Budget 2026 Expectations: Real Estate Hopes for Capital Gains Limit Revision & ESG Green Credits

Ahead of the Budget, attention is firmly on Finance Minister Nirmala Sitharaman, with expectations running high after the income tax rebate was extended to ₹12 lakh in the last Union Budget. However, following GST rationalisation to support household spending in late 2025, economists see limited headroom for big-ticket announcements.

Experts believe the Budget will prioritise targeted interventions over large, headline-driven capital expenditure. From a market perspective, focus is expected to remain on fiscal and policy support measures, defence, MSMEs, railways and infrastructure, and the transition towards greener growth.

Stock broking major JM Financial is expecting a possible increase in excise duty on petrol and diesel in the Budget 2026, a key policy move that could significantly risk India's downstream oil marketing companies (OMCs).

In its recent reports, the brokerage firm highlighted two main themes, first, that downstream OMCs like Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL) may face fiscal pressure if the government uses excise duty to boost revenue.

The Ministry of Finance and Corporate Affairs is reportedly considering a proposal to roll out a large one-time microfinance credit guarantee scheme for non-banking financial companies (NBFCs) in the upcoming Union Budget. The move is aimed at strengthening NBFC–microfinance institutions (NBFC-MFIs) by improving access to bank funding and easing liquidity pressures, while ensuring continued lending to low-income households.

According to a report by Mint, the proposed scheme is expected to be larger than the ₹7,500 crore credit guarantee offered during the pandemic and is likely to be managed by the state-run National Credit Guarantee Trustee Company (NCGTC).

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The Centre is considering setting up a ₹25,000 crore risk guarantee fund to support infrastructure projects, according to a Mint report citing sources. The proposed safety buffer is aimed at easing funding constraints and unlocking stalled projects amid rising delays, cost overruns and elevated borrowing costs.

The fund would partially guarantee loans extended by banks and financial institutions, helping reduce lender risk and improve credit flow to the sector.

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India, now the world’s fourth-largest economy, is set to remain in a ‘goldilocks’ phase, supported by strong growth, low inflation, a resilient banking system and ongoing reform initiatives that are expected to sustain the momentum seen in 2025, according to a government note released earlier this month.

In line with its focus on ease of living and ease of doing business, the BJP-led Union government’s upcoming Budget is likely to announce measures to boost capital expenditure and crowd in private investment, positioning India as an attractive destination amid tariff-related and geopolitical uncertainties.

Economic indicators remain supportive. Real GDP growth strengthened sequentially, reaching 8.2% in the second quarter of 2025–26, while retail inflation fell below the Reserve Bank of India’s lower tolerance band of 2% towards the end of the year.

“The current macroeconomic environment reflects a rare ‘goldilocks period’ of high growth and low inflation,” the note said.

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Capital spending is likely to pick up pace in FY27 as firmer domestic demand, rising capacity utilisation and softer inflation reinforce the outlook for a sustained investment cycle, economists told Outlook Business, even as the government is expected to continue prioritising public expenditure in the upcoming Union Budget.

“Capacity utilisation should improve further, particularly in infrastructure,” said Madan Sabnavis, Chief Economist at Bank of Baroda. He added that reforms announced in income tax and the Goods and Services Tax (GST) in the previous Budget reduce the need for aggressive or outsized capital spending this time.

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Dr Sangeeta Srivastava, Executive Director, Godavari Biorefineries Ltd (GBL), said that having successfully achieved E20 blending ahead of schedule, a productive surplus is now being faced by India, which requires urgent demand-side policy innovation.

She added that Budget 2026 should focus on incentivising E100-ready infrastructure and accelerating the mandate for Sustainable Aviation Fuel (SAF) to absorb this additional ethanol capacity, and that a strategic shift toward ethanol-to-chemicals and high-value bio-based derivatives is considered essential.

"This budget must provide the fiscal framework to transition from fuel blending to a global leadership role in the Sustainable Chemical economy,” she stated.

Due to strong demand, growing aspirations and encouraging government initiatives, the Indian real estate market has proven remarkably resilient. Developers anticipate reforms that will benefit the industry and homebuyers ahead of Budget 2026.

"We also hope that the government will continue to focus on more infrastructure development as it will help drive housing demand across the country," said Ramani Sastri, Chairman & MD, Sterling Developers Pvt Ltd.

Expanding affordable housing, first-time buyer interest subsidies, GST rationalisation, quicker approvals and industry status are examples of initiatives that could strengthen the economy, spur growth and support related industries.

Shwetank Singh, Executive Director, Chalet Hotels Limited, said, "As we approach the 2026 Budget, India's hospitality sector waits with measured optimism."

