Will Buying a Property Become Cheaper in 2026? Insights from the Union Budget 2026-27

The Union Budget 2026-27 has a very complex vision for the Indian housing market, with a balanced approach towards fiscal responsibility and structural changes. Although it continues to emphasize the government’s commitment to affordable housing and infrastructure development, the budget gives little immediate comfort to middle-class buyers in the urban sector.

Rather, the affordability benefits are expected to be derived in the long term through targeted subsidies, infrastructure-led growth, and an accommodative interest rate environment rather than tax incentives. We spoke to Pawan Sharma, Managing Director of TRG Group, who breaks it down for us.

Affordability: Progress Driven by Policy Support and Macroeconomic Conditions

The budget for 2026's affordable housing component relies heavily on macroeconomic policy initiatives and specific government interventions. One key aspect is the increased funding of the Pradhan Mantri Awas Yojana (PMAY) housing assistance program. Specifically, PMAY-Urban's ten-fold increase in its allocation to ₹3,000 crores and PMAY-Gramin receiving ₹54,917 crores have increased housing subsidy allocations from an overall ₹54,000 crores over five years. This has the potential to create a total of 2.24 crore urban homes, improving access to affordable housing for the less fortunate and low-income groups.

However, the advantage of these initiatives continues to accrue largely to the bottom part of the income pyramid. Middle-class buyers in urban areas, especially in large cities, continue to be plagued by affordability issues owing to increasing land and construction costs and the lack of revised eligibility criteria for the “affordable housing” segment.

Spending on infrastructure is a key driver of affordability. The budget’s historic capital expenditure of ₹12.2 lakh crore, an increase of 11.4 percent, is aimed at enhancing connectivity in urban areas and developing City Economic Regions. This will enable the unlocking of new supplies of relatively less expensive land parcels in peripheral regions and emerging cities, which will help to ease price pressures in the medium term.

Presently favorable interest rates will support the affordability of housing. There have been substantially reduced inflation figures, with a reduction of 125 bps from the repo rates, totaling the decrease by the end of 2025. The current interest rates for home loans lie within the range of 7.10%-7.35%, with the initial interest rate for home loans at the range of 7.10%-7.35%.

Housing Demand: Evolving Buyer Preferences and Market Dynamics

Home buying demand is affected by the changing preferences of buyers and changes in the housing market. The changes in home buying trends in 2026 will include the continuation of trends mirroring the changing preferences of buyers. In the future, buyers will not seek ultra-luxury housing but mid-priced housing (often referred to as premium) and compactly priced housing with functional layouts, good connectivity, and reasonable price value.

The demand trend is also changing. The residential market is becoming more end-user driven, as opposed to being driven by speculative buyers. The concept of hybrid work models, the space crunch, and the fact that rent-to-own remained an integral and sought-after model have been contributing immensely to making demand an even stronger force. Hence, the market is stable and healthy.

Policy Direction and Long-Term Implications

In addition to these housing sector-specific announcements, the environment for long-term growth in the real estate sector appears favorable in the Budget 2026. The focus on City Economic Regions promotes sustainable urbanization and deconcentration. The States are expected to get an interest-free loan of ₹1.5 lakh crore for 50 years, which will be used for capital expenditure and infrastructure development-related reforms, thereby improving the ability to deliver at the ground level.

Other sources of funding, like partial credit guarantees and REIT-based asset recycling, are expected to reduce risks and make this sector even more attractive to long-term institutional funding sources. This would bring greater liquidity and improved balance sheets to the developers of sustainable development in the real estate sector of Tier II and Tier III cities.

Gradual Gains, Paradigm Shifts

The 2026 Budget represents a cautiously optimistic outlook for housing affordability. It is supportive of rural and lower-income households through increased subsidies and infrastructure spending. TRG Group believes that benefits to urban middle-income households will ultimately be realized, along with the possibility of reduced interest rates, greater connectivity, and greater decentralized urbanization. The benefits of affordability are expected to emerge in a phased manner through reduced interest rates, improved connectivity, and deconcentrated urbanization. To facilitate increased homeownership, the issue of affordability and tax incentives needs to be addressed in a more comprehensive manner in the future.