As Union Budget 2026 approaches, India's real estate and housing ecosystem is seeking comprehensive policy reforms to address affordability challenges, tax complexities, and infrastructure development needs. Industry leaders across residential, commercial, and emerging asset classes are calling for future-oriented measures that can sustain growth momentum while addressing sector-specific challenges.

Key Policy Expectations and Tax Reforms

The sector's primary focus remains on GST rationalisation and enhanced tax benefits for homebuyers. Sheeshram Yadav, Managing Director of Yugen Infra, emphasised the industry's expectation for tax breaks, improvements in the credit-linked subsidy framework, and a simplified GST structure. The sector is particularly seeking lower GST rates on luxury housing to boost buyer sentiment and attract long-term investment.

Harsh Gupta, Founder of Sipyatrra, highlighted investor expectations for capital gains tax rationalisation, especially on long-term equity and digital investment products. The sector is also seeking clearer regulations around alternative investment assets to strengthen trust and deepen India's investment culture.

Infrastructure Development and Regional Growth

Tier II and Tier III cities have emerged as significant growth drivers, with industry leaders emphasising their potential to compete with metropolitan markets. Yashank Wason, Managing Director of Royal Green Realty, noted that these markets are offering infrastructure-led projects, better amenities, and comparatively affordable pricing.

Rajat Bokolia, CEO of Newstone, specifically mentioned emerging destinations like Sonipat, which are benefiting from improved connectivity through metro extensions, RRTS, and expressway projects. The sector expects continued policy support for raising affordable housing limits and rationalising stamp duties in these markets.

Commercial Real Estate and Investment Framework

The commercial segment is seeking measures to strengthen both demand and investment frameworks. Ashish Bhutani, CEO of Bhutani Infra, called for rationalised taxation, expanded metro and expressway connectivity, and incentives for green and wellness-driven developments to enhance investor confidence.

Henam Khaneja, Additional Vice President at Elante Group, emphasised that higher tax deductions on home loan interest would provide meaningful relief to homebuyers amid elevated interest rates, strengthening both residential and commercial demand.

Sustainability and Future-Ready Development

The sector is increasingly focusing on sustainability and green building initiatives. Dhaval Ajmera, Director of Corporate Affairs at Ajmera Group, called for waiving caps on home loan tax benefits and introducing interest subvention schemes for green-rated real estate debt to reduce borrowing costs significantly.

Raahil Reddy, Director of Residential Projects at Fortune Primero, emphasised the need for progressive policies focused on sustainability, green buildings, and new-age construction technologies rather than short-term incentives. The industry is seeking policy frameworks that support India's Net Zero goals while maintaining commercial viability.

Market Momentum and Growth Outlook

Despite challenges, the sector reports strong fundamentals and sustained demand. Abhishek Raj, Founder and CEO of Jenika Ventures, noted that residential sales have posted strong double-digit growth across major cities. The industry expects measures like increasing home loan interest deduction limits and offering incentives for first-time homebuyers to broaden market participation.

Pradeep Aggarwal, Founder and Chairman of Signature Global (India) Ltd, highlighted that India's housing sector has maintained strong momentum, supported by easing borrowing costs and steady demand across mid-income and premium segments. The sector anticipates that continued policy support focusing on quality, sustainability, and timely execution will position real estate as a key driver of employment and urban growth.

Indian real estate stocks continue facing pressure despite operating performance data from major developers indicating sector resilience. The Nifty Real Estate Index has declined approximately 11% over the past six months and nearly 3% in the past week, reflecting investor concerns about housing demand, rising prices, and macroeconomic uncertainty.

Stock Performance and Market Sentiment

Major real estate stocks have experienced significant declines, with shares of prominent developers showing substantial weakness:

This performance has established a cautious tone for the sector, with markets questioning whether Indian real estate has reached a plateau after a strong multi-year upcycle.

Housing Market Fundamentals

Aggregate market data reveals mixed signals across key metrics. Housing sales across the top seven cities declined 14% in 2025, while new project launches decreased 3% year-on-year to approximately 3.62 lakh units. Sales volumes remained relatively stable, declining only 1% to 3.48 lakh units, suggesting demand fatigue amid higher property prices and employment concerns in IT-heavy markets.

Regional Price Dynamics

Residential prices have continued rising across major markets, contributing to affordability concerns. According to Knight Frank data, price appreciation has been substantial across key metropolitan areas:

These price increases have reinforced concerns about a potential volume-led slowdown as affordability becomes challenging for broader buyer segments.

Developer Performance Divergence

Analysts highlight a growing divergence between broader market trends and large listed developer performance. Murtaza Arsiwala, Director of Research at Kotak Institutional Equities, noted that while volumes have softened from a top-down perspective, companies are delivering strong numbers and often running ahead of pre-sales guidance when examined individually.

A significant factor supporting developer performance is increasing reliance on sustenance sales from projects in existing geographies rather than aggressive new launches. Lodha Group's chief sales officer Prashant Bindal indicated that approximately 65-70% of the company's business now originates from established markets, providing consistency even during periods of muted launch activity.

Premium Segment Strength

The demand composition is shifting toward higher ticket sizes, with value growth remaining strong despite volume softness. Premium housing segments have demonstrated exceptional performance:

The most striking performance came from the ₹100-200 million segment, where sales surged 164%, highlighting the resilience of premium and luxury housing demand.

Market Valuation Disconnect

A notable disconnect persists between stock valuations and operational performance. Residential developers continue trading at discounted valuations despite delivering double-digit growth, while REITs command higher multiples based on steadier cash flows. According to Arsiwala, the market remains focused on industry-wide concerns, but continued company-level execution should eventually close this valuation gap.