While the industry has created 46.5mn jobs and is expected to support 64mn by 2035, the absence of infrastructure status limits access to soft financing, lower utility rates and reasonable property taxes. Singh pointed out that adding tourism to the concurrent list would improve policy coordination between the center and states.

He added that such changes would enable better destination development, and if implemented, could boost growth, bringing the sector closer to contributing $1trn to GDP.

Coworking spaces are emerging as a key feature of India’s commercial real estate, reflecting a broader shift towards flexibility, collaboration and hybrid work models. With start-ups and corporates relying increasingly on shared spaces, the sector seeks targeted support in the upcoming Union Budget.

"We request the government to introduce a concessional, slab-based GST rate for coworking services, particularly for start-ups and small businesses, as it would meaningfully improve cash flows and accelerate entrepreneurship," said Manas Mehrotra, Founder, 315Work Avenue.

Mehrotra also urged that blocked input tax credits on interior fit-outs should be removed and TDS under Section 194AB rationalised. Easier access to institutional finance would improve working capital efficiency, support sector growth and enable expansion into non-metro cities.

Harsh Jagwani, Managing Director, Notandas Realty, said, "Budget 2026 will be an opportune time for the Indian government to continue the growth momentum for the real estate sector, brought about by last year’s reforms."

He stated that with the growing demand for mid-premium and luxury homes, policies should focus on digital land registration, streamlined approvals through a Single Window Clearance System, and regulatory reforms under RERA to lower transaction risk. Incentives for housing finance, institutional investments, and Global Capability Centers will boost commercial and premium residential real estate. This will establish India as a global center for business and modern urban living.

As Goa draws more international visitors, restaurants are often the first touchpoint with Indian hospitality.

Vicky Bachani, Co-Founder, Jugnu, said, “Operating in a high tourism-driven market like Goa, the Union Budget 2026 plays an important role in strengthening the connection between hospitality, tourism and economic growth.”

He added that clear GST structures, simplified compliance and organised financing are crucial for scalable restaurant brands. Rationalised taxation and policy stability would support investment in infrastructure, talent, and service standards, enhancing visitor experiences, creating jobs, and positioning India as a competitive global food and travel destination.

The circular economy is emerging as a major driver of India’s sustainable growth, focusing on recycling, reuse and formalised waste management to cut emissions and reduce reliance on imported critical minerals. Policies that incentivise circular practices and support start-ups are seen as crucial for scaling the sector.

"The circular economy is a key driver of growth and decarbonization, with recycling and reuse capable of mitigating 45% of GHG emissions. For the Budget, we urge a dedicated circular economy fund to build critical recycling infrastructure and lower-interest refinance windows through NABARD and SIDBI for start-ups and waste management companies," said Anirudha Jalan, Co-Founder and Chief Strategy Officer, Recykal.

India stands at a critical juncture in its journey to become a global innovation hub and ESOPs (Employee Stock Option Plans) framework of a country plays a critical role in supporting the growth of the startup ecosystem.

In sharp contrast to other mature startup ecosystems, India's dual taxation model on ESOPs—taxing employees at exercise and again at sale—creates significant friction that is actively pushing Indian start-ups and founders toward offshore relocation.

"I am hoping to see a simplified ESOP taxation for startups during this budget that will be critical for the country's growing startup ecosystem," said Dr Ajai Chowdhry, Founder of HCL and Chairman of EPIC Foundation.

The Union Budget 2026 calendar is now official, ending days of speculation around the presentation date. Finance Minister Nirmala Sitharaman will table the Budget on February 1, 2026, Sunday, making it one of the more unusual Budget Days in recent memory.

The decision was cleared by the Cabinet Committee on Parliamentary Affairs, which has also finalised the schedule for the Budget Session of Parliament. Proceedings will begin on January 28 and continue until April 2, giving lawmakers over two months to debate fiscal priorities and legislative proposals.

The construction industry expects steps to ensure faster payments to contractors, especially small and medium-sized enterprises, where delayed cash flows continue to pose serious challenges, said Iesh Dixit, Co-founder and CEO, Powerplay, said. He added that greater investment in workforce training and modern construction methods would help boost productivity and reduce inefficiencies across the sector.

"The primary drivers of cost overruns are manual processes and a lack of transparency. Pushing for digitisation across the board will address these issues and benefit all stakeholders," he said.

The Budget should focus on strategic investment in foundational digital infrastructure, particularly advanced data centres, cloud platforms and sustainable high-performance computing, to enable scalable and responsible adoption of enterprise-grade AI across sectors, says Sachin Panicker, Chief AI Officer, Fulcrum Digital.

“India stands at a pivotal moment in its AI journey, with the AI ecosystem entering a phase where scale, trust and global competitiveness will define the next decade, and the Union Budget 2026 should reinforce the nation’s ambition to become a global AI innovation hub."

