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Mid-Income Housing Market Slowdown in India

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  Published in Business and Finance on Tuesday, January 13th 2026 at 12:03 GMT by Business Today

The Mid-Income Housing Conundrum

The mid-income housing market occupies a vital, yet often overlooked, space in India's real estate landscape. This segment caters to professionals, young families, and those seeking to upgrade from smaller living spaces. However, a confluence of factors - including rising construction costs, fluctuating interest rates, and a cautious consumer sentiment - have contributed to a slowdown in this key area. It's a segment ripe with potential, but currently facing headwinds that need to be addressed.

Developer Demands: A Three-Pronged Approach to Tax Relief

Industry representatives are presenting a cohesive set of proposals to the government, centered around targeted tax relief measures. They believe these interventions have the potential to be a significant catalyst for growth, not only for developers but also for the broader economy. The key requests are:

• GST Rate Adjustments: The most prominent request revolves around a reduction in the Goods and Services Tax (GST) rate currently levied on under-construction properties and ready-to-move-in homes. The current rate, while designed to standardize taxation, adds significantly to the overall cost of homeownership, potentially deterring potential buyers in the mid-income bracket. Lowering this rate would immediately improve affordability, making homeownership a more accessible goal for a larger segment of the population.

• Section 24 Revisions: Incentivizing Home Loan Investment: Developers are advocating for an increase in the permissible deduction under Section 24 of the Income Tax Act, which governs deductions on home loan interest payments. The existing limit, while helpful, may not be sufficient to incentivize a substantial increase in property investment, especially given the current economic climate and rising living expenses. A more generous deduction could significantly lower the effective cost of homeownership and spur demand.

• Leveling the Playing Field: Extending Affordable Housing Incentives: A crucial element of the proposal is the request to extend the incentives and benefits currently enjoyed by affordable housing projects to those serving the mid-income segment. This includes potential tax breaks on construction materials, expedited approval processes, and access to more favorable financing options. The rationale is that the mid-income segment faces similar challenges regarding viability and project timelines as affordable housing, and therefore deserves comparable support. Currently, the emphasis on affordable housing has inadvertently created a disparity, hindering the growth of the mid-income sector.

Why Mid-Income Housing Matters: A Macroeconomic Perspective

Boosting the mid-income housing sector is not solely about benefiting real estate developers; it's about stimulating broader economic activity. Increased construction activity creates jobs in the construction, manufacturing, and service sectors. Furthermore, homeownership contributes to a sense of financial stability and encourages spending on related goods and services, fueling economic growth. A thriving mid-income housing market serves as a critical engine for India's overall economic development.

Industry Optimism and the Budget's Role

The real estate industry maintains a cautiously optimistic outlook regarding the Union Budget 2026. While acknowledging the government's focus on various economic priorities, they express confidence that the significant potential of the mid-income housing segment will not be overlooked. The upcoming budget represents a pivotal opportunity for the government to demonstrate its commitment to inclusive growth and unlock the full potential of the Indian real estate market. Industry leaders are actively engaging with policymakers to ensure their concerns are heard and addressed, hoping for a budget that fosters sustainable and equitable growth across all segments of the housing market.