Kamal Ghorui
By Chintan Patel and Aman MehtaThe Union Budget 2026–27 reinforces a push towards infrastructure driven economic growth, setting a constructive backdrop for India’s real estate sector. While the budget does not introduce direct demand-side incentives for housing, its sharp focus on infrastructure, manufacturing, urban development and tourism is expected to create strong indirect momentum across residential, commercial, industrial and hospitality real estate segments.A key positive for the sector is the continued scale-up of public capital expenditure, with infrastructure outlay rising to INR 12.2 lakh crore from INR 11.2 lakh crore (FY 25-26). Sustained investment in transport networks and urban infrastructure is likely to unlock new real estate growth corridors, particularly beyond the traditional metro markets. The emphasis on strengthening Tier-2 and Tier-3 cities with populations exceeding five lakh recognizes their emerging role as economic centers and is expected to support incremental demand for various real estate asset classes in these locations.
The Budget has in addition also proposed the development of seven high‑speed rail corridors connecting major urban and economic centers, aimed at improving inter‑city mobility and acting as growth catalysts along peripheral and secondary micro-markets. In parallel, the creation of City Economic Regions (CERs) across Tier‑2 and Tier‑3 cities, backed by INR 5,000 crore investments per CER across five years, seeks to strengthen infrastructure and accelerate their transition into regional economic hubs, with positive implications for the real estate sector. Measures such as the proposed Infrastructure Risk Guarantee Fund and continued monetization of CPSE real estate assets through REIT structures are likely to improve private sector participation and liquidity within the infrastructure and real estate sector.The accelerated push toward manufacturing across sectors such as biopharma, electronics, chemicals, textiles, rare earths, and construction equipment is expected to significantly influence the industrial and logistics landscape. The expansion of manufacturing ecosystems, revitalization of legacy industrial clusters, and development of modern plug‑and‑play industrial parks will not only drive sustained long‑term demand for industrial land, warehousing and R&D infrastructure but also enhance the overall growth outlook for the real estate sector across multiple regions.The Budget underscores tourism‑led economic development with a focus on healthcare, heritage and eco‑tourism. Key proposals include the establishment of five regional medical hubs, development of 15 archaeological and heritage sites as experiential cultural destinations. Additionally, the proposal of Buddhist circuits across the North‑Eastern states is expected to strengthen spiritual tourism and support hospitality‑led regional growth.In the budget, while direct tax incentives remain limited, there is a stronger emphasis on a predictable, rules‑based tax regime aimed at resolving long‑standing procedural bottlenecks and transfer‑pricing disputes. This shift enhances investor confidence, lowers risk premiums for foreign capital, and supports more resilient financial markets. The Budget also introduces multi‑decade tax clarity for foreign cloud service providers, who are procuring data center services from India, ensuring non‑taxation on eligible cloud‑related income until 2047. Additionally, the introduction of a 15 per cent on cost safe harbor margin for Indian data‑center entities servicing overseas affiliates strengthens India’s positioning as a competitive hub for hyperscale cloud infrastructure. These measures are likely to attract long term capital into digital infrastructure including new entrants in the data center space.Tax compliance has been eased for resident buyers purchasing immovable property from non‑residents. The removal of the requirement to obtain a TAN, allowing TDS deposits through the buyer’s PAN, streamlines cross‑border transactions and reduces administrative friction.A notable aspect of the Union Budget 2026 was the continued absence of direct tax incentives for the residential real estate sector including on the homebuyer’s ask for increasing the INR 2 lakh cap on interest deduction for self-occupied properties. Despite long‑standing industry expectations, the Budget did not introduce any new exemptions, relief, credit of GST paid on inputs by developers or confer infrastructure status to the real estate sector, measures that stakeholders have consistently advocated to boost sectoral growth.Overall, the Union Budget 2026–27 positions real estate as a downstream beneficiary of infrastructure-led growth. While near-term residential stimulus may be limited, the structural measures announced provide a strong foundation for a geographically diversified and long-term expansion of the sector.(Chintan Patel is Partner- Deal Advisory and Head of Real Estate & Hospitality and Transport & Logistics, KPMG in India and Aman Mehta is Vice President – M&A Consulting, KPMG in India)
