365telugu.com online news,MUMBAI, January 19, 2026:Real estate consultancy Knight Frank India has released its comprehensive recommendations for the upcoming Union Budget FY 2026-27, calling for a radical overhaul of the affordable housing framework and new incentives to kickstart a formal rental housing ecosystem.
With the real estate sector contributing nearly 7% to India’s GDP, the consultancy warns that “structural imbalances” are threatening the momentum of the industry, particularly in the lower-income segments.
Reimagining “Affordability” for Metro Cities
The most striking data point in the report highlights a sharp decline in affordable housing: sales of units priced under INR 50 lakh have plummeted from 54% in 2018 to just 21% in 2025. To arrest this slide, Knight Frank suggests the government must acknowledge the reality of rising urban costs.
PMAY 2.0 Price Cap: The consultancy recommends raising the maximum house value limit for PMAY 2.0 subsidies from INR 35 lakh to INR 75 lakh in major metro areas.
Home Loan Tax Breaks: A proposal to more than double the tax deduction on home loan interest under Section 24(b)—increasing it from INR 2 lakh to INR 5 lakh—to provide immediate relief to middle-income buyers.
Unlocking the Rental Market
Knight Frank is advocating for the government to look beyond “ownership” as the only solution for housing. A significant portion of India’s sub-50 lakh housing stock remains vacant because investors find rental yields unappealing.
To solve this, the recommendations include:
100% Tax Exemption: A total tax holiday on rental income up to INR 3 lakh for properties valued under INR 50 lakh.
Surplus Land Usage: Utilizing surplus land held by the Railways and Defense forces for high-density rental developments, targeted specifically at low-income groups with a capped 2% yield.
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Developer Incentives: A 5-year tax holiday for purpose-built rental housing projects to attract institutional capital.
Modernizing Tax Timelines (Section 54)
The consultancy also pointed out that current tax laws for Long-Term Capital Gains (LTCG) are out of sync with modern construction cycles.
Extension to 5 Years: Knight Frank recommends extending the completion timeline for under-construction properties from three to five years to qualify for LTCG benefits, acknowledging that RERA-compliant, large-scale projects often take longer to deliver.
Pre-sale Purchase Window: Relaxing the criteria to allow homeowners to buy a new property two years before selling an old one (up from the current one-year limit).
A Green Mandate
To align with global sustainability goals, Knight Frank suggests a Central Subsidy Program covering 20-25% of the incremental costs of green building materials. This would mirror successful state-level models in Tamil Nadu and Andhra Pradesh, capped at INR 1-2 crore per project.
Shishir Baijal, Chairman and Managing Director, Knight Frank India:
“Affordable housing continues to underperform due to declining affordability and elevated input costs. Without timely policy recalibration, demand in this critical segment risks remaining suppressed. India must move decisively towards building a formal, long-term rental housing ecosystem to improve workforce mobility and attract patient institutional capital.”