Source: FirstPost ( https://bit.ly/4baVtnB )

India’s real estate sector stands at the threshold of a transformative era, driven by a robust economy, accelerated urbanisation, and rising foreign investments. Yet, the sector’s true potential can only be realised through strategic reforms in taxation. As Budget 2025 approaches, the industry’s stakeholders are eager for measures that could lower costs, simplify processes and incentivise participation from developers and buyers alike. Below are key tax reforms that could redefine the future of real estate in India.

Revamping GST on under-construction properties
The current Goods and Services Tax (GST) framework imposes rates of 5 per cent on non-affordable housing and 1 per cent on affordable housing, but the lack of Input Tax Credit (ITC) makes these projects less attractive compared to ready-to-move-in homes. Reintroducing ITC could transform this scenario by enabling developers to offset project costs and pass on the savings to buyers.

Rationalising stamp duty and registration costs
High stamp duty and registration fees—ranging between 7 per cent and 10 per cent across many states—add a substantial financial burden for property buyers, particularly in the mid-segment market. Reducing these costs uniformly could enhance affordability, reinvigorate sales of under-construction properties, and inject vitality into the real estate sector.

Expanding tax benefits for homebuyers
Tax deductions under the Income Tax Act, such as Rs2 lakh for home loan interest (Section 24(b)) and Rs1.5 lakh for principal repayments (Section 80C), have remained unchanged for years. Increasing the interest deduction limit to ₹5 lakh would make homeownership more accessible for middle-income families, while raising the principal repayment cap could further incentivise investments in residential real estate, driving significant growth in the sector.

Enhancing financing options for developers
Affordable financing remains a persistent challenge for developers, especially those focused on mid-segment and affordable housing projects. Offering tax incentives to financial institutions providing long-term loans to real estate developers could ensure a steady flow of capital. This, in turn, would facilitate timely project completions and reduce costs for both developers and buyers.