The Union Budget 2025 has introduced a landmark reform that brings significant relief to homebuyers, allowing them to claim nil annual value for up to two self-occupied houses. This means that homeowners will no longer have to pay tax on the notional rental income of a second house if it is not rented out. Previously, the benefit of tax exemption was available for only one self-occupied property, while individuals with a second house had to pay tax on its deemed rental value, even if they were not earning any income from it. This move simplifies tax compliance, eases financial strain on homeowners, and is expected to boost the real estate sector by encouraging multiple homeownership.
Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025, acknowledged the challenges faced by taxpayers under the previous regime and emphasized the government’s commitment to making homeownership more accessible and affordable. “Presently, taxpayers can claim the annual value of self-occupied properties as nil only on the fulfilment of certain conditions. Considering the difficulties faced by taxpayers, it is proposed to allow the benefit of two such self-occupied properties without any condition,” she announced in her budget speech. This reform is expected to directly benefit middle-class families, professionals, and individuals who own multiple properties for personal use in different cities.
Tax experts and real estate industry leaders have widely welcomed this policy change, citing its potential to transform homeownership dynamics in India. Sakchi Jain, a Chartered Accountant and Financial Educator, highlighted how this reform is part of a broader strategy to promote financial inclusion and economic stability. “Budget 2025 introduces key reforms aimed at tax relief, financial inclusion, and economic stability. Homebuyers now benefit from tax relief on two self-occupied properties, making homeownership more accessible. This will especially help individuals who need to maintain a second home for work or family-related reasons,” she explained.
Kaushal Agarwal, Co-Founder & Director of The Guardians Real Estate Advisory, noted that the exemption of tax on two self-occupied houses not only simplifies tax compliance but also provides much-needed financial relief to homeowners. “Earlier, individuals had to pay tax on the notional rental income of a second home, which added to their financial burden. This change is a significant step in recognizing the need for housing flexibility, particularly for families who have homes in different cities for work, investment, or personal reasons,” he said. He added that the new policy would reduce unnecessary financial stress and encourage more people to invest in real estate.
Chandresh Vithalani, Partner at Palladian Partners Ltd, pointed out the broader implications of this policy on the real estate market. “The Union Budget 2025 delivers a strong push for the real estate sector through a well-rounded approach that balances affordability, investment incentives, and project completion. By increasing the income tax exemption limit, homebuyers now have greater purchasing power, enhancing demand for residential properties. The move to allow tax benefits on two self-occupied properties instead of just one encourages multiple homeownership, making real estate a more attractive long-term investment avenue,” he said. He further explained that this policy would benefit families with dual residences, such as individuals who maintain one house in their hometown and another in a metropolitan city for work.
The real estate sector, which has been on a recovery path since the pandemic-induced slowdown, is expected to gain a substantial boost from this policy change. By making homeownership more affordable and reducing the tax burden, the reform is likely to encourage investment in housing across various regions. Experts believe that cities with growing employment hubs, such as Bengaluru, Hyderabad, Pune, and Gurugram, will see increased demand for residential properties as more professionals consider purchasing second homes.
Furthermore, this change aligns with the government’s broader vision of promoting real estate as a key driver of economic growth. Real estate developers and investors are optimistic that the increased affordability and tax benefits will lead to a surge in home purchases, thereby strengthening market confidence and supporting the overall economy. The policy also aligns with India's rapid urbanization, as more people move to different cities for job opportunities while maintaining a primary residence elsewhere.
Overall, the reform represents a major milestone in India’s housing and taxation policy. By alleviating the tax burden on second homes, the government has not only provided relief to homebuyers but also laid the foundation for sustained growth in the housing sector. With increased accessibility, greater affordability, and a simplified tax structure, this move is expected to benefit millions of homeowners and contribute to the long-term stability of India’s real estate market.
