Budget 2026: More Money for Housing, But Affordable Homes Still Awaits

New Delhi | February 2, 2026:

With the Union Budget 2026-27, presented yesterday by Finance Minister Nirmala Sitharaman, there's a notable increase in the allocation for the government’s flagship housing schemes, highlighting housing as an integral component of India’s social and economic policy. However, despite the significant jump in spending, the budget stopped short of offering targeted relief for the affordable housing segment, drawing disappointment from industry stakeholders grappling with slowing demand and shrinking supply.

Affordable housing has been known as a key strategy for increasing urban demand, employment generation, and financial inclusion. Over the years, ongoing government support helped expand homeownership among lower- and middle-income families. Yet, recent years have observed a marked decline, particularly after the pandemic.

As per ANAROCK data, the sales percentage of affordable housing has gradually declined from over 38% in 2019 to 26% in 2022 and further to just around 18% in 2025. Rising construction costs, stricter financing conditions, and a strategic shift by developers towards premium and luxury housing have together led to what experts describe as a clear declining trend in the segment.

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There were expectations for the Budget 2026 of direct demand-side intervention, especially through interest allowance schemes for first-time buyers, improved tax deductions on home loan interest, or reduction of stamp duties. None of these initiatives featured in the final proposals.

“The affordable housing segment was in urgent need of interest stimulants for both buyers and developers,” industry experts said, noting that without targeted incentives, the mismatch between supply and affordability is likely to persist.

PMAY Anchors Housing Policy

The Pradhan Mantri Awas Yojana (PMAY) remains the government's primary housing strategy. For the current phase, the Centre has set further goals: 2 crore additional houses in rural India through PMAY-Gramin & 1 crore houses in urban India under PMAY-Urban.

Reflecting this emphasis, the housing schemes’ allocations in the Union Budget 2026-27 saw one of the sharpest increases compared to previous years. For PMAY-Urban, funding was raised to ₹18,625 crore from ₹7,500 crore in the previous fiscal year.  Also, in another major boost, the budgets for PMAY-Urban 2.0 have an allocation of ₹3,000 crore, a huge jump from ₹300 crore last year.

Rural housing saw an even larger boost. Allocations under PMAY-Gramin increased to ₹54,917 crore from ₹32,500 crore in 2025–26, indicating one of the largest increases among major social sector schemes in this budget.

Government officials said the expanded budgets are expected to boost construction, generate employment, and solve housing shortages amid rising urbanisation and migration.

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Tax Support Continues, but No New Relief

Tax incentives remain a key support system for homebuyers. Interest paid on home loans continues to allow for deductions of up to ₹2 lakh under Section 24 of the Income Tax Act, while principal repayments are eligible for deductions under Section 80C. The extension of tax holidays for affordable housing projects has also helped developers recover supply in lower- and mid-income segments over the years.

However, markets were watching closely for fresh measures ahead of Budget 2026, including enhanced deductions for first-time buyers, new interest subsidy schemes, or incentives to boost affordable rental housing. These expectations remained unmet.

Market Reaction and Outlook

Reflecting the lack of reaction from real estate stakeholders, the Nifty Realty sector index was trading 1.7% lower at 2:31 p.m. IST on Budget Day. Analysts noted the lack of immediate demand-side support for affordable housing weighed on investor sentiment.

The budget’s broader emphasis on infrastructure development and urban expansion offers some medium-term support. The government’s sustained focus on Tier II and Tier III cities, paired with investments in connectivity and urban economic regions, is expected to support residential demand beyond the top metropolitan markets.

Experts believe that while the budget reinforces the government’s long-term commitment to housing, the absence of targeted measures for the affordable segment might delay a meaningful rise in demand. At present, the industry sees Union Budget 2026-27 as one that delivers more money but misses the most pressing pain point.