Industry Expectations from Union Budget 2025-26 

India stands at a pivotal economic crossroads in the Union Budget 2025-26, poised to unleash transformative reforms that will redefine national growth. With strategic focus on fiscal stability, innovative tax structures, and robust investment pathways, the budget represents a comprehensive blueprint for economic rejuvenation. By balancing public expenditure optimization, private sector stimulation, and structural tax refinements, the government aims to craft an ecosystem that accelerates India’s economic potential, driving inclusive development and global competitiveness. But what do industry doyens wish for in the upcoming Budget presentation? Read on to find out.  

Increase Funding for Affordable Housing 

The affordable housing segment is currently experiencing negative growth. We urge an escalated flow of funds to reinvigorate this crucial sector, thereby promoting inclusivity and sustainable urban development. 

Enhance Home Loan Tax Deduction Limits 

To support homebuyers, we advocate increasing the tax deduction limit on home loan interest payments from Rs. 2 lakhs to Rs. 5 lakhs, making home purchases more affordable and stimulating market demand. 

Grant Infrastructure Status to the Housing Sector 

Recognizing housing as infrastructure will unlock new avenues for investment and development, positioning the housing sector as a cornerstone of national infrastructure. 

Improve Urban Infrastructure 

Alongside housing, enhancements in energy and transportation infrastructure are indispensable. We underscore the necessity of these areas for sustainable urban growth and improved quality of life. 

Expand Rental Housing 

To improve rental affordability, it is imperative to expand rental housing beyond industrial workers. We recommend deleting notional income from house property held as stock-in-trade to facilitate the creation of a sufficient rental housing stock, in alignment with the ‘Housing for All’ objective. 

Incentivize Investment in Rental Housing 

Current provisions that set off losses from income from house property disincentivize rental housing investment. Given the potential for real estate investment to provide a source of income during retirement years, we propose the deletion of this section. 

Adjust Safe Harbour for Ready Reckoner Rates 

The current deemed tax on the difference between the Ready Reckoner/Circle rate and the market value of flats should have an increased safe harbour from 10% to 25% to reflect more realistic market conditions. 

Rationalize Individual Tax Rates 

A rationalization of individual tax rate slabs from the current 37% to 25% is strongly recommended to benefit taxpayers, enhance disposable income, and incentivize market participation. 

Equitable Dividend Taxation 

The rate of dividend taxation for resident investors should be maintained at 10% to ensure competitiveness and parity with NRI investors, promoting fair investment opportunities. 

Reform Capital Gains Tax for Housing Purchases 

Reforms to the capital gains tax rules pertaining to the purchase of multiple houses should be implemented. This will encourage homeownership, leading to increased housing demand and greater economic stability. 

He also puts forward a recommendation to incentivize slum redevelopment in cities like Mumbai, which can be eliminated in the next 5 years. Promoting these initiatives will drive more individuals to buy homes, thereby boosting housing demand, providing substantial support to homebuyers, and improving the affordability index. If implemented, these recommendations for the forthcoming budget will surely ensure a robust and thriving real estate sector, ultimately contributing to the nation’s economic progress and prosperity. 

While government’s “Make in India” initiative has already made significant strides in reducing import dependency and generation of employment, there is scope for further support in form of subsidies and grants, particularly for MSMEs and smaller manufacturers, to foster local innovation and mass production. This would reduce the increasing costs of imports and local production while inducing global competitiveness for OEMs and large component manufacturers.  

Further, the industry’s growth trajectory can be sustained by policies that encourage investment in new skill development workshops that enable seamless integration of digital and physical operations crucial in reaching the tech-savvy, Gen Z consumers and investor base.  

As the industry moves towards smart, IoT-powered appliances, incentives to drive innovation in energy-efficient technologies and green manufacturing are essential. Energy efficient star rated products should be given more impetus with the expansion of replacement AC market along with the growing primary demand in the wake of the climatic shift to warmer temperatures throughout the year. The growing strain on the energy sector creates a pressing need for support through subsidies to promote energy saving solutions which not only protect the environment but are also well aligned with the growing consumer demand for eco-friendly products. 

With the consumer durables sector (not including mobile handsets) expected to cross ₹3 lakh crores by 2029 and becoming the fourth-largest global market by FY27, Voltas is well-positioned to leverage emerging trends, advance energy-efficient product offerings, and strengthen its supply chain in alignment with India’s vision to become a global leader.  

