Union Budget 2026: Investors Eye Tax Relief and Incentives for Affordable Housing
Markets and affordable housing players are eagerly anticipating measures in the Union Budget 2026 that could stimulate demand and loan growth. Analysts suggest that any increase in home loan interest deductions, Pradhan Mantri Awas Yojana (PMAY) subsidies, or tax incentives for developers could provide a near-term trigger for stocks such as Aavas Financiers, Aadhar Housing Finance, and Godrej Properties, while supporting broader market sentiment in the real estate segment. With Tier-II cities emerging as key growth drivers, the affordable housing space is increasingly seen as a policy-sensitive sector.
Key trends in the affordable housing sector include growing demand in metros and emerging Tier-II cities, the increasing impact of high EMIs and interest rates on middle-income buyers, and a focus on stalled projects and rental housing models. Infrastructure-led affordable housing clusters are also on the rise.
However, the sector faces several challenges, such as outdated affordable housing definitions (Rs 45 lakh cap for metros), high construction and land costs that compress developer margins, and delays in project approvals that increase costs. Limited fiscal incentives for first-time buyers in the middle-income group also pose a challenge.
The last budget highlighted several supportive measures, including the allocation of Rs 15,000 crore to the SWAMIH Fund 2.0 for completing stalled affordable and mid-income housing projects, a 36% increase in PMAY-Urban allocation to Rs 19,794 crore, indirect tax support through GST relief for affordable housing projects, and a focus on urban infrastructure to enhance housing delivery.
Industry expectations for the Union Budget 2026 include raising the home loan interest deduction under Section 24(b) to Rs 4–6 lakh, redefining affordable housing to Rs 75–85 lakh for metros and Rs 60–65 lakh for non-metros, revamping PMAY subsidies for middle-income groups, reintroducing the Section 80-IBA tax holiday for developers, implementing single-window approvals to reduce project delays, and supporting rental housing models in Tier-I and Tier-II cities.
Investors will be closely monitoring affordable housing lenders and developers. Key players include Aavas Financiers, India Shelter Finance Corporation, Aadhar Housing Finance, Aptus Value Housing Finance India, Repco Home Finance Ltd, and GIC Housing Finance. Analysts at Axis Securities note that measures like higher home loan deductions or PMAY subsidies could directly lift loan growth and asset quality for these companies, making them key beneficiaries if the Budget delivers on affordable housing support. In the affordable housing segment, they prefer big brands like Prestige Estates, while developers such as Godrej Properties and Puravankara could benefit from potential incentives on home loans, stamp duty, and GST.
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