Budget 2026 and Affordable Housing: What Could Change for Buyers in India

Published By Business Standard

This is a policy-focused news analysis explaining how Budget 2026 affordable housing measures may affect homebuyers and developers, including taxation, GST, and housing growth in Tier II and Tier III cities.

India's affordable housing sector is under growing pressure. Home prices have increased sharply over the past few years, home loan interest rates remain high, and income growth has not kept pace. As a result, many middle-income and first-time buyers are finding it difficult to buy homes. Experts believe that Budget 2026 affordable housing measures will play a key role in addressing these challenges.

Even though demand for homes remains strong, especially among first-time buyers, policy support has not fully aligned with current market realities. The Budget 2026 housing policy in India is expected to address these gaps by improving tax benefits, redefining affordability limits, and supporting infrastructure development.

Why affordable housing definitions need change

The current definition of affordable housing has not been updated since 2017. During this time, property prices in most Indian cities have increased by nearly 60 to 100 per cent. However, household incomes have grown much more slowly. This mismatch has pushed affordable homes beyond the reach of many families.

Budget 2026 should revise the definition of affordable housing. Homes priced up to Rupees 75 lakh should be included, especially for families earning Rupees 12 - 15 lakh per year. Home loan limits may also need to increase to Rupees 60 - 70 lakh. Without this change, the affordable housing segment could shrink further, affecting both buyers and developers.

How tax relief can help homebuyers

Tax benefits are among the most effective tools for improving affordability. Homebuyer tax benefits Budget 2026 could offer direct relief through higher deductions on home loan interest and longer loan tenures.

For example, a first-time buyer purchasing a Rupees 45 lakh home with a Rupees 36 lakh loan at an interest rate of 8.5 to 9 per cent may see monthly EMI savings of Rupees 4,000 - 8,000 if tax limits under Section 24(b) are increased or interest subvention schemes are revived. Such measures can make buying a home more practical for middle-income households.

GST issues affecting affordable housing supply

On the supply side, developers are facing serious challenges. Many have reduced their focus on affordable housing due to low profit margins and rising construction costs. One primary concern is the GST impact on affordable housing.

Currently, affordable housing projects attract a 1 per cent GST without an input tax credit. This means developers cannot claim GST paid on raw materials, which increases overall project costs and reduces transparency. Budget 2026 should rework the GST structure to support affordable housing, especially for under-construction projects in smaller cities.

Tier II and Tier III cities are key to growth

The future of affordable housing lies beyond metro cities. Tier II and Tier III housing growth is expected to drive the next phase of demand. These cities offer lower land costs, improved infrastructure, and a better quality of life.

With better road networks, expressways, metro extensions, and rail connectivity, smaller cities are becoming attractive to both homebuyers and developers. Budget 2026 could support this trend by investing more in infrastructure and offering incentives for housing projects in emerging locations.

Importance of policy clarity and ecosystem support

Affordable housing growth also depends on clear and stable policies. Experts say faster approvals, simple taxation rules, and quicker dispute resolution can improve investor confidence. Regularly revisiting income limits and tax deductions will help policies stay aligned with market conditions.

Investment in urban services, workforce skill development, and stronger MSME ecosystems can also support housing demand. These steps help create jobs, increase income stability, and improve long-term housing affordability.

What experts are saying

Bhupindra Singh, Chief Operating Officer at RISE Infraventures, says today's homebuyers are careful and focused on long-term value. According to him, if policies are aligned with real buyer needs, a large amount of unmet demand can return to the market.

The road ahead

Overall, Budget 2026 affordable housing reforms can revive the sector if the government updates affordability definitions, improves tax benefits, eases GST pressure, and supports infrastructure growth. If done right, these changes can help buyers, support developers, and strengthen India's housing market in the years ahead.

1. What is Budget 2026 affordable housing?

Answer: Budget 2026 affordable housing refers to the government's plans to make homes more affordable for middle-income and first-time buyers through updated pricing, tax benefits, GST reforms, and improved infrastructure.

2. What changes are expected in the Budget 2026 affordable housing policy in India?

Answer: Budget 2026 affordable housing policy India may revise price limits to include homes up to Rupees 75 lakh and increase loan limits, aligning policies with rising property prices and buyer income levels.

3. How will the homebuyer tax benefits in Budget 2026 help buyers?

Answer: Homebuyer tax benefits Budget 2026 could increase deductions on home loan interest, extend loan tenures, and revive interest relief schemes, helping reduce EMIs for first time and middle income homebuyers.

4. What is the GST impact on affordable housing in India?

Answer: The GST impact on affordable housing currently increases costs because developers cannot claim input tax credit under the 1% GST rate. Budget 2026 may revise these rules to lower costs and improve project viability.

5. Why is Tier II and Tier III housing growth important for affordable homes?

Answer: Tier II Tier III housing growth is crucial as smaller cities offer lower land costs, better infrastructure, and connectivity. Budget 2026 may encourage development in these cities with incentives and infrastructure support.