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.
Realtors may post mixed Q4 results as residential demand moderates
India’s top listed real estate developers may report a mixed quarterly performance in terms of sales and revenues in the fourth quarter of 2024-25 (Q4FY25) because some of them missed their pre-sales guidance due to launch delays and moderate residential demand across major cities.
“Pre-sales and price growth seen in the past three years have strong embedded profits.
“As such, accounting profits are likely to improve on a year-on-year (Y-o-Y) basis.
“But collections and operating cash flows are likely to remain tepid at 0-5 per cent due to slower sales velocity while fixed costs and business development commitments remain elevated,” said Mahaveer Jain, director, India Ratings & Research.
The January-March period is typically considered a strong quarter for real estate.
Until FY24, buyers were incentivised to accelerate home purchases in March to claim additional indexation benefit.
But with this year’s tax policy change removing indexation from real estate, there wasn’t a rush to buy in March.
Buying decisions could take their own course, according to analysts at HSBC Research.
They added that the wealth effect from a weak equity market deferred purchase decisions of homebuyers in Q4, they added.
According to property consultant Anarock, housing sales in top seven Indian cities dipped 28 per cent in Q4FY25 as residential prices skyrocketed coupled with geopolitical headwinds.
“A slowdown in the real estate sector would directly hit booking volumes.
“Many developers rely heavily on pre-sales to generate cash flow, so a dip here could hurt top line growth.
“Developers may delay launches of slow execution to conserve cash, affecting revenue recognition under the project-completion method,” said Anuj Puri, chairman, Anarock group.
Despite the moderation in demand, Macrotech Developers (Lodha) and Godrej Properties reported increases of 32 per cent and 7 per cent in pre-sales for Q4FY25, respectively.
Both developers comfortably attained their annual pre-sales guidance.
According to Jain, the growth was due to a higher mix of premium (priced over Rs 2 crore) units and price growth.
“Also, our peer set is dominated by Tier-I players, who are benefitting from consolidation and pricing power.”
DLF and Oberoi may report a decline or flat sales growth due to high bases and no new launches in Q4FY25.
“The net asset value growth will be lower, and we are reducing the embedded earnings before interest, taxes, depreciation, and amortisation multiple for all firms,” they noted.
Bengaluru-based developer Sobha missed its annual sales guidance, but its sales for Q4FY25 grew by 22.1 per cent Y-o-Y, driven by the launch of Sobha Madison Heights and Sobha Hamptons in Bengaluru.
Sobha’s Bengaluru-based peer, Prestige Estates, also missed its annual guidance due to a delay in planned launches in Q4FY25.
It managed to launch four projects: Suncrest, Nautilus, Southern Star, and Spring Heights.
The developers, particularly the Bengaluru-based ones, faced approval challenges early in FY25, which seemed to have eased in Q4.
Both firms are likely to see a healthy topline growth, according to Bloomberg estimates.
Overall, analysts estimated a “healthy” quarter for real estate players despite the moderation in growth.
“Supply challenges have eased in Q4FY25 with broad-based recovery seen in new launches from listed developers across all key markets — especially Bengaluru and the National Capital Region (NCR),” analysts at JM Financial noted.
However, according to Jain, the base effect has started impacting Y-o-Y growth, as FY24 was a year of strong growth.
“Since FY22, most grade-A listed developers either achieved or exceeded their stated guidance but the impact of a sharp base effect and a moderation in pricing growth can impact future prospects of the sector,” a report by JM Financial stated.
By Prachi Pisal
