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The Union Budget 2025 has significantly impacted the Indian real estate sector, triggering a positive surge in stock prices. The most significant change is the increase in the tax deducted at source (TDS) threshold for rental income from ₹2.4 lakh to ₹6 lakh annually. This substantial increase directly benefits both landlords and tenants. Landlords will experience a considerable reduction in their immediate tax burden, simplifying rental transactions and potentially attracting more investors to the rental market. For tenants, the change implies a less cumbersome process for rental payments and a decrease in the administrative overhead associated with tax deductions. This move is anticipated to stimulate activity within the rental market, making it more accessible and efficient for all participants.
The immediate market reaction to this announcement was a sharp increase in the value of real estate stocks. Companies such as Prestige Estates saw their shares rise by as much as 9.3%, reaching a daily high of ₹1,489.95 on the Bombay Stock Exchange (BSE). Other prominent real estate companies, including Sobha, Phoenix Mills, Oberoi Realty, and Godrej Properties, also experienced significant gains, ranging from 1% to 4.6%. This market response underscores the considerable influence of the Budget's changes on investor confidence in the real estate sector. The increased threshold for TDS on rent is perceived as a positive signal, indicating a supportive government policy toward the industry’s growth.
Beyond the changes to rental TDS, the Budget 2025 also introduced provisions that could further boost the real estate market. The government announced that individual taxpayers can claim the annual value of up to two self-occupied properties as nil for tax purposes, regardless of any other conditions. This effectively eliminates the tax liability associated with the imputed rental income from these properties, potentially increasing the appeal of homeownership for a larger segment of the population. Furthermore, the budget included an income tax exemption for individuals earning up to ₹12 lakh per annum. This measure is likely to stimulate consumption, leading to increased demand for housing and other real estate assets. The combined effect of these tax changes is expected to create a more positive and vibrant real estate market in India.
The impact of Budget 2025's measures extends beyond just immediate market reactions and short-term gains. The long-term implications for the real estate sector are equally significant. By reducing the administrative burden associated with rental income tax and promoting homeownership, the government aims to foster a more inclusive and efficient housing market. Increased investor confidence, coupled with higher consumer spending, is projected to drive significant investment and construction activity within the sector. This could lead to the creation of new jobs, stimulate economic growth, and contribute towards addressing India's ongoing housing shortage. The success of these measures, however, will depend on several factors, including the overall economic climate, interest rates, and the availability of financing for real estate projects.
It is important to note that while the Budget 2025 measures are designed to stimulate the real estate market, there are potential challenges. Maintaining a balance between boosting the sector and addressing affordability concerns is crucial. Ensuring the benefits reach all segments of the population, not just high-income earners, will be a key consideration. Careful monitoring and evaluation of the impact of these changes will be essential to gauge their effectiveness and make further adjustments if necessary. The government will need to continue to foster a supportive regulatory environment and address infrastructure limitations to fully realize the potential of these measures in improving the overall Indian real estate landscape.
Source: Budget 2025: Real estate stocks rally up to 9% after rent TDS threshold raised to Rs 6 lakh