As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on February 1st, the real estate sector is advocating for key reforms to sustain growth and investment. Stakeholders are seeking tax relief, streamlined approvals, and incentives to boost demand in Tier-2 cities. The industry believes that targeted fiscal support in the upcoming budget could stimulate urban housing supply, strengthen allied industries, and contribute to employment generation and overall economic growth.
Tax Rationalization and Enhanced Incentives
The real estate sector is urging the government to rationalize stamp duty and provide income tax benefits for homebuyers to improve affordability and revive demand. Experts suggest revising existing tax benefits on home loan interest and principal repayment, which have remained unchanged for several years. Increased tax incentives on home loans and related deductions could help more middle-income families realize their dream of owning a home. The American Chambers of Commerce in India (AMCHAM) and the Bombay Chambers of Commerce and Industry (BCCI) have suggested increasing the deduction limit to ₹5 lakh or removing the restriction on the set-off of house property loss.
Redefining Affordable Housing
A key demand is to redefine "affordable housing" to reflect current market realities. The current cap of ₹45 lakh does not align with property prices, especially in metro cities. Industry experts propose increasing the cap to ₹75-85 lakh for metro cities and ₹60-65 lakh for non-metros. This adjustment would enable more buyers to qualify for affordable housing benefits, such as lower GST rates. Real estate expert Anuj Puri, Chairman of ANAROCK Group, believes that raising the price cap to ₹75-85 lakh while keeping the carpet area norms at 60-90 square meters would increase the number of homes that could be built from about 18% of current launches to more than 40%.
Streamlining Approvals and Regulatory Clarity
The real estate sector is also seeking faster approvals through a single-window clearance system to streamline project execution. Developers are also seeking clarity on capital gains taxation and GST rationalization on construction materials. Rationalizing taxes on construction inputs, faster approvals, and improved access to housing finance can strengthen supply-side confidence. Consistency in regulatory policies is crucial to enhance the ease of doing business and attract both domestic and foreign investment.
Focus on Tier-2 and Tier-3 Cities
The industry is emphasizing the importance of infrastructure development in Tier-2 and Tier-3 cities. Support for infrastructure development can lower project costs and improve viability. Manoj Gaur, CMD of Gaurs Group, expressed hopes that the Budget would prioritize infrastructure spending and create a supportive interest rate environment. Enhanced connectivity and productivity in these regions can drive economic growth and unlock housing demand, especially among first-time buyers.
Policy Continuity and Long-Term Vision
Industry leaders are emphasizing the importance of a predictable policy environment to sustain growth in the real estate sector. With ongoing global and domestic uncertainties, the sector is looking for a stable framework to foster long-term investment. Navin Makhija, Managing Director of The Wadhwa Group, describes the sector's current phase as one of “measured moderation,” where stability will hinge on supportive policy measures and access to finance. A stable and forward-looking policy framework that prioritizes infrastructure development, ease of execution, and regulatory clarity can benefit the real estate sector most.
As India progresses towards its Viksit Bharat vision, Budget 2026 has the opportunity to address affordability, financing, and execution challenges in the real estate sector. By implementing these key reforms, the government can create a conducive environment for sustainable growth, attract investment, and support the country's urbanization journey.
