Will Budget 2025 Focus On Tax Affordability And Consumption-Driven Economy?

When it comes to Budget, the real estate sector looks forward to policy initiatives and reforms that can drive growth, enhance affordability, and address long-standing industry challenges. The sector, a critical contributor to the nation’s GDP and a significant employment generator, requires sustained focus and support to maintain its upward trajectory

Everybody talks about rationalising taxes, including the income tax, but nobody does anything about it. Everybody agrees that the middle class in India is the most taxed category, yet nobody does anything about it. You have the income tax, GST or VAT on everything that you buy and then the much-talked about popcorn.

Pre-budget, one gets to read about the possibility of reduction in some taxes, demands for reliefs and giving hopes to income tax payers that their taxable income threshold will be raised. But the actual budget disappoints all!

But during the pre-Budget 2025 period, the demand for tax reliefs have been witnessed from all across the sectors.

Real estate industry – though yet to get the industry status – is supposed to rev up at least 270 allied sectors. Cement, sand, bricks, tiles, wood, electricity industry (which again has hundreds of elements) and transport at every stage are some of the industries that support real estate. And it is the most labour intensive despite the technology. In fact, this very technology also requires skilled manpower to deploy it efficiently.

The sector has been pleading for an industry status to get the benefits attached to an industry, financial benefits in particular. But successive governments have been cold-shouldering the idea. One fails to understand what the government will lose if it allows realty to function like an industry.

Let us analyse for a while the latest real estate market trends to understand the pressure under which it operates. Sales have dipped last year and the affordable housing segment continued to witness lukewarm demand. Aided by the buoyancy in the upmarket luxury housing, there has been a rise in the values of the properties sold. This is a clear indication of the fact that the rich have got richer and the poor, poorer. New launches in the top 7 cities saw a 7 per cent annual decline – from approx. 4,45,770 units in 2023 to approx. 4,12,520 units in 2024. MMR and Bengaluru saw the maximum new launches, together accounting for almost 50 per cent of the new supply in the year, says realty research and consultancy firm Anarock.

Anil Mutha, Chief Visionary & Co-Founder, Nandivardhan Group, talks about the surge in demand for properties priced at Rs2 crore and above which indicates a growing preference for high-quality, well-located homes among affluent buyers, aligning with Mumbai’s status as a global financial hub.

Rohan Khatau, Director, CCI Projects, points out that the decline in affordable housing registrations is concerning as it highlights the need for continuous efforts to address affordability and expand housing access. Samyak Jain, Director of Siddha Group, too, echoes similar sentiments: The decline in the affordable segment, however, calls for renewed focus on addressing housing affordability in the city.

Mumbai, or for that matter any city, is not all about the so-called aspirational quotient. Half of Mumbai lives in slums. And the government’s policies ought to cater to this bracket as well.

When it comes to Budget, the real estate sector looks forward to policy initiatives and reforms that can drive growth, enhance affordability, and address long-standing industry challenges. The sector, a critical contributor to the nation’s GDP and a significant employment generator, requires sustained focus and support to maintain its upward trajectory.

Just consider the industry body Naredco Maharashtra unit president Prashant Sharma’s wish list. He says to ensure the success of initiatives like PMAY-U, it is imperative to increase budgetary allocations for affordable housing and expand credit-linked subsidies. He also calls for revising income tax deduction limits under Section 24(b) for home loan interest from Rs2 lakh to Rs5 lakh,

He reiterates the sector’s long pending demand for granting industry status to the real estate sector. This will enable easier access to institutional funding at lower interest rates, particularly for mid-segment and affordable housing projects.

The government should promote green and sustainable real estate practices through tax rebates and incentives for developers adopting eco-friendly building technologies and materials, he says and calls for continued investments in urban infrastructure, including metro rail, highways, and smart cities, will boost real estate development in peripheral areas and unlock new growth corridors.

Despite the much-talked-about reforms, the realty sector has not seen any semblance of ease of doing business, when you look at the developers’ demand for single-window clearance mechanism for approvals, reduced compliance burdens, and clear land title policies.

Navin Makhija, Managing Director, The Wadhwa Group, says

to make housing truly affordable, an interest subsidy for developers of affordable housing projects would be a welcome step.

Anuj Pui, Chairman – ANAROCK, says amid declining real estate activity in the second half of CY 2024, the sector anticipates government measures to revive overall consumption.

While tax reliefs and other incentives are standard expectations, the government is likely to maintain its focus on building robust infrastructure across the country. Though infrastructure development may not provide immediate relief to end-users, it remains a key driver for long-term growth in the real estate market, says Puri.

Badal Yagnik, CEO, Colliers India, says accordance of industry status to real estate, standardization & extension of affordable housing benefits, streamlining and rationalization of GST levy across segments possess significant potential to drive heightened real estate activity across segments and geographies with better access to capital and single window clearance.

I discussed the real estate sector’s demands at length as its development will have a cascading positive impact on 270 industries which in turn will rejuvenate the economy. Will not a happy home buyer go for new white goods?

Come to think of it, there is no section which does not demand tax reductions in the Budget.

The F&B sector, which has been brawling with inflating operational and input costs, is looking forward to a reduction in GST on dining services along with a tax alleviation on sustainability packaging could be of crucial assistance, says Simranjeet Singh, Director, CYK Hospitalities, says start-ups are also demanding continued tax exemptions and the removal of angel taxes so as to attract more funding. Investments into Tier 2 and Tier 3 cities will benefit from policy environments that promote digital ecosystems to stimulate innovation, especially in agri-tech, health-tech and green-tech.

Dinesh Chandra Pandey, founder, Shankar Fenestrations and Glasses, says the fenestration, glasses, and lifestyle industries significantly influence modern architecture, urban development, and consumer-driven trends. (Fenestration is the art of arranging doors and windows).

These sectors contribute to the advancement of sustainability and energy efficiency and improve the functionality and aesthetics of spaces. With the world focusing on green construction, innovative materials, and smart technologies, these industries have become key drivers of economic growth and environmental responsibility. The lifestyle sector anticipates financial support for the use of sustainable materials and innovative designs in both luxury and everyday products. The adoption of circular economy practices like recycling and upcycling of glass and fenestration waste is motivated by incentives that are in line with global trends and consumer demand.

Kishan Karunakaran Founder and CEO, Buyofuel, opines that Budget 2025 is the opportunity to accelerate India’s green energy transition. Investments could lead to improvements in accessibility and scalability for biofuel solutions through advancements in research and development, logistics, and digital platforms, among other areas.

Reducing taxes is good politics as well as economics as it satisfies the taxpayer, helps generate disposable income which the people spend anyway. This leads to generation of demand which in turn boosts the factory output. Basics of economics, right?

Of late, there have been analytical reports that the personal income tax has outperformed the corporate tax and this has given a growing feeling that the government favours the rich and squeezes the middle class. The majority of the population – 80 crore to be precise - does not have to worry much as they continue to get free rations!

(The columnist is a Mumbai-based author and independent media veteran, running websites and a youtube channel known for his thought-provoking messaging.)