Budget 2025: Affordable Housing Is Expecting Big Changes From FM Nirmala Sitharaman; Expert Weigh In

The upcoming Union budget for FY26, which is scheduled to be tabled on February 1, 2025, is expected to include significant reforms that the real estate industry hopes will boost confidence in the face of a drop in transaction activity.

Following a setback in the previous budget when the government eliminated indexation benefits, real estate players are calling for the reinstatement of the Credit-Linked Subsidy Scheme under the Pradhan Mantri Awas Yojana (PMAY), a revision of the affordable housing criteria, and an increase in the tax exemption limit on housing loans to Rs 5 lakh.

Expert from industry

'The tax cut on housing loan interest should be increased to a maximum of Rs 5 lakh, as this will assist the middle class significantly. The proposed increase from Rs 2 lakh will allow expenses from over Rs 700 to all the way to Rs 90,000. As a result, tax expenditure will greatly decrease and moving home will become significantly cheaper', said Aman Gupta, director, RPS Group.

'With EMIs being at an all-time high of 8.5 cent to 9 per cent this increase will greatly assist the middle class, especially those looking to invest in tier 2 and tier 3 cities. Because of this, we predict that the demand for affordable housing will increase by at least 30 per cent during the next financial year,' Gupta added.

Price restriction of Rs 40 lakh is ancient

Given the reality of the situation, the current thresholds for affordable housing need to be changed as soon as possible. The price restriction of Rs 40 lakhs set several years ago should have been increased considering the increase in construction costs, which stands around 30-40 per cent., said L C Mittal, director of Motia builders

'Other factors, such as the size limitation of 60 sq m for metropolitan areas, for instance, fail to account for the changing global lifestyle requirements. There needs to be a more vibrant emphasis on including local market prices, construction expenses, and income to ensure that the vision of housing for all is met. Imposing such imaginations, it is recommended to establish prices and flexible boundaries that can look after the affordable housing aspect as well', said Mittal.

Increase in CLSS subsidy

'As a result of PMAY’s previous Continuous Linked Subsidy Scheme, millions of individuals belonging to economically weak areas were able to purchase their first home; hence, due to this, it is crucial to reinstate the CLSS,' said Manoj Goyal, Director, Forteasia Realty.

'However, due to the increase in construction expenses and hefty movement costs, increasing the subsidy limits of the CLSS may be what is needed for the demand of homes in the 40 lakh segment that have seen a drastic decrease since 2020,'Goyal added.