Budget 2026 Real Estate Expectations: Key Demands for Affordable Housing and Infrastructure
With just two days left for the Union Budget 2026 speech by Finance Minister Nirmala Sitharaman, the real estate sector has laid out its expectations from the Centre. Top on the list of demands are tax incentives to help accelerate homebuying and improve the availability of affordable housing.
Top industry leaders, such as Sudhir Pai, CEO of Magicbricks, have noted that while the housing market has shown signs of recovery, high entry costs continue to limit participation from middle-income buyers. According to Magicbricks data, supply has begun to rise steadily across key cities, but the market still faces significant challenges.
The Economic Survey 2025-26, tabled on 29 January, sets the tone for the government's economic approach. It projects FY26 growth at 7.4% and expects the Indian economy to expand at 6.8-7.2% in FY27. The survey emphasizes the need for cautious optimism amid global uncertainty.
In her 2025 Budget speech, Sitharaman announced the 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 a stipulation that at least 50% of the funding comes from bonds, bank loans, or public-private partnerships (PPPs). Each infrastructure ministry will present a three-year list of PPP projects, with a focus on three PPP proposals per ministry.
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, Sitharaman announced that the government aims to complete another 40,000 homes in FY26. Additionally, a second Special Window for Affordable and Mid-Income Housing fund or SWAMIH Fund 2 will be established with ₹15,000 crore.
Industry leaders have warned of a wide gap between premium housing and mass affordability, which has emerged as the sector's most pressing challenge. Anuj Puri, Chairman of ANAROCK Group, describes the current situation as a “perplexing point in India’s housing history.” According to ANAROCK Research, 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. However, these topline figures mask a sharp contraction in volumes, with the number of homes sold falling 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, with margins in the segment hovering around 10–12%, compared with 25–30% for premium projects. Rising land prices, elevated construction costs, and prolonged approval timelines have further eroded viability.
A major demand is 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, he estimates, could lift affordable housing’s share of new launches from 18% to over 40%.
Pai suggests doubling the home loan interest deduction under Section 24(b) to ₹5 lakh would help convert this stable demand into active transactions. Revival of the Section 80-IBA tax holiday is another critical ask. A time-bound reintroduction could quickly incentivize developers to return to the affordable segment, bridging the margin gap and expanding supply.
On the demand side, experts want a stronger push to the Credit-Linked Subsidy Scheme (CLSS). While CLSS was partially revived under PMAY-U 2.0, developers and consultants believe Budget 2026 should expand loan limits, enhance subsidy rates, and streamline disbursements to support first-time buyers more effectively.
Expectations are not limited to residential real estate. Coworking operators are seeking GST rationalization, removal of blocked input tax credit on fit-outs, and easier access to institutional finance. Another key expectation from Jagwani is to encourage Global Capability Centers (GCCs) investment in India.
Aparna Reddy, Executive Director at Aparna Enterprises, has pressed for reducing GST on steel, cement, aluminium, bricks, ready-mix concrete, and timber. Incentivizing domestic production of construction materials and allocating funds to fast-track land acquisition, environmental clearance, and municipal approvals can 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 significant boost to infrastructure and real estate through strategic allocations and policy reforms in the upcoming Budget 2026.”
