Budget 2026 Approaches as India's Real Estate Sector Reaches Critical Crossroads
The Union Budget 2026 is fast approaching, and India's real estate sector stands at a crucial turning point. On the surface, the market shows impressive numbers with record luxury home sales and rising property values. However, industry experts reveal a much more complex and troubling reality beneath these headline figures.
The most pressing challenge facing the sector today is the growing divide between premium housing and mass affordability. This widening gap has sparked urgent calls for policy intervention in the upcoming budget.
A Perplexing Point in Housing History
Anuj Puri, Chairman of ANAROCK Group, describes the current situation as a perplexing point in India's housing history. ANAROCK Research data shows that while the total value of homes sold in 2025 increased by 6% year-on-year to nearly ₹6 lakh crore, the actual number of homes sold fell by 14% during the same period.
"The market now clearly favours the rich," Puri states bluntly. He points to a staggering 170% spike in luxury home sales, while affordable housing continues to struggle. The share of affordable homes in total supply dropped sharply from 38% in 2019 to just 18% in 2025, indicating what Puri calls a structural crisis rather than a temporary slowdown.
Affordability Under Severe Strain Across Urban India
Industry data reveals that affordability pressures have intensified dramatically across urban centers. In 2018, more than half of new homes in India's top seven cities were priced below ₹50 lakh. By 2025, that share had plummeted to just 17%.
Rising property prices combined with higher interest rates have pushed EMI-to-income ratios to unsustainable levels around 60% for many households. This effectively prices millions of potential buyers out of the homeownership market.
ANAROCK's consumer survey highlights the severity of the situation. In Bengaluru alone, 42% of prospective buyers seeking homes under ₹1 crore can no longer afford to purchase, despite demand for budget housing growing 13% year-on-year.
"Brutal economics, not choice, keep buyers out of the market," Puri emphasizes.
Why Affordable Housing Supply Has Dried Up
Developers explain that the economics of affordable housing no longer make financial sense. Margins in this segment hover around 10-12%, compared to 25-30% for premium projects. Rising land prices, elevated construction costs, and prolonged approval timelines have further eroded viability.
The problem is compounded by an outdated policy framework. The ₹45 lakh price cap for affordable housing, established in 2017, no longer reflects urban realities. In most metropolitan areas, even peripheral projects now exceed this threshold, disqualifying developers from key incentives.
The expiration of the Section 80-IBA tax holiday in 2021 has worsened the situation, leading to fewer launches and tighter supply in the affordable segment.
Key Budget Expectations: Redefine, Revive, Rebuild
Industry leaders unanimously agree that Budget 2026 must decisively address these bottlenecks. A major demand involves redefining affordable housing price caps to reflect current costs. Puri advocates raising the cap to ₹85 lakh for Mumbai MMR and ₹75 lakh for other major metros, while retaining size norms to prevent misuse.
Such a move could potentially lift affordable housing's share of new launches from 18% to over 40%, according to industry estimates.
The revival of the Section 80-IBA tax holiday represents another critical ask. A time-bound reintroduction could quickly incentivize developers to return to the affordable segment, bridging the margin gap and expanding supply.
On the demand side, experts want a stronger push for the Credit-Linked Subsidy Scheme (CLSS). While CLSS was partially revived under PMAY-U 2.0, developers and consultants believe Budget 2026 should expand loan limits, enhance subsidy rates, and streamline disbursements to better support first-time buyers.
Pradeep Aggarwal, Founder and Chairman of Signature Global, stresses that sustained policy support is essential to maintain growth momentum. He reiterates the sector's long-standing demand for industry status, which could ease access to institutional finance and reduce borrowing costs.
"Real estate has the potential to contribute up to 15% of India's GDP by 2047," Aggarwal notes, aligning the sector with the government's 'Viksit Bharat' vision.
Ramani Sastri, Chairman and MD of Sterling Developers, believes affordability remains the biggest challenge for a large section of the population.
"Hence there should be expansion in the definition of affordable housing in urban areas as this would expand the benefits for homebuyers, thereby boosting end-user demand," Sastri says. "There is a strong case for interest subsidy for first-time homebuyers who currently fall outside affordable housing benefits."
Infrastructure, REITs and Ease of Doing Business
Beyond housing, Budget 2026 is expected to emphasize infrastructure-led development. Faster execution of metro rail, ring roads, suburban rail and logistics corridors could unlock new housing micro-markets and improve affordability through better connectivity.
Badal Yagnik, CEO of Colliers India, believes the budget will aim to balance fiscal discipline with growth. He highlights the importance of standardizing affordable housing norms for Tier I cities, incentivizing sustainability, and promoting REITs and SM-REITs to deepen retail investor participation.
From a developer's perspective, Ramani Sastri stresses the need for GST rationalization on under-construction homes, quicker approvals, and higher tax deductions on home loan interest from ₹2 lakh to ₹5 lakh annually to boost end-user demand.
Harsh Jagwani, Managing Director of Notandas Realty, emphasizes the need for digitization and streamlining the approval process for new construction projects.
"It would be prudent for the government to initiate a Single Window Clearance System," Jagwani says. "The government will also need to bring reforms in the digitization process of land as well as property acquisition. This will help accelerate the pace of development of new projects and ease the process of buying new homes for homebuyers."
Commercial Real Estate and Coworking Expectations
Expectations extend beyond residential real estate. Coworking operators are seeking GST rationalization, removal of blocked input tax credit on fit-outs, and easier access to institutional finance.
Manas Mehrotra, Founder of 315Work Avenue, says such measures would improve cash flows, support startups, and accelerate the growth of flexible workspaces, especially in non-metro cities.
Jagwani also highlights the importance of encouraging Global Capability Centers (GCCs) investment in India.
"As the country plans to position itself as a global hub of business and manufacturing, incentive-led policies and encouragement for GCCs will help drive momentum for the commercial real estate market," he explains. "With more global companies entering the Indian market, it will drive demand for premium office spaces which in turn will boost growth of the Indian real estate sector."
A Defining Moment for India's Housing Market
With housing affordability under severe strain and urban inequality widening, industry leaders view Union Budget 2026 as a defining moment. Whether through tax incentives, infrastructure acceleration, or policy recalibration, the sector believes decisive action now could prevent a deeper bifurcation of India's housing market.
The right policy interventions could potentially put homeownership back within reach for millions of Indians who currently find themselves priced out of the market. The upcoming budget represents a critical opportunity to address the structural challenges facing India's real estate sector and ensure more inclusive growth in the years ahead.
