Affordability remains a pressing concern

One of the most pressing concerns remains housing affordability, especially in metropolitan cities where statutory thresholds no longer reflect prevailing market prices.

While tax incentives under Section 80-IBA of the Income-tax Act, 1961 have helped boost the supply of affordable housing, strict caps on unit values have limited their practical effectiveness.

There is a clear need for the upcoming budget to revisit these limits and revise them in a calibrated manner, keeping location-specific pricing realities in mind.

Rethinking tax benefits

From the buyer’s perspective, increasing the deduction on housing loan interest under Section 24(b) and bringing back targeted benefits for first-time homebuyers, similar to those under Section 80EEA, could go a long way in easing affordability pressures and supporting genuine end-user demand.

Just as important is the need to reduce transaction-related hurdles and tax confusion. Differences in stamp duty rates across States, along with ongoing uncertainty around GST on under-construction properties, joint development arrangements, and redevelopment projects, continue to add to costs and slow down transactions.

Clear and consistent GST guidance, especially on the availability of input tax credit under the Central Goods and Services Tax Act, 2017 would go a long way in reducing disputes and improving project feasibility. Also Read: Budget 2026: India’s insolvency law faces its biggest upgrade in a decade

Further, a rationalisation of capital gains reinvestment benefits under Sections 54 and 54F of the Income-tax Act could encourage reinvestment in residential properties and enable smoother movement of capital within the real estate market.

Approvals and land records still a bottleneck

On the ground, project delays are still largely driven by slow approvals and unclear land titles. While single-window clearances and digitised land records have been discussed for years, they are yet to translate into a smooth, working system.

This continues to affect project timelines and weakens investor confidence. Budgetary support that pushes faster approvals and improves land record digitisation could help ease these long-standing bottlenecks.

Liquidity support shows early success

The sector has, however, benefited from earlier budget measures aimed at easing liquidity and completing stalled projects, most notably through the SWAMIH Fund, which helped revive stuck housing projects and offered much-needed relief to homebuyers.

Building on this momentum, the Union Budget 2026-27 should look at clearer and more practical frameworks under the Insolvency and Bankruptcy Code, 2016 to enable quicker resolution and completion of viable real estate projects.

Growth beyond metro sities

Looking ahead, sustained growth will hinge on policy support for rental housing, REITs, and expansion into non-metro cities, where infrastructure development is driving new real estate opportunities. Simplifying tax pass-through rules for REITs and encouraging wider adoption of the Model Tenancy Act would further strengthen the sector.

In conclusion, the Union Budget 2026-27 has the opportunity to move beyond incremental relief and offer structural, long-term solutions. A focus on tax certainty, regulatory efficiency, and execution discipline will be critical in enabling the real estate sector to contribute meaningfully to economic growth and urban development.

This article was originally published in The Economic Times on 29 January 2026 Written by: Bhoumick Vaidya. Click here for original article

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