India’s housing market is not short of demand as it heads into Budget 2026. What it lacks is conviction. Buyers are enquiring but not closing, the slowdown is being driven less by prices and more by uncertainty surrounding capital gains taxation, GST-related costs, and whether infrastructure announcements will translate into usable housing supply.
The demand base itself is changing. After several years of luxury-led growth, the centre of gravity is shifting towards mid-income housing. An tax expert, says this transition is already underway: “The Indian housing market is clearly moving out of a luxury-led upcycle and into a more value-driven phase, with the mid-income segment poised to anchor growth as premium demand begins to stabilise.”
He believes the Budget must respond to this shift. “From the Union Budget 2026, one should expect a sharper focus on improving affordability through enhanced tax relief for mid-income homebuyers.”
He also points to the supply side, noting that “policy support that encourages supply in the affordable and mid-market segments is critical” at a time when new launches are skewed towards higher ticket sizes.
He also highlights this imbalance. Its assessment shows a widening gap between headline growth and ground reality. While the total value of homes sold has increased, unit sales have declined as affordable housing supply continues to shrink.
Middle-income families are facing higher EMIs and fewer choices, even as luxury inventory expands. He warns that without corrective policy action, India risks sliding into a two-tier housing market where ownership becomes increasingly inaccessible for regular urban households.
Infrastructure remains the strongest medium-term lever. Industry expert has stressed that execution matters more than announcements. Faster rollout of metro lines, suburban rail networks, ring roads and logistics corridors can unlock new residential pockets, reduce commuting costs and ease pressure on city centres. For Budget 2026, the expectation is a sharper push on last-mile urban infrastructure rather than fresh project pipelines.
Another industry expert says uncertainty around capital gains has stalled transactions across segments. “The scenario involving capital gains taxation has brought the market to a standstill—especially with the increase in LTCG to 12.5 percent in 2024 and the unclear elimination of indexation.”
According to him, this uncertainty has frozen both buyers and investors. “Potential buyers are unwilling to upgrade due to the possibility of being taxed retrospectively,” he says, adding that investors are choosing fixed-income avenues instead of property.
Experts believe Budget 2026 can change behaviour if it delivers clarity. “The budget can reverse this trend by bringing back full indexation for pre-2023 assets (tax benefit that allowed investors to adjust the purchase price of long-term assets for inflation using the Cost Inflation Index (CII) and limiting LTCG to 10 percent.”
GST inefficiencies are adding to housing costs, particularly for under-construction projects. Higher effective GST and blocked input tax credits on cement and steel are pushing up prices and distorting buyer preference towards ready units.
Experts suggest extending the 1 percent GST composition scheme, currently limited to affordable housing, to the mid-income segment priced between Rs 45 lakh and Rs 1 crore. Under-construction mid-segment homes now attract 5 percent GST without input tax credit, inflating costs for buyers. This could translate into an immediate saving of Rs 300–500 per sq ft for buyers and improve affordability in markets such as Noida and Ghaziabad.
The majority of homebuyers rely on housing loans to fund their purchases; there is a strong demand for enhancing the income-tax deduction on home loan interest. “Increasing the deduction to at least Rs 5 lakh would provide meaningful relief to buyers, improve EMI affordability, and give a sustained boost to genuine end-user demand across markets,” another tax expert said.
The industry’s view on Budget 2026 is cautious but clear. Tax clarity alone may not trigger a sharp rebound, but it can prevent further erosion in sentiment. Without predictable capital gains rules and GST rationalisation, investor participation is likely to remain weak, and resale activity subdued. At the same time, faster infrastructure execution can gradually ease supply constraints and price pressure.
For real estate, Budget 2026 is less about bold incentives and more about removing uncertainty. Clear tax rules, a simpler GST framework and visible progress on urban infrastructure could unlock stalled decisions and keep housing demand steady through FY27.
