Budget 2026 & Housing Affordability in Mumbai: What Homebuyers Actually Need

Dhanaji Khot
Jan 25
3 min read

Mumbai does not suffer from a lack of housing supply.It suffers from an affordability gap created by outdated policies, rising EMIs, and metro-specific realities that national frameworks fail to address.

Every Union Budget claims to support homebuyers. Yet for most Mumbai residents, buying a home feels harder each year — not because of lack of intent, but because monthly financial pressure keeps increasing. As Budget 2026 approaches, the key question is no longer what the housing sector wants, but:

Will Budget 2026 make buying a home in Mumbai financially sustainable for real buyers?

This is the Mumbai Home Expert analysis — grounded in EMI math, buyer behaviour, and on-ground market truth.

Why Housing Affordability Remains a Challenge in Mumbai

In Mumbai, affordability is not about finding a “cheap” home. It’s about managing monthly cash flow without financial strain.

Despite stable interest rates:

Property prices have outpaced salary growth
Average loan sizes have increased sharply
Down payments consume a larger share of lifetime savings

For most end-users, the decision to delay buying is driven by EMI stress, not lack of confidence in the market. Any Budget reform that doesn’t directly reduce EMI burden or tax outgo will have limited impact.

The Affordable Housing Definition Is Outdated for Mumbai

The current affordable housing cap of ₹45 lakh has little relevance in Mumbai.

In most livable micro-markets:

₹45 lakh does not buy a functional home
Even suburban and extended suburbs exceed this level
Mid-income professionals earning ₹20–35 LPA fall outside eligibility despite being genuine first-time buyers

What Mumbai homebuyers actually need

A revised affordable housing cap of ₹80–90 lakh for Mumbai and MMR.

This change would:

Bring more homes under 1% GST (without ITC)
Expand access to tax incentives
Encourage developers to design realistic mid-segment housing

Without metro-specific affordability definitions, policy support remains disconnected from reality.

Tax Relief That Mumbai Homebuyers Are Actually Demanding

Why Section 24(b) No Longer Works

The current ₹2 lakh deduction limit on home loan interest under Section 24(b) has not kept pace with urban borrowing.

For a typical Mumbai home loan:

Annual interest often ranges between ₹4–6 lakh
A large portion receives no tax relief

What buyers expect from Budget 2026

An increase in the interest deduction cap to ₹5 lakh, particularly for self-occupied homes.

This would:

Reduce annual tax outgo meaningfully
Improve long-term EMI sustainability
Prevent buyers from postponing purchases purely due to tax inefficiency

PMAY-U 2.0 Must Reflect Urban Cost Structures

The Credit-Linked Subsidy Scheme (CLSS) under PMAY-U has supported affordability — but its impact in Mumbai has been limited.

For PMAY-U 2.0 to be effective:

Eligibility must expand for MIG buyers
Interest subsidies should range from 3% to 6.5%
Income and loan caps must reflect metro pricing realities

Without these updates, PMAY remains beneficial on paper but insufficient in high-cost urban markets like Mumbai.

Rental Housing Needs a National Policy Push

In Mumbai, renting is no longer a temporary phase — it is a long-term housing choice for many families.

A National Mission on Rental Housing could:

Offer tax incentives to long-term tenants
Encourage developers to build organised rental stock
Stabilise rental inflation near employment hubs

Strengthening rental housing does not reduce ownership demand — it prevents financially overstretched buying decisions.

GST on Construction Is a Hidden Affordability Lever

The current 18% GST on construction contracts quietly increases overall project costs, which are ultimately passed on to buyers.

Reducing GST to 12% or lower would:

Lower base construction costs
Reduce price escalation pressure
Improve launch pricing for mid-segment homes

This is a supply-side reform that directly benefits buyers without artificially inflating demand.

Infrastructure Connectivity Is Affordability’s Silent Multiplier

Housing becomes affordable when connectivity improves. Faster completion of metro corridors, suburban rail upgrades, and major road infrastructure expands the pool of livable, affordable housing options beyond traditional hotspots. In Mumbai, travel time often matters more than price discounts.

Industry Demands vs What Mumbai Homebuyers Actually Need

There is a clear gap between industry lobbying and buyer reality.

Industry Focus	Buyer Reality
Revival of Section 80-IBA (developer tax holidays)	Direct EMI and tax relief has greater impact
Granting “industry status” to real estate	Buyers need immediate affordability, not cheaper developer capital
Selective stamp duty relief	Mid-segment affordability matters more than luxury stimulus

Supply-side incentives help, but buyers make decisions based on personal financial comfort, not policy announcements.

Final Verdict: Budget 2026 Will Be Judged by Monthly Relief

For Mumbai homebuyers, true affordability means:

Predictable EMIs
Realistic tax benefits
Updated affordability definitions
Faster, well-connected housing supply

Budget 2026 has the opportunity to bridge the gap between policy intent and buyer reality. Whether it succeeds will determine not just transaction volumes, but long-term confidence in Mumbai’s housing market.