Budget 2026 Sectoral Expectations: Real Estate Awaits Policy Boost
With just two days remaining for Finance Minister Nirmala Sitharaman's Union Budget 2026 speech, the real estate sector has clearly articulated its expectations from the central government. Tax incentives to accelerate homebuying and improve availability of affordable housing top the list of demands from industry stakeholders who are closely watching the government's fiscal priorities.
Market Dynamics and Current Challenges
Sudhir Pai, CEO of Magicbricks, highlighted that their data indicates a clear market shift where supply has begun to rise steadily across key cities. However, while housing sentiment has rebounded from previous lows, high entry costs continue to limit participation from a large pool of middle-income buyers. This creates a paradoxical situation where supply increases but demand remains constrained by affordability issues.
The Economic Survey 2025-26, which was tabled on 29 January and sets the tone for the government's economic approach, projected FY26 growth at 7.4% as per the first advance estimates. The document further stated that the Indian economy is expected to expand at 6.8-7.2% in FY27, supported by strong macro fundamentals and a series of regulatory reforms. The outlook remains one of steady growth amid global uncertainty, requiring caution but not pessimism, according to the survey's assessment.
Looking Back: Budget 2025 Initiatives
In her 2025 Budget speech, Finance Minister Sitharaman announced several significant measures for the real estate sector:
- Creation of a ₹1 lakh crore Urban Challenge Fund to transform cities into growth hubs, support innovative redevelopment, and improve water and sanitation infrastructure
- The fund envisions coverage of up to 25% of the cost for bankable projects, with at least 50% of funding coming from bonds, bank loans, or public-private partnerships
- Each infrastructure ministry will present a three-year list of PPP projects, focusing on three PPP proposals per ministry
- An initial ₹10,000 crore allocation for fiscal year 2025-26 to launch the initiative
Additionally, for capital expenditure, the 2025 Budget allocated ₹1.5 lakh crore in interest-free loans and incentives from the government to encourage reforms. For affordable housing specifically, the government announced plans to complete another 40,000 homes in FY26 and establish a second Special Window for Affordable and Mid-Income Housing fund (SWAMIH Fund 2) of ₹15,000 crore.
The 2025 Budget revised the FY25 fiscal deficit to 4.8%, with a fiscal deficit target for FY26 set at 4.4%. For FY25, the revised estimate for total receipts (excluding borrowings) stood at ₹31.47 lakh crore, with net tax receipts at ₹25.57 lakh crore. The revised estimate for total expenditure was ₹47.16 lakh crore, including ₹10.1 lakh crore of capital expenditure.
Budget 2026 Expectations: Sector's Key Demands
Industry leaders have warned of a widening gap between premium housing and mass affordability, which has emerged as the sector's most pressing challenge. This situation has prompted urgent calls for policy intervention in Budget 2026.
Anuj Puri, Chairman of ANAROCK Group, describes the current situation as a "perplexing point in India's housing history." According to ANAROCK Research, while the total value of homes sold in 2025 rose 6% year-on-year to nearly ₹6 lakh crore, and institutional investments surged 51% in 2024 to $8.9 billion, these topline figures mask a sharp contraction in volumes. The number of homes sold actually fell 14% in 2025.
"The market now clearly favours the rich," Puri notes, pointing to a 170% spike in luxury home sales even as affordable housing languishes. Affordable homes accounted for just 18% of total supply in 2025, down sharply from 38% in 2019, highlighting what he calls a "structural crisis" rather than a cyclical slowdown.
Developers argue that the economics of affordable housing no longer add up while policy framework also lags. Margins in the segment hover around 10–12%, compared with 25–30% for premium projects. Rising land prices, elevated construction costs, and prolonged approval timelines have further eroded viability.
Specific Policy Recommendations
The real estate sector has put forward several specific demands for Budget 2026:
- Redefining affordable housing price caps to reflect current costs. Puri advocates raising the price cap for affordable housing to ₹85 lakh for Mumbai MMR and ₹75 lakh for other major metros, while retaining size norms to prevent misuse. Such a move could potentially lift affordable housing's share of new launches from 18% to over 40%.
- Doubling the home loan interest deduction under Section 24(b) to ₹5 lakh, which Pai suggests would help convert stable demand into active transactions.
- Revival of the Section 80-IBA tax holiday with time-bound reintroduction to quickly incentivize developers to return to the affordable segment, bridging the margin gap and expanding supply.
- Strengthening the Credit-Linked Subsidy Scheme (CLSS) by expanding loan limits, enhancing subsidy rates, and streamlining disbursements to support first-time buyers more effectively.
Broader Sector Expectations
Expectations extend beyond residential real estate. Coworking operators are seeking GST rationalisation, removal of blocked input tax credit on fit-outs, and easier access to institutional finance. There is also a push to encourage Global Capability Centers (GCCs) investment in India.
Aparna Reddy, Executive Director at Aparna Enterprises, pressed for reducing GST on construction materials including steel, cement, aluminium, bricks, ready-mix concrete, and timber. She also advocated for incentivizing domestic production of construction materials and allocating funds to fast-track land acquisition, environmental clearance, and municipal approvals to significantly lower project costs and accelerate delivery.
Venkatesh Gopalakrishnan, Director, Group Promoter's Office, MD, Shapoorji Pallonji Real Estate (SPRE), noted, "We are expecting a budget that brings together infrastructure led growth with tax clarity and housing focused reforms that can create a strong foundation for the residential real estate sector, allowing it to contribute meaningfully to economic growth while addressing the evolving needs of Indian homebuyers."
The real estate sector's comprehensive wishlist for Budget 2026 reflects both immediate concerns about affordability and longer-term structural issues that require policy intervention. As the countdown to the budget speech continues, industry stakeholders remain hopeful that their recommendations will find resonance in the government's fiscal planning.
