As the Union Budget 2026 approaches on February 1, India's Real Estate Sector is experiencing a strategic shift beyond traditional metros, placing increased emphasis on Tier-II cities and premium housing segments. Developers anticipate the upcoming budget will play a defining role in shaping demand patterns, investment flows, and long-term sector sustainability.

Tier-II Cities Emerge as Growth Drivers

Industry leaders report that India's housing momentum is increasingly driven by Tier-II cities, which offer an attractive combination of affordability, improving infrastructure, and expanding employment opportunities. Rajat Bokolia, CEO of Newstone, identifies cities such as Sonipat as strong real estate investment destinations within the NCR ecosystem.

Connectivity and Infrastructure Developments:

• RRTS (Regional Rapid Transit System) expansion
• Metro extensions
• UER-II (Upper Eastern Ring Road-II)
• Sonipat Master Plan 2031 implementation

Bokolia notes that compared to established markets like Gurugram or Noida, Sonipat offers more affordable pricing while benefiting from industrial growth and job creation. From a policy perspective, he expects Budget 2026 to consider raising affordable housing price limits, increasing home loan tax deductions, and rationalising GST or stamp duties.

Abhay Mishra, President & CEO of Jindal Realty, emphasizes that the government must formally acknowledge this structural shift. "India's housing growth is no longer metro-centric. Tier-II cities are now leading the next phase, supported by stable prices and strong infrastructure," Mishra states. He expects Budget 2026 to prioritise urban infrastructure spending, homebuyer tax support, and affordable housing incentives.

Infrastructure-Led Development and Policy Expectations

Developers operating across multiple geographies highlight that Tier-II and Tier-III cities now compete with metros on lifestyle, amenities, and project quality while maintaining significantly lower costs. Yashank Wason, Managing Director of Royal Green Realty, describes the upcoming budget as a critical opportunity to reinforce this trend.

Wason explains that these cities offer infra-led projects, larger homes, and superior amenities at reasonable prices, attracting both end-users and investors. The industry seeks further tax incentives, clearer GST norms, and continued policy stability to ensure long-term investor confidence.

Premium Housing Segment Seeks Policy Sophistication

While Tier-II growth dominates one market segment, the premium and luxury real estate sector has distinct expectations from Budget 2026. Navdeep Sardana, Founder of Whiteland Corporation, notes the focus has shifted from basic tax benefits to fiscal maturity and capital efficiency.

Following strong absorption in office and premium residential segments in 2025, the industry seeks policy measures supporting high-value transactions. A key demand from ultra-high-net-worth individuals (UHNI) involves re-evaluating the ₹10.00 crore cap on capital gains reinvestment under Sections 54 and 54F.

Premium Segment Expectations:

• Increased capital gains reinvestment limits
• ESG-compliant luxury development incentives
• Smart housing technology support
• Green financing incentives or tax credits

Financing and Investment Flow Improvements

Access to capital remains a critical concern for developers. The industry hopes Budget 2026 will introduce policies simplifying financing, improving liquidity, and lowering capital access barriers for credible players. Sardana adds that for NRI investors, further TDS rationalisation on property sales could significantly enhance foreign inflows into India's residential market.

Budget 2026: Shaping the Next Growth Cycle

Industry expectations from Budget 2026 reflect a Real Estate Sector at an inflection point. Tier-II cities are emerging as the next growth frontier, driven by infrastructure development, affordability, and lifestyle improvements. Simultaneously, premium and luxury housing segments seek policy sophistication to support high-value transactions and sustainable development.

Developers believe that if Budget 2026 successfully balances homebuyer incentives, infrastructure spending, financing reforms, and ESG-driven growth measures, it could establish the foundation for a sustained, stable growth cycle in Indian real estate, with Tier-II cities positioned as core drivers of this expansion.

India's real estate sector stands at a critical juncture, with industry leaders calling for comprehensive policy reforms in Budget 2026 to address a deepening housing divide. The sector, which contributes nearly 7% to India's GDP and employs over 70 million people, requires urgent fiscal intervention to maintain its role as a pillar of economic growth and urban transformation.

Growing Market Imbalance Threatens Housing Accessibility

Anuj Puri, Chairman of ANAROCK Group, warns of emerging structural imbalances creating a two-tier housing market. While luxury housing sales and prices capture media attention, homeownership is becoming increasingly unaffordable for large segments of the Indian population. Without decisive intervention in Budget 2026, Puri cautions that the gap between premium housing and basic affordable homes could widen further, potentially excluding millions from the ownership cycle.

Affordable Housing Requires Immediate Fiscal Support

The revival of affordable housing emerges as a central priority among industry recommendations. Puri emphasizes that reintroducing the 100% tax holiday for developers under Section 80-IBA could provide the most immediate and effective boost to supply. This incentive, which was withdrawn in 2021, had previously encouraged broader developer participation and accelerated affordable project launches.

Industry experts argue that without restoring such incentives and recalibrating affordability thresholds, both demand and supply in this critical segment will remain subdued.

Infrastructure Acceleration Critical for Housing Expansion

Infrastructure development represents another key area requiring immediate attention. While Puri acknowledges positive initiatives such as the National Infrastructure Pipeline and PM Gati Shakti, he highlights implementation speed as a persistent concern. Priority funding is needed for metro rail expansions, suburban rail networks, ring roads connecting peripheral regions, and integrated logistics corridors—all vital for unlocking new housing corridors and reducing pressure on urban cores.

Consumer-Focused Reforms to Boost Housing Demand

Anurag Mathur, CEO of Savills India, advocates for demand-side reforms that directly improve household affordability. His recommendations include:

• Raising the standard deduction for individual taxpayers
• Linking deductions to a percentage of income
• Implementing measures to increase disposable incomes

Mathur argues that higher disposable incomes can meaningfully support housing demand among middle-income and first-time buyers, particularly in urban centers.

Rental Housing and REITs as Affordability Solutions

Rental housing is increasingly viewed as a structural solution rather than a temporary measure. Mathur emphasizes the need for policy support to expand professionally managed rental housing, including enabling multi-family REITs. Such measures could improve affordability, enhance workforce mobility, and attract institutional capital into an underdeveloped segment despite rising urbanization.

Additionally, Mathur points to the importance of pragmatic land reforms and monetization of underutilized government land to address supply-side constraints, potentially lowering development costs and accelerating housing delivery.

Market Challenges Persist Despite Overall Resilience

Shishir Baijal, Chairman and Managing Director of Knight Frank India, notes that despite overall market resilience, affordable housing continues to underperform. He attributes this to declining affordability, rising input costs, and limited end-user support, warning that without timely policy recalibration, demand in this segment could remain structurally weak.

Baijal stresses the need to realign housing incentives with current urban cost structures, particularly in large cities where existing price thresholds no longer reflect market realities.

Infrastructure Investment for Inclusive Growth

Both Baijal and Mathur emphasize that sustained investment in mass transit and urban infrastructure is crucial for long-term inclusion. Improved connectivity to peripheral growth corridors can expand affordable land supply, while continued development of Global Capability Centers and office hubs in Tier II and III cities can drive decentralized job creation and promote more balanced urban growth beyond metropolitan areas.

Industry leaders agree that Budget 2026 represents a defining moment for India's housing sector. From restoring affordable housing incentives and accelerating infrastructure execution to strengthening rental housing and consumer affordability, experts emphasize that bold, coordinated policy action is essential to prevent a deeper housing divide and ensure India's urban growth remains inclusive and sustainable.