The upcoming Union Budget presents a critical opportunity to accelerate growth, foster innovation, and ensure long-term sustainability for India’s consumer durables sector, all while supporting the government’s goal of creating a competitive, self-reliant economy.” 

Over the last few years, the government has undertaken several commendable initiatives to enhance the ease of doing business and ensure regulatory clarity. 

In line with this, simplifying tax structures and ensuring more clarity in compliance requirements for startups and MSMEs will instil greater confidence in India’s legal and economic systems. 

India’s capital markets have emerged as one of the best-performing markets in 2024. To ensure FinTechs and other players in the financial services sector achieve momentous growth in the coming years, we hope the budget will introduce policies for enhancing financial inclusion and creating a more robust risk management framework. 

On the broader economic front, we look forward to more financial incentives such as subsidies and tax reliefs to reduce entry barriers for MSMEs and enable broader participation. Additionally, performance-linked benchmarks and targeted benefits, including easing the delivery of credit, will be crucial to propelling the MSME sector to new heights.” 

Expectations around MSME Lending 

“The Union Budget 2025 presents a critical opportunity to empower millions of entrepreneurs and create a more resilient and dynamic Indian economy. 

Considering how affordable and timely access to financing remains a priority for the MSME sector, we hope the government takes a comprehensive review of MSME schemes. Credit to the MSME sector recorded impressive growth in Q2 2025, aligning with the sector’s increased investments towards business expansion. 

While a slew of policy announcements in the past have catered to the short- and medium-term credit needs of MSMEs, we are anticipating policy measures that will strengthen the digital infrastructure and ease credit access to support MSME growth. 

AI-driven credit decisioning, an increase in the guaranteed coverage under CGTMSE, and subsidies to introduce innovative lending solutions will empower MSMEs to access credit without hurdles and foster inclusive economic progress. Government initiatives that support skill development and enhance participation across all tiers of the manufacturing ecosystem will further enable MSMEs to seize trade opportunities across global trade corridors.” 

Expectations around Fintech and Digital Lending 

“With expectations running high for India’s Union Budget 2025, the FinTech sector calls for forward-looking policies that will create a conducive environment and support innovation in key areas like digital lending, while ensuring data security and consumer protection. 

A lot remains to be done to bring the underbanked segments like MSMEs into the financial mainstream. The Union Budget can aid India’s FinTech sector to unlock the next phase of the digital lending revolution with supportive measures, clearer regulations, and tax exemptions. 

FinTech platforms aim to further augment digital lending offerings with highly personalised credit solutions and flexible repayment schemes. 

While UPI has pushed the envelope with innovations like credit payments, and international integration, the upcoming Budget presents an opportunity for measures that will encourage digital lenders to capitalise on this strong foundation. We expect policies that will catalyse innovation and enable FinTech players to strengthen market trust and offer long-term value by redefining credit accessibility and adopting fairer practices.” 

Streamlining the Fund Management Ecosystem 

The fund management industry, currently constrained by outdated regulations and fragmented governance, could see a significant boost in efficiency with the establishment of a single-window clearance system for fund registrations and compliance. This change is crucial to simplify operations, especially for early-stage investors who need agility to support startups promptly. 

Introducing stability in the regulatory framework will not only encourage more domestic and foreign capital inflow but also provide a sense of security to the industry. Frequent regulatory changes disrupt business continuity and stifle innovation in fund management, making stability a key factor for growth. 

Strengthening SIDBI’s Fund of Funds for Startups (FFS) 

The FFS program has been instrumental in catalyzing startup growth, but further enhancements are needed. Renewing SIDBI’s allocation with an additional ₹10,000 crores will ensure continued support for startups. 

Beyond FFS, India requires a sovereign-backed fund of funds anchored by SIDBI, which allows contributions from banks, insurance companies, and global sovereign wealth funds. A $5 billion to $10 billion anchor fund, with SIDBI contributing 20%, could unlock significant startup capital, fostering long-term partnerships and global investor confidence. 

With SIDBI as the anchor, this approach will create a much-needed pool of patient capital, catering to startups across stages. SIDBI’s credibility and experience supporting startups make it an ideal anchor for this fund, fostering long-term partnerships and global investor confidence. 

Expanding the Definition of Startups 

The current DPIT startup classification limits eligibility to companies under 10 years of age or with revenue below ₹100 crores. These thresholds are restrictive and fail to accommodate late bloomers or startups in high-GMV, low-margin industries. 

