Gurgaon, Jan 21: As the Union Budget FY 2026–27 approaches, the government is expected to sharpen its focus on boosting economic growth while strengthening domestic resilience, as global trade frictions & geopolitical volatility linger. The upcoming budget is likely to balance fiscal discipline with growth-oriented reforms, and focus on housing affordability, supply side push through infrastructure augmentation, manufacturing capacity expansion, sustainability adoption, strengthening of digital platforms & innovations within the realm of artificial intelligence. Allocations and measures in the budget are critical not only for supporting near-term economic momentum but also for building long-term structural strength across sectors, including real estate.
Housing and infrastructure are expected to remain central to the upcoming union budget, given their strong multiplier impact on employment, consumption, and urban development. Revisiting affordable housing definition & criteria and improving access to credit could provide a sustained boost to residential demand. Further, accelerating infrastructure-led development is likely to unlock new growth corridors and support expansion across real estate asset classes. Meanwhile, a calibrated push towards sustainability will be pivotal in enabling long-term, climate-resilient growth.
India’s real estate sector continued to demonstrate strong momentum through 2025, underpinned by robust economic growth, rising average income levels, and sustained investor confidence. Office leasing scaled new highs, crossing 70 million sq ft during the year, while industrial & warehousing demand also remained upbeat. Residential markets remained resilient despite cost pressures, supported by right-sizing of housing units, infrastructure-led connectivity enhancements and lifestyle-driven housing demand. Institutional investments also remained strong at USD 8.5 billion, the highest in recent years.
“The Union Budget 2026 is expected to place strong emphasis on housing and infrastructure as key levers of economic growth, while reinforcing domestic resilience amid global uncertainties. For the real estate sector, measures aimed towards rationalisation of affordable housing criteria, infrastructure-led equitable development, and incentivisation of sustainable building practices are high on the priority list. With end-user demand across office, residential, industrial & warehousing, retail and hospitality segments at historical peaks or close to peak levels, the upcoming Budget has the potential to further strengthen investor confidence, deepen market participation and support long-term growth,” said Badal Yagnik, Chief Executive Officer & Managing Director, Colliers India.
Targeted support for affordable housing to boost residential demand and supply
Residential real estate in India has performed strongly in recent years, with sustained momentum in housing sales across major markets. While overall housing demand remains firm, a persistent demand-supply gap continues to exist, especially within affordable housing. In fact, supply of houses catering to different categories of homebuyers at appropriate price points needs targeted policy intervention. The upcoming budget can include measures that reinforce homebuyer confidence, stimulate demand, improve access to credit and ease supply-side constraints, which in-turn could address the demand-supply mismatch in the long-term.
Demand side
· Revision of affordable housing threshold– The current INR 45 lakh cap for affordable housing no longer reflects price realities in most urban markets. The pressing need for a standard and comprehensive definition for affordable housing must take into account both size and ticket price. This would bring a large share of prospective homebuyers within the ambit of affordable housing benefits and allow easier & seamless flow of credit to eligible beneficiaries. Furthermore, an affordable-housing specific 1% GST rate and tax incentives could boost overall housing demand significantly.
· Extension of interest subsidy scheme- Extending and strengthening of interest subsidy schemes for first-time homebuyers can meaningfully improve affordability and accelerate homeownership. Lower borrowing costs would unlock end-user demand and provide a sustained boost to housing sales across affordable and mid-income segments.
· Simplified home loan portability– Homebuyers are seeking easier, low-cost loan portability to enable seamless switching between lenders for better interest rates and service terms. Measures such as digital balance transfers, faster approvals, and minimal or no transfer fees would enhance borrower flexibility and reduce long-term financing costs.
Supply side
· Increased allocation for stressed projects- Special Window for Affordable and Mid-Income Housing (SWAMIH), a government-backed stress fund, has already facilitated completion of over 61,000 homes in stalled projects till date. The upcoming budget is expected to increase allocations to the fund, extending last-mile funding support to stressed, RERA-registered projects and providing much-needed relief to developers and homebuyers.
· Subsidy model for green-certified projects– While select states currently offer incentives for sustainable projects, a uniform central subsidy mechanism that offsets 20–25% of the incremental cost of green materials and technologies could significantly accelerate the adoption of environmentally responsible construction practices.
· Proposal to cut GST on work contracts- A reduction in the current 18% GST on developers’ work contracts would help lower construction costs, ease margin pressures, and eventually help in the pass-through of benefits to homebuyers.
· Re-introduction of tax holiday for developers in affordable housing- Reintroducing the tax holiday for affordable housing projects can improve project viability and incentivise developers to scale up supply. This would help offset rising costs, revive stressed projects, and accelerate delivery in a segment that continues to face a supply shortfall.
Infrastructure-led growth to continue
The government is expected to continue its focus on infrastructure as a key engine of economic growth through the strengthening of logistics networks aimed at improving freight efficiency and greenfield development of expressways, industrial corridors, rail networks, metros, airports, ports, etc.
· Logistics infrastructure upgradation- Higher allocations for multimodal logistics parks and freight corridors are expected to reduce logistics costs, enhance supply-chain efficiency, and boost manufacturing competitiveness, especially across Tier II and III cities.
