Palladian Partners Advisory Ltd expects Budget 2026 to Centre on Affordability, Tax Alignment and Project Funding

PNN
Mumbai (Maharashtra) [India], January 23: As the Union Budget 2026 approaches, discussions around the real estate sector are increasingly focused on how existing policy frameworks align with current market conditions. While sustained public investment in infrastructure has supported housing demand in recent years, affordability and cost pressures remain key themes across segments.
Real estate contributes close to 13 per cent of India's GDP and supports over 50 million jobs. Industry observers note that premium housing and select Tier-II markets have shown resilience, even as rising land prices, labour costs and compliance expenses have made the mass and mid-income segments more sensitive to price movements.
One area under consideration is the definition of affordable housing. Homes priced below ₹45 lakh continue to qualify for incentives, but their share in overall residential sales has declined over the past five years in several urban markets. With input costs rising steadily, a review of price and size thresholds is being discussed as a way to better reflect present-day construction economics.
Homebuyer taxation is another aspect drawing attention. The housing loan interest deduction limit of ₹2 lakh has remained unchanged for nearly a decade, despite higher property values and borrowing costs. A calibrated revision, particularly for first-time buyers, is being viewed as a possible measure to ease affordability pressures while keeping end-user demand stable.
On the supply side, developers continue to track GST treatment for under-construction projects, where the absence of input tax credit affects overall project costs. Construction expenses are estimated to have increased by 20-25 per cent since 2021. In addition, ongoing support for last-mile funding of delayed projects is seen as helpful in ensuring timely completions and sustaining buyer confidence.
Infrastructure-led growth remains a defining factor for Tier-II and Tier-III cities, which now account for a growing share of new launches and sales. Continued investment in transport, urban infrastructure and digital land systems is expected to further strengthen these markets.
"Over the past few years, the market has evolved faster than policy definitions. Budget 2026 is an opportunity to reassess how well existing frameworks reflect current costs and buyer profiles," said Mr. Kamal Shah, Director- Palladian Partners Advisory Ltd
"Affordability today is shaped as much by financing costs as by home prices. Any incremental alignment on tax deductions could help improve purchase feasibility for end users," said Mr. Chandresh Vithalani, Director- Palladian Partners Advisory Lt.
"Continued focus on infrastructure and smoother execution of ongoing projects has already had a stabilising effect. Building on this approach could support steady, long-term growth," said Mr. Piyush Rambhia, Director- Palladian Partners Advisory Ltd
With no expectation of sweeping changes, industry participants view Budget 2026 as a chance for incremental adjustments that keep housing policy aligned with evolving market realities.
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