Union Budget 2026: Top 5 Real Estate Sector Demands for Affordable and Rental Housing
Finance Minister Nirmala Sitharaman will present the Union Budget 2026 today, and the real estate sector is bracing for significant announcements. Industry stakeholders are calling for a strong focus on affordable and rental housing, with a range of demands aimed at improving affordability and stimulating the construction of budget-friendly homes.
The current definition of affordable housing, unchanged since 2017, limits unit sizes to 60 sq metres in metros and 90 sq metres in non-metros, with a ₹45 lakh price cap. This definition no longer reflects the rising land and construction costs, according to CREDAI, the apex body of real estate developers. CREDAI has proposed revising the carpet area norms to 90 sq metres in metros and 120 sq metres in non-metros, removing the value cap altogether, and harmonising the definition with the unified list of infrastructure sub-sectors. An area-based approach, it said, would expand viable housing supply in urban centres, simplify compliance, and support employment and economic activity.
Real estate industry body NAREDCO has also urged the government to revise the definition of affordable housing, recommending that homes priced up to ₹75–80 lakh be classified as affordable, instead of the current ₹45 lakh cap.
CREDAI has further urged the government to launch a national rental housing mission, proposing tax incentives for both developers and tenants. Rapid urbanisation, driving migrant inflows, has left the organised rental housing segment underdeveloped. CREDAI recommends establishing a National Rental Housing Mission to develop large-scale affordable rental stock in tier-1 and tier-2 cities through fiscal incentives for developers, tax relief for tenants, and institutional participation. This initiative will formalise the rental market, curb informal settlements, support workforce mobility, and create a sustainable investment class without significant budgetary outlay.
NAREDCO has also urged the government to actively promote rental housing by offering appropriate incentives to real estate developers. Highlighting that rental yields in the housing segment remain low at just 1–3 per cent, making rental projects commercially unviable for developers. It suggested that tax incentives and supportive policy measures could help encourage realtors to invest in and scale up rental housing.
The existing ₹2 lakh cap on housing loan interest deduction has remained unchanged for over a decade and no longer reflects today’s higher property prices, loan sizes, and interest rates, industry bodies said. In most urban markets, the annual interest outgo for middle-income homebuyers exceeds ₹4–6 lakh, significantly diluting the benefit. Credai recommends removing the cap for the first self-occupied residential property and extending the deduction to the new tax regime to ensure parity. Naredco has also said that the government should enhance the deduction limit for interest on home loans to ₹5 lakh from the current ₹2 lakh, as well as provide industry status to further fuel the growth of the real estate sector.
Real estate developers and senior living players have sought policy support as demand for senior living rises with India’s ageing population. Among several demands by the players, one is to grant infrastructure status, followed by linking support to buyers with a pension. A key demand is the creation of pension-linked, tax-efficient financial products that allow seniors to convert their retirement corpus into predictable monthly payouts. According to experts, granting infrastructure status to the sector would improve access to long-term, affordable financing and encourage quality capacity creation across cities. The senior living players also hope to have a dedicated nodal agency to bring policy coherence across states and departments.
Homebuyers want real estate promoters to be held accountable. Just as allottees who default on payment obligations should lose the benefit of interest subsidy, promoters must be held equally accountable for delays, non-delivery, or failure to honour commitments made at the time of booking, Forum for People’s Collective Efforts, a homebuyers’ body, has said. It has also recommended that if promoters default, all EMIs received by the promoter entity during the year be added back to their profit calculations as a penalty, thereby disincentivising project delays and contractual breaches. The underlying principle must be unequivocal: a promoter’s promise to an allottee is sacrosanct and non-negotiable. Balanced accountability on both sides is essential to restore trust in the real estate sector and enable it to contribute meaningfully to the country’s economic growth.
