Real estate developers are hoping that the slew of tax concessions announced in Union Budget 2025, set to take effect this financial year, will spur demand for affordable and mid-segment housing, even as the broader housing market shows signs of fatigue.
These hopes come against the backdrop of a looming global recession that could nudge consumers to prioritise savings or essential expenses such as education, according to senior industry executives and tax planners.
“When individuals have more disposable income due to lower taxes, that extra cash in hand can go towards down payments, support higher loan eligibility, or help manage equated monthly instalments (EMIs) more easily.
"For many, this added financial leeway could be the final push to go ahead with a home purchase they’ve been putting off,” said Sunil Dewali, co-chief executive officer of Andromeda Sales and Distribution, parent company of Andromeda Realty Advisors.
While individual choices will depend on personal financial planning and broader market sentiment, some in the industry believe the larger trends favour housing in 2025-26.
“Midsize homes priced between Rs 2 crore and Rs 4 crore are expected to draw early interest, especially from value-conscious buyers who respond quickly to changes in monthly savings and affordability,” said Pradeep Aggarwal, founder and chairman of Signature Global, which focuses on mid-income housing in Gurugram.
He added that the updated tax regime has improved monthly savings, allowing families to reassess their finances and consider entering the housing market.
The Budget measures announced by Finance Minister Nirmala Sitharaman aim to reduce the overall tax burden on the middle class — the bulk of India’s taxpayer base — and increase disposable income to promote consumption.
With interest rates easing, including the Reserve Bank of India’s cut on Wednesday, both first-time buyers and upgraders may feel more confident about stepping into the market, particularly in the mid and premium segments.
Anuj Puri, chairman of Anarock group, said the relief measures could draw interest from both end-users and investors.
“A higher tax deducted at source (TDS) threshold on rental income helps landlords manage cash flow and may encourage further purchases,” he said, adding that many will likely lean towards affordable or mid-tier projects where EMIs are within reach.
Another emerging trend is the rise in joint loans, especially as more women join the workforce.
For example, if a couple each earn Rs 1 lakh a month, their combined annual income touches Rs 24 lakh.
According to one expert, salaried professionals earning Rs 10–25 lakh a year and engaging in early tax planning could become key contributors to mid-segment demand.
Similarly, those eyeing a second home — either for personal use or as an investment — may benefit from the waiver on notional rent for two self-occupied properties.
“Investor-landlords, encouraged by the revised TDS threshold on rental income, may also explore mid-segment assets in strong locations that can offer reliable rental yields,” said Puri.
However, Vivek Jalan, partner at Tax Connect Advisory Services LLP, cautioned that the new regime could have unintended effects in the near term.
The increase in the exemption threshold to Rs 12 lakh and the rationalised tax slabs could dissuade home loan-driven purchases, since those shifting out of the old regime will lose access to deductions of up to Rs 3.5 lakh for home loan repayments.
“This was a big incentive for the middle class to buy homes through loans. With the shift to the new regime, that incentive vanishes, and it remains to be seen whether housing demand dips as a result,” he said.
“The current anxiety over a global downturn may also hold buyers back, as they prefer to stay liquid,” said Shrinivas Rao, chief executive officer of corporate real estate services firm Vestian Global.
G Hari Babu, president of the National Real Estate Development Council — a self-regulatory body under the Ministry of Housing and Urban Affairs — acknowledged that middle-income households would gain some relief from the tax breaks, but housing may not top their spending list.
“With inflation and education costs rising, most people may use the tax savings for school or college fees. Perhaps only 5–10 per cent might channel it into housing, particularly if they qualify for higher-ticket loans,” he told Business Standard.
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