As the nation anticipates the Union Budget 2026, set to be unveiled by Finance Minister Nirmala Sitharaman on February 1st in the Lok Sabha, the real estate sector stands at a critical juncture, advocating vigorously for a suite of policy changes and tax concessions designed to galvanize demand, enhance affordability, and propel India towards its ambitious "Viksit Bharat" vision. The industry, a significant contributor to the nation’s GDP and employment, views this budgetary exercise as a pivotal opportunity to address long-standing structural challenges and unlock substantial growth potential across residential and commercial segments.
Industry leaders emphasize that the upcoming budget must serve as a catalyst for reinforcing the domestic consumption cycle, which is fundamental to broader economic resilience. Gautam Hari Singhania, Chairman and Managing Director of the Raymond Group, articulated this sentiment, stating, "The Budget presents a timely opportunity to accelerate India’s progress toward ‘Viksit Bharat’ while reinforcing the domestic consumption cycle. Measures that support consumer sentiment and disposable incomes can provide a meaningful boost to demand across sectors such as retail and real estate." This perspective underscores the interconnectedness of real estate with the wider economy, given its extensive forward and backward linkages with over 250 ancillary industries, including cement, steel, timber, and a vast labour force.
A primary demand emanating from the real estate fraternity revolves around direct fiscal incentives for homebuyers, particularly those aimed at reducing the burden of home loan interest. Experts are calling for enhanced tax deductions on home loan interest payments, an adjustment they believe is crucial for making housing more accessible across income strata. Rajan Yadav, Director at Roots Developers, highlighted the multifaceted benefits of such measures: "On February 1, 2025, the Union Budget is expected to provide measures to improve the real estate segment. The industry seeks tax deductions on home loan interest, better subsidies for buyers, and disbursements to reduce EMIs and risks. Such steps can drive growth and urban development while restoring demand in luxury segments." The current deduction limit under Section 24(b) of the Income Tax Act for interest on housing loans for self-occupied properties stands at INR 2 lakh. Industry proponents argue that this figure, set years ago, no longer reflects the escalating property prices and higher interest rates prevalent in today’s market. An upward revision to at least INR 5 lakh, they contend, would significantly boost disposable incomes, encouraging a larger segment of the population to transition from renting to homeownership, thereby stimulating housing demand and capital formation.
Beyond individual homebuyers, developers are also advocating for policy support to incentivize the creation of affordable housing units. A key proposal involves the reintroduction of Section 80-IBA of the Income Tax Act, 1961, which previously offered a 100% tax holiday to developers engaged in affordable housing projects. Anuj Puri, Chairman of ANAROCK, strongly endorsed this: "The most direct and immediate tool the government has at its disposal is to bring back the 100% tax holiday for developers of affordable housing under Section 80-IBA. This incentive, which expired in 2021, was very effective at getting more developers on board to launch more affordable housing projects. A limited-period tax holiday for Section 80-IBA projects approved within a defined window (say, 24-36 months) would be a high-impact, fiscally defensible intervention." This provision, if reinstated, could mitigate the high development costs and thin margins often associated with affordable housing, drawing more private sector investment into a segment crucial for addressing India’s persistent housing deficit, estimated to be in the tens of millions of units. The economic multiplier effect of such projects is substantial, generating employment and stimulating demand for building materials.
While affordable housing remains a critical focus, the luxury segment is also seeking growth-oriented incentives. Ashish Agarwal, Director at AU Real Estate, pointed out the evolving dynamics of the premium market: "Increasing incomes, wider global exposure, and a desire for safe, amenity-rich communities are the demand-driving factors for premium homes in the NCR. Buyer sentiment will be further enhanced by supportive tax policies, streamlined stamp duties, and infrastructure development across important areas." The burgeoning aspirational class, coupled with returning non-resident Indians (NRIs) seeking high-quality living spaces, has fueled a robust demand for luxury properties, particularly in metropolitan areas. Policies that ease transaction costs, such as rationalizing stamp duties, could further bolster this segment, which contributes significantly to state revenues and attracts foreign direct investment (FDI) into the real estate sector.
A notable shift in focus within the real estate discourse pertains to geographical expansion beyond traditional metropolitan hubs. Abhay Mishra, President and CEO of Jindal Realty, emphasized the growing potential of Tier II and Tier III cities: "With better infrastructure and stable prices, these markets can grow faster if the budget boosts urban infrastructure spending, gives tax support to homebuyers, and encourages affordable housing." These emerging urban centers have witnessed substantial housing momentum in recent months, driven by improved connectivity, lower cost of living, and decentralized economic activity. Investments in urban infrastructure, including transport networks, utilities, and social amenities, are crucial to sustaining this growth trajectory. Such development not only decongests major metros but also fosters more balanced regional development, creating new economic opportunities and improving quality of life for a larger population base.
Mohit Gohel, MD of Omaxe, echoed this sentiment, underscoring the importance of sustained policy attention to these areas: "Continued focus on urban infrastructure, transport connectivity, and housing-linked development will be critical, especially as Tier II and Tier III markets emerge as the next engines of growth. Policy continuity, faster approvals, and incentives that encourage sustainable construction can significantly improve execution efficiency on the ground." The emphasis on "policy continuity" and "faster approvals" highlights a broader industry call for a more predictable and streamlined regulatory environment. Delays in project approvals and clearances often inflate costs and timelines, deterring investment and ultimately impacting housing affordability. Simplifying regulatory frameworks, potentially through digital platforms and single-window clearance mechanisms, could significantly enhance the ease of doing business for developers.
Furthermore, the integration of sustainable construction practices is gaining prominence. Incentives for green building materials, energy-efficient designs, and environmentally friendly construction techniques could align the sector with India’s broader climate change commitments while creating a market for innovative, sustainable solutions. This approach not only addresses environmental concerns but also offers long-term operational cost savings for homeowners and developers alike.
The economic implications of a robust real estate sector are far-reaching. It is a major job creator, absorbing both skilled and unskilled labour, and its growth has a direct correlation with overall economic prosperity. A thriving housing market fosters household wealth accumulation, which in turn can spur consumption and investment. Globally, governments often deploy fiscal tools like tax incentives, subsidies, and infrastructure spending to manage housing markets and achieve broader economic objectives. India, with its vast population and rapid urbanization, stands to gain immensely from a well-calibrated budgetary approach that leverages the real estate sector as a key engine for inclusive growth.
In conclusion, the real estate sector’s expectations from Budget 2026 are clear: a balanced and growth-oriented fiscal package that prioritizes both demand-side incentives for homebuyers and supply-side support for developers. The proposed measures, ranging from enhanced home loan interest deductions and the revival of developer tax holidays to focused infrastructure spending in emerging cities and streamlined regulatory processes, collectively form a comprehensive blueprint. Such interventions, industry leaders believe, could play a decisive role in reviving broad-based growth, addressing the nation’s housing needs, and accelerating India’s journey towards becoming a developed economy. The budget, therefore, is not merely an annual financial statement but a crucial policy document that can shape the trajectory of one of India’s most vital economic sectors for years to come.
