Latest Government Policies Affecting Indian Real Estate

Wiki Article

The Indian real estate sector has long been a pillar of the country's economy, contributing significantly to GDP and employment. In recent years, the Indian government has introduced several reforms and policy changes to boost transparency, affordability, and growth within the sector. As we move into the second half of 2025, it's crucial for investors, developers, and homebuyers to understand the latest government policies shaping the real estate landscape.

1. Implementation of RERA (Strengthening Further in 2025)
The Real Estate (Regulation and Development) Act (RERA), originally implemented in 2016, continues to be strengthened in 2025. Several states have updated their RERA rules to improve accountability and ensure stricter compliance by developers.
Key Updates:

Faster grievance redressal timelines for homebuyers.

Mandatory quarterly project progress reports by developers.

Penalties for delays have become more stringent.

Impact: Homebuyers now feel more confident, and fly-by-night developers are being weeded out, leading to a more structured market.

2. Affordable Rental Housing Complexes (ARHCs)

Under the PM Awas Yojana-Urban (PMAY-U), the government has promoted Affordable Rental Housing Complexes (ARHCs) to support migrant workers and urban poor.

Recent Developments:

ARHC schemes now extended to Tier 2 and Tier 3 cities.

Incentives and tax benefits for private players developing rental housing.

Impact: This has opened up a new vertical in real estate focused on long-term rentals, especially in smaller cities with growing job hubs.

3. Digital Land Records Modernization Program (DILRMP)

The government continues to digitize land records across states through the Digital India Land Records Modernization Program.

2025 Progress:

Integration of GIS maps with land records in over 60% of districts.

Uniformity in land title systems being introduced for urban real estate transactions.

Impact: This is reducing title disputes, increasing investor confidence, and making land acquisition smoother for developers.

4. Tax Incentives for Affordable Housing

The Union Budget 2025-26 has extended several tax breaks aimed at promoting affordable housing.

Major Highlights:

Deduction of ₹1.5 lakh on interest paid on home loans for affordable homes extended till March 2026.

100% tax exemption for affordable housing developers under section 80IBA extended.

Impact: Boosts both supply and demand in the affordable housing segment, especially in suburban and developing areas.

5. GST Reform for Real Estate Sector

The GST Council is reviewing the input tax credit (ITC) structure for under-construction residential projects.

Expected Reforms:

Possible re-introduction of ITC to reduce project costs.

Clarification on GST applicability on joint development agreements (JDAs).

Impact: If implemented, these reforms will reduce costs for developers and buyers, encouraging more launches.

6. Green and Sustainable Real Estate Policy

To meet its climate commitments, the Indian government is pushing for green-certified buildings.

Initiatives:

Extra FSI (floor space index) incentives for IGBC- or GRIHA-certified projects.

Low-interest green finance schemes for sustainable housing projects.

Impact: Encourages developers to adopt eco-friendly practices while offering benefits to buyers through lower maintenance and energy costs.

7. Smart Cities Mission: Phase 2 Expansion

The Smart Cities Mission, initially launched in 2015, is seeing a second wave of development in 2025.

What's New:

More cities added under Smart Cities Phase 2.

Focus on real estate development around integrated townships and smart infrastructure.

Impact: Real estate demand is increasing around smart city clusters due to better infrastructure, connectivity, and services.

8. REIT Reforms and Investor Accessibility

The Securities and Exchange Board of India (SEBI) has eased norms for Real Estate Investment Trusts (REITs) in 2025.

Key Updates:

Minimum investment threshold lowered to ₹10,000 for small investors.

Inclusion of retail properties and rental housing into REIT portfolios.

Impact: Attracts more retail participation and increases liquidity in the commercial real estate segment.

9. Metro Rail and Infrastructure Policy Support

The central government’s push for infrastructure and metro connectivity is indirectly shaping real estate zones.

Focus Areas:

Metro expansion projects in cities like Pune, Ahmedabad, Coimbatore.

Improved infrastructure around industrial corridors like DMIC (Delhi-Mumbai Industrial Corridor).

Impact: Drives up land value and real estate demand near newly connected areas.

Conclusion

With the Indian real estate sector undergoing significant transformation, staying updated on these government policies is essential for all stakeholders. From tax benefits and transparency laws to digitization and sustainable development, the policy direction is clearly aimed at creating a transparent, inclusive, and future-ready real estate ecosystem.