Expanding the definition to include startups registered up to 20 years old and revising the revenue cap to reflect business models with significant GMV contributions will enhance inclusivity. This change aligns startup classification with MSME frameworks, ensuring fairness and better support for a broader range of innovative businesses. 

Tax Benefits and Subsidies  

Introduce higher tax deductions for developers building affordable housing units. Reduce or waive Goods and Services Tax (GST) on affordable housing construction materials. 

Land Reforms  

Unlock underutilized government land and offer it to developers at subsidized rates. Incentivize mixed-use developments, allowing affordable housing to be part of larger profitable projects. Digitalization of land. It is time every land parcel has its own land passport authenticated by the Government.  

Increased Floor Space Index (FSI)  

Provide additional FSI or FAR (Floor Area Ratio) for affordable housing projects, especially in tier-1 cities where land scarcity is a challenge. 

Interest Subvention  

Offer lower interest rates on loans for developers engaged in affordable housing projects. Extend credit-linked subsidy schemes for the construction phase. 

Special Development Zones (SDZs)  

Create affordable housing-specific SDZs with predefined infrastructure and fast-track approvals. 

Inclusionary Zoning  

Mandate a percentage of units in every housing project to be reserved for affordable housing. 

Single-Window Clearance System  

Implement a single-window digital platform for all affordable housing project approvals, including environmental clearances, building permits, and municipal sanctions. 

Defined Timelines  

Set strict timelines for the approval process, with automatic escalation mechanisms if deadlines are not met. 

Standardization of Codes  

Establish uniform codes and templates for affordable housing projects, minimizing ambiguity and the need for multiple reviews. 

Self-Certification Mechanisms  

Allow developers to self-certify compliance for specific non-critical aspects, subject to random audits by regulatory authorities. Levy hefty penalties if self-certification is done with malicious intent or wrong information.  

Pre-Approved Plans  

Provide developers with pre-approved templates for affordable housing layouts that meet safety and zoning regulations. 

Role of Public-Private Partnerships (PPPs) in Addressing the Affordability Gap 

Shared Risks and Investments: Governments can provide land or infrastructure at concessional rates, while private developers invest in construction and marketing. 

Innovative Financing Models: Establish housing bonds or low-interest funds under PPP models to finance affordable housing projects. 

Use value capture financing (e.g., increased land values from infrastructure upgrades) to fund affordable housing initiatives. 

Infrastructure Support: Governments can develop supporting infrastructure (roads, schools, utilities) in partnership with developers, reducing project costs. 

Rental Housing: Promote Build-to-Rent models through PPPs, providing affordable rental units for urban migrants. 

Government-Guaranteed Returns: Offer guarantees on minimum occupancy or returns for developers investing in affordable housing. 

Community Participation: Encourage PPPs to engage with local communities in project design, ensuring the housing meets the needs of end-users 

Kishore Karumanchi, CEO, Aciana 

“AI is transforming healthcare with accurate diagnoses and personalized preventive treatments. Raising the exemption limit for health check-ups from ₹5,000 to ₹20,000 would encourage regular screenings and lower the disease burden. Additionally, allocating more funds to research in genomics, biotechnology, and AI diagnostics is vital for innovation. Tax breaks for healthcare startups and stronger public-private partnerships can accelerate the use of advanced technologies in healthcare. 

These steps will expand access to quality care for millions and position India as a global leader in healthcare innovation. Investing in preventive care and advanced medical tech will improve public health and drive sustainable sector growth”. 

On streamlining the approval process for affordable housing 

Streamlining approvals is critical, with a centralized single-window clearance system, pre-approved land banks, standardized construction guidelines, and time-bound processes to minimize delays. Allowing certified third-party audits can further reduce bureaucratic bottlenecks without compromising safety standards.   

PPPs role in addressing the growing affordability gap 

Public-Private Partnerships (PPPs) play a transformative role by combining government resources and private sector expertise. Governments can provide subsidized land, invest in infrastructure, and offer financial incentives like tax breaks and subsidies. Private developers bring technical expertise, market understanding, and cost-efficient construction methods, such as prefabrication and modular techniques. Financial innovations, including blended finance models and subsidized mortgages, enhance funding options.   

PPPs also focus on creating sustainable communities by integrating essential amenities like schools, healthcare, and public spaces. Rental housing developments, supported by government subsidies, offer another avenue for affordable living. Risk-sharing mechanisms, such as government buy-back schemes for unsold units, mitigate market risks for developers, fostering scalable and inclusive housing solutions.