Budget 2026: FM Sitharaman’s Potential Impact on Affordable Housing in the Real Estate Sector
For India’s urban middle class, the dream of homeownership is becoming increasingly difficult to achieve. Despite rising incomes, high land prices and construction costs are making it harder for many to secure a stable home. As the upcoming Budget approaches, experts are calling for a pragmatic reset in the real estate sector, emphasizing the need to prioritize the common homebuyer and redefine what affordable housing means in today’s market.
Redefining Affordable Housing for Urban Reality
One of the most pressing issues in the current housing market is the outdated definition of affordable housing. The existing price cap of ₹45 lakh and size limits of 60–90 square meters were relevant a decade ago but no longer reflect the realities of Tier 1 cities. With land prices and construction costs soaring, even modest homes are now priced beyond the reach of many potential buyers. Experts suggest that raising the price cap to ₹80–90 lakh and increasing the size limit to 120 square meters would better align with current market conditions. This change would not only make more homes eligible for incentives but also stimulate demand and supply in the mid-income segment. For many, the goal is not to purchase luxury apartments but to find a livable, family-sized home within city limits.
Enhancing Tax Relief for Homebuyers
Tax incentives play a crucial role in making housing more affordable. Currently, the home loan interest deduction under Section 24(b) is capped at ₹2 lakh per year, a figure that has remained unchanged despite rising property prices and loan amounts. Increasing this limit to ₹5 lakh annually could significantly ease the financial burden on middle-income households. This adjustment would translate into substantial monthly savings for those servicing large home loans, ultimately boosting their confidence to buy. Additionally, reintroducing Section 80EEA, which provided extra tax deductions for first-time homebuyers, could further support young buyers who are struggling with high EMIs and down payments. A targeted deduction would encourage this demographic to transition from renting to owning, thereby revitalizing demand in the housing market.
Expanding Support for Middle-Income Buyers
While housing policies have traditionally focused on economically weaker sections, the middle-income group is increasingly feeling the strain of affordability in urban markets. Extending interest subsidies to first-time buyers who fall outside the current affordable housing definition could help bridge this gap. Even modest subsidies can significantly reduce EMIs over the life of a loan, making homeownership more attainable. This approach would signal a recognition of the challenges faced by the urban middle class, addressing their needs rather than solely focusing on lower-income groups. Furthermore, strengthening initiatives like the revamped PMAY-U 2.0 and expanding the Credit-Linked Subsidy Scheme (CLSS) could directly lower borrowing costs for low- and middle-income families, easing their financial stress and enhancing their ability to purchase homes.
Rationalizing Costs and Reviving Supply
High GST rates on construction materials and under-construction properties continue to inflate home prices, making it difficult for buyers to afford homes. A strategic reduction in GST, particularly for mid-income and under-construction homes, could lower acquisition costs and improve project viability for developers. This change would not only benefit buyers but also encourage purchases in the under-construction segment, enhancing cash flows for developers. Additionally, reintroducing the 100% tax holiday under Section 80-IBA could stimulate developer interest in affordable housing, shifting the focus away from luxury projects and towards more sustainable, inclusive growth. By implementing these measures, the government can help restore balance to India’s urban housing market, making homeownership a realistic goal for the urban middle class rather than a distant dream.
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