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As the Union Budget 2026 approaches, the real estate sector has renewed its demand for a comprehensive revision of India’s affordable housing definition. Industry stakeholders are urging the government to increase the affordable housing price cap from ₹45 lakh to ₹90 lakh, arguing that the existing limit no longer reflects current construction and land costs.
Alongside the cap revision, the sector is also seeking tax relief for real estate developers and lower GST on construction inputs to revive affordable housing supply and improve project viability.
The ₹45 lakh affordable housing cap was introduced in 2017. Since then, the real estate market has seen a sharp rise in:
Developers argue that continuing with outdated benchmarks has made affordable housing projects financially strained, especially in Tier 1 and Tier 2 cities.
Under the current framework, many modestly sized urban homes fall outside the affordable housing definition, even though they cater to middle-income buyers. Industry representatives believe that raising the cap to ₹90 lakh—or removing it entirely—would better reflect urban housing realities and expand eligibility for policy benefits.
Affordable housing attracts a concessional GST rate of just 1%. Increasing the cap would allow a larger number of homes to qualify for this lower tax rate, directly reducing the total purchase cost for buyers.
With a revised cap, developers would be able to offer:
This would especially benefit first-time buyers and middle-income families currently priced out of affordable housing schemes.
The real estate sector has urged the government to extend tax benefits for developers building affordable housing projects, similar to incentives offered in earlier years. These incentives previously played a key role in increasing housing supply and accelerating project launches.
Tax relief is seen as critical to:
To further support affordability, the industry has proposed reducing GST on developers’ works contracts from 18% to 12%. According to stakeholders, this move would lower construction costs and reduce the need to pass expenses on to buyers.
Lower GST could help stabilise home prices and improve affordability without compromising developer viability.
If the affordable housing cap is raised and tax relief is introduced:
This could ease pressure on housing markets where demand has consistently outpaced supply.
Affordable housing continues to see strong end-user demand. Policy support in Budget 2026 could:
For investors, affordable and mid-income housing remains one of the most resilient residential segments.
With stronger regulation and improved transparency, the real estate sector has emerged as a stable growth engine, recording annual growth of around 10–12%. Affordable housing remains central to this growth story.
Budget 2026 is expected to further strengthen this momentum by addressing structural affordability challenges.
Alongside fiscal reforms, the sector is increasingly focused on sustainability. Developers are adopting green construction practices and supporting long-term goals such as net-zero carbon emissions by 2047.
Large-scale afforestation and sustainability initiatives highlight the industry’s efforts to balance rapid urbanisation with environmental responsibility.
Budget 2026 has the potential to redefine India’s affordable housing landscape. By revising outdated price caps, offering tax relief to developers, and supporting sustainable construction, the government can unlock greater housing supply and improve access for millions of urban homebuyers. For buyers, investors, and developers alike, this could mark a pivotal shift in India’s housing policy.
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