Budget 2026: Can Policy Bridge India's Growing Housing Divide?

The real estate sector, contributing nearly 7% to India’s GDP and employing over 70 million people, remains a critical pillar of economic growth and urban transformation. Industry leaders believe a supportive fiscal framework in FY27 can unlock the next phase of housing-led growth, attract long-term institutional capital, and accelerate the government’s Housing for All vision.

A Growing Divide in India’s Housing Market

Cautioning about deepening structural imbalances, Anuj Puri, Chairman of ANAROCK Group, highlights the risk of a two-tier housing market. He notes that while luxury housing sales and prices dominate headlines, home ownership is becoming increasingly unaffordable for a large section of Indians. Without decisive intervention in Budget 2026, he cautions, the gap between premium housing and basic affordable homes could widen further, locking millions out of the ownership cycle.

Affordable Housing Needs Urgent Fiscal Support

Reviving affordable housing emerges as a central theme across industry views. Anuj Puri stresses that reintroducing the 100% tax holiday for developers under Section 80-IBA could be the most immediate and effective step to boost supply. According to him, the incentive—withdrawn in 2021—had earlier encouraged wider developer participation and accelerated affordable project launches. Industry experts argue that without restoring such incentives and recalibrating affordability thresholds, demand and supply in this critical segment will remain subdued.

Last-Mile Infrastructure: From Policy to Execution

Infrastructure acceleration is another recurring ask. Puri underlines that while initiatives such as the National Infrastructure Pipeline and PM Gati Shakti are positive, implementation speed remains a concern. He calls for immediate funding priority for metro rail expansions, suburban rail networks, ring roads connecting peripheral regions, and integrated logistics corridors—measures seen as vital to unlocking new housing corridors and easing pressure on urban cores.

Boosting Housing Demand Through Consumer-Focused Reforms

From the demand side, Anurag Mathur, CEO of Savills India, says Budget 2026 should focus on reforms that directly improve household affordability. He suggests raising the standard deduction or linking it to a percentage of income, arguing that higher disposable incomes can meaningfully support housing demand among middle-income and first-time buyers, especially in urban centres.

Rental Housing and REITs as the Next Affordability Lever

Rental housing is increasingly seen as a structural solution rather than a stop-gap. Mathur emphasises the need for policy support to expand professionally managed rental housing, including enabling multi-family REITs. Such measures, he says, can improve affordability, enhance workforce mobility, and attract institutional capital into a segment that remains underdeveloped despite rising urbanisation.

Land Reforms and Unlocking Supply

Addressing supply-side constraints, Mathur also points to the importance of pragmatic land reforms and monetisation of underutilised government land. These steps could lower development costs, unlock land supply in key urban markets, and speed up housing delivery.

Affordable Housing Still Under Pressure

Adding to these concerns, Shishir Baijal, International Partner, Chairman and Managing Director of Knight Frank India, says that despite overall market resilience, affordable housing continues to underperform. He attributes this to declining affordability, rising input costs, and limited end-user support, warning that without timely policy recalibration, demand in this segment could remain structurally weak.

Realigning Incentives With Urban Cost Realities

Baijal stresses the need to realign housing incentives with today’s urban cost structures, particularly in large cities where existing price thresholds no longer reflect market realities. He believes targeted fiscal support for homebuyers, along with measures that improve project viability for developers, can help revive both demand and supply across housing segments.

Infrastructure, Mobility and Inclusive Urbanisation

Both Baijal and Mathur underline that sustained investment in mass transit and urban infrastructure is crucial for long-term inclusion. Improved connectivity to peripheral growth corridors can expand affordable land supply, while continued development of GCCs and office hubs in Tier II and III cities can drive decentralised job creation and more balanced urban growth beyond metros.

Budget 2026: A Moment for Decisive Action

Across themes, industry leaders agree that Budget 2026 is a defining moment. From restoring affordable housing incentives and accelerating infrastructure execution to strengthening rental housing and consumer affordability, experts say bold, coordinated policy action is essential to prevent a deeper housing divide and ensure India’s urban growth remains inclusive and sustainable.