal advice. While every effort has been made to ensure the accuracy of the content, tax laws and regulations are subject to amendments and interpretations, which may impact the applicability of the information discussed.
Author can be contacted at aman.rajput@mail.ca.in
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