Greater policy clarity and regulatory certainty around AI deployment and data governance would help crowd in private investment and drive innovation. Targeted incentives for research and development, early-stage AI startups and domestic intellectual property creation are also critical to positioning India as a creator—not just a consumer—of global AI technologies.

Sunstone CEO Ashish Munjal shares his Budget 2026 expectations, calling for project-led AI funding, subsidized education loans, and tax-incentivized "employer-sponsored learning credits" to boost India's employability.

He said, "Budget 2026 is an opportunity to transform India's demographic dividend into a genuinely future ready workforce. To be able to address the growing skills gap, we need to have a major allocation of funds for project-led programs in artificial intelligence, data science, and other emerging technologies, besides investment in multilingual digital learning platforms under Digital India. This means funding not just content, but labs, faculty development, and industry led projects that bring NEP's vision to life inside classrooms."

“As India works towards strengthening its healthcare ecosystem, the upcoming Budget is an opportunity to reinforce the fundamentals of pharmaceutical manufacturing. Greater focus on quality linked incentives, support for domestic API production, and continued investment in compliance driven infrastructure will help Indian pharma companies scale responsibly. For mid sized manufacturers, ease of doing business, faster regulatory clearances, and targeted tax rationalisation can unlock capacity expansion without compromising on standards. A predictable policy environment will be critical for ensuring that Indian medicines remain trusted, accessible, and globally competitive," said Arpit Bhatia, Director, Laborate Pharmaceuticals.

PHDCCI suggests zero import duty for Gold Ore Concentrate (HSN 26169010), in line with Copper Ore Concentrate Budget which enjoys nil duty, even though it yields approximately 12 tons of gold annually as a by-product.

Furthermore, due to reduction in import duty on finished gold from 15% to 6% in the Union Budget 2024 25, direct imports of finished gold become more attractive than domestic refining, hindering the growth of India’s refining infrastructure. The reduction of duty to zero will bring parity with Copper Ore Concentrate which is essential to protect industry viability, encourage investment, and support domestic value addition and employment, said Rajeev Juneja, President, PHDCCI.

“The Indian aerospace sector is moving beyond assembly into deep, systems-level innovation. For companies like Arctus Aerospace building high-altitude unmanned aircraft, this budget is a chance to unlock true scale. We expect focused support for aerospace-grade manufacturing - structures, propulsion, avionics, and flight-critical electronics - along with patient R&D capital and high-altitude flight test infrastructure. Streamlined certification and airspace access for large UAVs will be equally critical. With consistent policy support, India can build sovereign aerospace platforms that compete globally, not just supply components," said Shreepoorna S. Rao, founder and CEO, Arctus Aeropsace.

Union Budget 2026 is expected to boost affordable housing and Tier-II real estate. Sonipat leads the trend in NCR with RRTS, Metro extensions, and the Maruti Suzuki plant driving a 15-25% annual price appreciation forecast, says Rajat Bokolia, CEO, Newstone.

"As the Union Budget 2026 approaches on February 1st, Tier II cities like Sonipat are becoming top real estate investment spots. Tier II cities offer affordable prices compared to Tier-1 cities. Sonipat leads this trend in the NCR. Better connectivity, RRTS, Metro extensions, UER-II, and the Sonipat Master Plan 2031 attract homebuyers as well as developers. Sonipat offers affordable options compared to Gurugram or Noida, along with rising job opportunities. The key expectations from the budget are that it might raise affordable housing limits, increase home loan tax deductions, and reduce GST/Stamp duties. This would drive more growth in tier-II cities like Sonipat. Investors could see post-budget price rises making Tier-II cities a smart investment choice," he said.

Ultra HNIs seek re-evaluation of the ₹10Cr capital gains cap, while the sector pushes for NRI TDS rationalization and specialized tax credits for ESG-compliant luxury smart homes, says Navdeep Sardana, Founder, Whiteland Corporation.

"The upcoming 2026 union budget is the most anticipated day for Indian real estate. While 2025 saw absorptions in office and premium real estate sectors, there has been a policy push for these segments. The premium segment is looking for a fiscal maturity. With premium real estate now the current trend, industry’s focus has moved beyond tax sops. The most critical expectation for the ultra HNIs is the re-evaluation of Rs 10 crore cap on capital gains reinvestment under sections 54 and 54F. Increasing this limit is important to facilitate the movement of uber-luxury properties. Moreover, we expect the union budget to propel ESG compliant luxury developments and smart housing technology integration via specialised green financing tax credits. Industry expects the budget to introduce policies simplifying availability of finance for developers, providing better liquidity and lower barriers. For NRI investors, a further rationalisation of TDS on property sales would significantly improve foreign capital inflows into India’s growing residential market, which is expected to dominate the 2026 landscape," he said.