Top 6 Real Estate Sector Expectations From The Budget 2026

With the Union Budget 2026 approaching, the Indian real estate sector—comprising both homebuyers and developers—has certain expectations focusing on reviving affordable housing, easing tax burdens, and recognizing new asset classes.

Here is a breakdown of the key pre-budget expectations for the real estate sector in India for 2026 as per Mr Bhavya Bagrecha, Fund Manager of Bharat Bhoomi Fund - Real estate AIF , Wealth Company Asset Management Private Limited (A Pantomath Group Company).

1. For Homebuyers: Tax Relief & Affordability

The primary focus for homebuyers is increasing disposable income and making home loans more manageable in a high-interest environment.

Higher Home Loan Interest Deduction (Section 24b):

• Current: Capped at Rs 2 lakh.
• Expectation: An increase to Rs 4-5 lakh.
• Rationale: With rising property prices and interest rates, the current limit (set years ago) covers only a fraction of the interest outflow for most middle-class borrowers in metros.

Redefining "Affordable Housing":

• Current: Capped at Rs 45 lakh.
• Expectation: Increasing the cap to Rs 75-85 lakh for metro cities (like Mumbai, Delhi-NCR) and Rs 60-65 lakh for non-metros.
• Rationale: It is virtually impossible to find a home within the Rs 45 lakh limit in major urban centers, rendering many buyers ineligible for affordable housing benefits (like lower GST rates).

Support for First-Time Buyers:

• Expectations for a revamped PMAY (Pradhan Mantri Awas Yojana) or similar credit-linked subsidy schemes (CLSS) to support middle-income groups (MIG) which have largely been left out of recent subsidies.

Increase in Standard Deduction

• There is a strong expectation that the standard deduction for salaried employees will be raised to Rs 1,00,000. This adjustment is primarily aimed at neutralizing the effect of inflation on real income. By increasing the tax-free portion of a salary, the government can directly boost disposable income for the middle class without altering the core tax rates.

Rationalization of Tax Slabs:

• Revision of income tax slabs under the New Tax Regime to make it more attractive. This could involve raising the income thresholds at which higher tax rates (like 20% or 30%) kick in.

2. For Developers: Supply-Side Incentives

Developers are seeking structural changes to improve liquidity and reduce project delays.

Restoration of Tax Holiday (Section 80-IBA):

• Context: This section provided a 100% tax holiday on profits from affordable housing projects.
• Expectation: Reintroduction of this benefit.
• Rationale: To incentivize private developers to re-enter the affordable housing segment, where profit margins are razor-thin due to high land and construction costs.

Industry Status:

• Expectation: Granting full "Industry Status" to the real estate sector.
• Rationale: This would allow developers to access loans at lower interest rates from financial institutions, reducing capital costs and potentially lowering property prices.

Single Window Clearance:

• Expectation: A centralized, digitized system for all project approvals (environment, fire, municipal, etc.).
• Rationale: Delays in approvals typically increase project costs by 10-20%. A unified system would ensure faster project delivery.

3. Rental Housing Scheme

A dedicated "National Rental Housing Scheme" that incentivizes developers to build, own, and manage rental assets for the long term, rather than selling them individually. Moving from a "buy-to-sell" model to a "build-to-rent" model to solve the housing crisis for the mobile workforce.

Tax Exemptions:

• Rental Income Holiday: 100% income tax exemption on rental earnings for the first 5-7 years for developers who maintain a portfolio of 500+ rental units.
• GST Waiver: Complete waiver of GST on construction costs and services for projects designated exclusively for rental purposes.

Rationale: This creates a stable asset class for pension funds/institutional investors and ensures high-quality, professionally managed housing stock for tenants, reducing the friction of dealing with individual landlords.

4. Sustainability-Linked Development (Green Decongestion)

The Proposal: A "Green FSI" (Floor Space Index) and fiscal incentive package including tax breaks for projects that meet 'Net Zero' or 'Platinum' green ratings. Linking financial incentives directly to carbon footprint reduction and lower Total Cost of Ownership (TCO) for cities.

• Decongestion Focus: Special incentives for Satellite Townships that use a "Walk-to-Work" concept to reduce the load on main city infrastructure. Special / Reduced Corporate tax on projects meeting Sustainability-Linked Development plans.
• TCO Reduction - Property Tax Rebates: A 25-50% rebate on property tax for buildings that treat 100% of their waste and water on-site (reducing municipal burden).
• Lower Interest Rates: Mandating banks to offer "Green Mortgages" and "Green Construction Finance" at 50-75 basis points lower interest rates for certified sustainable projects.
• Impact: This lowers the monthly utility bills (electricity/water) for end-users, effectively bringing down the Total Cost of Ownership over the asset's lifecycle.

5. Taxation Rationalisation for Real Estate AIFs

Real Estate AIFs typically invest via a Special Purpose Vehicle (SPV) - usually a Private Limited Company. Currently, there is a tax leakage:

• SPV Level: The SPV pays Corporate Tax (25%) on its profits.
• Distribution: When SPV pays dividends to the AIF, it may be taxed again depending on the structure.

The Proposal: If an AIF-held SPV distributes 90% of its cash flows to the AIF, the SPV should be exempt from Corporate Tax.

Impact: This ensures a "Single Layer of Tax" (only in the hands of the investor), drastically improving the Net Internal Rate of Return (IRR) for investors.

6. Asset Tokenisation Policy Framework

Currently, high-value assets (commercial towers, land banks etc ) are illiquid and accessible only to the ultra-wealthy.

The Asset Tokenisation Policy seeks to create a legal framework to "tokenize" these assets on a blockchain, allowing them to be broken down into affordable digital units (e.g., Rs 5,000 per token).

This policy aims to do for assets what UPI did for payments-democratize access via a 'Asset Tokenisation Bill' that creates a separate asset class for Tokenized Real Estate, exempts secondary token trades from stamp duty, and allows entities to raise capital via token issuance.

Summary Table: Key Demands vs. Rationale

Area	Key Demand	Why it matters
Section 24(b)	Hike limit from ₹2L to ₹5L	Offsets high EMIs; boosts demand.
Affordable Housing	Hike cap from ₹45L to ₹75L+	Aligns with actual market prices in metros.
Increase in Standard Deduction	₹1 Lakh	To neutralize the effect of inflation on real income
Rationalization of Tax Slabs	Revision in limits	Reduces tax burden and increases disposable income in the hands of Taxpayers
Section 80-IBA	Reintroduce tax holiday	Incentivizes developers to build budget homes.
Approvals	Single Window Clearance	Reduces delays and project costs.
Rental Housing Scheme	Tax holiday	Incentivizes developers to build Rental homes.
Sustainability-Linked Development	Tax Break	Helps in reduction in Carbon footprint.
AIF - SPV level pass through Taxation	Specific Tax Exemption	Positive impact on Net Internal Rate of Return (IRR) for investors
Asset Tokenisation Policy Framework	Creation of Framework	The UPI Moment for Real Estate