Union Budget 2026 Expectations | Realty sector seeks affordable housing reset, higher tax relief

With the Union Budget 2026 just 10 days away, real estate developers have stepped up their demand for policy support to revive housing demand and ease the growing financial burden on urban homebuyers.

Boman Irani, Chairman and Managing Director of Rustomjee Group, said the Union Budget remains “among the most consequential policy towards India’s growth with a direct bearing on economic sentiment and consumer confidence.” Emphasising the sector’s economic significance, he noted that real estate continues to be a key driver of GDP growth, employment generation and allied industries.

Irani said the upcoming Budget offers an opportunity to strengthen housing demand, outlining three key expectations from the government.

At the forefront is a redefinition of affordable housing. Currently, the category is defined by both unit size — 60 sq. metres in metros and 90 sq. metres in non-metros — and a price cap of ₹45 lakh, fixed in 2017. “The definition of affordable housing should be based purely on unit size, without a price cap,” he said, arguing that the existing threshold no longer reflects inflationary pressures. Adjusted for inflation, the limit is now closer to ₹75–80 lakh, while land costs, statutory premiums and construction expenses vary widely across regions, making a uniform price ceiling impractical.

The second major demand relates to income tax relief for homebuyers. Irani pointed out that the home loan interest deduction under Section 24(b), capped at ₹2 lakh, has remained unchanged for nearly a decade. “Annual interest outgo for middle-income homebuyers in urban markets now averages over ₹7.5 lakh,” he said, calling for the deduction limit to be raised to at least ₹10 lakh per home loan, particularly for first-time buyers. With urbanisation set to accelerate sharply in the coming decades, he said housing affordability in cities requires urgent policy attention.

The third expectation is GST rationalisation. Irani reiterated the industry’s long-standing demand for restoring input tax credit (ITC) to developers. As an interim step, he suggested that GST on homes qualifying under a revised affordable housing definition be reduced to nil, while other residential units should attract a rate of no more than 2.5%.

“These measures would lower effective costs for homebuyers, stimulate transactions and support sustainable urban development,” Irani said, adding that they would also align the sector with the government’s Viksit Bharat vision.