How Budget 2025 Impacts Homebuyers: Affordable Housing

The Union Budget 2025 has been hailed as a game changer for middle-class homebuyers, especially in the affordable housing segment. Amid rising property prices, the government has introduced several initiatives and reforms aimed at making homeownership more accessible. In this blog, we explore the Impact of Budget 2025 on Homebuyers – Affordable Housing in Focus, discussing key reforms, tax benefits, and funding initiatives that are set to benefit both homebuyers and the broader real estate market.

Increased Disposable Income and Tax Reforms

One of the most significant highlights of the Union Budget 2025 is the boost to disposable income. The government has restructured income tax slabs to provide maximum relief to middle-class taxpayers. For instance, individuals earning up to INR 12 lakh per annum will now pay zero personal income tax. This adjustment is expected to help taxpayers save approximately INR 10,000 per month based on their income slab. With increased savings, more homebuyers can manage their existing loans and enhance their eligibility for home loans, thereby making their dream of homeownership more feasible.

Key Tax Reforms:

• Zero Tax for Earnings Up to INR 12 Lakh:
  This change significantly increases disposable income, enabling taxpayers to allocate more funds toward home investments.
• Enhanced Savings:
  Increased monthly savings not only ease the burden of existing EMIs but also improve the capacity to secure additional financing for new property purchases.

Also Read: Union Budget 2025: SWAMIH Fund 2.0 Boosts Housing Completion

Reforms for Self-Occupied Properties

The Budget 2025 has introduced a progressive measure for existing property holders by allowing them to designate two properties as self-occupied units. This reform is particularly beneficial for individuals who own more than one property, as it:

• Eliminates Rental Income Tax:
  By classifying two properties as self-occupied, homeowners can claim a nil valuation for these assets, effectively removing the tax liability on any rental income component.
• Simplifies Exemptions:
  This change makes it easier for homeowners to claim exemptions, thereby reducing their overall tax burden and encouraging investment in second homes.

Increased TDS on Rent: A Win for Landlords and Tenants

Another notable reform in the budget is the increase in the TDS (Tax Deducted at Source) threshold on rent from INR 2.4 lakh per annum to INR 6 lakh per annum. This adjustment brings a dual benefit:

• For Landlords:
  Landlords benefit from immediate access to higher cash flow as the increased threshold reduces the tax deduction on rental payments, thereby improving their liquidity.
• For Tenants:
  Tenants face a reduced paperwork and compliance burden, making the process of paying rent and filing returns simpler and more streamlined.

Boost to Affordable Housing Demand

The Union Budget 2025 has taken significant steps to support the affordable housing segment—a sector that remains crucial for India’s burgeoning middle class. By eliminating the rental income tax for second self-occupied properties and increasing the TDS threshold, the government is not only enhancing buyers' affordability but also encouraging developers to focus on affordable housing projects. Projections indicate that the demand for affordable housing could reach 31.2 million units by 2030, reinforcing the long-term growth potential of this segment.

Also Read: Union Budget 2025: 1.5 Lakh Crore Interest-Free Loans to Boost India's Infrastructure

Special Funding Initiative: SWAMIH Fund 2

• SWAMIH Fund 2:
  The Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund 2 is a targeted initiative with a corpus of Rs 15,000 crore. This fund is designed to revive stalled projects in the affordable housing segment, aiming to complete 1 lakh housing projects that have faced delays. With 50,000 housing units already completed in this category, the fund is expected to provide a much-needed boost to both developers and homebuyers.

Impact on Home Loans and Borrowing

Budget reforms have a direct influence on home loan availability and affordability:

• Lower Home Loan Rates:
  The RBI’s recent repo rate cut of 25 basis points to 6.25% further enhances the affordability of home loans. Lower interest rates mean reduced EMIs, making it easier for more individuals to qualify for loans.
• Stronger Loan-Repaying Capacity:
  Increased disposable income and favorable tax rebates improve borrowers’ ability to repay loans, leading to higher approval rates and a healthier lending environment.
• Stimulated Real Estate Market:
  With the combination of tax rebates and lower interest rates, the overall demand for home loans is expected to rise, contributing to a more robust real estate market in the affordable housing segment.

Broader Economic and Urban Development Impact

The reforms in Budget 2025 extend beyond individual homebuyers:

• Economic Growth:
  Increased disposable income and a stable tax regime can lead to higher consumer spending, boosting the overall economy.
• Urban Renewal:
  With improved financing conditions and government support through funds like SWAMIH, developers are better positioned to undertake large-scale affordable housing projects. This can lead to the revitalization of urban areas and improved infrastructure.
• Investor Confidence:
  A favorable budget enhances investor confidence in the real estate sector, attracting both domestic and international investment and paving the way for sustained market growth.

Conclusion

The Impact of Budget 2025 on Homebuyers Affordable Housing in Focus is significant, especially for middle-class individuals striving to achieve the dream of homeownership. With increased disposable income, revised tax rebates, higher TDS thresholds on rent, and special funding for stalled projects through the SWAMIH Fund 2, the budget introduces a host of reforms that make affordable housing more accessible and sustainable.

For homebuyers, these reforms mean improved affordability and clearer financial planning, while investors benefit from a more stable and predictable market environment. As urban development continues to accelerate, particularly in the affordable housing segment, these measures are set to foster long-term economic growth and urban renewal.

Stay informed about these pivotal changes and leverage the benefits of the new budget to secure your place in India’s dynamic and evolving real estate market. Whether you're planning to buy your first home or invest in affordable housing projects, Budget 2025 lays the foundation for a more inclusive and prosperous future in the property sector.

Also Read: RBI Cuts Repo Rate: How It Will Reduce Your Home Loan EMIs