Union Budget 2026: The real estate sector is hoping for a few specific things. They're looking for changes to cheap housing, and they're also pushing for more rental homes
The real estate industry is pinning its hopes on Budget 2026 to focus on cheap and rental housing. They're also looking for incentives to encourage developers to construct homes that won't break the bank.
Finance Minister Nirmala Sitharaman is set to unveil the 2026 budget today, and the real estate sector has its sights firmly set on affordable and rental housing. Those in the industry are hoping for a more expansive definition of affordable housing, along with tax breaks for homebuyers to ease the financial burden. Furthermore, they are looking for incentives to spur developers to build homes that won't break the bank.
1)The definition of affordable housing needs to be reconsidered
The current definition, which hasn't changed since 2017, limits the size of units to 60 square meters in cities and 90 square meters in other areas. It also has a price cap of ₹45 lakh. CREDAI, the main organization for real estate developers, says this cap doesn't reflect the rising costs of land and building.
The situation is further complicated by the varying and often conflicting definitions found in programs like PMAY, RBI, NHB, and RERA, which inevitably leads to administrative headaches. CREDAI has suggested a revision of carpet area standards: 90 square meters in metropolitan areas and 120 square meters elsewhere, eliminating the value cap entirely. They also recommend aligning the definitions with the unified list of infrastructure sub-sectors. This area-based approach, they argue, would increase the availability of affordable housing in cities, streamline adherence to regulations, and ultimately boost both employment and economic growth.
NAREDCO, the real estate industry's representative body, has also called on the government to revisit its definition of affordable housing. They suggest that residences costing up to ₹75–80 lakh should be considered cheap, a significant increase from the existing ₹45 lakh limit.
2) Rental housing is the focus
CREDAI is pushing the government to kickstart a national rental housing mission, suggesting tax breaks for developers and renters alike. They argue that swift urban growth, fueled by a surge in migrants, has left the formal rental housing market lagging.
"CREDAI suggests a National Rental Housing Mission be established to build a substantial amount of affordable rental housing in tier-1 and tier-2 cities. This could be achieved through financial incentives for developers, tax breaks for tenants, and institutional involvement. The goal is to bring the rental market into the open, reduce informal housing, aid worker mobility, and create a viable investment opportunity without a huge impact on the budget,” they stated last week.
Aredco is pushing the government to actively support rental housing, suggesting that real estate developers be given the right incentives. They pointed out that rental yields in the housing market are currently low, hovering around 1–3 percent. This makes rental projects financially unattractive for developers. The group believes tax breaks and other supportive policies could spur realtors to invest in and expand rental housing projects.
3) Reassess the housing loan interest deduction limits
The current limit of ₹2 lakh for housing loan interest deductions hasn't budged in more than ten years. Industry groups argue it's out of step with the realities of today's property market, where prices, loan amounts, and interest rates have all climbed.
For many middle-income homebuyers in urban areas, the yearly interest payments surpass ₹4–6 lakh, which effectively diminishes the advantage. Credai suggests eliminating the cap for the first self-occupied home and making the deduction available under the new tax regime to create a level playing field, according to their statement.
4) Senior living providers are lobbying for infrastructure status
As India's population ages, the demand for senior living facilities is increasing, prompting real estate developers and senior living companies to seek government backing. One of their primary requests is for infrastructure status, coupled with support for buyers who receive a pension.
A major focus is the development of pension-linked, tax-advantaged financial products. These products would enable seniors to transform their retirement savings into reliable monthly income.
Experts believe that giving the sector infrastructure status would open doors to long-term, reasonably priced financing, which, in turn, would foster the development of high-quality facilities in cities. Furthermore, those involved in senior living are advocating for a specialized nodal agency. This agency would ideally ensure consistent policy implementation across various states and government departments.
5) Homebuyers, according to the Forum for People’s Collective Efforts
a group representing their interests, are demanding accountability from real estate promoters. The organization argues that just as buyers who fail to meet payment deadlines lose their interest subsidies, promoters should face similar consequences for project delays, failure to deliver, or not fulfilling promises made when the property was booked.
Furthermore, the forum suggests a penalty: if promoters default, all the EMIs they received within a year should be added back to their profit calculations. This, they believe, would discourage project delays and breaches of contract.
