Green Cities and Affordable Homes: Budget 2026 Real Estate Vision

With preparations in India for the Union Budget 2026–27, to be presented on 1st February, 2026, the real estate sector is also advancing towards a dual-pronged agenda: solving housing affordability as well as accelerating green and sustainable urban development.

As the housing costs are outpacing incomes in many markets, industry leaders and policy analysts are urging the government to deploy targeted fiscal incentives and regulatory reforms. This will ensure that urban growth is both inclusive and environmentally sound. Can housing affordability and green urban goals be fulfilled with Budget 2026?

Is Affordable Housing a Challenge?

India’s real estate landscape is seeing a drastic change in housing dynamics. Luxury and premium segments are growing with high-end properties surging dramatically. But affordable housing, on the other hand, has really lagged behind.

Industry report says that the share of affordable homes (especially those priced under ₹50 lakh) in total residential sales has reduced from over 52% in 2018 to less than 17% in 2025 in major cities. In the same period, luxury housing has shown a growth of 170%.

This imbalance has huge social and economic impacts. Middle-income families have to bear EMI burdens that far exceed sustainable thresholds. Some are even spending 40–60% of their income on home loan EMIs. In addition to this, there is unsold inventory in the affordable segment, which continues to shrink.

How are the Real Estate Sector Demands Ahead of Budget 2026?

In spite of this, the developers, homebuyers, and industry bodies are presenting unified expectations to Finance Minister Nirmala Sitharaman: -

1. Affordable Housing Cost Definitions

The current price cap for affordable housing, which is around ₹45 lakhs, seems outdated due to the rise in price of land and construction materials. Industry players, including major developers and associations, are urging for a revised cap that is close to ₹80-₹90 lakhs.

2. Expanded Tax Reliefs

A major ask is to enhance tax benefits for homebuyers and developers. The proposal includes:

• Increase in the home loan interest deduction limit from ₹2 lakh to ₹5 lakh.
• Reducing GST on under-construction housing from 18% to 12%.
• Additonal Interst Deduction under Sec 80EEA. (Newsbyte) (whalesbook)

3. SWAMIH Fund Expansion

The Special Window for Affordable and Mid-Income Housing (SWAMIH Fund), initiated with a corpus of ₹25,000 crore to revive stalled projects, has played a key role in unlocking nearly 100,000 housing units. Industry people are urging the government to enlarge this fund’s scope by increasing the financing support.

4. Tier-2 & Tier-3 City Focus:

As real estate growth shifts beyond traditional metros, stakeholders want budgetary incentives and infrastructure investments prioritised for Tier-2 and Tier-3 cities.

Green Urban Futures: Sustainability in Focus

Other than affordable housing, the industry is also looking for policy changes to promote green and climate-responsive construction. Need for eco-certification incentives, faster regulatory approvals for sustainable projects, and institutional financing for green retrofits has been forwarded by developers. These measures can encourage the adoption of energy-efficient building designs, and renewable energy integration in properties at larger scale.

Public-private partnerships are seen in urban infrastructure. They are developing mass transit systems, smart city utilities, and mixed-use developments. These are critical levers for sustainable urbanisation. A well-designed incentive framework can align private capital with national goals around emission reductions and liveable city ecosystems.

Conclusion

India’s housing affordability challenge cannot be viewed in isolation from its rapid urbanisation. The urban population is expected to exceed 600 million by 2036, so the demand for housing and urban infrastructure will increase. Hence, proper policy formation is required to prevent socio-economic gaps. Budget 2026 can become a turning point by combining affordability-focused reforms with sustainability goals.

Measures such as higher tax deductions, GST rationalisation, expanded funding through SWAMIH, and updated definitions for affordable housing can ease homeownership pressures. Moreover, incentives for green construction and infrastructure investment in emerging cities can promote low-carbon urban growth. If these steps are properly executed, they can help improve living standards and support long-term economic growth.

Source:

Economic Times
Whalesbook
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Newsbyte
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The Econmic Times
The Economic Times
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ABPlive
Business Standard