Union Budget 2026: Real Estate & Urban Housing Sector Expectations 

The Real Estate and Urban Housing sectors are at the forefront of India’s growth story, with a deep connection to job creation, infrastructure development, and social welfare. With a booming population in major cities amid rising urbanisation, the demand for affordable housing continues to surge. So now industry leaders and experts look for critical policy interventions in Union Budget 2026. 

Affordable Housing Policy Reforms & GST Clarity  

One of the most significant expectations from the real estate sector is the revision of the affordable housing definition. Currently, homes priced up to ₹45 lakh are classified as affordable, but with the rise in property prices across urban India, this threshold is increasingly seen as outdated. The industry is urging the government to raise this threshold to ₹80 to ₹90 lakh to better reflect the current housing market dynamics. 

Industry bodies are also seeking GST rationalisation on under-construction homes, with hopes for a reduction in tax slabs for works contracts. According to media reports, GST rates for real estate related material and services could be lowered from 18% to a more competitive 5% to 12%. Such reforms would not only help reduce the cost of construction but also encourage faster completion of housing projects. Developers and buyers are seeking greater clarity and simplification in GST for under-construction properties, works contracts, and input credits. The sector has long argued that rationalising GST burdens and streamlining input tax credit rules to reduce project costs and make pricing more transparent for buyers.​ 

Tax Relief for Homebuyers and Investors 

Developers argue that the current affordable housing price limit is too low for today’s urban property prices and excludes many mid-income projects in big cities. They want the government to raise this limit so that a larger set of homes and buyers can qualify for applicable tax benefits and subsidy-linked schemes. 

Another critical ask is for expanded tax relief for homebuyers, particularly those taking out home loans. The current tax deduction of ₹2 lakh on home loan interest under Section 24(b) is viewed as insufficient given the rise in housing prices. Experts are suggesting that the Centre should increase this limit to ₹3 lakh in Union Budget 2026. The affordable housing segment, especially first-time homebuyers, is also expected to benefit from any change in this rule. 

News reports also suggest that there are demands for a more consistent tax treatment of second homes and investment properties, which could help channel savings into formal housing assets instead of informal structures. Clear, stable tax rules can support end-user purchases, drive upgrade demand, and provide more visibility for long-term investors.​ 

There is renewed debate around capital gains tax rules for property, with calls for clearer indexation, holding period norms, and easier rollover options when switching homes. Union Budget 2026 is seen as a chance to address these pain points and reduce friction for both retail investors and developers.​ 

Financing and Policy Support  

Financing remains one of the biggest challenges in the affordable housing sector. Industry bodies like the National Real Estate Development Council (NAREDCO) and CREDAI are calling for increased allocation under PMAY (Pradhan Mantri Awas Yojana) for affordable housing projects. The aim is to ensure that the government's financing schemes continue to support affordable housing at scale. Additionally, experts are pushing for incentives for green buildings and sustainable urban infrastructure. The Centre’s focus on green energy and eco-friendly construction is expected to be ramped up, with potential tax breaks for developers investing in energy-efficient buildings.  

Boosting Rental Housing, REITs and Institutional Capital 

Industry voices emphasise the need to deepen India’s rental housing and REIT ecosystem so that more institutional capital can flow into the sector. Expectations include tax clarity and supportive rules for REITs and real estate-focused AIFs, along with policy frameworks that encourage large-scale rental and managed housing projects.​ As urbanisation accelerates, a deeper rental market and stronger listed real-estate vehicles (like REITs). It can provide flexible housing options for migrants and young professionals, without forcing them to buy a home immediately. Budget support for these structures can also create more liquidity and accessible ways for retail investors to participate in real estate.​ 

Urban Infrastructure & Tier 2/3 City Development 

Developers expect Union Budget 2026 to continue pushing for infrastructure-led growth with higher allocations for urban transport, water, sanitation, and social infrastructure in Tier 2 and Tier 3 cities. Better connectivity and quality-of-life improvements in these markets can support new housing clusters and reduce pressure on tier 1 cities.​ Linking housing policy with urban infrastructure plans such as metro networks, industrial corridors, and logistics hubs remains a key ask from industry players. With the right mix of infrastructure spending, policy support, and tax clarity, Union Budget 2026 can help real estate play a stronger role in both economic growth and inclusive urban development. The Union Budget 2026 holds the key to addressing the rising demand for affordable housing, offering tax relief, and policy interventions aimed at sustainable urban development. By aligning policy with the current housing market dynamics, the Centre can significantly boost the sector and its contribution to the nation’s economy.