As India approaches Union Budget 2026, the real estate sector stands at a critical juncture where policy decisions will significantly impact housing affordability and urban development. The industry has demonstrated unexpected resilience over the past two years, maintaining steady demand across housing segments while navigating global uncertainties and domestic policy changes.

Sector Resilience and Market Dynamics

The real estate market has shown remarkable stability, with premium and luxury segments continuing to attract buyers seeking long-term asset security. This sustained momentum reflects improved regulatory maturity, enhanced governance standards, and rebuilt trust between developers and homebuyers. The sector's performance has been supported by RERA-compliant disclosures and digital transaction platforms that have increased transparency and buyer confidence.

Key Budget Expectations and Policy Priorities

Industry stakeholders anticipate several critical policy measures in the upcoming budget. The primary focus remains on maintaining continuity in long-term housing and urban development programs, which enables better project planning and sustained employment across construction and allied industries.

Infrastructure Status and Capital Access

Granting housing infrastructure-equivalent status would unlock access to patient, long-tenure capital at reduced financing costs, enabling more sustainable project development and improved affordability for end-users.

Affordability Enhancement Measures

The revision of affordable housing price caps represents a crucial area requiring immediate attention. The current threshold of ₹45 lakh needs updating to reflect contemporary urban land and construction costs that have evolved significantly over the past decade.

Proposed Affordability Reforms

• Price Cap Revision: Updating the ₹45 lakh limit to reflect current market realities
• Interest-linked Incentives: Enhanced home-buying benefits for first-time buyers
• Tax-related Support: Improved buyer confidence through fiscal measures
• Market-aligned Benefits: Ensuring policy relevance to today's homebuyers

These measures would help bridge the gap between housing aspiration and access, particularly benefiting first-time buyers while encouraging developers to launch projects in affordable and mid-income segments.

GST Rationalization and Cost Management

Streamlining GST on construction-related items emerges as another priority for reducing cost pressures across the value chain. Current taxation structures on construction inputs significantly impact project viability and delivery timelines.

A simplified tax framework would enhance the sector's ability to deliver projects at scale while maintaining quality standards and meeting delivery commitments.

Industry Transformation and Future Outlook

The real estate sector has undergone significant institutional transformation, characterized by improved regulatory oversight, technology adoption, and enhanced buyer awareness. RERA compliance has standardized disclosures, while digital platforms have revolutionized transaction processes. This evolution positions the industry for sustainable growth with appropriate policy support.

The upcoming budget presents an opportunity to reinforce this positive trajectory through progressive policy measures focusing on affordability, rationalization, and stability while recognizing evolved market conditions and supporting the vision of housing for all.

Tax policy experts have presented comprehensive recommendations for Budget 2026 to enhance India's mergers and acquisitions environment, particularly with the Income-tax Act, 2025 scheduled for implementation from April 1, 2026. The suggestions aim to address existing regulatory gaps and improve the ease of doing business for M&A transactions.

Fast-Track Demerger Tax Neutrality

A primary recommendation involves extending tax neutrality to fast-track demergers under Section 233 of the Companies Act, 2013. Currently, the Income-tax Act, 2025 provides tax neutrality only to NCLT-approved demergers under Sections 230 to 232, excluding fast-track demergers that enable small or closely held companies to undertake demergers without court approval.

The finance ministry's rationale for excluding fast-track demergers centers on concerns about potential valuation manipulation without court oversight. However, experts argue this approach contradicts the ease of doing business agenda, forcing genuine taxpayers to choose between transaction efficiency and tax benefits.

Contingent Consideration Clarity

Experts emphasize the need for clear taxation guidelines on earn-out, profit-linked, or contingent consideration arrangements that have become increasingly common in M&A transactions. These arrangements tie part of the sale consideration to achieving specific profitability or financial milestones.

The current legal framework lacks clarity on:

• Taxability of contingent payments
• Timing of taxation for such arrangements
• Treatment of milestone-based considerations

Foreign Company Merger Anomalies

The recommendations address existing inconsistencies in foreign company merger taxation. While foreign companies enjoy capital gains tax exemptions on direct or indirect share transfers during mergers with other foreign companies, shareholders of the amalgamating company face potential capital gains liability on share swaps.

This creates an anomaly compared to domestic mergers, which provide exemptions at both company and shareholder levels.

Capital Gains Tax Rate Concerns

The recent capital gains tax regime rationalization introduced higher long-term capital gains tax rates, which experts suggest adversely impacts investor returns and exit efficiency. The increased rates potentially drive investors toward jurisdictions with more favorable tax regimes.

Key concerns include:

• Reduced post-tax returns for investors
• Decreased competitiveness with other investment destinations
• Impact on foreign capital attraction

Experts recommend reducing capital gains tax rates, suggesting restoration of the earlier 10.00% rate to improve India's competitive position in attracting foreign investment.

Strategic Implementation Timeline

With the Income-tax Act, 2025 set for April 1, 2026 implementation, Budget 2026 represents the final opportunity to incorporate these amendments before the new framework takes effect. The recommendations aim to position India as a preferred destination for cross-border M&A activities while maintaining regulatory integrity and supporting corporate growth objectives.