As Budget 2026 approaches, India's real estate sector is advocating for a comprehensive policy framework that addresses rising urban costs, evolving buyer preferences, and the growing influence of institutional capital. Industry leaders view the upcoming budget as pivotal for sustaining housing momentum, improving affordability, and unlocking long-term value across residential, commercial, and mixed-use developments.

Institutional Capital Demonstrates Strong Market Confidence

Recent fundraising activities highlight robust institutional appetite for execution-ready real estate projects, particularly in the National Capital Region (NCR). Bhumika Realty successfully raised ₹170.00 crore from Aditya Birla Sun Life AMC, partnering with global investor BGO, for a newly launched mixed-use project in Faridabad.

Uddhav Poddar, CMD of Bhumika Group, noted that while capital inflows remain healthy, tax frameworks have not kept pace with market realities. He emphasized that home prices across major NCR cities have increased structurally due to higher land, construction, and compliance costs, while tax thresholds and benefits have remained largely unchanged.

Mid-Income Housing Emerges as Growth Driver

Industry executives indicate India's housing market is transitioning from a luxury-led upcycle to a more value-driven phase. Tanuj Shori, Founder and CEO of Square Yards, identified the mid-income segment as the expected growth anchor as premium demand begins to stabilize.

Key reform priorities for mid-income housing include:

• Enhanced tax relief for mid-income homebuyers
• Higher interest deduction limits
• Continued investment in urban infrastructure
• Expanded definition of affordable housing in urban areas
• Interest subsidies for first-time homebuyers

Ramani Sastri, Chairman and MD of Sterling Developers, highlighted affordability as a major challenge for a large section of buyers despite strong home ownership aspirations.

Tier II Cities Drive Market Expansion

A growing consensus among developers positions Tier II cities as increasingly important drivers of residential and mixed-use demand. Rajat Bokolia, CEO of Newstone, highlighted Sonipat's emergence as a key investment destination within the NCR, supported by infrastructure developments.

Yashank Wason, Managing Director of Royal Green Realty, noted that Tier II and III cities now offer infrastructure-led projects, superior amenities, and larger homes at more reasonable prices, reducing migration pressures on metros while delivering long-term investment stability.

Industry Status and Regulatory Reforms

Developers continue to identify approval delays and land-related complexities as major operational bottlenecks. Harsh Jagwani, Managing Director of Notandas Realty, advocated for comprehensive regulatory improvements including single-window clearance systems, cleaner land-title mechanisms, and stricter escrow enforcement under RERA.

Gautam Kanodia, Founder of KREEVA and Kanodia Group, reiterated the sector's demand for industry status recognition, which would improve access to organized capital and financing efficiency for long-gestation projects.

Sustainability and Infrastructure Focus

Badal Yagnik, CEO and Managing Director at Colliers India, emphasized the need to balance fiscal discipline with growth-oriented reforms. Key recommendations include revising affordable housing criteria to reflect price realities in Tier I cities and encouraging retail investor participation through more attractive REITs and SM-REITs structures.

The sector's leadership believes Budget 2026 must establish foundations for sustained long-term growth through policy clarity and execution efficiency, positioning real estate as a cornerstone of India's economic growth strategy amid global volatility and evolving domestic demand patterns.

ICICI Securities expects the Union Budget 2026 to deliver positive surprises for lenders and industrial stocks, with a strategic shift toward manufacturing and infrastructure development rather than tax stimulus measures. The domestic brokerage anticipates higher capital expenditure allocations, increased divestment activities, and focused spending on developmental areas.

Manufacturing Takes Center Stage

Analysts Vinod Kakri and Bhavesh Talreja from ICICI Securities indicate that after providing tax stimulus surprises in the previous year, the Budget for FY27 will likely prioritize developmental spending over broad-based tax relief. The focus on domestic manufacturing aligns with the increasingly inward-looking global policy environment and elevated geopolitical risks.

The brokerage expects continued government support for labour-intensive manufacturing sectors, particularly textiles and jewellery, which face pressure from US tariff announcements. Strategic budget allocations through Production Linked Incentive (PLI) schemes will likely target high-value sectors.

Infrastructure Investment and Fiscal Constraints

Despite the manufacturing focus, fiscal constraints and the government's commitment to reducing the debt-to-GDP ratio will influence spending patterns. ICICI Securities projects that capex growth for FY27 may not exceed the nominal GDP growth rate. In 2025, the government allocated ₹11.21 lakh crore for the infrastructure sector, establishing a substantial baseline for continued development.

The brokerage notes that with tax collections slipping in FY26 following various concessions throughout the year, the government has already implemented revenue-shoring measures, including recent excise duty hikes on tobacco products.

Revenue Enhancement Through Divestment

With tax collection trends showing weakness, ICICI Securities anticipates renewed focus on alternative revenue sources. Divestment and asset monetisation are expected to gain prominence as key revenue-generation tools. However, the brokerage sees limited upside in dividend payouts, which have already increased significantly since FY23.

Bond Market and Debt Management

The brokerage highlights the challenging bond market environment, where yields remain elevated at around 6.60% despite RBI rate cuts of 125 basis points to 5.25%. Market expectations of increased borrowing, particularly from state governments planning approximately ₹5.00 trillion in Q4 FY26 borrowings, continue to pressure yields.

ICICI Securities suggests that positive surprises in fiscal management, such as lower-than-expected debt-to-GDP or fiscal deficit-to-GDP ratios (currently budgeted at 4.40% for FY26), could help reduce bond yields and interest rates. Controlled government bond issuance would also minimize crowding out of private borrowers, supporting private sector investment and overall credit growth.

Investment Implications

Based on these Budget expectations, ICICI Securities recommends an overweight stance on lenders and industrial stocks. The anticipated focus on manufacturing, infrastructure development, and credit growth creates favorable conditions for these sectors, while controlled fiscal management could support broader market stability through improved bond market dynamics.