What India’s Housing Market Needs from this Year’s Budget

by Dhiren Tharwani, Director, Tharwani Realty

In 2026, the Indian realty sector is set to see a crucial turning point. Following the recovery phase due to the pandemic outbreak, the realty sector is currently experiencing slow growth due to various aspects such as price resistance, which has consistently increased over time and impacted the affordability of middle-class homebuyers. Though demand remains strong in select segments, especially premium and luxury housing, the larger market needs differential fiscal support to prevent increased inequalities and to keep growth healthy.

In India, residential real estate has expressed mixed performance throughout the country. Demand for premium homes in the major metros remained resilient due to income increase, exposure to other countries and desire for an upgraded standard of living. Nevertheless, sales volumes have fallen in recent years on the aggregate level, as high property prices have eroded the affordability of typical homebuyers. This imbalance between supply and affordability emphasizes a pressing need for government intervention to facilitate investment and development in premium development properties, along with creating demand through continued job growth rather than only through an appreciation of property values.

Supporting Premium Home Buyers and Investors

In order to support premium home buyers and investors in the upcoming budget, one of the key factors is the necessity for enhanced support for those individuals and businesses that have the means to purchase premium housing. Premium housing can provide a significant boost to the overall market perception of real estate as well as attract domestic and NRI investors into urban areas and sustain the growth of urban development on a large scale. However, rising input costs, land prices, and interest rates have significantly increased the ticket size of premium homes, making even high-income buyers more cautious.

As a response, the government can add more incentives that will affect the buying decision of the premium buyers segment by way of superior income tax deduction on home loan interest payments and home loan principal repayments to buyers of higher value homes, by improving the levels of tax deductions or limits, thereby encouraging real end users and long-term investment opportunities in this segment, so as to achieve sustained demand in the premium residential sector.

Expanding Definitions for Premium Housing

It is observed that the current pricing thresholds and tax classifications do not adequately reflect the realities of premium housing markets in large metros. With increasing land and building costs, there are now numerous standard premium products classified as being ineligible for tax or regulatory relief. Adjusting these thresholds to keep pace with current inflation will help ensure that state and local fiscal and regulatory policies continue to support and keep pace with current market conditions. Additionally, this will give incentive to builders and developers who have been focused on creating the highest-quality, design-led and technology-based premium products, to wait for the right time to build, rather than moving to build exclusively high-end luxury or speculative products.

Reforms of Taxes and Regulations to Increase Premium Supply

The upcoming budget should also include tax and regulatory reforms that support the supply of premium housing. Rationalising GST on construction and providing targeted tax relief for high-quality residential developments can significantly reduce the cost of delivery, making premium homes more attractive to both buyers and developers.

In addition to taxation, simplifying the regulatory approval process remains a priority. Implementing single-window clearance systems, expediting environmental and municipal approval processes, and creating a more transparent regulatory framework for the real estate sector will reduce holding costs for developers. As such, developers will have the ability to execute projects more efficiently, improve their supply chains and ultimately achieve more stability in India’s premium housing market.

Financing Arrangements & Interest Relief

As the Reserve Bank of India is about to enter the cycle of possible rate cuts, the budget should make sure that any successive decrease in the policy rates gets reflected in the reduced borrowing rates for the purchase of homes. Sometimes, the banks are not able to transmit the total effects of the rates cut and tend to soften the impact of the demand effect to some extent.

Infrastructure for Inclusive Growth 

The dynamics within the housing market are inextricably connected to the state of the infrastructures. Allocation of funds that facilitate the improvement of transportation systems and social development within the housing market will reduce the cost of living. Moreover, investments within the township and peripheral area growth strategies would be able to mediate the issues related to the cost of property within the urban areas.

In a country like India, the prospect for growth is imminent for the realty sector for the year 2026. However, it is important for the budget to make some significant changes to ensure that the affordability crisis is not exacerbated, pushing first-time buyers to the backseat. This is a chance for the Union Budget to make some necessary modifications to make it attractive for the growth of the housing sector.