· Enhancing rail freight efficiency- With 100% electrification of tracks nearing completion, investments are likely to shift towards easing congestion through the introduction of new lines, track doubling, gauge conversion, and expansion of dedicated freight corridors, which will improve cargo movement across key industrial hubs.
· Port-centric development- Incentives for port-linked manufacturing and logistics clusters could support export-led growth, particularly in heavy manufacturing, energy equipment, and bulk cargo industries.
· Enhanced viability gap funding and regulatory support – Expanding funding allocation, coupled with clearer regulatory frameworks and faster clearances, could incentivise greater private sector participation and accelerate project execution timelines.
Strengthening support for domestic manufacturing and MSMEs
Manufacturing impetus will remain central to long-term growth, employment generation, and export competitiveness. Targeted fiscal support, tax certainty, and infrastructure push will be critical in capability building and strengthening of investment appetite.
· Extension of concessional corporate tax regime- Extension of the 15% concessional corporate tax rate for new manufacturing units beyond March 2024 could bring in fresh investments and support long-term capacity expansion.
· Enhanced R&D support- Stronger R&D support can drive innovation in advanced manufacturing, materials, and high-value products.
· Driving MSME growth with better cash flow management- Stricter enforcement of the 45-day payment rule and linking GST payments to actual invoice receipts and not accruals can ease liquidity pressure.
· Customs duty relief on critical raw materials- Reducing/ exempting customs duty on key raw materials can support domestic steel and alloy manufacturers while mitigating dumping pressures from overseas markets.
· Incentives for capital goods manufacturing- Dedicated policy and fiscal incentives can promote domestic production of high-value capital goods, reduce import dependence and strengthen India’s role in global value chains.
Enhancing competitiveness through technology, AI and innovation
The government is expected to prioritize push towards technology, artificial intelligence, automation, and innovation-led growth. Increased investments in R&D, digital infrastructure, and emerging technologies are likely to drive long-term growth, especially in alternative asset classes such as data centres.
· Incentivizing data centre segment- Policy support through fiscal incentives, rationalized power tariffs, land rate concessions, and faster approvals could provide a supply-side boost.
· Focusing on AI clusters and data centre parks- The Union Budget 2026 could prioritize targeted support for AI research, high-performance computing, and development of large-scale AI and data centre clusters to accelerate digital and innovation-led growth. A cohesive national AI and data governance framework can become crucial in attracting global investments and positioning India as a competitive hub for AI and data-driven industries.
· Skilling, talent, and automation-led productivity- Budgetary allocations towards digital skilling programmes, including centers of excellence in collaboration with IITs and MNCs, can help address talent shortages. Additionally, R&D prioritization in robotics and automation could enhance productivity across manufacturing and industrial processes.
Balancing growth with climate commitments and long-term energy security
The government is likely to emphasize renewable energy adoption, strengthen grid resilience, and promote sustainable construction practices. Budgetary support aimed at clean energy manufacturing, green finance, and electric mobility ecosystems can play a critical role in achieving national net-zero goals.
· Accelerating renewable energy adoption and grid resilience- Enhanced fiscal support for solar and renewable capacity addition, along with targeted incentives for energy storage systems (ESS), can improve grid stability, power availability, and support higher penetration of clean energy.
· Promoting green buildings and sustainable real estate- Tax breaks and GST concessions for green buildings can encourage wider adoption of energy-efficient designs, low-carbon construction materials, and sustainable construction practices.
· Strengthening clean energy manufacturing and supply chains- Policy support to scale up domestic manufacturing of solar modules, batteries, and clean-energy components, along with incentives for securing critical minerals, can reduce import dependencies.
· Creation of a green finance fund – The creation of a national green finance institution or dedicated fund can expand EV manufacturing corridors and renewable energy projects by mobilizing long-term capital.
“The Union Budget 2026–27 provides a defining opportunity to accelerate sustainability and technology adoption across India’s real estate sector. Greater policy support for green buildings, energy-efficient construction and digital infrastructure, can significantly improve operational efficiencies, reduce lifecycle costs, and enhance long-term asset resilience. With occupiers and investors placing greater emphasis on ESG compliance, targeted policy measures, fiscal incentives, and regulatory transparency are poised to play a decisive role in future-proofing real estate development while enhancing India’s competitiveness in global markets.” said Vimal Nadar, National Director, Research, Colliers India.
Strengthening of urban development initiatives in the form of higher allocation in dedicated funds, rejuvenation programs and spatial growth dispersion plans can promote planned as well as futuristic growth in Indian cities. Increased funding for transit-oriented development, urban renewal missions, smart city programmes etc. would help unlocking land potential, encouraging private investments, and supporting sustained growth across real estate asset classes.
Overall, Budget 2026 is expected to strike a fine balance between fiscal prudence and economic growth, with a strong emphasis on housing, infrastructure, manufacturing, and sustainability. Continued policy support, infrastructure investments, and targeted incentives could further strengthen crucial sectors, including real estate. Moreover, as global uncertainties are likely to persist, the Budget will play a critical role in reinforcing domestic growth levers, improving investor confidence, and laying the foundation for long-term expansionary growth.
