Industry wants revision of affordable housing definitions to reflect rising land and construction costs
Calls grow for higher home loan tax deductions and interest relief for mid-income buyers
Developers seek GST rationalisation, uniform stamp duty and faster approvals
As the government readies the Union Budget 2026, India’s real estate sector is looking to the government for targeted policy interventions after demonstrating strong resilience through shifting interest rate cycles, inflationary pressures and global uncertainty.
Realty experts say that the move can sustain growth, revive affordability, and improve long-term viability across segments. According to them, the upcoming budget will be crucial in recalibrating policy priorities, like revisiting outdated definitions of affordable housing, rationalising GST, easing capital access for developers, and boosting tax relief for homebuyers.
1 January 2026
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With buyer preferences shifting and construction costs rising sharply since 2017, the sector believes the upcoming budget could determine whether the current momentum broadens into a more balanced and inclusive growth phase.
“Policy support is important to encourage supply in the affordable and mid-market segments, as recent launches have been disproportionately skewed towards higher ticket sizes,” said Tanuj Shori, founder and CEO of Square Yards.
He believes that the budget aligned to these realities can strengthen end-user demand, improve price-to-income dynamics, and support a more balanced and sustainable phase of urban housing growth.
Affordability in Focus
The urgent need to revise the definition of affordable housing to reflect present-day market realities has been the most consistent demand of the real estate sector. The current price cap of ₹45 lakh and size limits of 60-90 square metres, industry leaders argue, no longer align with urban land prices, construction costs and consumer expectations, especially in Tier 1 cities.
“The real estate sector’s hopes from Union Budget 2026 are to update old definitions of affordable housing and give people some financial relief,” said Anuj Puri, Chairman of ANAROCK Group. He pointed out that inflation in construction materials and labour costs has significantly eroded margins, making affordable housing projects increasingly unviable for developers under existing norms.
Puri suggested raising the price cap to ₹80–90 lakh and expanding size criteria can reinvigorate supply and demand in the segment. Affordability is also top of mind for homebuyers, particularly in the mid-income category.
On the other hand, Shori noted that the housing market is transitioning away from a luxury-led upcycle toward a more value-driven phase. “The mid-income segment is poised to anchor growth as premium demand stabilises”.
He adds that enhanced tax relief for homebuyers and higher interest deduction limits could significantly improve affordability metrics. Ramani Sastri - Chairman & MD, Sterling Developers also echoed the call to raise the home loan interest deduction limit from the current ₹2 lakh to ₹5 lakh annually, alongside interest subsidies for first-time buyers who fall outside the affordable housing bracket.
Such measures, they argue, could unlock pent-up end-user demand and strengthen price-to-income ratios in urban housing markets.
Tax Rationalisation & GST
Tax rationalisation remains another major expectation from Budget 2026. Developers continue to flag the high GST burden on construction contracts, currently at 18%, as a key challenge affecting project viability. Many industry players are seeking a reduction to either 12% or 5%, particularly for affordable and mid-income housing projects.
“There is a strong need for a rational GST structure on residential properties and greater clarity in taxation,” said Dhiren Tharwani, Director at Tharwani Realty, adding that better access to institutional funding and streamlined approvals are essential for delivering future-ready homes.
Additionally, stamp duty and registration charges, which currently vary widely across states from 7.5% to 12%, are another pain point for buyers. Industry leaders believe that greater uniformity in these charges could directly reduce transaction costs and improve housing affordability, particularly for first-time buyers.
Beyond housing, stakeholders are also pushing for reforms that deepen capital markets participation in real estate. Badal Yagnik, CEO and Managing Director of Colliers India, said that Budget 2026 should balance fiscal discipline with growth-oriented incentives.
He highlighted the need to make REITs and SM-REITs more attractive to encourage retail investor participation and democratise real estate investment.
“Standardisation of affordable housing criteria and infrastructure-led supply-side push can unlock long-term growth across asset classes,” Yagnik said, adding that sustainability incentives for green buildings should also be part of the budget’s real estate agenda.
Capital Access Demand
The realty experts are also urging the government to focus on improving liquidity and ease of doing business, particularly for developers operating in the affordable and mid-income segments. Amit Jain, CMD of Arkade Developers, said meaningful tax rationalisation and targeted relief could significantly improve project viability and bridge the demand-supply gap.
“If the government delivers on these fronts, we expect improved liquidity, faster approvals and renewed investor confidence,” Jain said, noting that such measures could translate into faster project execution, timely delivery and broader economic uplift.
Another key growth engine highlighted by industry experts is the coworking and flexible workspace segment, which has emerged as a defining feature of India’s evolving commercial real estate market. With hybrid work models becoming mainstream, coworking operators are seeking GST rationalisation and better cash flow support.
Manas Mehrotra, Founder of 315Work Avenue, called for concessional, slab-based GST rates for coworking services and the removal of blocked input tax credit on interior fit-outs. He also flagged the need to rationalise the 10% TDS on coworking payments, which he said strains working capital for operators.
At a broader level, developers are seeking structural reforms such as single-window clearance systems, faster digitisation of land records and recognition of real estate as an infrastructure sector. These changes, industry leaders argue, would unlock cheaper funding, reduce delays and improve regulatory transparency.
