Budget 2026: How Indian Real Estate Is Entering a New Phase

Budget 2026 is an infrastructure-led budget, anchored by a record capital expenditure of ₹12.22 lakh crore. Through a mix of capex, tax rationalisation, and regulatory nudges—from GST changes to REIT and SM-REIT frameworks—it strengthens the supply and investment side of Indian real estate, while near-term demand outcomes remain contingent on execution, state policies, and financing costs.

What The Budget Actually Announced

1) Big capital expenditure push, ₹12.22 lakh crore for FY27 (highest ever= 4.4% of GDP):

This raises public infrastructure spend and accelerates roads, metros, airports, and utilities that support real estate demand, especially in Tier 2/3 cities.

The Rising Dominance of Tier 2 and Tier 3 Cities in India’s Real Estate Market

2) GST rationalization on construction inputs (implemented in 2025):

Key inputs such as cement were moved from 28% –> 18% and several other inputs were lowered, which reduces construction input tax burden.
GST change is a 2025 council decision but materially affects Budget 2026 outcomes.

3) Dedicated REIT route for CPSE asset monetization (Budget proposal):

The Union Budget proposes using REIT structures to recycle CPSE real estate assets, effectively creating a pipeline of institutional-grade stock for the listed REIT/SM-REIT market.

4) SM-REIT/ Fractional regulatory environment continuing to firm up:

SEBI‘s SM-REIT framework (and broader changes to make REITs more investable) remains an active enabler for smaller, tradable real estate vehicles. Industry reports estimate meaningful SM-REIT potential in coming years.

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5) Targeted reliefs and implementation support:

Budget documents and PIB note programmed for affordable housing completion (SWAMIH and related windows), risk-sharing or credit support mechanisms and measures to speed asset monetization.

Short to Medium Term Measurable Effects

1) Construction cost profile developers:

• Estimated direct reduction in construction input costs:

2-4% (industry consensus estimates after GST cuts on cement, tiles, bricks and allied items). That is the likely range for construction cost relief for a typical mid-rise/high-rise project.

• Likely pass-through to apartment prices:

1-3% reduction in buyer price or equivalent improvement in developer margin. Analysts and industry notes put potential buyer savings at roughly this magnitude if developers transmit benefits. Expect variation by developer, project stage and local taxes.

Practical Implication: Developers with stretched balance sheets may keep margin gains; financially health developers may use savings for price competitiveness or faster project completion.

2) Infrastructure Multiplier:

• Capital expenditure increase: FY27 capex at ₹12.22 lakh crore (4.4% of GDP), PRS/PIB estimate shows an 11-12% increase over 2025 revised estimates. This is projected to accelerate real estate supporting infrastructure (roads, metros, airports).

Projection (5-24 month): Corridors with confirmed infra (expressways, metro phases) can see transaction velocity and price appreciation lift of 3-8% versus unchanged baseline (local conditions apply). This is consistent with market commentary from CBRE/Cushman showing renewed institutional appetite and improved leasing fundamentals.

3) Affordable Housing & Stressed Inventory

• Budget measures (SWAMIH continuation, completion funds and risk windows) aim to clear stalled projects and complete thousands of units. Official notes cite tens of thousands of units completed under special windows; Budget aims to accelerate remaining completions.

Projection (12-24 months): Completed inventory release will improve buyer confidence in some micro-markets where projects were stuck; however, the overall affordability problem needs more targeted demand-side measures (income support, interest reductions) to materially increase volumes.

4) Institutional Product Growth: REITs & SM-REITs

• CPSE REITs and SM-REITs can create a new supply of institutional grade assets and a retail/institutional entry point. CBRE and industry reports place SM-REIT market potential in India in the tens of billions USD (CBRE cited USD 75bn potential for SM-REITs). SEBI changes already make smaller pooled vehicles possible.

Projection (12-36 months): Expect meaningful growth in listed and private REIT/SM-REIT issuance, improving liquidity for commercial assets and investable channel for higher-net-worth and retail investors (timeline depends on CPSE asset identification and transactions).

