New Delhi: Knight Frank India has put forth a set of focused recommendations for the Union Budget FY 2026–27, aimed at revitalising the housing sector—particularly affordable and rental housing—while supporting sustainable urban development. The real estate sector contributes nearly 7% to India’s GDP and employs over 70 million people, making it a vital engine of economic growth and job creation. However, affordable housing has witnessed a sharp slowdown, with its share in residential sales declining from 54% in 2018 to 21% in 2025, despite stable overall housing demand.
To address this imbalance, Knight Frank India recommends rationalising affordability thresholds under PMAY 2.0 by increasing the maximum eligible house value to INR 75 lakh in major cities, aligning subsidies with prevailing urban price realities. It also proposes enhancing the home loan interest deduction under Section 24(b) from INR 2 lakh to INR 5 lakh to improve end-user affordability.
The firm has also emphasised the need to build a formal rental housing ecosystem. Key suggestions include tax exemptions on rental income from sub-INR 50 lakh homes, incentives for purpose-built rental housing, and the strategic use of surplus government land for long-term rental developments catering to low-income households.
Further, Knight Frank India has called for reforms under Section 54 of the Income Tax Act to ease capital gains reinvestment timelines and recommended the introduction of a central green building subsidy to accelerate sustainable construction practices.
Commenting on the upcoming budget, Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said, “Targeted fiscal support, aligned with today’s urban cost structures, is critical to revive affordable housing demand and supply. At the same time, a supportive framework for rental housing and continued investment in urban infrastructure will be key to enabling inclusive and sustainable urban growth.”