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Real-Estate Sector Budget 2025 Highlights
In the Union Budget 2025, the Finance Minister announced a series of policy reforms aimed at boosting India's real estate sector. Building on the success of the SWAMIH Fund I, a new fund, SWAMIH Fund 2, with a corpus of INR 15,000 crores, will be established as a blended finance facility. This fund will receive contributions from the Government, banks, and private investors and is expected to expedite the completion of stalled housing projects, offering relief to homebuyers. Additionally, policy measures have been introduced to promote urban development, including the creation of an Urban Challenge Fund worth INR 1 lakh crore, which is set to play a crucial role in the growth and transformation of cities. Let’s understand what the real estate gained in Budget 2025.
SWAMIH Fund 2
Under the Special Window for Affordable and Mid-Income Housing (SWAMIH), 50,000 homes in stalled projects have been completed, bringing relief to homebuyers who had been waiting for possession. These homeowners have now received their keys. Additionally, another 40,000 units are set for completion in 2025, easing the financial burden on middle-class families who have been managing both home loan EMIs and rental expenses.
Building on this achievement, the government will launch SWAMIH Fund 2—a blended finance initiative supported by contributions from the government, banks, and private investors. With a corpus of ₹15,000 crore, this fund aims to fast-track the delivery of another one lakh housing units, ensuring timely completion and stability in the real estate sector.
Tax Relief for Residential Property Investors
Currently, claiming a zero annual value for self-occupied properties comes with certain requirements. Recognizing the challenges this poses for taxpayers, the government proposes a more lenient approach. Homeowners will now be able to designate two of their self-occupied properties as having a nil annual value, which will result in the elimination of the previous condition.
Public-Private Partnership in Infrastructureure
To boost infrastructure development through Public-Private Partnerships (PPPs), each relevant ministry will formulate a three-year pipeline of projects suitable for this model. Recognizing the importance of state-level participation, states are also encouraged to develop their own project pipelines and can access funding and expertise through the India Infrastructure Project Development Fund (IIPDF) to prepare robust PPP proposals.
Reimagining Urban Development: Reforms and Initiatives
The government has unveiled a series of transformative measures aimed at revitalizing urban governance, municipal services, land management, and urban planning. These reforms will be incentivized to ensure effective implementation and sustainable growth.
Urban Challenge Fund
A significant highlight is the establishment of an Urban Challenge Fund, with an allocation of Rs 1 lakh crore. This fund is designed to support ambitious projects under the themes of 'Cities as Growth Hubs,' 'Creative Redevelopment of Cities,' and 'Water and Sanitation,' as outlined in the July Budget. The fund will cover up to 25% of the costs for bankable projects, with the condition that at least 50% of the funding is sourced through bonds, bank loans, and public-private partnerships (PPPs). For the fiscal year 2025-26, an initial allocation of Rs 10,000 crore has been proposed.
Tax Certainty for Alternate Investment Funds (AIFs)
To bolster infrastructure development, Category I and II Alternate Investment Funds (AIFs) will be granted tax certainty on gains from securities. This move aims to provide stability and encourage greater investment in critical sectors.
National Framework for Global Capability Centres (GCCs)
A national framework will be introduced to guide states in promoting Global Capability Centres in emerging tier 2 cities. The framework will focus on enhancing talent availability, improving infrastructure, reforming building bylaws, and fostering collaboration between industry and government.
Investment Friendliness Index
In a bid to encourage healthy competition among states, an Investment Friendliness Index will be launched in 2025. This index will evaluate states based on their ability to attract and facilitate investments, furthering the spirit of cooperative federalism.
Mixed Reactions from Real Estate Stakeholders
The announcements have elicited a mixed response from real estate industry stakeholders. While some have applauded the budget for its forward-looking initiatives, others have expressed concerns over missed opportunities. The real estate sector remains cautiously optimistic as it evaluates the potential impact of Finance Minister Nirmala Sitharaman’s budget announcement on February 1, 2025.
These reforms and initiatives signal a renewed focus on urban development, aiming to create sustainable, inclusive, and economically vibrant cities for the future.
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