Budget 2026 Unveils Major Infrastructure Push for Tier 1 and Tier 2 Cities
Finance Minister Nirmala Sitharaman delivered her Budget speech with a series of promising announcements that are being hailed as a positive measure by the real estate industry. The focus on Tier 1 and Tier 2 cities signals a strategic shift towards strengthening emerging urban centers beyond the traditional metros, aiming to build a future-ready Bharat.
Capital Expenditure and Infrastructure Development
In a significant move, the government has set the capital expenditure target for FY27 at ₹12.2 lakh crore, aligning with its continued reliance on infrastructure-led growth. This substantial allocation is expected to drive large-scale initiatives aimed at boosting development in cities with populations exceeding five lakh, including Tier II and Tier III urban areas.
The budget emphasizes:
- Creating regional growth hubs to improve economic connectivity
- Supporting planned urbanization and enhancing livability
- Developing sustainable economic clusters capable of attracting long-term private investment
Real Estate Investment Trusts (REITs) and Funding Mechanisms
Industry experts are particularly enthusiastic about the proposal to create dedicated Real Estate Investment Trusts (REITs) to accelerate monetization and facilitate the recycling of significant real estate holdings of Central Public Sector Enterprises (CPSEs). This initiative is expected to provide much-needed liquidity and investment opportunities in the sector.
Complementing this is the proposed Infrastructure Risk Guarantee Fund, which will offer prudently calibrated partial credit guarantees to lenders. This measure is specifically designed to improve access to finance during high-risk construction and development phases, thereby supporting both infrastructure and real estate projects.
City Economic Regions and Decentralized Development
To promote decentralized economic development, the budget has earmarked ₹5,000 crore over five years for the development of City Economic Regions. These regions are envisioned as integrated urban-industrial clusters that will:
- Support employment generation
- Reduce pressure on larger metropolitan centers
- Enable more organized growth in smaller cities
Pyush Lohia, Director of Lohia Worldspace, hailed the budget as "a big opportunity for real estate boom in smaller cities." He noted that "these smaller cities are becoming places for business, and people are starting to want to live and work there. Overall, the Budget provides stability, improves investor sentiment and lays the groundwork for balanced, sustainable growth across residential, commercial and infrastructure real estate segments."
Multimodal Connectivity and Transportation Initiatives
The Finance Minister emphasized strong focus on multimodal connectivity with several key initiatives:
- Coastal Cargo Promotion Scheme: Aims to increase the share of inland waterways and coastal shipping from 6% to 12% by 2047
- Viability Gap Funding (VGF) scheme: For seaplane operations to enhance regional connectivity
- New dedicated freight corridors: Connecting Dankuni in the east to Surat in the west
- 20 new National Waterways: To be developed over the next five years
- Seven high-speed rail corridors: Proposed to act as growth connectors between major economic nodes
Workforce Development and Regional Centers
To support the expanding infrastructure ecosystem, the Budget announces the establishment of training institutes as Regional Centres of Excellence. These centers are aimed at building a skilled workforce aligned with the sector's long-term needs, ensuring that human resource development keeps pace with infrastructure expansion.
The comprehensive approach outlined in Budget 2026 represents a holistic strategy for urban development that balances economic growth with sustainability, while creating new opportunities for investment and employment across India's emerging urban landscape.
