Budget 2025 for homebuyers: Real estate industry expects affordable housing revival

Homebuyers have big expectations from Budget 2025. They expect that the government will introduce measures to make home-buying affordable.

The real estate industry has also echoed homebuyers' concerns and hopes that the upcoming Union Budget would revive affordable housing, which was once a thriving sector.

Affordable housing has struggled in the post-pandemic years as demand and supply have shrunk.

The sales share of affordable housing fell to 18% in 2024 from over 38% in 2019, according to Anarock data. Further, its share of total housing supply in the top seven cities dropped to 16% in 2024 from nearly 40% in 2019, according to Anarock data.

Why is affordable housing necessary?

Amid rising property prices across cities in the last few years, it is becoming difficult for the common man to afford a house.

Real estate experts are, therefore, stressing the need to revive affordable housing.

"For the real estate sector, key expectations include industry status recognition and a revival of the affordable housing segment," said Anuj Puri, chairman, Anarock Group

Badal Yagnik, CEO of Colliers India, also expects the budget to extend affordable housing benefits to homebuyers.

How to revive affordable housing

Homes priced below ₹45 lakh and sized up to 60 sq.m. carpet area are classified as affordable housing. While the size criteria is okay, experts say the price limit is unrealistic, specially for cities like Mumbai.

"A key priority for the budget should be adjusting the affordable housing price cap beyond the current ₹45 lakh to align with rising development costs in metropolitan areas," said Piyush Bothra, co-founder and CFO of Square Yards.

Experts say that the affordable housing cap should be raised to at least ₹85 lakh in Mumbai and ₹60-65 lakh in other metro cities to reflect market realities.

"Such revision would enable more properties to qualify as affordable housing, granting buyers access to lower GST rates (1% without ITC) and other subsidies," says Puri.

The government could release centrally controlled land managed by agencies like the Indian Railways, Port Trusts, and the Department of Heavy Industries for affordable housing projects.

Under PMAY, the subsidy scheme for EWS/LIG households expired in 2022. It may be brought back to incentivise first-time buyers of affordable homes. The government could also extend loans for new construction or add essential features like rooms, kitchens, or toilets to existing properties.

Under PMAY (Rural), the Government may think about providing subsidies to help convert ‘kaccha’ homes into ‘pucca’ ones if the eligibility criteria of the beneficiary are met.

Through section 80-IBA of the Finance Act 2016, developers enjoyed a 100% tax holiday for affordable housing projects. It acted as a major incentive, boosting the supply of affordable housing.

"Reintroducing this benefit could be transformative, offering substantial tax breaks to developers focused on affordable housing projects," said Puri.