Budget incentives, higher TDS exemption, tax relief to spur housing market growth

Real estate markets across India’s key cities are expected to get a major push with the Union Budget 2025-26 proposal to allow taxpayers claim annual value of two self-occupied properties as nil without any condition and increasing the annual limit for tax deducted at source (TDS) on rent to Rs 6 lakh from Rs 2.40 lakh.

Both the proposals are likely to boost investments in property markets in the backdrop of possibility of higher adjusted returns.

“With a clear focus on infrastructure enhancements, this budget incentivizes the purchase of a second flat by individuals, which will further augment homebuying for investments; TDS hiked on rent up to Rs 6 lacs will support rental investment,” said Niranjan Hiranandani, chairman, NAREDCO.


According to Hemal Mehta, partner, Deloitte India, for the property sector, the benefit of having a higher amount of exemption limit for withholding tax on rent payment now applicable to all the lessees and annual value of two houses being nil without giving any justification is a move towards simplification. “The concept of trust first scrutiny later is partly visible,” he said.

The proposal to set up the Urban Challenge Fund with a corpus of Rs 1 lakh crore to focus on infrastructure improvement and redevelopment projects is also expected to drive higher activity with enhanced urban connectivity and boost development.

Of the total corpus, Rs 10,000 crore is proposed to be allocated in the financial year 2025-26 to amplify infrastructure development across urban corridors.

According to experts, the continued emphasis on affordable and mid-income housing will further drive demand, supporting homeownership aspirations. Additionally, personal income tax reforms and a higher TDS threshold for senior citizens will improve disposable income, positively influencing housing affordability.