Digital Real Estate | Union Budget 2026: Knight Frank calls for strong push to revive affordable and rental housing

The housing sector, a cornerstone of any nation's economy and social fabric, faces persistent challenges in India, particularly concerning affordability and access to adequate shelter. The recent recommendations by Knight Frank ahead of Union Budget 2026 bring to light the critical need for decisive fiscal intervention to rejuvenate the affordable and rental housing segments. This analysis delves into the intricate layers of this issue, its background, key players, and profound implications for India's future. Historically, India has grappled with a significant housing deficit, especially for its economically weaker sections (EWS) and low-income groups (LIG). Post-independence, various government initiatives, including the establishment of housing boards, aimed to address this. However, the sheer scale of the problem necessitated more comprehensive approaches. A pivotal shift occurred with the launch of the Pradhan Mantri Awas Yojana (PMAY) in June 2015, with the ambitious goal of "Housing for All by 2022." PMAY, encompassing both urban (PMAY-U) and rural (PMAY-G) components, provides financial assistance, interest subvention, and credit-linked subsidies to eligible beneficiaries, aiming to ensure dignified housing for millions. Despite its efforts, challenges persist, exacerbated by macroeconomic factors. Knight Frank's call for fiscal support in the upcoming Union Budget 2026 stems from a worrying trend: a significant plunge in sales for homes priced below Rs 50 lakh. This segment is crucial for achieving affordable housing goals, and its decline signals eroding affordability for a vast majority of potential homebuyers. The proposed solutions are multifaceted: increasing the limits under PMAY to cover a broader range of affordable properties, enhancing interest deductions on home loans (currently governed by Section 24(b) of the Income Tax Act, 1961), waiving rental income tax, and providing incentives for green-building initiatives. These measures collectively aim to stimulate demand, reduce the financial burden on homebuyers and renters, and promote sustainable construction practices. Several key stakeholders are deeply invested in this scenario. The **Government of India**, particularly the Ministry of Housing and Urban Affairs and the Ministry of Finance, is central, responsible for policy formulation, budget allocation, and scheme implementation. **Real estate developers** are direct beneficiaries or sufferers of policy changes, as their supply hinges on market demand and regulatory support. **Homebuyers**, especially those in EWS, LIG, and Middle-Income Groups (MIG), are the ultimate beneficiaries of affordable housing schemes and tax reliefs. **Financial institutions** like banks and Housing Finance Companies (HFCs) play a crucial role by providing home loans, and their business is directly affected by interest rates and tax deductions. Finally, **consultancies** like Knight Frank, through their research and recommendations, act as crucial voices, informing policy debates with data-driven insights. This issue holds immense significance for India. Economically, the real estate sector is a vital engine of growth, contributing substantially to the GDP and generating extensive employment through its backward and forward linkages with over 250 allied industries. A robust housing sector signals economic health and stability. Socially, addressing the housing deficit is fundamental to improving living standards, reducing urban slums, and fostering social equity. Access to safe and adequate housing is intrinsically linked to better health outcomes, educational attainment, and economic opportunities, thereby contributing to poverty alleviation. From a governance perspective, effective housing policies are critical for managing rapid urbanization and developing sustainable, inclusive cities. From a constitutional standpoint, while the Indian Constitution does not explicitly guarantee a 'Right to Housing', the Supreme Court has interpreted the 'Right to Life and Personal Liberty' under **Article 21** to include the right to shelter as a fundamental right. Furthermore, the **Directive Principles of State Policy (DPSP)**, though non-justiciable, guide the state in formulating policies. **Article 38** mandates the state to secure a social order for the promotion of welfare of the people, and **Article 47** places a duty on the State to raise the standard of living. These principles underscore the state's responsibility in ensuring adequate housing. Relevant legislative frameworks include the **Real Estate (Regulation and Development) Act, 2016 (RERA)**, which aims to bring transparency and accountability to the sector, and the **Model Tenancy Act, 2021**, which seeks to reform India's rental housing market. Looking ahead, the adoption of Knight Frank's recommendations in Union Budget 2026 could significantly revive the struggling housing sector, injecting much-needed liquidity and confidence. This could lead to increased construction activity, job creation, and improved urban infrastructure. Conversely, inaction could perpetuate stagnation, widen the housing gap, and exacerbate social inequalities, hindering India's broader development goals. The emphasis on green-building incentives also points towards a future where sustainable development is integrated into housing policies, addressing environmental concerns alongside economic and social needs. The budget's stance on these recommendations will be a critical determinant of India's housing trajectory in the coming years.