Budget 2026 Wishlist: Why Affordable Housing Needs a Reality Check Now
As India moves closer to Union Budget 2026, the real estate sector has sharpened its focus on one critical issue affordable housing.
Over the past few years, housing demand has stayed resilient. However, affordability has steadily weakened. Rising land prices, higher construction costs, and rigid policy definitions have created a serious mismatch between ground realities and government frameworks.
Because of this growing gap, developers and homebuyers now expect Budget 2026 to deliver practical reforms, not symbolic announcements.
The ₹45 Lakh Cap Has Lost Touch With Urban Reality
To begin with, the current ₹45 lakh price cap for affordable housing no longer works in major cities. The government fixed this limit in 2017. Since then, everything has changed.
Construction costs have risen sharply. Steel, cement, and labour now cost far more. Urban land prices have moved even faster. As a result, building a decent two-bedroom home within ₹45 lakh has become nearly impossible in metros.
Today, a basic 600 sq ft apartment costs:
- ₹60–75 lakh in Mumbai’s outer suburbs
- ₹50–65 lakh in Pune
- Similar or higher levels in Delhi-NCR and Bengaluru
Despite this, policy definitions have not evolved. Consequently, many genuinely affordable homes fail to qualify for incentives.
Redefining Affordability Without Diluting Its Purpose
Importantly, the sector does not want to dilute the idea of affordable housing. Instead, it wants realism.
Experts now recommend raising the price cap to ₹75–85 lakh, while keeping carpet area limits between 60 and 90 square metres. This approach protects affordability. At the same time, it reflects actual urban costs.
A home in a peripheral zone does not become “luxury” just because its price has increased due to inflation. With a revised cap, more projects would qualify for benefits.
In fact, this single reform could raise affordable housing’s share of new launches from around 18% to over 40%. That shift alone could unlock massive stalled supply.
Bring Back Tax Incentives to Revive Supply
Next, taxation plays a crucial role in project viability.
Earlier, Section 80-IBA offered tax holidays for affordable housing projects. This incentive encouraged developers to enter the segment at scale. However, the benefit expired in 2021 and never returned.
Without tax relief, developers struggle to balance costs and pricing. Margins shrink. New launches slow down.
Therefore, the industry strongly urges the government to reintroduce Section 80-IBA in Budget 2026. This move would immediately improve feasibility and bring developers back into the affordable space.
Strengthen CLSS Under PMAY-U 2.0 to Boost Demand
While supply matters, demand-side support matters just as much.
The Credit-Linked Subsidy Scheme (CLSS) under PMAY earlier transformed first-time homeownership. Buyers received interest subsidies directly into their loan accounts. EMIs dropped instantly. Affordability improved overnight.
Although CLSS returned under PMAY-U 2.0, current coverage remains limited. Budget 2026 must expand eligibility and increase subsidy amounts.
Interest subsidies of 3–6.5% often decide whether a family can buy a home or not. Strengthening CLSS would restore buyer confidence and revive end-user demand across EWS, LIG, and MIG categories.
Increase Home Loan Interest Deduction Under Section 24(b)
Another long-standing demand relates to home loan tax benefits.
Currently, buyers can claim only ₹2 lakh per year on interest payments under Section 24(b). This limit feels outdated in today’s EMI environment.
Experts now recommend raising the cap to ₹5 lakh. This change would immediately reduce the tax burden for salaried buyers. It would also encourage faster buying decisions, especially in the affordable and mid-income segments.
Rental Housing Needs New Thinking and Fresh Incentives
Meanwhile, rental housing continues to remain underdeveloped.
Many homes priced below ₹50 lakh sit vacant because owners find renting financially unattractive. Low yields and taxation discourage participation.
To fix this imbalance, the sector suggests a 100% tax exemption on rental income up to ₹3 lakh for homes costing up to ₹50 lakh. This step would push owners to rent out idle properties and increase supply where demand remains highest.
Additionally, experts urge the government to use surplus public land owned by railways, defence, and other agencies for high-density rental housing. Such projects could address urban migration challenges efficiently.
Relax Capital Gains Rules to Improve Housing Liquidity
Under Section 54, sellers must reinvest capital gains within strict timelines to avoid tax. However, selling older homes now takes longer due to financing constraints and rising new supply.
Therefore, experts propose extending the pre-purchase window from one year to two years. This flexibility would prevent distress sales and support healthier resale markets.
Industry Perspective: What Developers Are Saying
Sanjeev Singh, Managing Director, SKJ Landbase, clearly sums up the situation:
Affordable housing cannot survive with outdated benchmarks. Budget 2026 must align policy with real urban costs. A higher price cap, stronger CLSS support, and smarter tax incentives will revive genuine end-user demand and unlock long-term growth.
His view mirrors the sentiment across the sector.
Final Take: Budget 2026 Can Reset the Housing Story
Affordable housing supports economic growth. It improves workforce mobility. It strengthens social stability.
If Budget 2026 delivers practical reforms, India can revive this crucial segment without compromising intent. The opportunity exists. Now, all eyes remain on the Finance Ministry.
