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Mid-Income Housing Market Faces Challenges

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  Published in Business and Finance on Monday, January 12th 2026 at 5:48 GMT by Business Today

The Current Landscape: A Challenging Market for Mid-Income Housing

The real estate sector has navigated a period of challenges in recent years, and the mid-income housing segment has borne a particularly heavy burden. This segment, crucial for accommodating the growing urban population, is facing a confluence of issues including rising construction costs, limited affordability, and fluctuating interest rates. While the 'affordable housing' label traditionally focuses on lower income brackets, the mid-income segment - those earning slightly above the minimum thresholds for affordable housing but still facing financial strain - represent a substantial portion of potential homebuyers.

Industry Demands: A Multi-Pronged Approach to Stimulus

The real estate industry's push for budgetary consideration isn't a singular request; it's a well-defined strategy encompassing several key areas. The primary demands, articulated by prominent developers and industry bodies, include:

• Goods and Services Tax (GST) Reduction: Currently, construction materials are subject to GST, which significantly contributes to the overall project cost. Developers are urging the government to lower this rate, arguing that it would directly improve affordability for potential buyers. A reduction in GST would make projects more viable and reduce the price point for mid-income families.
• Enhanced Home Loan Interest Deductions (Section 24(b)): The existing deduction limit under Section 24(b) of the Income Tax Act, which allows homeowners to deduct interest paid on home loans, is viewed as insufficient. Increasing this limit would provide considerable financial relief to prospective homebuyers, making homeownership a more attainable goal.
• Infrastructure Status for Affordable Housing: This is a significant ask, as granting infrastructure status to affordable housing projects would unlock access to cheaper funding options and attract a wider range of institutional investors. Infrastructure status typically comes with preferential lending rates and streamlined regulatory approvals, drastically improving project viability.

The Economic Rationale: More Than Just Housing

The industry's plea isn't solely about benefiting developers. They argue that a thriving mid-income housing market generates a cascade of positive economic impacts. These include:

• Job Creation: Construction is a labor-intensive industry. Increased construction activity translates directly to more jobs for skilled and unskilled laborers.
• Stimulating Related Industries: The housing sector is intricately linked to numerous ancillary industries, including cement, steel, paint, and interior design. A boost in housing construction stimulates demand across this entire value chain.
• Increased Tax Revenue (Long-Term): While short-term tax relief might appear to reduce government revenue, the long-term economic growth stimulated by a vibrant housing market is expected to offset this initial impact, ultimately leading to higher overall tax collections.

Government Considerations: Balancing Act and Fiscal Constraints

The government has publicly expressed its commitment to promoting affordable housing and urban development. However, implementing the industry's demands requires a delicate balancing act. Significant tax changes can have a substantial impact on government revenue, and any decisions must be weighed against the need for fiscal responsibility and overall economic stability. The government's budget allocation for 2026 will be a key indicator of their priorities.

Looking Ahead: Optimism Tempered with Reality

Despite the challenges, the real estate industry maintains a cautiously optimistic outlook regarding the Union Budget 2026. They hope that the government will recognize the critical role the mid-income housing segment plays in overall economic growth and be receptive to their proposals. Whether or not all demands are met remains to be seen, but the industry's concerted lobbying effort underscores the urgency and importance of addressing the current market dynamics. A supportive budget could indeed mark a turning point, paving the way for a more robust and sustainable future for the Indian real estate sector.