5) Downsides Risks That Can Negate Gains

• State level stamp duty and registration adjustments: Several state actions can partly or fully offset centre’s GST gains (industry flagged examples where stamp duty increases erase GST benefit).
• Financing costs & macro: If RBI policy (rates) or liquidity tightness keeps borrowing costs high, buyer affordability remains constrained despite cost-side gains. CBRE/JLL note that investor appetite improves as financing eases.

Evidence-Based Projections

1. Construction Costs:

Likely to fall 2-4% for new projects (materially driven by cement & allied input GST cuts). If fully passes through, buyer prices could ease by 1-3% in the next 6-12 months in new launches.

Source: industry and analyst estimates.

2. Infrastructure Led Price Uplift:

Corridors directly benefitting from budget capex and CPSE monetisation could record 3-8% outperformance in transactions vs markets without infrastructure upgrades over the next 12-24 months. This is consistent with historical infrastructure premia and current consultancy outlooks.

3. SM-REIT/REIT Liquidity:

The SEBI/Budget pathway and CPSE REIT initiative can increase investable institutional inventory materially in 26-34 months; CBRE projects multi-billion dollar potential for SM-REITs. Expect more listed schemes and secondary liquidity for commercial assets.

4. Sales Volumes and Segment Split:

Short-term volumes may remain mixed: luxury sales are strong (value up, volumes down in some reports), while affordable volume recovery will be gradual unless demand-side measures improve. Expect uneven recovery with premium and institutional grade assets outperforming.

5. Downside Offset Risk:

State duties, delayed infra execution and high-borrowing costs can erase up to most of the modest price benefits for buyers in certain micro-markets; net outcome is highly local. Industry warnings from Credal/State bodies confirm this.

Budget 2026 & Indian Real Estate — Key Highlights at a Glance

Area	What Budget 2026 Did	Likely Impact	Time Horizon
Capital Expenditure	Record ₹12.22 lakh crore capex (~4.4% of GDP) focused on infra	Boosts real estate demand along infra corridors, esp. Tier 2/3 cities	6–24 months
Infrastructure Push	Roads, metros, airports, utilities accelerated	3–8% price & transaction outperformance in infra-linked micro-markets	12–24 months
GST on Construction Inputs	Effective tax rationalisation on cement & allied inputs (via 2025 GST Council)	2–4% construction cost relief; 1–3% price/margin benefit	6–12 months
Developer Economics	Lower input costs + faster execution	Margin support for stressed developers; competitive pricing by strong players	Near–medium term
Tier 2 & Tier 3 Cities	Infra-led growth model strengthens non-metro markets	Rising dominance in housing & commercial absorption	Structural / long-term
CPSE Asset Monetisation	Proposed REIT route for CPSE real estate assets	Creates institutional-grade commercial inventory	12–36 months
REIT / SM-REIT Framework	SEBI framework continues to mature	Expands fractional & institutional investment channels	12–36 months
Affordable Housing	SWAMIH continuation & completion support	Improves buyer confidence; limited demand boost	12–24 months
Demand-Side Stimulus	No major new buyer incentives announced	Volumes remain uneven, affordability still constrained	Near term
Financing Costs	Dependent on RBI rate cycle & liquidity	High rates can dilute budget benefits	Ongoing risk
State-Level Risks	Stamp duty / registration hikes possible	Can offset GST-led gains locally	Market-specific
Overall Outcome	Structural strengthening, not a short-term giveaway	Developers, infra-linked & institutional assets benefit most	Long-term

Conclusion

Budget 2026 strengthens the structural foundation of Indian real estate rather than delivering a short-term demand stimulus. The capex-led approach, combined with GST rationalization on construction inputs and the formalization of REIT and SM-REIT pathways, improves project economics, supports faster execution and expands institutional investment channels. These measures are clearly positive for developers, infrastructure-linked micro-markets and commercial assets, and they reinforce India’s long-term urban growth story.