Budget 2026 for real estate: What FM Sitharaman can do for affordable housing – wishlist for reviving urban housing affordability

For the common man, this isn’t about chasing speculative gains—it’s about securing a stable home without overleveraging the future.

By Raj KhoslaFor India’s urban middle class, owning a home remains the single largest financial aspiration—and increasingly, the most elusive one. Despite rising incomes, homeownership in cities is being squeezed by high land prices, escalating construction costs and policy definitions that no longer reflect market realities. As the Budget approaches, the real estate sector—particularly urban housing—needs a pragmatic reset, with the common homebuyer at its centre.Redefining ‘Affordable Housing’ for Today’s CitiesThe first and most urgent reform lies in revisiting the definition of affordable housing. The current price cap of ₹45 lakh and size limits of 60–90 sq metres may have been relevant a decade ago, but in Tier 1 cities they are now disconnected from reality. Land prices, compliance costs, and material inflation have moved sharply upward, pushing even modest homes well beyond the official affordability threshold.A revised cap of ₹80–90 lakh and a size limit of up to 120 sq metres would better reflect urban market conditions and consumer expectations. For the common man, this isn’t about buying a luxury apartment—it’s about securing a livable, family-sized home within city limits. Updating this definition would immediately expand the universe of homes that qualify for incentives, unlocking both demand and supply in the mid-income segment.Boost Tax Relief to Improve Real AffordabilityTax incentives remain one of the most effective tools for improving housing affordability. Yet, the current home loan interest deduction under Section 24(b), capped at ₹2 lakh per year, has remained unchanged despite rising property prices and loan sizes.Raising this limit to ₹5 lakh annually would significantly improve the affordability equation for salaried buyers. For a typical middle-income household servicing a large home loan, this change alone could translate into meaningful monthly savings, improving cash flows and confidence to buy.Equally important is the reintroduction of Section 80EEA, which offered additional tax deductions for first-time homebuyers. Many young buyers today fall just outside the affordable housing bracket but still struggle with high EMIs and down payments. A targeted deduction under 80EEA would encourage this cohort to enter the market, converting renters into owners and reviving end-user demand.Interest Subsidies Beyond the Affordable BracketHousing policy has traditionally focused on economically weaker sections and lower-income groups—and rightly so. However, the middle-income segment increasingly finds itself without support, despite facing intense affordability stress in urban markets.Extending interest subsidies to first-time buyers who fall outside the affordable housing definition could bridge this gap. Even a modest subsidy can reduce EMIs meaningfully over the life of a loan, making ownership viable without distorting prices. From a common man’s perspective, this signals that policy recognises the pressures faced by the urban middle class—not just the extremes of the market.Strengthen PMAY-U 2.0 and CLSSThe revamped PMAY-U 2.0 offers an opportunity to restore confidence in government-backed housing initiatives. Expanding the Credit-Linked Subsidy Scheme (CLSS) with higher interest subsidies for low- and middle-income groups would directly reduce borrowing costs and improve affordability.Unlike upfront incentives, interest subsidies work quietly but powerfully over time, easing repayment stress and lowering default risks. For households balancing education, healthcare and retirement savings, this kind of long-term relief can be the difference between buying now and postponing indefinitely.Rationalise GST to Lower Acquisition CostsHigh GST on construction materials and under-construction properties continues to inflate home prices. A calibrated reduction in GST—especially for mid-income and under-construction homes—could meaningfully lower acquisition costs for buyers while improving project viability for developers.For the common man, this would reflect transparently in the final price, not just on paper. Lower GST can also encourage purchases in the under-construction segment, improving developer cash flows and reducing reliance on high-end luxury launches.Revive Section 80-IBA to Boost SupplyFinally, supply-side incentives must return to the policy agenda. The withdrawal of the 100% tax holiday under Section 80-IBA has dampened developer interest in affordable and mid-income housing, tilting supply towards luxury projects with higher margins.Reintroducing this tax holiday would encourage developers to re-enter the volume-driven housing space, improving availability and moderating prices over time. A healthier mix of housing supply is essential if the market is to move away from being luxury-led and towards sustainable, inclusive growth.A Budget for Balanced GrowthTogether, these measures can unlock pent-up demand, improve price-to-income ratios and restore balance to India’s urban housing market. For the common man, this isn’t about chasing speculative gains—it’s about securing a stable home without overleveraging the future.If the Budget can realign housing policy with ground realities, it can revive confidence, stimulate construction-led employment and reaffirm homeownership as an achievable goal for India’s urban middle class—not a distant dream.(Raj Khosla is Managing Director, MyMoneyMantra)